UK coal industry is looking for a bailout after decades of decline

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Michael Bastasch Contributor
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The United Kingdom’s coal industry is in trouble. Coal mines are closing across the country and the industry needs to raise money to fund these mine closures. The industry is in talks with private investors and the government for a potential bailout.

The UK Telegraph reports that there will be only one deep coal mine left in Britain by the end of next year, as UK Coal — the country’s largest producer — moves ahead with closing two of its three remaining coal pits as they are no longer financially viable.

“Owner UK Coal is in talks with Government and the private sector to try to secure a bailout, understood to be worth close to £20m, to fund a so-called ‘managed’ closure of the deep pits. If the talks fail, the pits will close imminently,” the Telegraph reports.

Why is the UK coal industry in shambles? There are several reasons, but the recent natural gas boom in the U.S. has begun to displace coal as a main power source. This has been coupled with federal environmental regulations which have caused hundreds of U.S. coal generators to retire, meaning more U.S. produced coal is being sent overseas to Europe and Asia.

The flood of U.S. coal exports to the UK, combined with a weak dollar, have rendered UK coal mines uneconomical, and have the industry lobbying private financiers and the government to finance their continued operations.

Coal miners unions are also worried and lobbying for bailout funds as well to keep mines operating in the country.

“The [European] Commission says there is no obstacle in providing modest help,” Chris Kitchen, general secretary of the National Union of Mineworkers, told BBC News. “All it would take to secure thousands of good jobs is a commitment from this government.”

The Labour Party is also looking to get the government to bailout the coal industry, saying the country needs to protect jobs.

“We really need to stand together…when we’ve got jobs at risk, but also the whole of the remaining deep mine coal industry, at a time when we need…to maintain that diverse energy supply,” said Yvette Cooper, the shadow home secretary.

Coal power still plays a major role in Britain’s energy supply, providing the country with 40 percent of its power, according to grid operator data. But decades of increased international competition and green energy policies that discourage hydrocarbon use have sent the UK mining industry on a path of decline.

“Britain’s coal industry was at the heart of its economic growth in the early 20th century when it employed around 1.2 million people at nearly 3,000 collieries,” reports Reuters. “Last year, British coal production fell to the lowest in at least 15 years at 12.8 million tonnes, less than a third of what was still being produced in the late 1990s.”

The government bailout is expected to be a joint effort with private financiers. The bailout amount is expected to be about $33 million, but the government has yet to agree to the deal.

But the bailout could be derailed by European Union officials, who have the power to block state aid to industries if they feel it would distort market competition. The UK government is in discussions with them to make sure the bailout won’t meet such political roadblocks.

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