Coal Subsidies: America's Worst Policy Idea?

Coal Subsidies: America's Worst Policy Idea?
AP Photo/Susan Walsh

If someone produced “America’s Worst Policy Idea” as a weekly televised contest with Simon Cowell as a judge, West Virginia Gov. Jim Justice’s most recent proposal on coal would be a serious contender to win for the month of August, if not the entire year.

Justice’s idea, which he says President Donald Trump is “really interested” in, would have the federal government pay $15 for every ton of Appalachian coal burned in U.S. power plants for an undetermined time. The proposal may be part of a larger political gambit that involves Justice’s recent change of political parties, along with rumored shifts of cabinet officials and Senate appointments. Whatever Justice’s motivations, it’s a bad idea, deserving of 15 minutes of infamy, not fame.

To start, it’s an unjustifiable subsidy by taxpayers at a time when natural gas prices are low and renewable energy costs are falling. U.S. power plants burned at least 110 million short tons of Appalachian coal in 2016, according to Bloomberg Intelligence. A payment of $15 for each of those tons would cost taxpayers at least $1.65 billion per year.

Between 2008 and 2016, the price of coal per 1 million British thermal units (BTUs) delivered to electricity generators rose by 2.4 percent, and the price of natural gas fell by 68 percent. There is no doubt the Obama administration placed a severe regulatory burden on the coal industry, especially in its second term. But Texas and Pennsylvania shale frackers caused more economic duress in coal country than any single government policy.

Were Justice’s subsidy to be implemented, it also would serve as a direct attack on coal miners in Wyoming and Montana, who produce two-thirds of U.S. coal at a lower cost and with fewer greenhouse gas emissions (thanks to western coal’s lower sulfur content). In 2015, 74 coal mines west of the Mississippi provided two-thirds of U.S. coal production, while 760 mines in the Midwest and Appalachian East — places like Illinois, Kentucky, and West Virginia — produced the remainder. It’s tough to make an “America First” argument when your primary target is red, white, and blue as well.

Justice makes the case for his plan in a recent Bloomberg article. There he offers a national security argument that falls somewhere on the spectrum between false and insulting. For instance, he claims that coal mines in West Virginia are necessary for the United States to survive a terrorist attack. “Can you imagine what would happen if we lost the power in the East for a month, or two months, or three months?” Justice asks. “It would be like a nuclear blast went off. You would lose hundreds of thousands of people. It would be just absolute chaos beyond belief.”

It is true that terrorist attacks on U.S. energy infrastructure have been a general concern of federal authorities since 2001. But natural gas infrastructure isn’t any more vulnerable than coal infrastructure, which is almost completely above ground. The same logic could be used to argue there are terrorism risks at gas stations and electricity transformers. To claim that coal mining has a special standing above all other forms of energy production just doesn’t pass the smell test.

Gov. Justice should put a little more faith in the free market and little less in his ability to co-opt the political system. The coal industry is in the midst of a minor comeback, with exports for the first quarter of 2017 58 percent higher than the same quarter last year. U.S. coal production in 2017 is expected to grow 8 percent over the year before. The industry should use the remainder of Trump’s time in the White House to invest in automation and strengthen its financial balance sheet — rather than lobbying for a subsidy that would only last the length of the current administration.

William Murray is the federal energy policy manager for the R Street Institute.

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