Trump May Be Offering Coal Leases That No One Wants

  • Lifting moratorium does nothing to help coal against cheap gas
  • President seen signing executive order backing fossil fuels

Trump Signs Executive Order on Energy Independence

President Donald Trump is expected to lift a moratorium on federal coal-mining leases Tuesday -- and it probably won’t do the industry much good until years after he’s left office.

That’s because U.S. coal companies including Peabody Energy Corp. won’t be looking to secure new reserves of the fossil fuel on federal land for years, especially as mining slows amid the sector’s worst downturn in generations. Production in Wyoming and Montana, where much of government coal is located, fell 18 percent in 2016 from the prior year. Coal’s share of U.S. power generation has plunged in the face of competition from cheap natural gas and renewables.

“No one’s looking for new coal reserves,” said Robert Godby, a professor of energy economics at the University of Wyoming. “The decline in coal demand has meant existing reserves will last a lot longer.’’

Trump is set to sign an executive order Tuesday that would promote domestic oil, coal and gas by reversing much of former President Barack Obama’s efforts to address climate change, according to details shared with Bloomberg News. The order will require the Interior Department to lift a moratorium on the sale of new coal leases on federal land, and compel a review of regulations designed to reduce greenhouse gas emissions from power plants.

The move is part of a broader effort by Trump to kill regulations he deems “job-killing” and make good on a campaign promise to unleash “clean, beautiful coal” and bring jobs back to the sector. While Trump’s rolling back a policy that may have loomed over coal producers in coming decades, it’s going to take more to overcome market forces and raise demand for the fossil fuel to a level that’ll put miners back to work, coal executives and analysts say.

For its part, Peabody, the largest U.S. coal miner by volume, won’t need another federal coal lease in Wyoming and Montana’s Powder River Basin for “approximately a decade at this point,’’ spokesman Vic Svec said by phone. While it viewed the moratorium as "poor policy," Peabody enjoys “a comfortable amount of coal reserves,” Svec said.

See Also: Trump Order Said to Reverse Obama Climate Push as Critics Object

Obama issued the moratorium in January 2016, saying it’d allow the Interior Department time to study the environmental impact of how coal mining contributes to climate change and where it should take place, if at all. During Obama’s final days in office, his team released a blueprint for overhauling the program that included the possibility of tacking a carbon fee onto coal leases or ending it altogether.

Earlier this month, the Trump administration approved a coal lease in Utah that predated the moratorium. The application, submitted in 2005, covers a tract projected to contain about 56 million tons of coal reserves. By comparison, Peabody controls more than 3 billion tons of reserves in the Powder River Basin, according to its website.

The prohibition had the potential, over several decades, to surpass the controversial Clean Power Plan as the Obama administration’s most significant climate change policy, according to Bloomberg Intelligence. And the proposed carbon tax could have raised the price of Powder River Basin coal from $12 a ton to $92, said Matt Preston, a research director at the consulting firm Wood Mackenzie Ltd. 

Death Knell

“It’d pretty much be the death knell for coal mined on federal lands,” Preston said. “The industry can take a sigh of relief while Trump’s in office.”
 
While Trump’s policy reversal could prove pivotal for the Powder River Basin in the long term, it may not help miners much during Trump’s tenure, said Rob Barnett, an analyst at Bloomberg Intelligence. Coal companies have much more pressing matters including how many coal-fired power plants stay open and how competitive coal remains compared with gas and renewables.

“It’s not like companies will suddenly say, ‘Oh great, we can lease on more federal land, let’s do it and boost production,’” Barnett said. Obama’s “policy was all with an eye toward 2040 as opposed to 2018.”

— With assistance by Jennifer A Dlouhy, and Aoyon Ashraf

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