President Donald Trump's announcement that he will ditch a global climate agreement may be just what many coal producers wanted to hear, though canceling the deal is unlikely the panacea for a battered U.S. coal industry hoping to stabilize demand as it sees little chance of rebounding to historic highs.
Trump announced the withdrawal at a June 1 event at the White House, indicating he would be open to renegotiating an international climate negotiation.
The U.S. coal industry had been somewhat split, publicly, on the potential downsides of the Paris Agreement on climate change. On the one hand, many saw the agreement as a direct attack on coal and miners. Others saw the opportunity for the U.S. to inject talk of technology such as carbon capture and storage into international negotiations, securing more long-term prospects for coal under the assumption that attempts to lower carbon dioxide emissions will continue.
While companies such as Murray Energy Corp. lined up staunchly against the Paris accord, some took a more supportive or flexible position on the deal. As "will he or won't he" rumors swirled and Trump wavered amid a split in his own administration's take on the issue, some coal companies seemed ready to defend either position.
"The president is a tremendous advocate for coal and its essential role in America's future energy mix, and we are confident that he will factor that strong support into his decision on the Paris agreement,"Arch Coal Inc. spokeswoman Logan Bonacorsi said in a statement June 1 before the announcement. "Regardless of what he decides, we know that he will be looking to ensure a strong American economy, a competitive U.S. manufacturing sector, a reliable and resilient power grid, and a vibrant U.S. steel industry, while at the same time ensuring a clean and sustainable environment."
Powder River Basin coal producer Cloud Peak Energy Inc.'s vice president for government public affairs had warned in April that "things are not going to get better in terms of the international approach to climate policy without the U.S. at the table." He said remaining engaged would allow the U.S. to push policies that would stop "persecuting coal."
"[Signatories to the Paris agreement] are not living up to the same basis on which they claim to act," Cloud Peak's Richard Reavey said in the earlier interview. "And I think the U.S. has the opportunity, by staying in Paris, to be a force for good and a force for leadership."
Peabody Energy Corp., the country's largest coal producer, said it would support a decision to withdraw, but also had some suggestions for improving the agreement if the U.S. were to stick with the vast majority of countries that have supported the agreement. Peabody spokeswoman Beth Sutton pointed to a position statement that suggested the commitments should be rewritten to avoid affecting economic growth and meet other criteria.
"The accord is flawed on a number of levels," Peabody's statement said. "The U.S. executive branch signed the Paris Agreement in December 2015 and pledged to reduce its greenhouse gas emissions by 26 to 28 percent below the 2005 level by 2025. Peabody believes that this path cannot be followed without substantially impacting the U.S. economy, increasing electricity costs on families and businesses, and requiring the power sector to rely on less diverse and more intermittent energy sources."
Arch, Peabody and Cloud Peak had all expressed some level of willingness to support a form of the Paris climate deal early in the Trump administration.
Peabody also suggested technology should be used to address climate change challenges. The company called for research and development of carbon capture, use and storage and other technologies that would allow for burning coal in a carbon-constrained world.
While many in the industry seem to see the development of new technology as crucial to the long-term health of coal, Trump's recent budget proposal deeply cut coal research programs. Such moves have sent "mixed messages" to an industry figuring out whether Trump's actions are benefiting an industry he promised to put back to work.
"It's important that we support our new president and he has made many positive promises to the American people about coal, coal miners and the future of the coal industry as a key supplier of reliable, low-cost energy to the nation," Kenneth Nemeth, secretary and executive director of the Southern States Energy Board, said to a crowd of coal industry supporters in mid-May. "Based on this dialogue, what is concerning me is the status of coal programs and R&D in the administration's 2018 federal budget. Trump likes coal. Trump will support coal, but he's also cutting coal."
At the same event, Rep. Morgan Griffith, R-Va., praised the change the Trump administration brought to Washington. He said he will be fighting for money to fund using coal in new ways, but supported exiting the agreement because he was skeptical other countries would be willing to give up economic progress for climate action.
"The world's not going to buy into it because the world wants to see their way of living going up instead of going down," Griffith said. "The Paris agreement needs to be put aside because it's not fair to put an artificial cap on our production and have a future cap placed on some of the emerging countries."
As evidenced from public securities filings, it is clear the Paris agreement is far from coal's only challenge. Several public coal companies disclosed the Paris agreement as a potential risk that could reduce demand and prices for coal, though the accord did not create any binding obligations to reduce greenhouse gas emissions.
"Concerns about the environmental impacts of coal combustion, including perceived impacts on global climate issues, are resulting in increased regulation of coal combustion in many jurisdictions, unfavorable lending policies by government-backed lending institutions and development banks toward the financing of new overseas coal-fueled power plants and divestment efforts affecting the investment community, which could significantly affect demand for our products or our securities," Cloud Peak disclosed in an annual filing in February.
In a March 28 filing, newly public producer Ramaco Resources Inc. captured another major challenge for coal that goes beyond pressure from the federal government and cheap natural gas. States are adopting their own limits on greenhouse gas emissions, limiting coal's opportunities unless "we or prospective customers" invest in carbon capture and storage technology.
"The uncertainty over the outcome of litigation challenging the [Clean Power Plan] and the extent of future regulation of [greenhouse gas] emissions may inhibit utilities from investing in the building of new coal-fired plants to replace older plants or investing in the upgrading of existing coal-fired plants," Ramaco said.
Opposition from environmentalists, who have vowed to intensify efforts against coal in the wake of Trump's election, continues to pressure the sector. In a June 1 email, the Sierra Club touted it has helped retire seven coal plants in six states since Trump has taken office.
Utilities and their representatives have been breaking similar news to coal producers and their supporters at industry conferences. Despite the positives Trump could bring to the bottom line for coal, many utilities just do not have much room to build any new coal capacity. The Paris deal, like Trump's announcement he would pull back the Clean Power Plan, could prove to persuade few if any utilities to change course on a transition away from coal.
Karen Obenshain, director of fuels, technology and commercial policy at the Edison Electric Institute, said at a May coal industry gathering that factors such as cheap natural gas and state policy mean Trump's promise to bring back coal mining and coal jobs is not likely to happen. The Edison Electric Institute represents all U.S. investor-owned electric companies.
"Remember, our industry builds assets that last for decades; a new administration in the White House can last four to eight years. So, our members are thinking they don't see any prospect for coal at this time," Obenshain said. "I think there is a future for coal. It's not rosy."