Business Ethos Blog

Can the Coal Industry be Revived?

Dr. David Mielke, Retired Dean of the College of Business at Eastern Michigan University

Dr. David MielkePresident-elect Trump, while campaigning in the coal belt of Ohio, West Virginia, Kentucky and Pennsylvania, said he would revive the coal industry.  This is in stark contrast to President Obama’s war on coal and pledge to shut down the industry.  During the past 7 years, there have been hundreds of coal mines closed, coal company bankruptcies and an estimated loss of 20,000 jobs.  The EPA, in the name of reducing carbon emissions to fight climate change, established the Clean Power Plan to greatly restrict the use of coal fired power plants.  Given the pressures on the coal industry will it survive?  For the sake of climate change should the use of coal be eliminated? Is it possible to reverse the job erosion and increase employment or rather to stabilize the industry? Is there an opportunity to revive the economies of the coal producing states and the coal industry?  Should President-elect Trump attempt to do so?  What is the “Right Thing to do?”  Let’s look at some issues:

  1. National polls show that climate change is very low on the list of voters’ priorities.  US emissions of particulates, metals and varied gases including ozone, lead, carbon monoxide, nitrogen oxide and sulfur oxide fell almost 70% between 1970 and 2014.
  2. President Obama and environmentalists claim power plants are a major source of greenhouse gases causing climate change, yet U.S. carbon dioxide emissions fell to a new 25-year low during the first six months of 2016.  Energy-related carbon emissions in the first half of the year were 2.53 billion metric tons, the lowest since the same period in 1991. Full-year emissions for 2016 are on pace to be 5.18 billion metric tons, which would be the lowest on record since 1992, according to the latest federal projection.  The numbers mean the U.S. is on track to reduce energy-associated carbon emissions by at least 1.5% this year compared with a 3% drop last year.
  3. In the name of reducing carbon emissions the EPA passed the Clean Power Plan regulations requiring states to reorganize their energy economies greatly impacting electric plants, especially coal fired power plants.
  4. The Supreme Court stayed enforcement of the CPP after 28 states sued.  The DC Circuit Court of Appeals has heard oral arguments, but has not decided the case.
  5. During the past 7 years, there have been dozens of coal company bankruptcies and nearly 20,000 jobs have been lost.  In West Virginia alone, since President Obama took office, 335 coal mines have closed and nearly 10,000 mining jobs, over one third of the industry’s employment in the state, have been eliminated.
  6. The bankruptcies have accentuated the United Mine Workers multi-employer pension plan problems.  For every worker there are now 10 retirees.  Liabilities have exploded as bankrupt companies have stopped contributing to the plan.
  7. Benefits are underfunded by $5.6 billion, or about $600,000 per worker and the plan is expected to go broke by 2025. If it does, the federal Pension Benefit Guaranty Corporation will take over and pay a maximum $12,870 a year pension for someone who worked for 30 years, versus $24,250.
  8. Now President Obama and Democrats and some Republicans have proposed bills in the House and Senate to bail out the United Mine Workers pension plan which could cost $3.5 billion over the next decade.
  9. Companies have proposed plans to build shipping docks in Los Angeles and the State of Washington to export coal. The proposals were rejected in both cases.

President-elect Trump made campaign promises to revive the coal industry.  The ability to do so faces a multitude of issues, the EPA Clean Power Plan regulations and the associated court case, how to create jobs for the 20,000 miners who lost their jobs, the potential failure of the United Mine Worker pension plan and whether or not climate change is being caused by coal given the reduction in emissions for the past several years.  Is it realistic to expect the coal industry to expand and to increase employment?  Or is it more realistic to work to stabilize the industry?  Is part of the solution to bail out the pension plan?  What is the “Right Thing to do?”  It appears that President-elect may have over-promised and will not be able to deliver the expansion of the coal industry.  However, he can move to stabilize it by rescinding the EPA Clean Power Plan, removing other regulations that hinder the industry without impacting health and safety, promoting the expansion of coal exporting opportunities and to promote the industry rather than demonizing it as has been the case with the current administration.  However, if legislation is passed to bailout the pension plan he should veto it.  Bailing out one industry’s pension plan will only lead to the same for others in the future.  The pension Benefit Guaranty Corporation was set up to deal with bankrupt pension plans.  It is unfortunate that in this case, President-elect Trump may have over promised and will under deliver—always best to do the opposite.