(Bloomberg) — Central Appalachia coal prices at a 12-year high could give West Virginia a boost just as President Joe Biden needs to persuade its Senator Joe Manchin to support a $2 trillion tax-and-spending package that includes climate-change measures.
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Biden’s Build Back Better package now moves to the Senate after the House passed it on Friday. Manchin, a West Virginia Democrat, is at the center of negotiations for the proposal that includes spending on child and elder care, but also initiatives to reduce dependence on coal by investing in clean-energy technologies. Progressives want ambitious spending and environmental regulations to meet climate goals.
A recovery-driven surge in global demand for electricity could put Biden’s flagship legislation in a double vise, validating the importance of coal and natural gas as baseload fuels, but also contributing to the rising inflation that Manchin has said is a primary concern in passing another big government spending package.
“I can tell you the coal market in West Virginia has never been hotter. They cannot produce enough coal for demand in the world,” Manchin said Tuesday as he convened a Senate committee hearing on higher energy prices. “I can’t believe what I’m seeing today. I’ve never seen it.”
The House on Friday passed the bill that Biden campaigned on. One Democrat, Maine Representative Jared Golden, joined all Republicans in voting no. As the legislation now moves to a deadlocked Senate, where Republicans also unanimously oppose it, Biden needs votes from Manchin and Senator Kyrsten Sinema, of Arizona, for passage.
Rising coal prices are a potential boon for West Virginia. Central Appalachia coal climbed more than $10 in the week ended Nov. 12 to $89.75 a ton on the spot market, the highest since 2009.
Most coal mines are already operating at full capacity and the vast majority of their output is under contract, so they can’t take full advantage of the sudden increase in spot prices. However, those gains are enough to prompt smaller mining companies to reopen idled facilities, said Brian Lego, a research assistant professor at West Virginia University.
He’s already seen mines reopen in the southern part of the state, some backed by private equity companies that are seeking to take advantage of surging prices for exports. That means more jobs in a region that’s been hard-hit by earlier downturns in the coal industry and then the Covid pandemic.
The decades-long drop in coal demand has hit southern West Virginia hardest, with production down 77% since 2001. Mines in the northern part of the state have increased production about 10% since then.
The surge in demand also means more competition to attract miners in a tight labor market. Some companies have boosted wages 10% to 12% over 2019 levels, according to Ernie Thrasher, chief executive officer of Xcoal Energy & Resources LLC, a Pennsylvania coal trader that works with several suppliers.
Rising coal prices could also hurt West Virginia consumers, who still get 93% of their electricity from coal-fired utility plants — compared to a U.S. average of 25%.
But Kevin Book of Clearview Energy Partners said the benefits of higher prices in West Virginia far outweigh the costs.
“You’re going to get more oomph in West Virginia from the mine mouth and the spillover effects of the economy than you might lose from power price increases,” he said.
In talking points directed at West Virginians, the White House says the social spending bill will help the U.S. meet its climate targets “in a way that creates good-paying union jobs, grows domestic industries, and advances environmental justice.” New job-training programs through the state’s 11 community colleges would help transition to jobs of the future in public health, child care, manufacturing, information technology and clean energy.
But in West Virginia, there’s deep skepticism at the ability of the government to deliver.
“Forever, this area is basically, ‘Why are you against coal?’ any time you try to talk about anything other than coal,” said state Senator Ron Stollings, a Democrat who represents the southern West Virginia coal town of Logan. “I’m not against coal. It’s just that we can’t have all our eggs in one basket. We’ve had that and it’s just come back to devastate us.”
(Michael Bloomberg, the founder and majority owner of Bloomberg LP — the parent company of Bloomberg News — committed $500 million to Beyond Carbon, a campaign aimed at closing the remaining coal-fired power plants in the U.S. by 2030 and halting the development of new natural gas-fired plants. He also started a campaign to close a quarter of the world’s remaining coal plants and cancel all proposed coal plants by 2025.)
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