In an earlier article leading up to President Donald Trump's inauguration (see Holland & Knight's alert, "Railroads May Benefit if Trump Keeps Promise to Energize Coal Industry," Jan. 19, 2017), it was noted that a few factors have negatively impacted the transportation of coal, including the relatively low price of natural gas and regulatory burdens with respect to coal. As a result, structural changes have already been made by power plants and railroads to move away from coal, and any improved coal prospects would need to be both substantial enough and sustained enough to alter the long-range planning of both industries and justify the large capital expenditures that would likely be necessary to utilize substantially more coal.
Among the many Executive Orders (EO) issued by President Trump in his first 100 days was "Promoting Energy Independence and Economic Growth," issued on March 28, 2017, which, among other things, focuses on putting coal miners back to work, a Trump campaign promise. (For a detailed analysis of the EO, see Holland & Knight's alert, "A Closer Look at President Trump's Executive Order on Energy Independence," April 12, 2017.)
Soon after the release of the EO, some media outlets have included similar statements regarding a return to the use of coal, including CNNMoney ("The falling price of natural gas is the primary reason for the plunge in use of coal by utilities") and NPR ("Renewable energy is surging. Natural gas is cheaper. The market forces just don't play in coal's favor"). However, some power plants might be able to take advantage of a coal resurgence. Jim Matheson, CEO of the National Rural Electric Cooperative Association, told NPR, "Some of our members are in a situation where they've got very expensive coal plants that had some investments made just recently for pollution control, and having the capacity to or the flexibility to run those and pay those down is really important to them and their particular consumers."
Railroads have made recent public statements that coal revenue is not something railroads should depend on long term. That said, a recent report from the Association of American Railroads showed that coal traffic in the first week of April was up 29 percent year-over-year. As mentioned in the previous article, one category of coal that presents an opportunity for increased rail transportation is export coal. If President Trump's EO or further congressional action is able to increase coal traffic, even marginally, railroads would benefit in the short term and it might smooth the transition to other commodities.