The coal industry is on the verge of extinction. Coal’s precipitous fall from providing almost half of our electricity is not a result of free-market forces but from government regulation driven by President Obama with aggressive support from crony capitalists and environmental activists.
Tragically, the destruction of the coal industry is a case study in Obama’s heavy handed command and control energy policy. Under this scheme, the chosen industries such as wind and solar companies are showered with government grants and loans while coal – a competing and therefore an undesirable source of electricity – gets punished with excessive regulations.
The numbers don’t lie; the share of electricity generated from coal in the U.S. has plummeted to a projected 38 percent in 2012 from 49 percent in 2007. According to the Energy Information Administration, the drop in coal generated power is expected to fall 10 percent from 2011 to 2012.
Unsurprisingly, the shares of coal company stocks reflect the emerging demise of the industry. Shareholders of Peabody, the largest U.S. coal company, watched the company’s share price fall about 57 percent since last year and Alpha Natural Resource shareholders experienced a drop of about 70 percent during the same time period.
Obama’s hostility toward the coal industry started before he became the leader of the free world. While campaigning for the presidency in 2008 Obama promised his cap-and-trade energy policy would make electricity prices “skyrocket” and he added, "So if somebody wants to build a coal plant, they can - it's just that it will bankrupt them."
Climate profiteers have also played a key role in the coal industry downfall. Corporations sought to profit from Obama’s cap-and-trade energy policy. Business leaders abandoned free-market principles and joined with former environmental activist adversaries to lobby for government regulation of carbon dioxide emissions. Duke Energy, Exelon, NextEra Energy and General Electric were part of this effort.
Since coal emits twice as much carbon dioxide when burned than other fossil fuels, cap-and-trade would have preferentially punished this fuel source giving a competitive advantage to natural gas and non-combustible forms of electricity generation such as nuclear and renewable energy.
The lobbying push of big business and environmental activists was strong enough to pass the Waxman-Markey cap-and-trade bill through the House of Representatives in 2009 but the legislation died in the Senate the following year.
Undeterred by the will of the American people, President Obama side stepped the legislative process and arrogantly pursued the persecution of the coal industry through the EPA. Following the demise of his climate change legislation and the loss of Democrat control of Congress after the 2010 election, Obama simply stated, “There’s more than one way to skin the cat.”
EPA assumed the lead role by coming out with punishing regulations under the Clean Air Act targeting coal-fired utilities. The EPA issued the Cross State Air Pollution and Utility MACT rules and a recently proposed greenhouse gas rule.
The compliance costs associated with the two aforementioned final rules are forcing utilities to close coal-fired power plants. According to the National Mining Association, 57 power plants will be closing in the coming years because of the new regulations.
States that have a heavy reliance on coal generated power will be especially hard hit by these power plant closures. Ohio, which derives about 80 percent of its electricity from coal, is expected to lose 11 coal-fired power plants.
The newly proposed greenhouse gas regulation, if promulgated, would prevent construction of new coal-fired power plants. The proposed limit for carbon dioxide emissions can’t be met with existing commercial technology.
Given the tremendous regulatory pressure on coal coupled with low natural gas prices, utilities are switching to the lower price and less regulated fuel source.
The change to natural gas favors companies such as Chesapeake Energy who worked hard to skew the regulatory table to favor its business. Chesapeake reportedly donated $26 million to the Sierra Club to support the groups Beyond Coal advocacy campaign. The company also gave money to the American Lung Association to fund an anti-coal advertising campaign.
New York City Mayor Michael Bloomberg also jumped on the anti-coal bandwagon by donating $50 million from his foundation to the Beyond Coal effort of the Sierra Club.
Higher electricity prices and its corresponding reduction in disposable income will be a consequence of Obama’s war on coal. Lower and fixed income families will bear the brunt of this economic hardship. Possible electricity shortages resulting in brownouts and blackouts from the rapid coal power plant closures are also likely.
Meanwhile, the coal and affiliated steel, railroad and mining supply industries were slow to recognize that the goal of Obama and his allied corporate and environmental activists is to wipe out the coal industry and they mounted a feeble defense of their businesses.
Businesses that fail to recognize Obama’s hand in economic Darwinism are destined for extinction.