Burnt out

Challenges to US carbon rules won't save coal

President Barack Obama is unveiling new pollution caps for power plants on Monday - the same day a big coal miner, Alpha Natural Resources, filed for bankruptcy. The carbon rules are riling energy industry supporters, but for coal it's economic pressures, not politics, that are causing the pain.

The energy industry was already worried enough about a cut in carbon emissions proposed last year by Obama and the Environmental Protection Agency. The latest iteration calls for slightly larger reductions still - 32 per cent lower emissions at power plants by 2030 as against 2005 levels. The target is fossil fuels in general, but coal use is under most pressure as it's the most polluting variety.

For purveyors of the black rock the new plans may come as something of an insult, but the injury has already been done. Alpha, for example, finally folded under its $3 billion debt load. It never recovered from the $7 billion acquisition of Massey Energy in 2011. A stronger coal market might have justified the deal, but instead shareholders have been essentially wiped out by weaker demand and prices.

Central Appalachian coal futures prices fell 40 per cent between 2011 and the end of 2014, and production is down nine per cent over the same period and may be worse this year, according to the US Energy Information Administration. That can't be blamed on Washington red tape. It has more to do with weak global demand and cheap substitutes, like natural gas in recent years.

Tougher emissions limits only make things worse at the margin. The industry is nonetheless expected to challenge Obama's proposals in court. It will find political support from state governments. Republicans from coal-producing regions have already signaled opposition to the president's plan, with Kentucky Senator Mitch McConnell, for instance, urging state governors to refuse to comply.

There's also an element in the GOP that would love to deny Obama the chance of a legacy as the most aggressive reducer of greenhouse gases to date. That may make the outcome of any challenges more political than practical. With oil prices seeming relatively stable, US gas cheap and coal demand soft, it will take more than friendlier regulations to ignite the ailing sector.