The death of US coal: industry on a steep decline as cheap natural gas rises
With Massey Energy boss Don Blankenship headed to prison and some of the industry’s biggest companies bankrupt, a historic transformation may be ahead
On a wintry night in 2010 a few months before 29 men were killed in the Upper Big Branch mine explosion, the coal boss, Don Blankenship – then one of the richest and most powerful men in West Virginia – squared up to Robert Kennedy Jr in a public debate about destructive mining practices and climate change.
The contest had been an epic smackdown and about 1,000 people turned out to see the scion of the liberal Kennedy clan take on the native son and champion of coal.
But Kennedy, despite his impressive command of facts, never really managed to land a punch, or cause a ripple in Blankenship’s impassive demeanor – let alone win over an audience stacked with miners from the coal baron’s Massey EnergyCompany.
“When you criticise what we do as an industry, you are criticising the people that are teaching your Sunday school, that are coaching your little league,” Blankenship told Kennedy. The line got the biggest applause all night.
Six years later, Blankenship and the coal industry he championed are both on the ropes. The former chief executive is headed to prison and some of the biggest coalmining companies in the world are in bankruptcy or possibly headed that way –knocked out of electricity markets by cheap natural gas and the environmental regulations Blankenship so vehemently opposed.
The former chief executive of Massey Energy was sentenced this week to a year in prison for willfully violating mine safety standards – the highest penalty available under the law. Blankenship was not accused of direct responsibility for the accident – the worst in 40 years in the US.
Next week Peabody Energy, the world’s largest publicly traded coal company, will come to the end of a 30-day grace period to repay its crushing debts or fall into bankruptcy.
The company’s share price has fallen by 98% since 2011.
Peabody missed two interest payments totaling $71m on its debt on 15 March. The company also laid off more than 250 workers at its Powder River Basin mine in Wyoming, billed as the biggest coalmine in the world.
Three other coal giants have declared bankruptcy within the last six months, ArchCoal, Patriot and Alpha Natural Resources. Alpha bought out Blankenship’s old firm nine months after the Big Branch Disaster.
With Blankenship headed to prison, the entire US coal industry appears headed for a historic transformation – forced mainly by cheap natural gas produced by fracking.
The US energy information administration last month released estimates showing coal production declining across the country by 29% in the first 10 weeks of 2016 compared with the same period last year.
The agency said it anticipates natural gas will overtake coal as the country’s biggest source of electricity this year – a projection that is expected to result in hundreds more layoffs in the coming months.
On the same day, Arch Coal announced it would stop pursuing the Otter Creek project in Montana, which would have been one of the biggest surface mines in the country, blaming capital costs and weakness in the coal markets.
The Obama administration has also squeezed off prospects for future coal projects, overhauling the system of fossil fuel leases on public lands. In his finalState of the Union address, Obama said he would push for changes to the leasing of public lands for oil, coal and gas leases at cut-rate prices, saying: “Rather than subsidize the past, we should invest in the future.”
Meanwhile, the US coal industry’s efforts to find new markets in Asia and Europe have run into troubles. China is moving away from coal, and it is getting harder to get coal to the other big potential market in India. On 1 April, the company behind the proposed Gateway Pacific Terminal suspended the $700m project until the courts can rule on a challenge from the Lummi tribe.
However, Blankenship, in line with leading officials in West Virginia and other coal-producing states, blames Barack Obama’s efforts to fight climate change, and rules due to come into force cutting emissions from power plants.
Blankenship then and now denied climate change was even occurring, describing it as “Obama’s hoax”.
The debate that night in 2010 was about mountaintop removal mining, a practice heavily promoted by companies like Blankenship’s of blowing the tops off mountains to get at thin seams of coal.
The practice reduced majestic treed mountains to barren moonscapes, and fouled streams and valleys with toxic mining debris. But it was cheaper because it kept labour costs down.
That night Kennedy condemned the technique as a crime of historic proportions.
“This is the worst environmental crime that ever happened in our history,” began Kennedy. “It is a crime, it is a sin, and it is a moral obligation to stop this from happening.”
Until Blankenship’s sentencing this week, however, no coalmining executive had ever been sent to jail for putting coalminers’ lives in jeopardy by placing profit over safety.