Coal's Regulatory Reversal: Navigating Opportunities in U.S. Federal Leasing Policy Shifts

The Trump administration's dismantling of federal coal leasing restrictions from 2017 to 2021 marked a historic pivot in U.S. energy policy, aimed at reviving the coal industry through deregulation and regulatory reversals. While the coal sector's long-term decline persists due to market forces like cheaper natural gas and renewables, the policy shifts have created fleeting opportunities for strategic investors. This article explores how coal equities and infrastructure assets could benefit from these changes—and why caution remains critical.

The Regulatory Reset: Key Policy Shifts

Under President Trump, the Department of the Interior (DOI) spearheaded reforms to federal coal leasing, ending the Obama-era moratorium on new leases and streamlining permitting processes. Key actions included:

1. Ending the Coal Leasing Moratorium (2017):
   The 2016 moratorium, which had frozen new federal coal leases pending environmental review, was revoked. This allowed renewed access to the Powder River Basin, a region holding 40% of U.S. coal reserves.

2. Streamlining Permitting:
   Amendments to resource management plans in Wyoming and Montana removed restrictions on coal mining, expediting approvals for projects like the Spring Creek mine.

3. Royalty Relief for Producers:
   The DOI introduced faster review processes for requests to reduce federal royalty payments, easing financial burdens on coal operators.

4. Reduced Oversight:
   The “Ten-Day Notice Rule” (revised in 2020) curbed federal oversight of coal mining violations, shifting authority to states.

Market Dynamics: Policy Gains vs. Market Realities

While regulatory tailwinds aimed to revive coal, market forces have proven insurmountable. U.S. coal production fell by 37% between 2017 and 2021, driven by:
- Natural Gas Competition: Hydraulic fracturing drove gas prices to historic lows, undercutting coal in power generation.
- Renewables Surge: Solar and wind capacity grew by 50%, displacing coal in the energy mix.
- Global Shifts: Declining international demand and China's coal import restrictions added pressure.

Despite short-term gains post-2017, coal stocks like Peabody Energy (BTU) and Arch Coal (ARCH) failed to sustain momentum, underscoring the limits of policy alone.

Strategic Opportunities: Where to Look

While coal's structural decline remains intact, investors can find niches in equities and infrastructure:

1. Coal Equities: Target Resilient Players

• Firms with Federal Leases: Companies with access to low-cost Powder River Basin reserves, like Cloud Peak Energy (CLD), may benefit from prolonged federal leasing.
• Diversified Operations: Look for coal miners with exposure to metallurgical coal (used in steel production), which faces less domestic competition than thermal coal.

2. Infrastructure Plays: Transportation Assets with Dual Uses

• Railroads and Ports: Coal-dependent railroads (e.g., Union Pacific (UNP)) or ports with coal terminals could see short-term gains. However, investors should prioritize assets that can pivot to other commodities (e.g., grain or renewables components).
• Power Plants: Infrastructure funds or utilities with coal plants retrofitted for carbon capture (CCUS) technologies might see value if federal subsidies expand.

Infrastructure ETFs have outperformed coal-specific funds, highlighting the sector's broader appeal.

Risks and Challenges

• Regulatory Uncertainty: Biden's 2021 reviews and 2024 court decisions on leasing policies create volatility. Future administrations could reinstate stricter rules.
• Demand Collapse: Renewables and gas are structural threats; coal's 20% U.S. energy share in 2017 dropped to 19% by 2021.
• Climate Pressures: Institutional investors are exiting coal, and global decarbonization targets limit long-term viability.

Investment Considerations

• Timing: Consider short-to-medium-term plays (1–3 years) tied to federal lease auctions or infrastructure projects. Avoid long-term commitments.
• Diversification: Pair coal exposure with renewables or natural gas investments to balance risk.
• Policy Tracking: Monitor DOI lease sales and legislative moves on climate policies (e.g., IRA provisions for CCUS).

Conclusion

The Trump-era regulatory reset created a brief window of opportunity for coal equities and infrastructure assets, but investors must treat these as tactical plays rather than bets on a coal renaissance. Focus on firms with adaptable business models and infrastructure assets with dual-use potential. As renewables and gas dominate the energy transition, coal's role will remain marginal—requiring investors to prioritize agility and risk mitigation over optimism.

In the coal sector, strategic opportunities exist—but they are fleeting.

Data as of July 2025. Past performance does not guarantee future results.