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Trump’s Terrible Plan to Rescue the Coal Industry

President Donald Trump holds up a “Trump Digs Coal” sign as he arrives to speak during a Make America Great Again Rally at Big Sandy Superstore Arena in Huntington, West Virginia, Aug. 3.
Indeed he does.
Saul Loeb/Getty Images

During his presidential run, Donald Trump’s promises to rescue the coal industry always seemed like empty rhetoric. “We’re going to put those miners back to work. We’re going to get those mines open,” he told a hard-hat wearing crowd in Charleston, West Virginia. “You’re going to be working your asses off.” What Trump never bothered to explain was how he would stop the economic forces that were quickly making coal power obsolete.

There’s still little way for Trump to bring coal back to its former, 20th century glory. But it turns out he was serious about salvaging the industry after all—serious enough that his administration now wants to keep old, obsolete power plants alive by forcing consumers to overpay for their electricity.

The administration’s proposal, now being considered by the Federal Energy Regulatory Commission (FERC), would essentially require utility companies to purchase electricity from coal and nuclear plants at prices guaranteeing them a profit, even if there are cheaper alternatives available on the market.

Environmental groups have come out hard against the scheme, as have the solar, wind, and natural gas lobbies, which all stand to lose out in the deal. It’s a policy idea bizarre and awful enough to unite the eco-crusaders of the Natural Resources Defense Council with the fossil fuel champions of the American Petroleum Institute.

“The actual, legal regulatory details of this are not clear at all, because the proposal is poorly drafted and incredibly vague on a bunch of key details,” Miles Farmer, an energy attorney with the NRDC, told me. “The only thing that is clear is that it’s an attempt to save coal and nuclear plants.”

In some ways, the administration’s move amounts to an uncharacteristic acknowledgment of economic reality. Trump spent much of his campaign vowing to revive coal-mining jobs by rolling back President Obama’s climate change and industry regulations. As many energy experts pointed out at the time, this was wildly unrealistic. While stricter environmental rules certainly didn’t help coal’s fortunes, the sector has mostly declined over the past decade because power companies turned to cheaper natural gas. Competition from increasingly affordable renewables like wind and solar isn’t helping either. To keep coal afloat, Trump would have to go to war against the free market—which seemed a bit unlikely.

But that’s exactly what he appears to be doing. Last week, Energy Secretary Rick Perry took advantage of an obscure 1977 law and asked FERC to consider a rule ensuring power plants could sell their electricity at prices that let them recover their full costs of production while earning a “fair rate of return,” so long as they kept a 90-day supply of fuel on site. That 90-day thing ensures that this rule would really only apply to coal and nuclear plants, which tend to keep their fissile material and hardened chunks of carbon close at hand as opposed to natural gas plants, which generally receive a steady flow of fuel through pipelines. (In the future, some natural gas plants could try to qualify for it by keeping more liquified fuel on hand.) Renewables would also have a hard time meeting the 90-day threshold, since they don’t store that much power.

So why is it supposedly necessary to prop up coal? For months now, Perry has been trying to build a case that disappearing coal and nuclear plants have made the U.S. electric grid less stable and more prone to blackouts. Keeping them on life support through government-mandated higher prices would make our electricity system more resilient, he claims.

There is not a great deal of evidence to back that up. After Perry commissioned a report on the issue in April, the Department of Energy’s staff concluded that wholesale electricity markets—where utilities buy power, before sending it to their customers’ homes and offices—were working just fine for the time being. (“They are currently functioning as designed,” the report stated, dryly.) However, they theorized that the grid could face reliability issues in the future as more coal and nuclear plants, which tend to run all the time and provide a constant source of electricity, power down. The report also noted that blackouts during some recent extreme weather events, like the 2014 polar vortex and Superstorm Sandy, had exposed weaknesses in our grid.

Perry ran with this. “In the wake of the devastation wrought by the Polar Vortex, Superstorm Sandy, and Hurricanes Harvey, Irma, and Maria,” he wrote in his letter to FERC’s commissioners, “much more work needs to be done to preserve these fuel-secure generation resources that have the essential reliability and resiliency attributes needed to keep the lights on for all Americans in times of crisis.” In other words: If the entire Midwest freezes over again, we need to make sure there are plants with giant piles of coal around to keep our electric heaters humming.

This is not a particularly convincing argument. First, it’s worth noting that outside of those massive storms, power plants very rarely go offline because they can’t find enough stuff to burn. Between 2012 and 2016, 0.00007 percent of electricity disturbances involved a fuel supply shortage, according to an analysis by the Rhodium Group (which called Perry’s proposal a “solution in search of a problem”). The old, inefficient coal plants that have been shuttering also seem to be more likely to suffer outages than the new plants that have been replacing them. “Yet DOE wants to subsidize these clunkers so they won’t retire,” writes Steve Huntoon, a former president of the Energy Bar Association.

Coal probably isn’t the solution to inclement weather, either. The dirty black stuff can freeze in extreme cold, rendering it useless. As the very report that Perry commissioned notes, coal plants still suffered widespread failures during the polar vortex, even if they did play a role in keeping the grid functioning. Having a three-month supply of fuel on hand won’t necessarily help much during hurricanes either, when the major problem tends to be downed power lines, as we’re seeing now in Puerto Rico. If Trump wants to make sure people have electricity in an emergency, he should focus on figuring out how to keep their houses connected even if they’re cut off from one part of the grid. (There’s also just something perverse about subsidizing coal to deal with superstorms fueled by global warming.)

While it might not make our grid much more stable, forcing utilities to buy overpriced coal power will certainly make electricity more expensive for companies and families. Because the proposal is preliminary, it’s hard to predict exactly what the costs will be. But sources I spoke with suggested the rule would transfer many billions of dollars into the bank accounts of inefficient coal plants. “Rates would escalate phenomenally,” John Hughes, president and CEO of ELCON, a trade group that represents major industrial companies that buy electricity in bulk, told me. “In a normal situation, plants that can’t compete would go out of business. We see no reason for bailing out these plants.”

One reason, of course, is to save a handful of jobs in an industry Trump promised to protect, much to the planet’s peril. It’s a little difficult to say precisely how many coal plants would benefit from Perry’s proposed rule. The regulation appears to be aimed at saving what are known as “merchant” power plants—sometimes called independent power producers—which operate on their own apart from integrated utility companies. Of the 427 coal plants that existed in 2015, according to the Energy Information Administration’s most recent stats, about 127 were independent. So theoretically, this could be lifesaver for a sizable chunk of the coal-burning power plants in operation, but not the majority.

In the end FERC is an independent body, and it can choose to accept or reject the Trump administration’s proposal. The rule’s chances are a bit murky for now; the commission’s chair has suggested that he’s sympathetic to the idea, but Trump’s other Republican picks for the five-person commission are considered wild cards. If FERC embraces the regulation, though, it’s likely that some of the many groups opposing it will sue.

For now, the NRDC’s Farmer tried to offer me an upbeat take on what he’s calling Trump’s coal industry bailout: “There’s no way that this will arrest the decline of coal, because there’s no way that the country would be crazy enough to set up the markets this way—in the long term.”

In the short-term, Donald Trump is president.