OPIS Insights

Barron’s Senior Energy Writer Laura Sanicola and Charles Dayton, associate director of research and analysis at OPIS, discuss what’s ahead for coal this week.

Watch this week’s episode for insights into the announcement that the Trump administration is intending to expand coal leasing and further fund coal plant upgrades and what this could mean for US coal producers.

Transcript:

LAURA SANICOLA: Hi, everyone. This is Laura Sanicola, author of Barron’s Energy Insider, and I’m here this week with Charles Dayton, associate director of research and analysis at OPIS. Charles, thanks for joining us this week.

CHARLES DAYTON: Thanks for having me, Laura.

SANICOLA: Yeah. So let’s just dive into it. The Trump administration is intending to expand coal leasing and further fund coal plant upgrades. We’ve heard trickles of news like this all year. What do we know of his latest plan? What does it mean for US coal producers?

DAYTON: Sure. And, yeah, we understand where the administration is coming from. We’ve all seen our electric bills and how AI is driving up electric prices. I did the math this morning, and since 2020, electricity costs are up about sixty three percent more than total inflation. So there’s clearly an issue there, and kind of this all of the above approach is the way they’re trying to handle it.

To your point, one of the solutions to that they see is opening up over thirteen million acres of federal land for coal mining for potential coal leases. While this is good in theory, coal companies already have quite a bit of coal reserves. If you look at the average of the publicly traded companies, it’s somewhere over ten years of Powder River Basin where this would all take place. Coal reserves already kind of in the ground waiting to be mined. So coal companies are much more concerned about what does this look like ten years out? Do I want to make this big purchase of a coal mining lease because of something ten years from now. And and that’s really hard to do when your administration potentially is out of here in three years. So that’s the big issue kind of the coal companies are are are wrestling with.

There have been a couple of other things that the administration has offered as well. For example, they offered a large loan to the port of Longview, which is one of the West Coast ports out there up in the Washington area, which should allow you to have a hedge. If you have problems with domestic coal, you can still export it. So this may give a little bit more comfort for some of them. But, you know, for now, again, the issue is that when you have over ten years of reserves sitting in the ground, you’re not really in a huge rush to pick up more coal reserves yet, if that makes sense.

SANICOLA: Right. So is that why we haven’t seen too many of the coal companies kind of move up on this news?

DAYTON: Yeah. They’ve been kinda quiet about all of it, haven’t they? And, you know, again, that’s probably part of the reason for it.

The other part of this we saw is the very significant I think it was 625 million dollars that the administration is putting towards kind of the coal power plants and things like that that they announced here a few days ago. While that’s a great step in the right direction, it’s a substantial sum of money. I know you had my colleague, Andy Blumenthal, on here a few weeks ago, and he pointed out that, one plant for one month is costing someone on the order of just under thirty million dollars to keep it running. When you look at two hundred plants across the fleet, six hundred million dollars, while, again, very generous, it doesn’t seem like it goes as far as it may otherwise.

So, you know, again, that’s part of the issue. It’s especially when you have these plants all planned for retirement at certain points, you run them, you maintain them, you’ve done everything kind of expecting a certain retirement date. It’s very expensive to turn around and kinda keep this going longer, which is, you know, what we’re running in here on the utility side. And so, yeah, on the producer side, you’re kinda seeing the same thing is that, it’s really hard to turn around the ship.

It happens slowly and it’s expensive. And, you know, this may be a good first step. I’m just not sure it’s it’s the last step yet.

SANICOLA: Alright. Well, thanks for that analysis, Charles, and thanks everyone for listening. We’ll see you next week.