Last week, as I was working on a story about the so-called “War on Coal” being waged by Obama (spoiler alert: It’s cheap natural gas, not the current administration, that’s the culprit), I ran into an article indicating that Peabody Energy, the biggest coal company in the world, plans to lay off about a thousand workers in coming months.
That’s potentially bad news for the Powder River Basin in Wyoming, where Peabody owns two massive mines and employs thousands of high-wage workers. At first glance, it appears that maybe the war on coal is taking its toll, and that King Coal may be getting a demotion. But look closer and it turns out that the war, in this case, is being waged against the coal miners by the companies themselves.
Peabody says it hopes to save some $100 million over the next year, in part by slashing 1,000 jobs in the United States and Australia. On its face, that makes sense, given the hard times faced these days by the coal industry, which is getting battered mostly by cheap natural gas but also by upped regulations (and the threat thereof).
But wait. Peabody, it turns out, is not hurting at all. In fact, the same story about the layoffs notes that its earnings during the third quarter of this year were higher than last year. Peabody has thrived during alleged war waged by the Obama administration. It’s had higher profits for each of the last four years than it did in 2007. Even during the recession’s 2009 trough, when coal demand plummeted, Peabody’s operating profit exceeded that of 2007 by a significant margin. We’re talking billions of dollars in gross profit, (hundreds of millions after taxes, amortization and other tangential expenses). This company, at least, is doing quite well during the War on Coal.
In other words, Peabody is slashing jobs not to stay afloat, but merely to up shareholder returns. And, perhaps, to add a bit more to their political campaign contribution fund. Peabody and its buddies Arch Coal (which hasn’t done as well as Peabody, but has still raked it in during the Obama years) and Oxbow (owned by Bill “the other brother” Koch) have together forked out millions of dollars this election season, most of it aimed at toppling Obama and getting Republicans into office. They’re also supporters of the National Mining Association’s “Mine the Vote” effort, which is supporting conservative candidates, almost exclusively Republican, everywhere.
So how can this beleaguered industry make such big profits or sink so much into political candidates during times when domestic coal demand is fading? Part of it is that the bad times aren’t being felt across the entire industry. Peabody has actually upped production and expanded its workforce since 2007 at its North Antelope Rochelle Mine -- the second largest coal mine on the continent and maybe the world (the biggest is Arch Coal’s Black Thunder complex, also in the PRB). Western coal, in general, is holding up better than Appalachian coal because it’s generally cheaper to mine per Btu and is also cleaner-burning.
Selling coal elsewhere also helps. Peabody has mines in Australia, and is building its presence in China, Indonesia and Mongolia. And U.S. coal mines are offsetting decreased domestic demand with growing exports. This year, the Department of Energy predicts that exports will exceed 125 million tons, an all time record. That’s in spite of the fact that the powerful effort to build coal shipping terminals in the Pacific Northwest are still a long ways from fruition, and face increasing scrutiny. Though Asia and its ever-expanding hunger for energy of all forms is the long-term jackpot for the coal industry, Europe is actually proving to be a pretty good market, too. Since Germany’s post-Fukushima decision to shutter its nuclear power industry, the entire continent has leaned towards coal. Relatively cheap, clean American coal. As for that lack of shipping terminals? Even Western coal mines have found a run-around, shipping through Texas and the Gulf of Mexico.
Corporate coal, in other words, is still king.
Jonathan Thompson is a senior editor for High Country News. His Twitter handle is @jonnypeace.