Testimony by Dan Cohn, Energy Finance Analyst
Institute for Energy Economics and Financial Analysis
To the Oregon State Legislature, House Committee on Emergency Management,
General Government, and Veterans
on House Bill 4083
I submit this testimony in support of House Bill 4083. The coal industry is exposed to significant investment risks as its market position rapidly declines. House Bill 4083 would be protective of the value of Oregon’s pension investments.
The present bill would direct the State Treasurer to avoid new investments into the thermal coal industry; review the pension fund’s current holdings for thermal coal companies; and dispose of thermal coal company securities in a prudent manner, with exceptions made for companies that are transitioning their business into renewable energy on a timeline acceptable to the Oregon Investment Council.
Decreasing the state’s exposures to coal is judicious in light of the industry’s declining prospects. “Thermal” coal is coal mined for combustion in power plants to produce electricity. It comprises the lion’s share of U.S. coal production. The amount of coal burned each day in the U.S. has fallen from about 2.8 million tons a day in 2008 to roughly 1.1 million tons a day in 2023—a 62% drop.
Coal’s share of electricity generation has fallen significantly and faces further declines. Final figures for 2023 are expected to show coal falling short of a 20% share of the U.S. power market. This stands in contrast to all years before 2020, when coal’s market share never dipped below 20%. This about-face is expected to persist in the near-term, as large coal stockpiles at power plants decrease the need for additional coal purchases. The U.S. Energy Information Administration predicts that total coal mined in 2024 could fall nearly 20% from last year, with further declines in 2025.
The coal industry has negligible prospects for turning around its shrinkage. No new coal-fired power plants have been announced in the U.S. for many years. Coal fired power generation cannot compete on price with natural gas, wind, or solar. Proposals to use coal for non-combustive purposes have not seen significant commercial deployment. Instead, electric utilities have announced new construction of nearly 12 times more solar, wind, and battery storage capacity than the next largest source of new generation, gas-fired power plants.
The future for the coal industry is reflected in its miniscule share of the stock market’s value. At the end of 2023, the coal industry weighed in at a mere 0.038% of the Russell 3000, a commonly recognized index representing U.S. stocks. (FTSE Russell. Russell 3000 Sector Weight Holdings Data. December 29, 2023.)
The present bill directs the Oregon Investment Council and State Treasurer to reduce exposure to coal in a way that is protective of the portfolio’s long-term value: