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State efforts to boost coal production, demand largely symbolic, observers say


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State efforts to boost coal production, demand largely symbolic, observers say

Several state legislatures took up bills aimed at boosting coal during their 2019 sessions, but industry observers said the efforts will do little to turn the tide for the struggling sector.

While some producers have been able to take advantage of strong export pricing in the global metallurgical market, many of the proposed bills were geared toward helping thermal coal producers as domestic demand continues to shrink.

Robert Godby, director of the University of Wyoming's Center for Energy Economics and Public Policy, said much of the pro-coal legislation "has largely been symbolic" and is unlikely to do much more than slightly extend the life of some affected mines or plants.

"If nothing else, it demonstrates state support for a coal industry that is either politically important or economically important," he said. "... The market's kind of like a tide. There's just not a lot you can do to stop it. You can maybe sandbag for a little while, but eventually, it overwhelms."

In Wyoming, Gov. Mark Gordon signed a bill into law mandating that investor-owned utilities try to sell coal-fired power plants before closing them down. But utilities already seek out buyers when they consider closing a plant, said James Van Nostrand, a West Virginia University law professor and director of the Center for Energy and Sustainable Development.

"If it thinks there's a buyer out there, it's going to have to try to sell it," he said. "... They're closing them for a reason. They're not cost-effective."

Godby said the law is more of a "poison pill" to create enough uncertainty that utilities rethink closing a Wyoming coal plant and consider generators in other states. Wyoming may have to give tax breaks to a new owner and then shift the cost to ratepayers.

"The question becomes: Who thinks that they can do better than the utility in making money here?" he said. "And the only way they really could is if they got some sort of very lucrative, forced price."

Energy Ventures Analysis President Seth Schwartz said the bill could slow the closure of economic coal plants that companies want to shutter for political or environmental reasons.

"It's not so much that most are becoming uneconomical," he said, "it's a question of whether you trust the utilities to make a good decision here, a good economic decision."

Gordon vetoed a bill that would have allowed the Legislature to appropriate $250,000 to hire private counsel to sue Washington state for its role in blocking a coal export terminal that would help connect western coal producers with the strong Pacific market. In his veto letter, the governor said while he supports the coal sector, the Wyoming attorney general's office is already involved in litigation over the terminal and filing a competing claim would be counterproductive.

Van Nostrand agreed that adding another party to the ongoing lawsuit would not make a difference, and said building a terminal on the West Coast faces stiff political opposition. Washington's governor, Democrat Jay Inslee, is running for president on a climate change-oriented platform, "so you're not going to get a coal export terminal" in that state, Van Nostrand said.

Utah's Legislature passed a bill requiring a state board that provides loans or grants to localities affected by mineral resource development on federal lands to first consider appropriating money to a bulk commodities ocean terminal project when considering funding throughput projects, The Salt Lake Tribune reported. Utah coal producers want a coal export terminal in Oakland, Calif., to sell their coal to the Asian market, but the project is tied up in a lawsuit with the city government.

In West Virginia, both legislative chambers passed two bills that are awaiting action from Gov. Jim Justice. One would incrementally decrease the severance tax on steam coal from 5% to 3% over three years; Schwartz said the measure will not "change the whole world completely, but it will definitely help."

The other bill would provide a 35% tax rebate for capital investment in new machinery and equipment used to mine coal in the state, something that could "definitely improve capital budgets," Schwartz said. That legislation could help spur investment into West Virginia's coal operations.

Van Nostrand said the severance tax legislation might help keep one or two mines on the margin open but the change does not make much difference, given the "huge market forces" facing thermal coal.

West Virginia's cheapest seams have already been mined, he said, and he was not sure the incentives offered in the bills were enough to entice coal companies to start operations in the state as opposed to Ohio, Pennsylvania or Indiana.

"I just don't see much expansion going on, period," he said.