Tracking the Coal Industry – Past, Present, and Future Trends

By Garrett White   •   2/18/2021

It's no secret that the coal industry is contracting—decreasing in its market share of electricity production—while renewable energy resources surge in acceptance as the world takes a variety of actions to address climate change. However, coal is still a $20 billion industry in the United States alone. Now under the Biden administration, what will happen to coal in the next 4 years? Will the new administration accelerate coal's decline with key initiatives or will market factors play a role in the industry's future one way or the other?

At SIAS Global, our team of scientists, surety and finance advisors, and environmental law specialists has wide-ranging expertise in many aspects of the extractive industries. While we can evaluate a variety of mineral commodities and different extractive sites, we have a unique understanding of the coal industry. That said, we are evaluating the future of coal under the Biden administration through an analysis of past action by the Obama administration, comments that President Biden made during the election campaign, and regulatory and market data regarding the coal industry.

Looking at the Obama administration's actions on fossil fuels, how can one predict what President Biden is likely to do over the course of the next 4 years with regards to coal? And what, if any, effect will it have on the industry? According to the Energy Information Administration (EIA), under the Obama administration, coal production declined 23%, from 1.06 billion metric tons (reported as 1.17 billion short tons) in 2008 to 814 million metric tons (Mt) (reported as 897 million short tons) in 2015, an average rate of -3.7% each year. In comparison, during the last 4 years under the Trump administration, the industry has continued to decline—from 814 Mt (reported as 897 million short tons) in 2015 to an estimated 482 Mt (reported as 537 million short tons) in 2020, an average rate of -9.8% each year).

This decline took place while natural gas production steadily rose and wind and solar production rapidly replaced fossil-fuel production of electricity, according to the EIA. Natural gas has seen a consistent and sharp rise since 2005 and, after the initially strong push of solar and wind energy production under the 8 years of Obama administration, the production and consumption of renewable energy has continued to increase but at a somewhat slower rate under the Trump administration.

Meanwhile, the State of New York has just announced a major offshore wind project, which Governor Cuomo claims will result in a combined 2,490 megawatts of carbon-free electrical generating capacity. This is clearly a sizable project when compared with current nuclear generation capacity in New York (5,396.3 megawatts) and New York's entire generating capacity from renewable sources (7,487.2 megawatts) as of 2019.

Overall, the decline in coal has been a continuation of a longer trend that started in 2008 when coal production peaked. Looked at over multiple decades, the decrease in coal-powered electricity production is not as dramatic, and even less so considering that demand for electricity has increased overall.

On the campaign trail, while President Biden outlined a vision in his climate plan to help support dying coal communities and hold coal companies accountable for the health of their workers, he acknowledged that the future of coal is declining and plans to build on the G7 commitment to “eliminate financing for coal in all but the poorest countries.”

Conversely, Federal agencies are predicting a rise in the production of coal in the first year of Biden's Presidency. These predictions are also being reported by news agencies such as The Financial Times who predicts a “rebound in the burning of coal and a record increase in carbon dioxide emissions in the US,” citing 495 Mt (reported as 546 million short tons) of coal going into power plants as the industry recovers from the coronavirus pandemic and tries to increase supply to meet demand.

So, what additional insights can be gained by using SIAS Global's Kairos Database™? Over the last 3 years, we at SIAS have been able to review the rate of decline in coal production on a mine-by-mine, rather than national production, level by using our internal data as collected from Federal and State regulatory agencies across the United States. According to our most recent data, there are 766 active permits aggregated across four key coal States—Kentucky, Tennessee, Virginia, and West Virginia. Looking at change over time in each State, Tennessee had a slight increase, going from 32 active permits in 2018 to 33 in 2020. Kentucky went from 418 in 2018 to 452 in 2021. West Virginia went from 83 active permits in 2018 to 77 in 2021, only a six-permit decrease. Lastly, Virginia went from 231 active permits in 2018 to 199 in 2020. Now looking at the number of active permits across these four States, there was relatively no change.

In examining violations in two key coal States, we found that the number of violations issued in Kentucky rose from 697 in 2018 to 1,367 in 2020 while issued violations in West Virginia also rose from 183 in 2018 to 252 in 2020. These numbers demonstrate a pretty dramatic rise. So, did coal companies in these States take a more laissez-faire approach with their operations given the Trump administration's stance towards regulations and its support of the industry? Another hypothesis is that States could have been stricter in their enforcing of violations because mining companies have not been actively reclaiming sites, which ultimately would leave taxpayers absorbing the costs of cleaning up if the environmental bonds in place to pay for required cleanups are not sufficient.

In summary, rather than only focusing on production and future demand, perhaps we should examine and monitor what is happening where coal is being mined. Who is going to pay to clean up if the coal companies cannot? This question needs to be part of the analysis if we want to gain better insight to the prospects for coal in the next 4 years and beyond.