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August 6, 2012

Obama Regs Causing More Layoffs in Coal Country

August 6, 2012
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First, Patriot Coal files for bankruptcy; and now OhioAmerican Energy Inc. permanently closes a coal mining operation in eastern Ohio due to regulatory actions by the Obama Administration. On July 31, OhioAmerican Energy Inc., a subsidiary of Murray Energy, announced the closing of a mining operation in Jefferson County, Ohio that employed 239 direct workers and supported 2,629 indirect workers in the community (store clerks, teachers and other supporting jobs).[i]

Production at the mine began in May, 2007 and was supposed to continue for at least ten years. But regulations put in place by the Obama Administration is shuttering coal-fired generators, and requiring large investments in environmental equipment for those that remain on line. According to Mr. Robert E. Murray, the founder of OhioAmerican, “There will be additional layoffs, not only at Murray Energy, but also throughout the United States coal industry due to Mr. Obama’s ‘War on Coal’ and the destruction that it has caused to so many jobs and families in the Ohio Valley area and elsewhere.”  And, according to Mr. Stanley T. Piasecki, General Manager and Superintendent, “Both Mr. Obama and Vice President Joe Biden stated that there would be ‘no coal in America’ prior to their elections. They are making good on their intentions while they destroy so many lives and family livelihoods in this area for no benefit whatsoever.”

And true it is that additional layoffs will occur to the U.S. coal industry. Coal-fired electric generating companies are having problems as well as coal companies. Midwest Generation, owned by Edison International, has 6 coal-powered electric plants in Illinois representing 13.5 percent of the state’s generating capacity (5,943 megawatts out of a state total of 44,127 megawatts) and employing about 1,000 workers. The company plans to close two of the plants in September, laying off 150 to 180 workers, because of onerous federal regulations affecting coal-fired power plants. The company must reduce mercury emissions by 90 percent across its fleet of plants by 2015 and gradually decrease other pollutants by 2019. Environmental retrofits at three of the company’s coal plants would cost $628 million and retrofitting one of the other plants is expected to cost $160 million.[ii]

However, the company may also be forced to default on its lease for two of its Illinois power plants because it might not have enough money to repay a $500 million debt that is due in June 2013. Besides the investments needed to meet the new regulations, Midwest Generation is also being squeezed by depressed power prices primarily due to low prices for natural gas—the major competing fuel to coal in the generation sector. Under current power prices, it is speculated that Midwest Generation’s cash flow would remain negative until at least 2016.

Conclusion

Coal companies are facing cancellation of customer contracts, lower coal prices and rising expenditures for environmental and other liabilities that severely constrain a company’s liquidity and financial flexibility, forcing the need for bankruptcy protection.  With coal-fired generation levels declining due to   environmental regulation and competition from natural gas, coal plants are being shuttered, and with no new coal-fired plants being built due to other environmental regulations, the coal industry in the United States is destined to dwindle, with mine closures and unemployed miners. President Obama and Vice President Biden are getting their campaign wish. As Mr. Obama said during his campaign, “So, if somebody wants to build a coal plant, they can – it’s just that it will bankrupt them.”



[i] News Release, OhioAmerican Energy Inc. coal mining operation closed in Eastern Ohio, July 31, 2012, http://ftpcontent.worldnow.com/wtrf/newsrelease.pdf


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