Horn_Robert sachs_adam2016In the name of job creation, the Trump Administration is attempting to single-handedly bring back the coal industry via executive action.  But while the president may be scoring political points in coal country, as a practical matter that’s really not where energy sector job growth will come from in the next few years.

Nevertheless, the past several months have seen a resurgence of the long dormant coal industry.  Hampered by a number of factors (including President Obama’s emphasis on renewables and restrictions on developing new coal-fired power plants), mine sites that were previously shut down, such as several sites in West Virginia, are now staffing full shifts to meet the current increasing in demand.

The Trump Administration’s push to re-energize the coal industry was aided by Congress’ successful effort to remove the “Stream Protection Rule.” In early February, the senate used its authority pursuant to the Congressional Review Act to approve a measure that was signed by the president eliminating the rule preventing coal mining debris from being dumped into nearby streams. It is estimated that elimination of this rule alone could create thousands of coal related jobs.  Additional executive actions benefiting the fossil fuel industry include lifting the moratorium on issuing new coal mine leases on federally-owned lands and the attempt to roll back methane emission standards (as detailed in an earlier post).

These attempts to unravel Obama-era climate action policies, however, have not had an immediate impact on federal or state requirements that promote new investment in renewable energy resources. Spurred by existing government incentives and a growing recognition that renewable energy technology has become a more environmentally-friendly and markedly less expensive alternative, we both agree that, despite its resurgence, the coal industry will find it exceedingly difficult to recover fully.

The wind and solar industries have been in major growth mode for most of this decade, and federal tax credits for renewable energy projects are legally baked into the system for at least the duration of President Trump’s first term. Thanks in part to the 2015 extension of federal tax incentives, declining installation and equipment costs, and state renewable energy portfolio mandates, investment in utility-scale wind and solar is expected to increase by 73% over the course of this administration.  And in states like North Carolina, South Carolina, Montana and Oregon, a decades-old law — the Public Utility Regulatory Policies Act, aka “PURPA” — has effectively forced big utilities to buy power from smaller renewable companies as long as they are cost competitive with fossil fuels.  Our firm’s energy group has seen first-hand the positive effects this law has had on stimulating investment in solar projects.

With the price of natural gas projected to remain low for the foreseeable future and with renewable technology becoming cost-competitive in many parts of the world, even coal industry stalwarts like BP Amoco acknowledge that global energy consumption has moved drastically away from coal in recent years. Renewable advocates believe that the transition from fossil fuels to renewables appears to be irreversible. However, President Trump and his Interior Department already have initiated policies and programs designed to reverse his predecessor’s climate-and-energy initiatives. This switch in federal policy could slow the transition to renewables in the United States substantially.

President Trump’s attacks on President Obama’s climate-related rules and his other actions have many obstacles to overcome, including what likely will be a rash of lawsuits. But the critical question to ask now is whether the ailing coal sector can benefit from the relaxation of federal regulations given the expected long-term global trend of lower demand for coal. It could be years before we know the impact of President Trump’s conservative initiatives.