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Coal is backdrop to Trump's infrastructure speech as export projections improve

President Donald Trump's fondness for coal was evident again this week when a barge full of it served as the backdrop during his recent speech on infrastructure, and export projections of the fossil fuel are looking bullish.

"By the way, those coal miners are happy. Coal miners, oh, they like Trump. They like Trump," Trump said at the event, held along the Ohio River, on June 7. "Same with steelworkers and oil workers. We've taken those restrictions and those horrible regulations off your companies. We're going to have clean, beautiful air. Clean, beautiful crystal water, but you're going to have your jobs also. You're going to have your jobs, maybe more than ever before."

Trump also touted an upcoming mine opening in Pennsylvania. "That hasn't happened in a long time, folks," Trump said. "We're putting the people and we're putting the miners back to work."

Things are looking rosier for coal as the U.S. Energy Information Administration boosts its latest domestic coal production forecast, spurred by an improved export outlook.

According to the latest "Short-Term Energy Outlook" released June 6, the government agency revised its 2017 export projections significantly upward. Exports in 2016 totaled 60.3 million tons, and the government expects them to climb 18.9% to 71.6 million tons in 2017 before falling 14.4% in 2018. The 2017 and 2018 projections are a respective 13.2% and 3% increase versus the prior outlook.

On increased demand from exports, the EIA revised its projections for domestic coal production upward by 1.4% to 784 million tons in 2017 for a 7.7% year-over-year increase. At 787 million tons, the 2018 coal production outlook is up 0.2% versus the prior outlook for a 0.3% rate of annual growth.

However, for the Powder River Basin, Seaport Global Securities LLC noted that coal volume growth could turn negative at some point in 2017.

The note states about 330 million tons of coal were shipped from the basin in 2016. Based on the sum of production guidance from publicly traded producers, the note states, production will likely be up only 3% in 2017 compared to a year ago.

One challenge for producers looking to increase their output: a lack of workers. The U.S. coal industry is reportedly finding miners are scarce.

In a June 7 research note, analyst Lucas Pipes of FBR & Co. said labor was "frequently cited as a limiting factor" by companies responding to improved metallurgical coal prices. In previous research, Pipes estimated that U.S. production of metallurgical coal could increase 10 million tons to 16 million tons over the next 12 months to 18 months, a figure Pipes claims the industry views as reasonable if not a bit higher than internal estimates.

"Producers and contractors alike are struggling to fill vacant positions, with employee turnover increasing," the note states. "Competition for labor is increasing, putting upward pressure on wages. We were surprised by the level of urgency with which market participants characterized the constraint."

As hiring ramps up, federal safety officials are targeting miners with little experience or who are new to coal mines in an effort to curb mine fatalities. So far this year, seven coal miners have died on the job. With nearly six months remaining in the year, the fatality count is on track to exceed the nine mining deaths charged to the industry in 2016.

The causes of this year's accidents include a slip and fall, collapses of mine infrastructure and fatal interactions with powered haulage.

"We've got to take a little step back and see if we can come up with something, some kind of trend, a commonality between these fatals and look to see if there's anything we can do to curb that trend," said Tim Watkins, a deputy administrator at the U.S. Mine Safety and Health Administration, at a stakeholder meeting June 8.

According to slides presented by Watkins, miners with less than a year of experience — total or at the current mine — accounted for the vast majority of injuries. The rate of injury dropped sharply as experience increased in the first several years.

In legislative action, U.S. House members and a coal industry spokesperson questioned the Abandoned Mine Lands program for a perceived lack of oversight at a congressional hearing June 7.

Hal Quinn, president and CEO of the National Mining Association, said about $8.5 billion of the $11 billion total of the fund has been spent, but as of Sept. 30, 2016, only $2.8 billion has been used for the reclamation of priority abandoned coal mine sites.

"This is not only a financial gap for the program but a credibility gap for the program managers. Accounting for the $5.7 billion gap is difficult, if not impossible, from the information the [Office of Surface Mining Reclamation and Enforcement] makes publicly available," Quinn said, referring to a U.S. Department of the Interior Inspector General report on OSMRE's oversight of the AML program. Some of the issues he specifically highlighted included states diverting AML money to non-coal projects even though they had a number of high-priority reclamation projects outstanding.

Elsewhere on Capitol Hill, industry executives said there is a critical need for federal funding to develop clean-coal technologies such as carbon capture and sequestration.

David Greeson, the project lead of Petra Nova LLC and the vice president of development at NRG Energy Inc., spoke as a witness at a U.S. Senate Committee on Energy and Natural Resources hearing on studying cost reductions in emerging energy technologies. He said that the 20% federal funding share through the Clean Coal Power Initiative operated by the U.S. Department of Energy was critical to the development of the plant.

Future carbon capture projects face a number of challenges, including a drastically reduced budget request for the 2018 fiscal year from the Trump administration and the announced withdrawal of the U.S. from the Paris Agreement on climate change.