Bloomberg Businessweek (Asia) - - Features - BY PAUL M. BAR­RETT AND JAMES ROW­LEY

Abal­lad called Coal Keeps the Lights On took singer­song­writer Jimmy Rose of tiny Pineville, Ky., all the way to the fi­nals of Amer­ica’s Got Tal­ent in the sum­mer of 2013. AGT judges Howard Stern, the ra­dio shock jock, co­me­dian Howie Man­del, and supermodel Heidi Klum cheered and clapped. “That was a damn good song,” Stern de­clared. Rose, a 36-year-old for­mer coal miner, says high­light­ing the in­dus­try’s plight was a de­lib­er­ate choice: “It’s a song about a way of life that’s in dan­ger of dis­ap­pear­ing.”

Al­most ex­actly a year later, the singer’s mi­nor celebrity took him to a less likely venue: the or­nate main hear­ing room of the En­vi­ron­men­tal Pro­tec­tion Agency, where he tes­ti­fied at the in­vi­ta­tion of Mitch McCon­nell as part of the Se­nate ma­jor­ity leader’s de­fense of coal. The ef­fu­sive Rose and the dour McCon­nell made an odd pair. When Rose stood to lead a spon­ta­neous Pledge of Al­le­giance, an ev­i­dently sur­prised McCon­nell had to scram­ble awk­wardly to his feet. Rose went on to out­shine McCon­nell with a pas­sion­ate con­dem­na­tion of EPA reg­u­la­tions he said are turn­ing east­ern Ken­tucky into “a war zone.” “You won’t come to this poverty-stricken area,” he lec­tured EPA of­fi­cials. “You won’t come and look my peo­ple in the eye.”

Rarely dra­matic, McCon­nell read his tes­ti­mony in a char­ac­ter­is­tic drone. Even though he’s from Ken­tucky, the law­maker doesn’t claim long-stand­ing ties to coal. Be­fore com­ing to the Se­nate, he says, “as a lawyer in Louisville, was I pay­ing at­ten­tion to coal? Not much.” But since Pres­i­dent Obama took of­fice in 2009, vow­ing to com­bat cli­mate change, McCon­nell has po­si­tioned him­self as coal’s bul­wark—a cen­tral el­e­ment of his across­the-board cam­paign to thwart the pres­i­dent po­lit­i­cally.

Coal needs all the friends it can get. The in­dus­try is un­der siege from fed­eral reg­u­la­tion, most re­cently Obama’s Clean Power Plan, which went into ef­fect on Oct. 23 and seeks to re­duce car­bon emis­sions by 32 per­cent by 2030. Con­sumers and activists, mean­while, are per­suad­ing util­i­ties to close ag­ing coal-fired power plants. With fund­ing from Bloomberg Phi­lan­thropies, the Sierra Club’s Be­yond Coal cam­paign has helped shut down more than 220 coal fa­cil­i­ties over the past five years. (Bloomberg Phi­lan­thropies was cre­ated by Michael Bloomberg, founder and owner of Bloomberg LP, which pub­lishes this mag­a­zine.)

Even more dam­ag­ing than pres­sure from en­vi­ron­men­tal­ists has been com­pe­ti­tion from plen­ti­ful, in­ex­pen­sive nat­u­ral gas—a cleaner-burn­ing source of elec­tric­ity in­creas­ingly fa­vored by util­i­ties. Coal pro­vides 39 per­cent of the na­tion’s power, down from 50 per­cent a decade ago. Some 8,000 jobs have dis­ap­peared just from the coal­fields of east­ern Ken­tucky since 2010. Says Rose: “A lot of peo­ple are count­ing on Se­na­tor McCon­nell to fig­ure some­thing out.”

The fight can seem quixotic, given the chal­lenges fac­ing coal. The re­cent Paris agree­ment among na­tions to re­duce car­bon diox­ide emis­sions puts the in­dus­try un­der even more pres­sure, but McCon­nell wel­comes the mis­sion. He’s ex­e­cut­ing it with broad ges­tures as well as ob­scure leg­isla­tive ma­neu­vers. He hopes the hy­brid strat­egy keeps Democrats oc­cu­pied un­til Novem­ber 2016, when Repub­li­cans have a chance to re­take the White House and re­verse the Obama reg­u­la­tory of­fen­sive.

“It’s a last stand; the forces ar­rayed against coal are too pow­er­ful to re­sist,” predicts David Doniger, di­rec­tor of the cli­mate pro­gram at the Nat­u­ral Re­sources De­fense Coun­cil (NRDC). “The trou­ble with last stands, though, is that they can go on for a long time, and McCon­nell is a very de­ter­mined fighter.”

Ad­di­son Mitchell McCon­nell, 73, has built a three-decade Se­nate ca­reer on po­lit­i­cal savvy and pro­ce­dural mas­tery. Dur­ing an in­ter­view in his Capi­tol of­fice, he avoids per­son­al­iz­ing his re­la­tion­ship to the coal busi­ness. Asked about coal be­ing wo­ven into Ken­tucky’s DNA and what that means to him, he re­sponds: “Yeah, I think we fig­ured out that it was a big is­sue in our state be­yond the coal­fields start­ing in 2012, when Con­gress­man Andy Barr de­feated Ben Chan­dler in the cen­tral Ken­tucky dis­trict where there are no coal mines.” Barr, a Lex­ing­ton Repub­li­can, ousted the Demo­cratic in­cum­bent by link­ing Chan­dler to Obama’s ef­forts to curb car­bon diox­ide emis­sions from coal-pow­ered util­i­ties. To McCon­nell, any at­tempt to ar­rest global warm­ing re­quires a re­turn to me­dieval des­ti­tu­tion, es­pe­cially for his con­stituents: “I mean, in what way is it help­ful to have the planet have more and more peo­ple liv­ing in poverty, more and more peo­ple in the dark—lit­er­ally in the dark—po­ten­tially?”

The Se­nate ma­jor­ity leader didn’t be­gin his ca­reer as an arch­con­ser­va­tive. In a then-pre­dom­i­nantly Demo­cratic Ken­tucky, he rose through Repub­li­can Party ranks in the late 1960s and early ’70s as a mod­er­ate. Ac­cord­ing to a re­cent bi­og­ra­phy by jour­nal­ist Alec MacGil­lis, he named his cat Rocky af­ter Nel­son Rock­e­feller, the gen­er­ally lib­eral Repub­li­can gov­er­nor of New York. (An aide says the cat be­longed to McCon­nell’s ex-wife.) McCon­nell op­posed Ron­ald Rea­gan’s first two bids for the GOP pres­i­den­tial nom­i­na­tion, sup­port­ing Pres­i­dent Ford in 1976 and Ge­orge H.W. Bush in 1980.

He be­gan chang­ing di­rec­tion in 1984, when, un­der the tute­lage of con­sul­tant Roger Ailes, now the head of Fox News, McCon­nell won elec­tion to the U.S. Se­nate. He rode the Rea­gan revo­lu­tion, sup­port­ing arms for the right-wing con­tra guer­ril­las in Nicaragua, “tort re­form” that re­stricted con­sumer law­suits, and con­ser­va­tive ju­di­cial ap­point­ments.

Back­ing coal went with­out say­ing for a mem­ber of Ken­tucky’s con­gres­sional del­e­ga­tion, but it wasn’t an is­sue to which McCon­nell de­voted dis­pro­por­tion­ate at­ten­tion. “He was there for coal but didn’t have to worry about it much dur­ing the [Ge­orge W.] Bush years, when fed­eral pol­icy was friendly,” says Bill Bissett, pres­i­dent of the Ken­tucky Coal As­so­ci­a­tion since 2010 and, be­fore that, a pub­lic-re­la­tions pro­fes­sional in neigh­bor­ing West Vir­ginia. Util­i­ties faced no or­ga­nized na­tional op­po­si­tion in the early 2000s, when they pro­posed build­ing scores of coal-fired plants to re­place a gen­er­a­tion of ag­ing fa­cil­i­ties.

But then the mar­ket for coal shifted—and so did the pol­i­tics. Nat­u­ral gas made avail­able by hy­draulic “frack­ing” and hor­i­zon­tal-drilling tech­niques, com­bined with the 2008 fi­nan­cial cri­sis, scut­tled plans for ex­pand­ing coal. To­day, the cost of nat­u­ral gas elec­tric­ity, in­clud­ing power plant con­struc­tion, is about $73 per megawatt hour, ac­cord­ing to Charles Pat­ton, pres­i­dent of Ap­palachian Power, West Vir­ginia’s largest util­ity. For a con­ven­tional coal plant, it’s $95.

An­nual U.S. coal consumptio­n peaked in 2007 at 1.1 bil­lion tons and de­clined to 919 mil­lion tons in 2014, the least since 1992. Ken­tucky pro­duc­tion topped out ear­lier, in 1990, at 173 mil­lion tons. The state was dis­placed as the na­tion’s No. 1 pro­ducer in 1988 by Wy­oming, home to the re­source-rich Pow­der River Basin, which has cleaner-burn­ing coal than Ap­palachia. “The de­te­ri­o­ra­tion in Ken­tucky has been pretty steady, but peo­ple al­ways hoped things would turn around,” Bissett says.

As its for­tunes eroded, coal be­came an is­sue in the 2008 pres­i­den­tial cam­paign. In Jan­uary of that year, can­di­date Obama told the San Francisco Chron­i­cle about his sup­port for leg­is­la­tion pe­nal­iz­ing car­bon emit­ters: “If some­one wants to

build a new coal-fired power plant they can, but it will bank­rupt them be­cause they will be charged a huge sum for all the green­house gas that’s be­ing emit­ted.”

Af­ter tak­ing of­fice the fol­low­ing year, Obama pushed a ca­pand-trade bill that would have im­posed a limit on power plant CO2, re­quir­ing heavy emit­ters to buy pol­lu­tion cred­its from cleaner ri­vals. The House of Rep­re­sen­ta­tives, then con­trolled by Democrats, nar­rowly passed the leg­is­la­tion in June 2009. In the Se­nate, also dom­i­nated by Democrats, the bill faced a threat­ened Repub­li­can fil­i­buster or­ga­nized by McCon­nell.

For McCon­nell, coal was one bat­tle in a much larger po­lit­i­cal war. Then the Repub­li­can mi­nor­ity leader, he had been fight­ing al­most all of Obama’s ini­tia­tives. “The sin­gle most im­por­tant thing we want to achieve,” McCon­nell told Na­tional Jour­nal in 2010, “is for Pres­i­dent Obama to be a one-term pres­i­dent.”

He swung into ac­tion brand­ing cap-and-trade a “new na­tional en­ergy tax.” He and fel­low Repub­li­cans lob­bied mod­er­ate Democrats leery about sup­port­ing any­thing framed as a tax. McCon­nell even tried in a round­about way to take ad­van­tage of the BP oil spill that sum­mer, which had be­gun in April with the explosion of the Deep­wa­ter Hori­zon rig in the Gulf of Mex­ico. In a floor speech, he as­serted the “in­con­ve­nient fact” that BP had “helped write” the cap-and-trade leg­is­la­tion. BP, like Shell and other ma­jor oil com­pa­nies, had com­mented on drafts of cap-and­trade. Tar­ring the bill by as­so­ci­a­tion with BP seems des­per­ate, but at the time it ap­peared to help. Democrats wa­vered. ThenSe­nate Ma­jor­ity Leader Harry Reid never brought cap-and-trade to the floor. “The rea­son Reid didn’t want to sched­ule that vote is be­cause he had too many red-state Democrats who weren’t go­ing to vote for it,” McCon­nell says with an air of sat­is­fac­tion.

Af­ter the de­feat of cap-and-trade and Demo­cratic set­backs in the 2010 midterm elec­tions, Obama looked for ways he could move for­ward on cli­mate change us­ing his ex­ec­u­tive author­ity, a process that cul­mi­nated in the Clean Power Plan. “It’s really ar­ro­gant,” McCon­nell says. “This is not the re­sult of any law that’s been passed, and so you’ve got un­elected bu­reau­crats do­ing things that have a dra­matic, de­press­ing ef­fect on the econ­omy.” That’s a per­spec­tive widely shared in Ken­tucky, where, McCon­nell says, re­peated in­vites for vis­its from EPA of­fi­cials have been re­buffed. “They don’t want to see the face of this,” he says of the EPA.

“McCon­nell is the one per­son na­tion­ally who’s been say­ing for years that this is a war on coal, and he’s right,” says Ken­tucky state Se­na­tor Bran­don Smith, a Repub­li­can. “We’ve lost thou­sands of jobs, and we have noth­ing to re­place them.” He’s hav­ing break­fast at France’s Diner in Haz­ard, the seat of Perry County. As wait­ress Shelly Napier pours cof­fee, she notes that busi­ness is way down at the restau­rant (it’s al­most empty). Six of her male rel­a­tives have lost min­ing jobs in the past 18 months. “This is a nice town,” she says, “but you’re see­ing the worst of it—shut-down stores, empty build­ings.”

John Combs runs a chrome­plat­ing shop 90 min­utes away in Pikeville that re­fur­bishes hy­draulic parts for bull­doz­ers and other sur­face-min­ing equip­ment. In 2011 he em­ployed 72 peo­ple; to­day, 38. In 2014, Combs hosted a fundraiser for McCon­nell (Rose per­formed). “I give Se­na­tor McCon­nell all the credit in the world,” Combs says, “but I don’t know if he can stop this on­slaught from Obama and the Democrats.”

Brian Pat­ton is pres­i­dent of Moun­tain­side Coal, a com­pany in Wil­liams­burg, Ky., that mines high-grade coal used in the man­u­fac­tur­ing of com­puter chips and so­lar pan­els. In the past year, with de­mand from China erod­ing, he’s let go 40 of 140 work­ers. Be­fore this gig, Pat­ton worked for James River Coal, a larger com­pany that filed for bank­ruptcy pro­tec­tion for a sec­ond time in April 2014. More than three-dozen U.S. coal oper­a­tions have been forced into bank­ruptcy in the past three years, ac­cord­ing to re­search firm SNL En­ergy. Many are small, but in ad­di­tion to James River, the in­sol­ven­cies in­clude prom­i­nent names such as Al­pha Nat­u­ral Re­sources and Pa­triot Coal.

“This is more than a bad cy­cle; the shrink­age in ther­mal [coal used for elec­tric­ity] is struc­tural, and it’s not com­ing back,” says Jesse Par­rish, vice pres­i­dent at Lex­ing­ton, Ky.-based Black­hawk Min­ing, founded in 2010 to buy and com­bine the as­sets of fail­ing coal com­pa­nies. Black­hawk has trimmed pay­rolls and re­duced ben­e­fits to re­tirees. Once a pow­er­ful pro­tec­tor of min­ers’ rights, the at­ro­phied United Mine Work­ers of Amer­ica no longer rep­re­sents any ac­tive employees in Ken­tucky’s coal­fields. “The pol­i­tics has evolved from man­age­ment vs. la­bor to a uni­fied front of own­ers and work­ers try­ing to sur­vive,” Par­rish says.

In his 2014 re­elec­tion cam­paign, McCon­nell won four east­ern coal coun­ties with pre­dom­i­nantly Demo­cratic elec­torates that he’d never won in five prior tries. And like Ken­tucky vot­ers, the coal in­dus­try, though fi­nan­cially crip­pled, has ex­pressed its grat­i­tude. Ac­cord­ing to the Cen­ter for Re­spon­sive Pol­i­tics, a Wash­ing­ton re­search non­profit, McCon­nell’s cam­paign com­mit­tee re­ceived $425,600 from min­ing in­ter­ests from 2009 through 2014—an unim­pres­sive amount that ranked only No. 15 among the se­na­tor’s con­trib­u­tors (se­cu­ri­ties and in­vest­ment firms ranked No. 1, with $2.3 mil­lion). But what min­ing could muster for McCon­nell, the cen­ter’s data show, made him coal’s top Se­nate re­cip­i­ent.

Once re­elected, McCon­nell be­came Se­nate ma­jor­ity leader, a ca­reer-long as­pi­ra­tion. The day af­ter he won, he told the Lex­ing­ton Her­ald-Leader that one of his top pri­or­i­ties would be “to do what­ever I can to get the EPA reined in.” His main tar­get, he said, was the Clean Power Plan, then in pre­lim­i­nary form. Un­der the plan, the EPA sets in­di­vid­ual state car­bon-re­duc­tion goals that col­lec­tively achieve the 32 per­cent cut by 2030. States

may pro­pose their own tai­lored pro­grams, in­clud­ing such steps as boost­ing use of wind, so­lar, and other renewables; im­pos­ing pe­cu­niary penal­ties on car­bon emis­sions, pos­si­bly in com­bi­na­tion with a cap-and-trade sys­tem; and switch­ing elec­tric­ity gen­er­a­tion from coal to nat­u­ral gas. If a state fails to de­velop a plan by 2018, the EPA will draft one for it.

The EPA main­tains that it doesn’t need con­gres­sional ap­proval to im­ple­ment the plan. McCon­nell dis­agrees. He’s des­ig­nated his top en­ergy aide, Neil Chat­ter­jee, to co­or­di­nate a mul­ti­fac­eted lob­by­ing-and-lit­i­ga­tion drive to stop the agency. “It’s un­usual to see a Se­nate ma­jor­ity leader play this role,” says Bissett of the Ken­tucky Coal As­so­ci­a­tion. “But there’s really no one else there to do it, so Leader McCon­nell stepped up.”

In March, McCon­nell sent let­ters to all 50 gov­er­nors urg­ing them to defy the EPA by sim­ply re­fus­ing to com­ply with the Clean Power Plan. Si­mul­ta­ne­ously, his of­fice served as a clear­ing­house for state law­suits seek­ing to stop the EPA in court. Twenty-seven at­tor­neys gen­eral have filed suit so far, as have nu­mer­ous util­i­ties and coal com­pa­nies. Roughly at the same time as his let­ter-writ­ing cam­paign, McCon­nell’s of­fice helped or­ches­trate a House hear­ing chaired by Rep­re­sen­ta­tive Ed Whit­field, a fel­low Ken­tucky Repub­li­can. Whit­field’s star wit­ness was the well-known law pro­fes­sor Lau­rence Tribe of Har­vard, who’s been re­tained by Pe­abody En­ergy, the na­tion’s largest coal com­pany, to ad­vo­cate against the EPA pro­posal. Ar­gu­ing that the Obama ad­min­is­tra­tion was in­fring­ing on state author­ity, Tribe com­pared the Clean Power Plan to “burn­ing the Con­sti­tu­tion.” “If I thought the case was a close one, I wouldn’t have taken it on,” Tribe says. “If I’m proven right on the law, then lots of time, money, and jobs will have been lost pur­su­ing an im­por­tant goal in an un­law­ful way.” His hir­ing was a PR coup, given Tribe’s pedi­gree and long re­la­tion­ship with the pres­i­dent. McCon­nell misses no op­por­tu­nity to note the con­nec­tion. “You know who Lau­rence Tribe is, right?” he asks dur­ing an in­ter­view. “He’s the most prom­i­nent lib­eral con­sti­tu­tional law pro­fes­sor in the coun­try.”

Nu­mer­ous other schol­ars have dis­puted Tribe’s ar­gu­ments for Pe­abody, but the law­suits over the power plan are a se­ri­ous mat­ter and will al­most cer­tainly end up be­fore the U.S. Supreme Court, pos­si­bly in 2017. In the mean­time, it’s un­clear how many states will vol­un­teer car­bon-re­duc­tion plans, as op­posed to wait­ing to see how the jus­tices rule.

By con­trast, some of McCon­nell’s other swipes at the EPA are more sym­bol than sub­stance. In March he of­fered a suc­cess­ful amend­ment to a non­bind­ing bud­get res­o­lu­tion that barred the EPA from deny­ing states fed­eral high­way funds for non­com­pli­ance with the Clean Power Plan. “Wash­ing­ton bu­reau­crats shouldn’t be al­lowed to pun­ish in­no­cent Amer­i­cans by threat­en­ing the roads and bridges they use,” McCon­nell said in a state­ment. This was pe­cu­liar, be­cause the EPA lacks author­ity to block fed­eral high­way funds in this man­ner—and the agency im­me­di­ately said so.

In an­other move, McCon­nell ap­pointed him­self to a Se­nate Ap­pro­pri­a­tions sub­com­mit­tee with ju­ris­dic­tion over the EPA. At a panel hear­ing in April, he cas­ti­gated EPA Ad­min­is­tra­tor Gina McCarthy: “My con­stituents want their dig­nity re­stored. They want to be able to work.”

McCarthy re­sponded: “I be­lieve the EPA has de­signed this plan in a way that we are re­spect­ing the cur­rent sit­u­a­tion in states and their en­ergy mixes, de­sign­ing our stan­dards to ac­com­mo­date the rea­son­able ben­e­fits in terms of re­duc­ing car­bon pol­lu­tion, and what those states can do.” She added: “We are act­ing un­der the author­ity that Congress gave us un­der the Clean Air Act, and we are go­ing to be pro­duc­ing a rule that is go­ing to with­stand the test of time in the courts.”

McCon­nell pushed through a Se­nate res­o­lu­tion dis­ap­prov­ing of the Clean Power Plan in Novem­ber, a to­ken vote with no prac­ti­cal ef­fect, but one he in­tended as a sig­nal to for­eign di­plo­mats gath­er­ing in Paris in De­cem­ber to ne­go­ti­ate with the U.S. over the global cli­mate pact. His mes­sage, as ex­pressed in an op-ed that ap­peared un­der his by­line in the Wash­ing­ton Post on Nov. 27, was that “com­mit­ments the pres­i­dent makes [in Paris] would rest on a house of cards of his own making.”

On Dec. 12, the Paris cli­mate con­fer­ence ap­proved an agree­ment fa­vored by the Obama ad­min­is­tra­tion that seeks to limit global warm­ing to less than 2 de­grees Cel­sius (3.6 de­grees Fahren­heit), us­ing prein­dus­trial tem­per­a­tures as a base­line. In a state­ment, McCon­nell warned against cel­e­bra­tion: “Be­fore [Obama’s] in­ter­na­tional part­ners pop the Cham­pagne, they should re­mem­ber that this is an unattain­able deal based on a do­mes­tic en­ergy plan that is likely il­le­gal, that half the states have sued to halt, and that Congress has al­ready voted to re­ject.”

Doniger, the NRDC cli­mate ex­pert, says McCon­nell is wag­ing a cyn­i­cal—and ul­ti­mately los­ing—bat­tle. “The only ques­tion he’s ask­ing him­self is, ‘How can I work this is­sue for par­ti­san ad­van­tage?’ ” Doniger points to a speech in Oc­to­ber de­liv­ered by Pat­ton of Ap­palachian Power in which the util­ity ex­ec­u­tive, a foe of the Clean Power Plan, con­ceded that in the long run coal can’t bounce back: “The de­bate largely at this point in time has been lost.”

“I sus­pect that in his heart, McCon­nell knows that, too,” Doniger says.

If the se­na­tor does know that the war over coal is un­winnable, he’s keep­ing it to him­self. He in­sists that in the 2016 pres­i­den­tial elec­tion, the Repub­li­can can­di­date could eke out vic­to­ries in coal-re­liant swing states by promis­ing to kill the Clean Power Plan and res­cue the in­dus­try. “It is an is­sue in south­east­ern Ohio and in western Penn­syl­va­nia,” he says, “and if you’re run­ning for pres­i­dent, you’ve got to carry those two states.” The Se­nate ma­jor­ity leader, in other words, is not yet rais­ing a white flag. <BW>

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