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Murray chief blames Obama for continued decline of coal-fired power

Washington — The head of Murray Energy on Tuesday backed calls for emergency steps to aid coal-fired power and blamed the Obama administration for coal's continuing decline as a share of the power market, saying utilities set their plans under Obama and are now too politically correct to embrace coal.

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Meanwhile, speakers at the same panel in Washington also debated the impact of the Trump administration's trade policies on US energy exports, with one think tank official saying trade conflicts are hurting the prospects for LNG contracts during a key negotiation window.

Bob Murray, president and CEO of Murray Energy, opined on why coal's share of the power market is continuing to decline under the Trump administration. Electric utilities got into a pattern on what they had to do to comply with the Obama administration's rules and now they have no desire to change course, he said at a summit hosted by Politico Pro. "It is politically correct and it is also something that the government led them into," he said.

US coal use in the power sector was down 4% in the first half of 2018, compared with the same period last year, and declines were expected to continue with another 4% drop in the first half of 2019, the US Energy Information Administration said in its July short-term energy outlook.

Murray Energy, the nation's largest privately held coal producer, last fall urged FERC to act quickly on a proposal (RM18-1) by the Department of Energy seeking market changes that would guarantee full cost recovery and a return on investment of generators that maintain 90-day on-site fuel supplies.

FERC nixed that plan and in January launched a holistic review (AD18-7) of the resilience of the bulk power system. Meanwhile, DOE officials are weighing options to aid struggling coal and nuclear plants, including considering emergency authorities to address baseload retirements and fuel security issues.

MURRAY SAYS COLD SNAP SHOWS NEED FOR COAL POWER

In response to a question about DOE using emergency authority to help the coal industry, Murray said a cold snap last winter proved the need for coal-fired power. From late December to early January, gas prices rose and the price of electricity in New York City increased, Murray said.

"We have a reliability problem in this country, in this grid. We do not have enough margin," he said. "And that was shown by that one cold snap, just 12 days."

But another speaker on the panel countered that it is local infrastructure decisions - not fuel supplies - that are impacting prices. A community might refuse to have a pipeline built and have difficulty obtaining energy supply, but there is no shortage of natural gas, explained Amy Myers Jaffe, the director of the program on energy security and climate change at the Council on Foreign Relations.

"Different communities make their own judgments about what kind of resources and what kind of plants they want to have available, and what kind of wires and pipelines and coal plants they want in their mix, and sometimes there are consequences to that," she said. "But generally speaking, natural gas prices in my opinion are going to continue to go down."

TRADE CONFLICTS SEEN HURTING WINDOW FOR GAS EXPORT DEALS

On a related matter, Jaffe noted that changes in the US fuel mix make it increasingly important for the US to be able to export its excess energy supplies, but the Trump administration's trade policies could make it hard to do so.

"There is this very narrow window where the United States could make a lot of headway, and the fact that we're having trade negotiations and everything is getting wrapped together I think could be a serious problem for our energy exports," Jaffe said. For example, Qatari contract renegotiations will occur between 2020 and 2022, so 2019 was going to be a very critical time for the US gas industry to sign contracts, she said.

This concern about LNG has come up before. In June, an LNG official said that an interested Chinese buyer had held off completing a purchase agreement with the Magnolia LNG project until there is greater certainty about threatened tariffs. At the time, Greg Vesey, managing director of parent company Liquefied Natural Gas Ltd., raised concern that the customer would eventually turn to other suppliers like Russia, Qatar or Australia.

Jaffe argued that trade tensions could also impact exports of Permian Basin gas to Mexico.

"If Mexico's economy isn't doing as well, or if our trade patterns with Mexico are such that Mexico feels it needs to diversify its energy in different directions, that could be very difficult for the president's agenda for energy dominance," she said.

But Murray said the Trump administration's trade policy has not hurt coal exports.

"The trade discussions have been a great concern to us as to the effect on the export markets, but they are so desperate for coal around the world that it has had no effect," he said. --Kate Winston, kate.winston@spglobal.com

--Edited by Matt Eversman, matthew.eversman@spglobal.com