Is President Obama Trying to Kill King Coal?

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American Coal Mining
Is President Obama trying to kill the U.S. coal industry? In a recent campaign swing through southwestern Virginia, Republican lawmakers alleged just that.

With executives from coal miner Alpha Natural Resources (ANR) and electric utilities Dominion Resources (D) and PPL (PPL) in tow, Republicans marched through the crucial swing state last week, arguing that new greenhouse gas regulations promoted by the Environmental Protection Agency would effectively ban the construction of new coal-fired power plants in the state -- by making it prohibitively expensive to build them.

Specifically, the EPA is proposing that new coal plants include "carbon-capture" technology that industry representatives say is "not cost-effective under current market conditions" and may not even help reduce carbon emissions at all. Competing fuels like natural gas not only cost less than coal, but emit about half the carbon that burning coal does. Combine this with the low prices (and lower profits) that coal companies get these days -- which don't yield enough revenue to pay for the EPA's required equipment -- and coal promoters argue that it's effectively impossible both to comply with regulations and stay in business.

The result: Coal plants cannot be built. Coal will not be bought. Coal companies will go out of business.

Coal miningA Prophecy Fulfilled

It probably didn't hurt their argument that earlier this month, we saw the first high-profile U.S. coal company bankruptcy when Patriot Coal (PCXCQ.PK) filed for Chapter 11.

The headlines practically wrote themselves: "Tragedy Strikes as Obama Regs Kill Patriot!" Over the weekend, the President told local television audiences, "If we win Virginia, then we will win the election." But even if the reverse isn't necessarily true, it almost seems as if the EPA set out to write a connect-the-dots puzzle -- and the prize for completing it is kicking its own boss out of the White House.

What Does It Mean to You?

So the new EPA regs may be hard on Obama's chances in coal country. But what does this whole sooty brouhaha mean to folks here on Main Street? As with so many things in life, it's a tale of good news and bad news.

Let's tackle the bad news first: Energy prices are going up, and it's going to cost you more to heat your home (and pay your electric bill, and put fuel in your car).

You see, one of the reasons coal is so cheap right now is that natural gas is cheaper. Thanks to the fracking craze that's sweeping our nation faster than the hula hoop, natural-gas prices are close to historic lows. It's simple economics: As gas gets easier to obtain from underground shale formations, the supply rises, and the cost plunges. This undercuts the cost of more expensive-to-extract fuels such as coal and oil -- and nuclear, solar, geothermal and wind as well.

But here's the thing: The energy ecosystem is deeply interconnected. Part of the reason coal prices are low is because of the pressure from competing cheap natural gas. But if you kill King Coal (which accounts for about one-third of electricity production today), then suddenly natural gas has to carry more of the load. Demand for it increases relative to supply, and gas prices rise.

For that matter, even if the coal industry fails to just roll over and die -- even if just a handful of coal companies go bankrupt from higher regulatory costs -- this too raises the cost of gas and power in general. It's only a matter of degrees (pun intended), because even if coal remains an energy option, its supply is still dropping, and its ability to compete with gas declines accordingly.

Simply put, for natural gas prices to remain cheap, coal has to stick around to compete with it -- which won't happen if coal companies start shutting down.

That said, there is a silver lining to all this.

If the EPA regulations come into force and coal companies go out of business, they won't be polluting the air anymore or contributing to climate change. And if it turns out that the coal companies are exaggerating the dangers to their industry and can remain in business under the new regulations and produce cleaner power, then greenhouse gas emissions will be reduced that way as well.

Is that prospect worth paying a little (or a lot) more for your electric bill? Tell us what you think below.

Motley Fool contributor Rich Smith holds no position in any company mentioned, but Motley Fool newsletter services have recommended buying shares of Dominion Resources.


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358 Comments

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Tara

Is it even possible to kill the coal industry? It's a little bit vital to live sometimes. I don't think it would even work to get rid of the coal industry.

Tara | http://www.dieandgasket.com/

March 25 2014 at 5:28 PM Report abuse rate up rate down Reply
Jason Knighte

I agree it is a pretty interesting article. I personally think that having coal is important. I think that we should keep using it wile we search for better methods for everything, once we have something else in place that is when I think that we should let go of the coal industry.

Jason.
http://www.wepackitall.com/Packaging_Blister/

January 02 2014 at 10:18 PM Report abuse rate up rate down Reply
Cambria Rhay

Interesting article. I don't know how I feel about it because I've heard that coal mining is really dangerous and not good fuel but at the same time, by killing that industry you're putting all those coal miners out of a job. That just adds to the already existing job crisis. I'm torn. Delta Logistics | http://www.deltalogistics.com/services/warehousing/

January 02 2014 at 4:52 PM Report abuse rate up rate down Reply
Property

Isn't the greenhouse gas/global warming argument pointless when China is burning twice as much coal as the US?

November 08 2012 at 12:26 PM Report abuse rate up rate down Reply
Robert & Lisa

Union Coal miners are cutting their own throats by voting for Obama.

July 30 2012 at 12:18 PM Report abuse -1 rate up rate down Reply
slverlake3

That industry needs to die. Coal mining is very dangerous and coal is an extremely filthy fuel. We have better ways to produce electrical power now. I think coal should be banned all together. Out here in California we have all gas fired power plants and 2 nuclear ones and the governor has something called the "1 million solar roofs initiative". Getting rid of coal will go a long way in cleaning up our air.

July 30 2012 at 11:34 AM Report abuse +2 rate up rate down Reply
1 reply to slverlake3's comment
docmetcalf1955

california also has the highest energy costs, and the most pollution, do the math, california, the land of fruits and nuts.

July 30 2012 at 9:37 PM Report abuse +1 rate up rate down Reply
goldaxe

How about let them coal plants upgrade to clean tech and write it off their tax.

July 29 2012 at 5:53 AM Report abuse +1 rate up rate down Reply
Gumby

Those hillybilies down there in the SW Virgina are lots smarter than Romney cares to give them credit for... High tech companies can relocate there!!

July 27 2012 at 5:24 PM Report abuse +1 rate up rate down Reply
Gumby

King Coal??? Ha hah ha I think it is actually more like King Firewood and Charcoal!! Firewood is the biggest fuel in the world by far!! Billons are using firewood !! Coal powerplants is the next logical to electrifiying the international rural communities like Ameirca did to rural communiites 100 years ago.. You got to believe how many millons of cords of firewood are consumed worldwide every week or month... The poor people are chopping down trees like mad!!

July 27 2012 at 5:22 PM Report abuse -2 rate up rate down Reply
Gumby

Rich I think you are misled for thinking that new nat gas resources through fracking is cheaper than old nat gas reserves already set up... I suspect not... Currently nat gas prices plummeted from overproduction, of course .. But it is not clear yet what the true costs of the new nat gas reserves coming from the fracking really are. As matter of factly, exploration and development of new fracked nat gas reserves is coming to a grinding halt .. Once the bean counting guys finished the number crunchings, we will surely see a rebound in nat gas prices before too long.. Coal will no longer be the king of electricity as its share of electric generation will decline from as high as 50% of all electricity generated in America down to perhaps 30%.. We are busy adding clean energy like wind turbines and solar energy all along... Coal will still stick around but some producers like Patriot which was famous for removing entire mountains to recover thin seams of coal will go out of business. We dont need Patriot's coal... The biggest baddest coal companies will continue with either strip mining or long walling methods. The biggest baddest single mine is located near Gillette, Wyoming at the northeastern corner for tourists' own curiousity... Anyone can see how thick the coal seams is at Gillette, Wyoming. It is usually 100 feet thick as opposite to Patriot's yard thick seams. deep into the mountains. Am I making things clear , Rich?

July 27 2012 at 5:10 PM Report abuse rate up rate down Reply