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A year after Trump's election, coal's future remains bleak

Reuters  |  WASHINGTON 

By Timothy Gardner

(Reuters) - A year after Donald was elected president on a promise to revive the ailing U.S. industry, the sector's long-term prospects for growth and hiring remain as bleak as ever.

A review of mining data shows an industry that has seen only modest gains in jobs and production this year - much of it from a temporary uptick in foreign demand for U.S. rather than presidential policy changes.

U.S. utilities are shutting coal-fired power plants at a rapid pace and shifting to cheap natural gas, along with wind and solar power. And domestic demand makes up about 90 percent of the market for U.S.

"We're not planning to build any additional facilities," said Melissa McHenry, a spokeswoman for American Electric Power, one of the largest U.S. utilities. "The future for is dictated by economics … and you can't make those kinds of investments based on one administration's politics."

plants now make up 47 percent of AEP's capacity for power generation, a figure it plans to shrink to 33 percent by 2030.

(For a graphic on production, demand and employment, see: http://tmsnrt.rs/2zKY1tQ)

The situation highlights the limitations of presidential policy on major industries and global economic trends. As some energy experts have said all along, the forces that will make or break mining are well beyond the powers of the Oval Office.

A White House official did not respond to a request for comment.

has likely done all he can do to help the industry, said Luke Popovich, a spokesman for the National Mining Association, which represents major U.S. companies.

"The government is no longer against us," he said. "We now only have market forces to contend with."

has taken action on many promises he made to interests in states that helped him win the

The president started the process of killing former President Barack Obama's Clean Power Plan, meant to reduce carbon emissions from power plants; ended an Obama-era moratorium on leasing on federal lands; ditched limits on dumping waste into streams; and started withdrawing the United States from the Paris Climate Agreement.

Now Trump's Energy Secretary, Rick Perry, is attempting to push a rule through the independent Federal Energy Regulatory Commission that would subsidize power plants that store at least a 90-day supply of on site. The goal is to extend the life of some burning power plants, a move Perry says will make the electric grid more reliable.

While the full impact of Trump's policy could take years to understand, the changes so far are unlikely to boost domestic demand, energy analysts and utility officials said.

"BACK 100 PERCENT"

has cast the industry as a victim of burdensome regulation.

The industry has lost more than 40 percent of its work force in less than a decade and seen production drop to its lowest levels since 1978. Its share of the power market has fallen to less than a third from about half in 2003.

"We're going to bring the industry back 100 percent," said at a rally in Virginia in August of 2016.

So far, progress has been limited.

U.S. production is on track to rise more than 8 percent in 2017 over the previous year, to 790 million tons, according to the Energy Information Administration. But 2018 output is expected to decline.

The number of miners has also risen slightly to 51,900 in October, up about 2,200 since November 2016 - but down about 70 percent from a 1985 peak, according to the Labor Department.

On November 1, cited the modest production increases in a Tweet, saying, "It is finally happening for our great clean miners!"

But these increases are largely attributable to demand for U.S. from Asian steel mills after temporary outages from their usual suppliers in Australia, according to James Stevenson, a analyst at IHS Markit.

During the first six months of 2017, Asian countries took in 7.5 million short tons of U.S. coal, up 97 percent over the same period in 2016, according to the EIA.

That demand will soon fade, Stevenson said.

"We are not going to get a repeat of 2017," he said of the spike in exports.

"OBSOLETE"

Forecasts from utilities and the U.S. government reveal little reason for hope of a sustained rebound.

Utilities are expected to shut down more than 13,600 megawatts of plant capacity in 2018. That follows a loss of nearly 8,000 MW this year and 13,000 MW in 2016, according to EIA and Thomson data.

By 2025, coal-fired power plant capacity will dip to 226,380 MW, down about 30 percent from 2011, according to EIA.

Three Texas plants owned by Vistra Energy Corp subsidiary Luminant are among the latest to close, bringing the number of plants that shut, or plan to, to 265 since 2010 - a figure higher than the 258 plants that remain, according to the Sierra Club, which has campaigned against

Vistra said the closures were forced by lower prices for natural gas and renewable power - and not by environmental regulations.

Duke Energy, one of the country's largest utilities, has shut down more than 5,400 MW of capacity since 2011 and plans to shed another 2,000 MW by 2024.

Over the next decade, Duke plans to invest $11 billion in new natural gas and renewable power - and nothing in new coal-fired generation, said spokesman Rick Rhodes.

A Nov. 2 report by the Federal Reserve Bank of St. Louis - which has two of the largest producers in its district, Peabody Energy Corp and Arch Inc - said coal-fired power plants "may eventually become obsolete."

companies believe they can survive despite the troubling market outlook.

Peabody expects a "modest number" of power plant retirements in the coming years, with some of that lost capacity shifting to remaining plants that will increase output, spokesman Vic Svec said. Arch spokeswoman Logan Bonacorsi offered a similar forecast.

Robert Murray, the chief executive of privately-held Murray Energy Corp - one of America's biggest underground miners - said could do more for the industry. The administration, Murray said, should end tax breaks for wind and solar power and reverse an EPA finding that carbon emissions endanger human health.

But Trump's tax bill last week preserved most solar incentives, which have bi-partisan backing. And the EPA has so far steered clear of the so-called "endangerment finding" on emissions that is the basis of many fossil-fuel regulations, given the breadth of scientific evidence that would be needed to reverse it.

Murray Energy, meanwhile, announced on Oct. 31 it will buy a 30.5 percent stake in a coal-mining partnership in Utah called Canyon Consolidated Resources, LLC.

The deal might help the companies cut costs, but it's unlikely to help workers: Murray said about 200 of 1,000 jobs in Utah could be lost.

(Reporting by Timothy Gardner; additional reporting by Scott Disavino in New York; Writing by Richard Valdmanis; Editing by Brian Thevenot)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, November 13 2017. 12:21 IST
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