Wednesday, March 30, 2016

Coal in Transition

Hillary Clinton raised hackles when she told the world that shutting down coal-fired plants and reducing our dependence on coal generally was an inevitable part of her concern/platform for the environment. That she also proposed a massive influx in infrastructure and re-training dollars for the increasingly-displaced coal workers was shoved to the bottom of reports from her opponents. She was anti-miner, anti-growth, according to GOP pundits.
Yet the most conservative elements of the Wall Street community have come to the same conclusion. Coal is not and cannot be a growth industry, particular not in the United States. Iconic financial institution, Goldman Sachs, has issued a report stating that the use of thermal coal is an “irreversible” declining “long-term” trend. How times, and allies of old, have changed. An industry that has been plagued with pollution issues, black lung disease and a horrific safety record is facing the ultimate downsizing.
Back in 1902, when a coal miners’ strike threatened to shut down power generation (from trains, to heavy industry, to a nascent electrical power generating capacity), mega-financial giant, John Pierpont Morgan (yes, that JP Morgan), stepped in and negotiated a truce, earning him the gratitude of then-President Teddy Roosevelt. But today, the banking industry shares Goldman’s fear that coal is an industry with nowhere to go but down.
“Mr. Morgan’s bank, now JPMorgan Chase, announced two weeks ago that it would no longer finance new coal-fired power plants in the United States or other wealthy nations. The retreat follows similar announcements by Bank of America, Citigroup and Morgan Stanley that they are, in one way or another, backing away from coal.
“While coal has been declining over the last several years, Wall Street’s broad retreat is an ominous sign for the industry… ‘There are always going to be periods of boom and bust,’ said Chiza Vitta, a metals and mining analyst with the credit rating firm Standard & Poor’s. ‘But what is happening in coal is a downward shift that is permanent.’
“On [March 16th] the world’s largest private-sector coal company, Peabody Energy, said that it might have to file for bankruptcy protection, following a path already taken by three of the nation’s other large coal companies… Peabody has been trying to sell three of its mines in Colorado and New Mexico to raise cash. But the sale to Bowie Resource Partners appears to have stalled amid the difficult financing environment. Bowie did not comment. A Peabody spokesman said the company ‘stands ready to complete the sale of assets to Bowie.’
“Coal, like railroads, steel and other engines of the nation’s industrial expansion in the 19th and early 20th centuries, helped drive Wall Street’s profits for generations. More than a century later, the coal industry is in a free fall and the banks are pulling away… ‘Given the state of the coal industry today, I think Mr. Morgan himself might make the same decision,’ said Jean Strouse, a biographer of the banker.
“Some banks say they are trying to do their part to curtail climate change by moving away from coal projects and financing ventures that produce less carbon. But bankers also say there is a more basic reason for the shift: Lending to coal companies is too risky and could ultimately prove unprofitable… Coal companies are being squeezed by competition from less expensive energy sources like natural gas and by stiffer regulations — pressures that show no signs of letting up. New York Times, March 20th. Coal is still responsible for a third of America’s electrical power generating capacity, but the notion of “clean coal” is a myth where effluents are simply pumped underground for future generations to deal with the toxic pollutants.
There are issues as banks pull back, however: “[The] banks’ retreat could inflict collateral damage on an industry that employs tens of thousands of workers and needs financing not only to keep operating, but also to clean up coal mines after they close. If coal companies are unable to pay for the mine reclamation, taxpayers could be on the hook for the cleanup costs.
“As big American lenders pull back, a few foreign banks, like Deutsche Bank, have been willing to step in, industry officials say…In its latest annual corporate responsibility report, Deutsche Bank said it was phasing out financing for projects that employ so-called mountaintop removal mining, which environmentalists say is particularly harmful. But the bank’s policy statement did not commit to the type of broad reduction in coal exposure that many American lenders have made in recent months.” NY Times.
But what about the miners? Who cares for them? Is it a matter of “horse and buggy” economics? As former President Bill Clinton observed, since we’ve had a steady decline in mine employment since the 1920s, if we really cared about miners, we would have done something to benefit them a long, long time ago. Wikipedia: “In 1914 at the peak there were 180,000 anthracite [hard coal] miners; by 1970 only 6,000 remained. At the same time steam engines were phased out in railways and factories, and bituminous [soft coal] was used primarily for the generation of electricity. Employment in bituminous [coal mining] peaked at 705,000 men in 1923, falling to 140,000 by 1970 and 70,000 in 2003.” And the numbers have plunged from there as mines face a very uncertain future everywhere (not just the U.S.)… no matter who wins the elections this year.
I’m Peter Dekom, and seismic shifts in heavy industry can render an entire sector of labor vulnerable to massive unemployment; the answer lies not in trying to preserve that which cannot be sustained but to deal directly to support those displaced by the change.

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