CHARLESTON, W.Va. -- While King Coal is losing its economic advantages, it is still showing that it has some political prowess. Consider that it just recently knocked off one of President Obama's picks to head an obscure federal agency, saying that the man had a vendetta against the coal sector.
It's not the type of victory that the industry used to score when it was at its pinnacle. But, hey, if it can help defeat the man who would regulate the pipeline and transmission systems, then that will work too. Never mind that it was unable to affect the nominations of the woman who heads the U.S. Environmental Protection Agency and the man who leads the U.S. Department of Energy, both of whom have a direct say in how the coal industry runs its business.
It's an illustration of coal's declining influence. Setting aside the regulatory environment and looking exclusively at the economic fundamentals, coal is having a difficult time competing with natural gas. The result: coal that is used to make electricity fell by 12.5 percent in 2012 compared to 2011, accruing to the benefit of natural gas, says the U.S. Energy Information Administration. Meantime, natural gas usage is expected to rise by 30 percent over three decades.
That reality is coupled by declining coal seams in Central Appalachia that are also getting more expensive to drill out. The culmination of all those dynamics is that the pricing ratio between the two fuels will remain constant: Natural gas is at $3.50 cents per million Btus, and it is not expected to go much higher in the coming years because of the wealth of shale gas reserves.
The issues are further compounded because the burning of coal releases about twice the emissions as natural gas, including carbon dioxide.
So, what is the coal industry to do? The strategy is two-pronged: Take aim at the federal government that is imposing the regulations to make the industry cleaner and more efficient while at the same time, ask it for the money to install the technologies to give it that upper hand.
With much of the developing world dependent on coal, it would make sense to manufacture the technologies to burn it cleaner. But the problem, in the United States, is that coal is already more expensive than natural gas. And, the added widgets would only contribute to the price tag.
Why not rely more on natural gas? It's cleaner and cheaper. But eventually -- can't give a timeframe -- its price will rise. More demand domestically along with the pressures to sell the stuff overseas will push those rates higher. This is what the coal industry is banking on.