The battle for Appalachia
A gaffe, it’s said, is when a politician inadvertently tells the truth — and that’s what happened recently when Hillary Clinton, in trying to explain her clean-energy policies, declared that she would be putting “a lot of coal miners and coal companies out of business”. Voters across Appalachia pricked up their ears, and Clinton was rewarded with a resounding defeat in West Virginia’s Democratic primary, and a disappointing virtual tie in Kentucky.
Clinton was trying — albeit clumsily — to make a reasonable point: with the coal industry circling the drain, investing in renewables is a smart way to breathe new life into struggling regional economies. But Clinton’s made-for-TV mix-up is one Donald Trump won’t readily let her forget: in a series of triumphant rallies, he mocked Clinton and pledged to bring mining jobs back to coal country. “We are going to open the mines,” he promised a cheering crowd. “If I win, we are going to bring those miners back.”
Of course, it’ll take more than Trump clowning around in a hard hat to bring back the glory days of King Coal. Still, the episode shows the degree to which — contrary to many pundits’ expectations — coal is emerging as a key issue in the presidential race. That’s partly due to Trump’s own emergence as a political force: Appalachia, after all, is Trump country, full of the white, working-class voters he’s counting on to put him in the White House. In the GOP primaries, Trump won all but 16 of the counties in the region, which includes portions of crucial swing states including Pennsylvania, Ohio andVirginia.
More broadly, the coal debate highlights the degree to which Democrats have lost their grip on a once reliably blue corner of the country. When President Barack Obama was elected, Democrats and Republicans split congressional districts with active mines more or less evenly. Now, Republicans represent 45 of the 51 congressional districts with mining operations, and also hold most of the statehouses and gubernatorial mansions in coal-producing states.
That’s partly due to Obama’s climate policies — an easy target for Republicans, even if experts say macroeconomic trends, and America’s newfound abundance of cheap natural gas, are the real causes for coal’s collapse.
Whatever the cause, there’s no denying that coal country is hurting. The coal sector has lost 94 percent of its market value over the past five years, with the sector’s combined worth tumbling from $68.6 billion to barely $4 billion. Some coal companies have now resorted to simply giving away struggling mining operations rather than coughing up the cash needed to mothball them. Even once-mighty coal giant Peabody (NYSE: BTU) collapsed into bankruptcy last month, burdened by debts linked to its poorly timed $5.2 billion takeover of Australia’s Macarthur Coal in 2011, when coal prices were at their peak.
Wall Street is skeptical about the odds of coal making a comeback: in recent months, a string of major banks including Wells Fargo, Morgan Stanley and JP Morgan have stopped funding coal projects altogether. “This once mighty industry is destined to gradually shrink in importance, and virtually disappear as an investable sector,” predicts Margie Patel, a portfolio manager with Wells Fargo Asset Management.
That hasn’t stopped some coal investors from betting on a rebound, and a few blue-sky thinkers are even predicting a new wave of climate-conscious investment aimed at driving up the price of coal to make renewables more cost-competitive. In general, though, the smart money is in agreement: coal is on the way out, and investors — including many fossil fuel companies — are focusing on renewables. “Politics aside, it’s easy to see why coal investors would sell first and ask questions later,” writes ValueWalk’s Lawrence Hamtil.
Experts say that there would be no plausible way for President Trump to resurrect Appalachia’s coal industry. Vast subsidies would be needed to shore up the failing sector, along with an implausible string of global deals to create new markets for America’s coal. "It's very, very, very unlikely [Trump] could do something to get coal back to where it was seven years ago," said John Deskins, director of the Bureau of Business and Economic Research at West Virginia University.
That might not matter to Trump’s supporters: it’s easy to see why so many Appalachian voters would warm to a candidate who’s promising to help them, rather than one who appears set on driving more nails into King Coal’s coffin. Trump’s newfound love for coal might not make much sense as an energy policy, or as an investment strategy, but as an emotional pitch to down-on-their-luck coal workers, it could prove an effective message. “Is it an over-promise? Yeah, maybe. But the message is spot on: 'I'm gonna try,’” says GOP energy lobbyist Mike McKenna.
The irony is that while Trump’s pro-coal tub-thumping won’t actually do much to help mining communities, Clinton’s more measured approach — which includes a detailed plan for a $30 billion revitalization project, and the development of wind and hydro resources in coal producing states — might actually have a shot at lifting coal country out of its economic rut.
The challenge for Clinton, as she pivots away from the primaries and focuses on the general election, will be to find a way of persuading voters that when it comes to energy issues, her unpopular realism is a better bet than Trump’s unrealistic populism. To win that argument, Clinton will have to convince voters not just that the coal industry can’t be saved, but also that clean energy can take its place, and be a net win not just for investors, but also for American workers, in Appalachia and beyond.
Companies to watch
* Appalachian Power, a unit of American Electric Power (NYSE: AEP), is still heavily reliant on coal but has been working to build a more diversified energy portfolio, and to prepare for the possibility of carbon pricing.
* Virginia has been ahead of the curve in transitioning away from coal, thanks in part to the efforts of Dominion Resources (NYSE: D), which has pledged to connect 500 megawatts of solar power in Virginia by 2020, and has been converting some of its coal plants to burn biomass.
* A number of small companies and nonprofits, including Solar Holler, WV Sun, and MTV Solar, are working to bring rooftop solar to coal-country homeowners. “The solar industry has reached a point where even in states like West Virginia, that are known for their fossil fuels, solar seems to be fully embraced,” says MTV Solar co-owner Pete McKechnie.
Ben Whitford is the U.S. correspondent for The Ecologist. He has written for the Guardian, Newsweek, Mother Jones, Slate, and many other publications.