Mark Sumner
Fri Nov 23 02:47:35 +0000 2018

There’s a really good reason to believe government will have to step in hard to save coal in the short run, because the industry is on the brink of an absolute, final collapse in the very, very near future.

Despite everything Trump has done, 2018 continues to see coal power plants close in record numbers ... and 2019 will see still more. But that’s not the biggest factor pushing the coal industry to a dramatic collapse.

In the last year, it has actually become cheaper to build NEW wind or solar than to simply operate existing coal power plants. Crossing that threshold is bringing on a crisis.

With that milestone, the value of coal still in the ground is now =very close to zero=. And that’s a huge problem for coal companies, because those in-place reserves have always been the greater part of their net value.

That means that everything these companies have—every equipment loan, every pension obligation, and most importantly every reclaimation bond—is now secured by NOTHING. They are swinging in the wind.

In this situation, even the largest, seemingly most secure companies are paper tigers. Even those that can continue to find sales in the declining market, will go down, instantly, with the slightest push.

Billions of on-the-books dollars in the form of in-situation reserves no longer exist. They have gone poof. And as states like Wyoming realize this, the odds of a Giant Light Switch getting flipped in the form of demanding secure bonds, is growing.

It may genuinely be necessary to prop up, or nationalize, the remaining steam coal industry long enough to get cheaper sources on line.

Ten years ago, over 50% of the nation’s power came from coal. That's been very nearly cut in half. Getting rid of the rest is a good thing—but there’s a real danger it’s going to happen in an unstructured collapse. Soon.