The Coal Lobby's Fight for Survival

For a century, coal dominated America's energy landscape, cheaply fueling the factories of the Rust Belt and lighting up homes across the country. King Coal also enjoyed almost unrivaled influence in Washington. On Capitol Hill, the muscular coal lobby routinely rolled its opponents. In particular, the clout of the coal lobby—and the money it doled out—was a major reason Congress has never enacted a serious climate-change law.

Now all that's changing. Coal is under siege from forces beyond its control. Its dominant place in the American economy is slipping—and so, for the first time in a century, is its ability to get what it wants from Washington. There are two big reasons for this. The first is economic: Over the past two years, as a glut of cheap natural gas has flooded the U.S. energy market, coal has been pushed out. The second is more existential: The world is waking up to the fact that pollution from coal-burning plants is the chief cause of global warming. Although some coal companies still deny that, governments around the world don't—and they are pushing policies to end coal's use. In the U.S., President Obama is deploying the full force of his executive authority to crack down on climate change. Coal is now reckoning with its role in global warming, whether it likes it or not.

Obama made that plain this week with his sweeping speech laying out a climate plan that could devastate the U.S. coal industry. New Environmental Protection Agency regulations will at the very least freeze construction of coal plants and likely lead to the shutdown of existing plants. "Power plants can still dump unlimited amounts of carbon pollution into the air for free," Obama said. "That's not right, that's not safe, and it needs to stop. So today, for the sake of our children, and the health and safety of all Americans, I'm directing the Environmental Protection Agency to put an end to the limitless dumping of carbon pollution from our power plants."

Once upon a time, such an announcement—a shot across the bow of King Coal—would have been political suicide. No more. The mine is collapsing.

To understand how the coal lobby has foundered, look at the American Coalition for Clean Coal Electricity, the coal-advocacy coalition that for the past five years has been the most public and aggressive face of the industry. ACCCE was born in Washington in 2008 out of the merger of two older coal advocacy groups for the express purpose of fighting a Senate climate-change bill. Since then, the group has spent tens of millions of dollars annually on television advertising celebrating the role of so-called "clean coal" in the economy and slamming EPA regulations that could hurt coal.

Last year, in the heat of the presidential campaign, ACCCE hired a new CEO, Robert "Mike" Duncan, the ultimate old-school Republican operator. A former head of the Republican National Committee and regional chairman of George W. Bush's 2000 presidential campaign, Duncan cofounded American Crossroads, Karl Rove's super PAC juggernaut that helped drive the 2010 GOP takeover of the House. Duncan also brought a personal touch to coal advocacy: The Appalachia native is the grandson of two Kentucky coal miners.

Duncan took over just as ACCCE was supercharging the role of coal in the 2012 campaign. In October, just ahead of the presidential debates, the group launched a $35 million ad campaign attacking Obama for shutting down coal plants, destroying jobs, and hobbling the nation's economy. The lobby conducted nonstop TV, Facebook, and Web video campaigns, it sent its "citizen army" to rally for Mitt Romney in coal country, and it ignited the narrative that Obama was waging a "war on coal." It was a culmination of the coal industry's multiyear push against the Obama administration's energy policies, and coal threw everything it had against him. From 2008 to 2012, the industry nearly quadrupled its political contributions, directing 90 percent of its money toward Republicans.

The effort to get Obama out of the White House was a total failure. He won reelection comfortably, carrying all the key swing states that produce the most coal: Pennsylvania, Ohio, Colorado, and Virginia, leaving the industry with but a giant swath of scorched earth.

The lobby was left in disarray. "They hit the panic button," said an energy consultant who once worked as a contractor for ACCCE and who like many who spoke with National Journal asked to remain anonymous out of respect for Duncan and the lobby.

ACCCE responded with a staffing purge. In the first half of this year, Duncan fired or didn't renew the contracts of a slew of top coalition officials, including three vice presidents and the senior vice president for communications. In January, ACCCE put out a request for proposals to 51 Washington strategy and PR firms, looking for a consultant who could help stanch the bleeding and forge a new message. Duncan's pick for the job was JDA Frontline, led by a trio of seasoned Republican strategists—Jim Dyke, Kevin Sheridan, and Kevin Madden. JDA president Dyke is a former RNC spokesman who worked in the George W. Bush administration. Sheridan, a wiry, intense political operative, most recently served as vice presidential candidate Paul Ryan's communications director. Madden, the affable and polished former chief spokesman for Romney's 2008 campaign was also an adviser to the GOP candidate's 2012 effort. In May, Sheridan moved over to ACCCE's corporate headquarters full time to work on a new plan for the old industry. In the coming weeks, the group will roll out a new public-relations and lobbying blitz aimed at resetting its message and defusing antagonism with the administration. Instead of saturating Fox News with "war on coal" ads, the group will send Duncan on cable news and the editorial-board circuit to talk about coal's role in the economy and how to create a "path forward" for with new technology.

Behind the scenes, however, the coal companies and the consultants who represent them in Washington are often at loggerheads. Privately, many people working for the coal lobby concede that time has finally come for coal to face up to climate change. They don't want the coal industry to look like a science-denying dinosaur—a charge that's also been leveled against many Republicans on the far right. They recognize that the game has changed, with a new energy market and administration that will regulate them against their will. They believe it's time to stop the war, engage the enemy, and to ask it for help, both in developing environmental regulations and researching the new technology. But that thought turns the stomach of the corporate chiefs at some of the country's oldest coal companies—the titans used to the halcyon days of coal power.

Here's how a longtime Republican energy strategist put it: "When you can't make the phone call saying, 'Don't fuck with me anymore,' you have to change what you're doing."

IN DECLINE

The numbers tell the story of coal's fall. Since 2004, the share of U.S. electricity from natural gas jumped from 16 percent to 26 percent, while the share from coal plummeted from 51 percent to 40 percent, according to the Energy Department. Last year coal production fell to just 37 percent of the power mix, although it picked up slightly when natural-gas prices rose—a signal that should prices rise again, coal could regain some of its lost ground. Of course, that's a circumstance over which coal has no control, and, meanwhile, Obama's climate rules will all but ensure electric utilities won't invest in new coal plants.

The fact is, coal is a smaller piece of the economy than it once was. At the heart of coal's 2012 campaign message was an assertion that new EPA coal rules would cost millions of jobs. But, according to the Bureau of Labor Statistics, there are only 84,000 U.S. jobs in coal mining. While miners will surely suffer if coal continues to decline, the hard political fact is that the number of people employed in the industry just isn't enough to make a difference in a national election. The coal industry hopes that even if U.S. coal production shuts down, it could find salvation in overseas markets, by exporting coal to China and Europe. But Obama put the kibosh on that this week, too. He called on all world governments to end public funding for coal-fired power plants—a move the U.S. can enforce through its influence in organizations like the World Bank. "That definitely sent a signal that the U.S. doesn't support coal in the world," said Jennifer Morgan, an analyst with the World Resources Institute, a think tank.

Between the boom in natural gas, the force of the new regulations, and the diminished political clout of coal country, "I don't think they're having an existential crisis," another D.C. energy strategist said about the coal lobby. "I think they're already dead, and just don't know it yet."

That's left energy lobbyists in Washington openly questioning ACCCE's future; many say it might not be around a year from now. By all accounts, the only way for coal to carve a future for itself will be to do something that would gall many GOP operatives—ask the Obama administration for help.

Many also question whether Duncan, the ultimate Republican political operative, who started out by hiring Romney campaign staffers, is the right man for the job. Former Democratic Rep. Rick Boucher lives in coal-rich southwest Virginia, and he knows the politics of coal all too well. In 2009, he negotiated for coal to get huge carve-outs in a House climate-change bill, but his constituents voted him out of office anyway, just for backing the bill. Boucher, who now consults at the law firm Sidley Austin, said of Duncan, "I was puzzled by that. It seems that in hiring him, the organization moved to the right at a moment when the country is not moving to the right."

For coal to save itself, "it would be a very important first step to open a dialogue with the Obama administration and expand their support to strong Democratic and Republican centrist politicians," says Merribel Ayres, president of Lighthouse Consulting Group, a firm that advises many of the nation's biggest energy companies on lobbying and PR strategy.

"Fighting like it's a war is very different from trying to forge a truce," Ayres says. "Forging the game plan for a truce is very different than designing a battle plan."

THE LIFELINE

The term "clean coal" is tricky one; it can mean different things, depending on whom you ask. Coal is a dirty fuel. It doesn't just spew carbon dioxide, it also produces toxic pollutants such as mercury, which is associated with birth defects and neurological disorders, and sulfur dioxide, which causes acid rain. Thanks to a 1990 clean-air law, the coal industry is required to fit its smokestacks with filters and scrubbers that "clean" those toxins from the coal. And for a lot of the coal industry, that's what "clean coal" means. Last year, ACCCE sent out a mobile classroom—a van outfitted with examples of such filters and scrubbers—to "clean-coal" rallies in swing states to make the case that the industry has already invested in clean-coal technology. But smokestacks and scrubbers don't do anything about coal's carbon dioxide emissions—the stuff that causes climate change. And right now, there is no affordable technology to clean the carbon out of coal.

As it happens, a group of scientists are working on just that—a breakthrough technology called "carbon capture and sequestration," which would do pretty much what the name says. Carbon capture, installed in a coal-fired power plant, pulls the global-warming pollution from burning coal and sequesters it by injecting it deep into underground caverns. The good news for the coal industry is that carbon capture exists and that it works. The bad news is that for now, it's far too expensive to be deployed on a commercial scale. For a coal plant to install carbon-capture technology today would send the price of coal-fired electricity soaring.

"A breakthrough in affordable carbon capture is the lifeline for coal," said Alex Trembath, an energy analyst with the Breakthrough Institute, a California think tank, and the coauthor of a report out this week titled "Coal Killer: How Natural Gas Fuels the Clean Energy Revolution."

"There's still a lot of coal with us, but to use it, we have to make [carbon capture] affordable and cheap. That's a big if. But if the coal industry wants to survive, they've got to get together about carbon pollution, and think seriously about carbon capture."

Success is far from guaranteed. The Energy Department has been trying to find a breakthrough in carbon capture since the George W. Bush administration, and has so far spent more than $5 billion on the effort, but many scientists doubt the technology will ever work.

Affordable carbon-capture technology is coal's moon shot. Because the research is so expensive and the chance of a breakthrough so far off, only one entity is investing significantly in finding a solution: the U.S. government. Specifically, it's an Energy Department lab called ARPA-E, which stands for Advanced Research Projects Agency-Energy. The lab is modeled after the Defense Department's DARPA, which developed the Internet and other breakthrough technologies. ARPA-E's mandate is to find the 21st-century equivalent of an energy moonshot: cheap, affordable, reliable energy that won't contribute to global warming.

ARPA-E is also a signature Obama program. The funding to start the lab came from the president's 2009 stimulus law, part of $40 billion invested in clean-energy programs—the same funds Republicans derided as "green pork." ARPA-E was also a favorite of Steven Chu, Obama's first-term Energy secretary, a physicist who has devoted his career to fighting climate change and who earned the coal industry's undying enmity when he delivered a 2007 speech declaring "coal is my nightmare."

ARPA-E does groundbreaking work, but a study by the Electric Power Research Institute concluded that it would take $1 billion of government spending annually, for a decade, on carbon research to achieve a breakthrough. Last year, ARPA-E's entire budget was $400 million.

But other federal agencies are getting in on the carbon-sequestration act as well. On the heels of Obama's climate-change speech, the Interior Department announced that the U.S. Geological Survey will release the first-ever national geologic carbon sequestration assessment—in other words, the government is researching where carbon can be captured and stored underground, in a possible future fueled by carbon-capture coal plants.

The irony is extreme: The coal industry is deeply allied with the Republican Party and worked tirelessly to eject Obama from office. But its salvation may rest with his administration.

ADMITTING THE PROBLEM

Until this year, the members of ACCCE—companies such as Peabody Energy, American Electric Power, and Murray Energy—had almost never even talked about climate change and had shown little interest in working with the Obama administration. There are signs that attitude is shifting.

Earlier this month, I sat down with Duncan and ACCCE's senior lobbyist, Paul Bailey, at their downtown Washington office, a suite of sleek glass-walled rooms trimmed with silver and filled with all-white furniture, to discuss the lobby's new approach.

Duncan, with his campaign background, broad smile, and ease with talking points, will spend the coming months on Fox News and CNN, at town-hall talks and newspaper editorial-board meetings, trying to sell new, post-2012 coal talking points. But Bailey, a quiet wonk-cum-lobbyist who thinks and speaks with nuance and precision—about climate science, environmental policy, and the legal implications of EPA's climate regulations—will have the harder job. As the coal industry makes its first overtures to the Obama administration, it's Bailey who has gone to the White House, and it's Bailey who will represent coal in meetings with EPA.

I asked them, "Is coal having an existential crisis?"

Bailey looked thoughtful. "Is this our Nietzsche moment?" he mused.

"It's our Mark Twain moment," said Duncan. "The reports of our death have been greatly exaggerated."

Asked if burning coal causes climate change, Duncan had the air of a man ready to admit he has a problem.

"I'm not going to sit here and deny carbon and the concerns that are out there," he said.

The words were innocuous enough, but the message it conveyed was anything but. The industry that for so long stood on war footing with this administration sounds prepared to sue for peace. In fact, Duncan appears to have a surprisingly good command of climate science. He can speak comfortably, for example, about the number of parts per million of carbon dioxide in the atmosphere that scientists say will push the Earth to a so-called climate tipping point, a wonky, divisive subject on which it's highly unusual to find a former RNC chair and current coal lobbyist so conversant.

Duncan added, "The concerns are there. We want to offer solutions that keep us competitive in the world, make us secure, provide jobs for people, and have the best environmental footprint."

Earlier, in a conversation with Duncan late last year, I asked him how that might happen. The Republican coal lobbyist brought up Obama's pet clean-energy research lab. "They're doing some great research on this at ARPA-E," Duncan said. "It could make a difference for the country."

Bailey also has high hopes for ARPA-E. "There are technologies that are just over the horizon. There are all sorts of ways to reduce carbon in the air." Bailey has discussed inviting scientists from the ARPA-E labs to ACCCE's annual board meeting in November, to talk to the group's members about how their research can help.

Meanwhile, Bailey is gearing up to pay a visit to EPA, the same agency that coal companies spent months lambasting on the campaign trail. "We'd just like to start a conversation with them," he said.

While Republicans in the Senate have so far held up the confirmation of Gina McCarthy, Obama's pick to head EPA and thus to oversee the climate regulations, Bailey hopes she could be receptive to coal's entreaties to at least put out looser rules, with a longer time frame.

"The relationship between [Obama's first-term EPA chief] Lisa Jackson and coal was not good. We hope that if Gina McCarthy is confirmed, we'll have a better relationship with EPA."

THE DIVIDE

But it's far from certain how receptive ACCCE's member companies will be to a visit from ARPA-E's scientists, or to a push from Washington consultants to openly acknowledge coal's contribution to climate change, or to the idea of going hat in hand to EPA. The lobbying coalition is composed of a mix of companies—coal producers, electric utilities, and railroads, which transport coal—with a wide range of views on carbon, climate science, and the Obama administration. By all accounts, the groups have often struggled to find consensus. One former contractor to ACCCE put it this way: "Talk about a coalition that hates each other."

And the issue of climate change could cleave the coalition entirely.

One of ACCCE's most important members is Ohio-based Murray Energy, the nation's largest privately owned coal producer. "There is no relationship between the utilization of coal and climate change," company spokesman Gary Broadbent wrote to me in an e-mail. "Our members of Congress, and particularly the Obama administration, confuse scientific facts and evidence with their own beliefs."

And what about the idea that carbon-capture technology can save coal?

"The government has already spent substantially on carbon capture and storage ("CCS") technology, and we have not made progress," Broadbent wrote. "The promise of CCS technology is used by politicians to pretend that they are doing something for the coal industry, when they are not."

Electric utilities are another story entirely. ACCCE member American Electric Power, an Ohio-based company which owns the nation's largest fleet of coal-fired power plants, has been expecting Obama's climate-change announcement for months, and company officials have been meeting with EPA to negotiate the terms of the climate rules.

These officials praised McCarthy for working with them. "Early on, Gina brought us in to talk about the rules," John McManus, AEP's vice president of environmental services, told me earlier this year. "We talked about timing, technology, and cost. My sense is that Gina is listening, has an open mind; she wants to hear the concerns of the regulated sector."

AEP's answer to the climate-change rules has been more adaptive than antagonistic: Rather than accuse Obama of waging war on coal, it is simply closing its coal plants and turning to natural gas. "We support fuel diversity for the U.S., which means keeping coal in the mix for generation, but we also will be retiring a significant amount of coal-fueled generation in the next few years and expect that we won't been building any additional coal-fueled plants in the next few decades," said AEP spokeswoman Melissa McCarthy.

To survive, the coal lobby will likely have to show more of that flexibility.  The internal divides make it hard for the coal lobby to advocate for itself, but it's trying. The first step will be ACCCE's new summer campaign, which will involve far more conciliatory rhetoric and far less anti-Obama bombast.

It will also involve less money. For the past five years, ACCCE has fought for coal with huge television ad campaigns, with lavish annual budgets sometimes exceeding $40 million. But for coal to save its own life, the industry will need a lot more than new talking points. It will need to wake up to an entirely different reality, one that it accepts—not denies.