If implemented, the new proposals announced Tuesday would spell trouble for a coal industry already under pressure from cheap natural gas.
“If regulations occur on existing plants, it could further shrink the coal industry,” said Jim Rollyson, an analyst at Raymond James.
Coal Battling Multiple Fronts
The coal industry’s move to reduce sulfur emissions was a gradual process. It started with using coals that burn off less sulfur, before moving on to the installation of pollution-control equipment, called scrubbers.
“That’s the correct way to do this,” Rollyson said. “Even if you philosophically agree with the administration, the timeline has to change. There needs to be a longer runway to promote the switchover. The EPA is going crazy to put these things in place in a short amount of time, but you can’t just shut down plants that don’t have the technology to deal with carbon.”
He added that carbon emissions standards on power plants will “dramatically increase costs for everybody,” including coal companies, utilities and consumers, if the industry isn’t allowed to move at the most economically efficient pace.
U.S. coal producers could theoretically look to export more coal in the wake of restrictions on existing power plants, but prices in other regions aren’t conducive to exports.
“What’s stopping exports right now is global prices are relatively low,” said Marie Shmaruk, a credit analysts at Standard & Poor’s. “When natural gas prices are low, it has a detrimental effect on coal prices.”
EPA rules on existing plants would likely lead to high-cost production coming off line, Shmaruk added, particularly in the Appalachians where producers have already cut capacity.
Also threatening the potential for higher coal exports is the possibility of regulating the shipment of coal to other countries. Shmaruk noted that restrictions at West Coast ports have held up export plans.
While there is room for coal exports to grow, recent numbers show a record amount of coal being