By Valerie Volcovici,
Nichola Groom
and Scott DiSavino
| WASHINGTON/LOS ANGELES/NEW YORK
When President Donald Trump
signed an executive order last week to sweep away Obama-era climate change
regulations, he said it would end America's "war on coal", usher in a
new era of energy production and put miners back to work.
But the biggest consumers of
U.S. coal - power generating companies - remain unconvinced.
Reuters surveyed 32 utilities
with operations in the 26 states that sued former President Barack Obama's
administration to block its Clean Power Plan, the main target of Trump's
executive order. The bulk of them have no plans to alter their multi-billion
dollar, years-long shift away from coal, suggesting demand for the fuel will
keep falling despite Trump's efforts.
The utilities gave many
reasons, mainly economic: Natural gas - coal’s top competitor - is cheap and
abundant; solar and wind power costs are falling; state environmental laws
remain in place; and Trump's regulatory rollback may not survive legal
challenges.
Meanwhile, big investors
aligned with the global push to fight climate change – such as the Norwegian
Sovereign Wealth Fund – have been pressuring U.S. utilities in which they own
stakes to cut coal use.
"I’m not going to build
new coal plants in today’s environment," said Ben Fowke, CEO of Xcel
Energy, which operates in eight states and uses coal for about 36 percent of
its electricity production. "And if I’m not going to build new ones,
eventually there won’t be any."
Of the 32 utilities contacted
by Reuters, 20 said Trump's order would have no impact on their investment
plans; five said they were reviewing the implications of the order; six gave no
response. Just one said it would prolong the life of some of its older
coal-fired power units.
North Dakota's Basin Electric
Power Cooperative was the sole utility to identify an immediate positive impact
of Trump's order on the outlook for coal.
"We’re in the situation
where the executive order takes a lot of pressure off the decisions we had to
make in the near term, such as whether to retrofit and retire older coal
plants," said Dale Niezwaag, a spokesman for Basin Electric. "But
Trump can be a one-termer, so the reprieve out there is short."
Trump's executive order
triggered a review aimed at killing the Clean Power Plan. The Obama-era law
would have required states, by 2030, to collectively cut carbon emissions from
existing power plants by 30 percent from 2005 levels. It was designed as a
primary strategy in U.S. efforts to fight global climate change.
The U.S. coal industry,
without increases in domestic demand, would need to rely on export markets for
growth. Shipments of U.S. metallurgical coal, used in the production of steel,
have recently shown up in China following a two-year hiatus - in part to offset
banned shipments from North Korea and temporary delays from cyclone-hit
Australian producers.
RETIRING AND RETROFITTING
Coal had been the primary fuel
source for U.S. power plants for the last century, but its use has fallen more
than a third since 2008 after advancements in drilling technology unlocked new
reserves of natural gas.
Hundreds of aging coal-fired
power plants have been retired or retrofitted. Huge coal mining companies like
Peabody Energy Corp and Arch Coal fell into bankruptcy, and production last
year hit its lowest point since 1978.
The slide appears likely to
continue: U.S. power companies now expect to retire or convert more than 8,000
megawatts of coal-fired plants in 2017 after shutting almost 13,000 MW last
year, according to U.S. Energy Information Administration and Thomson Reuters
data.
Luke Popovich, a spokesman for
the National Mining Association, acknowledged Trump's efforts would not return
the coal industry to its "glory days," but offered some hope.
"There may not be
immediate plans for utilities to bring on more coal, but the future is always
uncertain in this market," he said.
Many of the companies in the
Reuters survey said they had been focused on reducing carbon emissions for a
decade or more and were hesitant to change direction based on shifting
political winds in Washington D.C.
"Utility planning
typically takes place over much longer periods than presidential terms of
office," Berkshire Hathaway Inc-owned Pacificorp spokesman Tom Gauntt
said.
Several utilities also cited
falling costs for wind and solar power, which are now often as cheap as coal or
natural gas, thanks in part to government subsidies for renewable energy.
In the meantime, activist
investors have increased pressure on U.S. utilities to shun coal.
In the last year, Norway's
sovereign wealth fund, the world's largest, has excluded more than a dozen U.S.
power companies - including Xcel, American Electric Power Co Inc and NRG Energy
Inc - from its investments because of their reliance on coal-fired power.
Another eight companies,
including Southern Co and NorthWestern Corp, are "under observation"
by the fund.
Wyoming-based coal miner Cloud
Peak Energy said it doesn't blame utilities for being lukewarm to Trump's
order.
"For eight years, if you
were a utility running coal, you got the hell kicked out of you," said
Richard Reavey, a spokesman for the company. "Are you going to turn around
tomorrow and say, 'Let's buy lots of coal plants'? Pretty unlikely."
(Editing by Richard Valdmanis
and Brian Thevenot)
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