When Peabody Energy Corp. announced it was suspending quarterly payments to shareholders to save cash, it marked the end of an era for traditional U.S. coal miners. Coal, for decades viewed as a stable investment, is now fighting for its life. Earlier this year, Arch Coal Inc. halted its dividend and has been warned by the New York Stock Exchange it could be delisted if shares stay below $1. Walter Energy Inc., which also suspended its payout, and Alpha Natural Resources Inc. have been dropped by the exchange. Walter filed for bankruptcy earlier this month.So America's largest coal firm has stopped paying dividends like everyone else. Another controversy concerns Obama's "Clean Power Plan" meant to rein in carbon emissions specifically. This law would supposedly put lots of coal miners out of business. In fact, the second-largest US coal firm declared bankruptcy right before Obama made his speech:
Tuesday’s announcement from Peabody, the largest U.S. coal producer, came minutes after Consol Energy Inc., a company increasingly focused on producing natural gas, cut its dividend to 1 cent from 6.25 cents.
As the White House puts its cards on the table, the second-largest U.S. coal producer is folding its current hand and reshuffling. Alpha Natural Resources declared bankruptcy this morning to get out from under $3.3 billion in debt accumulated over the past several years. The specific timing of its filing—hours before the EPA publishes its rules—may be coincidental. That it has happened at all is not.Michael Bloomberg being a green activist, it is no surprise that he says it's not Obama's fault that coal is going the way of the dodo Stateside. Rather, then market is responsible for this turn of events:
Several factors converged to bring about coal's collapse, of which Obama is only the easiest for coal industry leaders to blame. There's the U.S. natural gas boom, which gave power producers a cheaper, less-polluting alternative. Coal companies took on debt around 2011, when Chinese demand pushed prices up globally, according to Bloomberg. That binge has wound down since then, taking coal prices with it, and coal companies like Alpha Natural Resources are left holding the bill.
Critics of the Environmental Protection Agency’s new Clean Power Plan are describing it in apocalyptic terms. But much of what they believe about the plan -- that it will destroy the coal industry, kill jobs and raise costs for consumers -- is wrong. And it’s important to understand why.From an environmental standpoint it would be easy to follow what Bloomberg says, but then again, he's a Noo Yawker not attuned to the sensitivities in the coal belt states. My first reaction when reading these stories was "huh, they still have coal companies in America?" Nevertheless, it is entirely possible for an upcoming battle royale to emerge pitting the administration against the coal miners and their allies. In mid-Eighties Britain, it was an epoch-making fight. I don't foresee that same amount of divisiveness repeating itself in the US, but I think that fancy boys like Bloomberg will be surprised at how much opposition a "sunset" industry and its allies will be able to put up.
The overblown political rhetoric about the plan tends to obscure the market reality that the coal industry has been in steady decline for a decade, partly as a result of the natural gas boom, but mostly because consumers are demanding cleaner air and action on climate change. Communities across the U.S. have led the way in persuading utilities to close dirty old coal plants and transition to cleaner forms of energy. The Sierra Club’s grass-roots Beyond Coal campaign (which Bloomberg Philanthropies funds) has helped close or phase out more than 200 coal plants over the past five years.
The primary reason for the public revolt against coal is simple: It causes death, disease and debilitating respiratory problems. A decade ago, coal pollution was killing 13,000 people a year. Today, the number is down to 7,500, which means that more than 5,000 Americans are living longer, healthier lives each year thanks to cleaner power.