Production costs, not competition from natural gas, are the biggest reason for the industry’s decline over the years, a new study revealed.
Resources for the Future, a nonprofit group that conducts research on energy and environment issues, published a study this month that argues production costs have been the largest factor regarding hundreds of coal mine closures. This bucks traditional thinking that the rise of natural gas and other changes in the energy market is the main culprit.
The study used a model that analyzes “closure as a function of expected profits.” Using information from federal databases, the authors were able to isolate the impact of specific “demand and supply shocks.”
“We find that rising production costs explain about two-thirds of the observed coal mine closures caused by declining profits between 2002 and 2012,” the authors wrote. “Natural gas prices and reduced electricity consumption independently explain about one-third of the closures.”
The U.S. coal industry grew rapidly from the 1950s to the early 2000s. However, coal-fired power plants have shuttered by the hundreds since the turn of the 21st century, resulting in thousands of coal miners losing work. The vast majority of closures have taken place in Appalachia, where the industry has been in decline for decades.
The energy market has greatly evolved in the past decade in response to innovations in the industry, including the proliferation of hydraulic fracturing. One major change has been the rise of natural gas, which recently gained an edge on coal as the country’s leading source of electricity. Experts have pointed to natural gas competition as reason for coal’s decline, but others have placed blame on ballooning environmental regulations that have rendered the extraction of coal too expensive.
The issue has been a major component in President Donald Trump’s executive agenda. In hopes of reviving the coal industry, the Republican-led White House has rolled back numerous environmental regulations that were implemented during the Obama era. Rollbacks included several major Environmental Protection Agency regulations aimed at coal power, including the Clean Power Plan and mercury rules.
“You’re going back to work,” Trump said last spring to a group of coal miners who were present for the signing of an executive order that rescinded environmental regulations they long argued were shackling the industry.
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