One of the only entirely reliable constants in human history is change. Nothing in this world is completely fixed. That truism is especially applicable for our industry today. Substantial changes have occurred in the coal and gas markets over the past six to eight years, meaning that life as our industry knew it for the past several decades is very likely gone.
Rather than coal being the silent juggernaut that provides 50 percent of America’s energy, the new normal for our coal industry appears to be 1) direct competition with gas in a market with limited growth, 2) a federal government that appears dedicated to aggressively regulating our industry at every turn, 3) well-financed anti-coal groups that spend hundreds of millions to directly impact legislation and regulation and 4) mandates and subsidies that require renewables to take up a growing share of energy markets.
In response to these pressures, the coal mining industry is also changing. The goliath coal companies of the 2000s are not wielding the same influence in markets. Instead, they are adapting to increasingly variable global consumption levels, cutting production and, in many cases, merging with other producers or shuttering operations. Stock market returns for coal mining companies are falling, and it is clear that only the strong will survive.
The face of the electric utility market is changing as well. In competitive markets, low gas prices create challenges for coal and nuclear units to remain viable and economical. In regulated markets, the mandated influx of renewables is forcing vertically integrated utilities to adapt their business models to account for distributed generation or generation that is ”wired” into their service territories. Once again, only the strong will survive.
The face of the transportation market is changing as well. Railroads, barging companies, ports and terminals must adapt to a new normal. In the winter of 2014, when the Arkansas duck ponds froze, utilities were starved for coal, and railroads spent most of the year under a cloud of federal inquiries regarding the quality of their service. Today, utilities are flush with coal.