The U.S. coal industry is in long-term decline according to an analysis by Keith Goldberg at Law360. Four major U.S. coal mining companies have filed for bankruptcy protection this year, but bankruptcy does not provide an easy way for coal companies to avoid the high costs of operating a coal mine. The costs continue after a mine is closed, with the cost of cleaning up the mining site and the ongoing costs of health care for miners. These are costs that coal companies pay only about half of, but that still may be more than some of them can afford.
The market price of coal has never covered all the costs of coal mining. For a recent example, see a coal mining project in Australia that was approved only because regulators illegally disregarded some of the costs. The only solution when production costs are too high is to start to phase out the less favorable mines. That will be a difficult transition for an industry that sees itself as expanding, but it is hard to see where new markets for coal will be found. As it is, coal is too expensive as an energy source to use for much beyond generating electricity and making steel. In electricity, coal is squeezed by falling prices for natural gas and solar. We have already seen aging coal power plants shut down in cost-cutting moves, and this will affect more and more of the electricity supply as solar installation prices fall. Official policies in the two largest coal-consuming countries, China and the United States, point toward a phase-out of coal within the next 80 years. This combination of market forces and official policy have already created a glut of coal in the international market. Facing high costs and declining demand, some of the coal mines that fall into bankruptcy this year and next will ultimately have to shut down.
