By March 28, 2017 Read More →

Trump to reverse Obama’s ban on new federal coal leases, but industry awash in coal

coal leases

The Trump administration’s move to end President Obama’s ban on new federal leases comes at a time when companies have enough coal leases to last over 15 years. Billings Gazette photo.

Many companies have enough coal leases to last well over a decade

On Tuesday, the Trump administration will sign a decree to reverse former President Obama’s 2016 ban on new federal coal leases as part of the government’s move to reduce green regulations Trump says have hobbled drilling and mining industries.

“When we evaluate energy, let’s look at the social cost of not having a job,” Trump’s Interior Secretary Ryan Zinke said in a Twitter post on Tuesday ahead of the executive order.

Reuters reports the move comes at a time, however, when the coal mining companies with the most to gain from the decree currently have enough coal leases to last well over a decade.

Peabody Energy, Arch Coal and Cloud Peak have enough coal in the ground in existing leases to last an average of 17 more years at 2015 sales levels, according to earnings reports.

Despite the Obama regulations, current levels of reserves appeared to be within historical norms.  Under George W. Bush, when there were no bans on federal coal leasing, the industry had about 18 years worth of leases on federal lands.

At a time when power companies are switching to renewable energy sources and cheap, cleaner and abundant natural gas, the US coal industry is struggling to compete.  Coal accounts for about one-third of US electricity production, down from about half a decade ago.

 

“These initiatives prevent things from getting worse for coal, but they won’t help much,” Charles Dayton, vice president of market analytics at Doyle Trading Consultants told Reuters.

Two companies, Arch Coal and Peabody both confirmed they have substantial reserves on their federal leases, but they still welcomed the move by the Trump administration.

“Peabody has a comfortable amount of reserves in the Powder River Basin, although we recognize the poor public policy represented by the leasing moratorium put into place by the prior administration,” Peabody spokesman Vic Svec told Reuters in an email.

Arch Coal spokeswoman Logan Bonacorsi told Reuters Arch has “sufficient permitted reserves to sustain our operations on federal lands for a number of years to come.” She added “But as with all producers we will need to add reserves over time, and the ability to obtain those reserves when needed is important.”

Ahead of the executive order, shares in Cloud Peak were up about 3 per cent, Peabody up 1.5 per cent and Arch was down 0.3 per cent.

Tuesday’s executive order will also seek to undo Obama rules and initiatives that limited carbon emissions, including the Clean Power Plan.  The Clean Power Plan pressured states to replace coal-fired power stations with cleaner fuels like natural gas, wind and solar.

Also, the Obama administration’s ban on new federal coal leases was part of a broad environmental and economic review of royalties from lease deals.

It is unclear whether the review will continue following the ban stoppage.  Some analysts say the Trump administration move could trigger a near-term land rush by companies fearing higher royalty rates down the road.

Luke Popovich of the National Mining Association said “Lifting the moratorium would strengthen the signal to markets that the federal government is not any longer standing in the way of fossil energy.”

The coal industry is looking at a slight boost in demand, driven by higher natural gas prices.  The US Energy Information Administration has forecast a 9 per cent increase in western coal production to 443.4 million short tons by 2018.

But, others were less optimistic about the outlook for the US coal industry, saying the best the Trump initiative could do is slow down the sector’s decline.

Since 2012, coal production has dropped more than 25 per cent to its lowest levels since 1978 due to lower prices.

During the 2016 election campaign, candidate Trump promised to bring back jobs to hard-hit coal country that had been hit by massive layoffs and bankruptcies.

 

 

 

 

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