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Southwest Virginia coal production continues decline

Coal has seen its share of booms and busts throughout the past century, but some say the current downturn in the industry is the worst they can remember.

“The only one I can remember like the one now was in the mid-50s,” said Harry Childress, who has worked in the mines his whole life and now is president of the Virginia Coal and Energy Alliance. “I remember my dad being out of work and looking for odd jobs and trying to provide for us. But it came back.

“Now, I don’t know.”

Here’s what he means by a bust: Southwest Virginia produces about half the coal it did 10 years ago.

The tonnage of coal produced has dropped by about 2 million tons per year since 2011, and appears to be on track to do so again this year.

And Alpha Natural Resources, one of the largest coal producers and leading producer of metallurgical coal, has lost about 5,000 employees since 2011, as it slimmed down after acquiring Massey Energy.

The numbers

In 2014, Virginia produced 15.3 tons of coal, according to the state Department of Mines, Minerals and Energy, which keeps track of mines in the state and the tons produced, people employed and hours on the job.

In 2004, with 4,558 employees reported to the DMME, 30.2 tons of coal were produced. Last year, there were 3,632 employees, and about half as much coal produced.

The number of mines operating in the state has steadily declined in the last decade — in 2004, there were 294 mines, and in 2014, just 216.

Employment numbers are reported to the DMME by the companies, spokeswoman Tarah Kesterson said.

Since July 2014, more than 500 Virginia miners have been laid off, and Alpha Natural Resources announced then the layoffs of some 1,100 West Virginia miners. Alpha now has about 9,000 employees and operates 60 mines and 22 processing plants.

SunCoke Energy announced last fall that it would pull out of the coal-producing business altogether.

“Clearly, the coal business is stressed now,” said Kevin Crutchfield, chairman and CEO of Alpha, which is headquartered in Bristol, Virginia. “Five years ago, coal represented half of American energy. Now it’s 40 percent or lower.”

Mining jobs pay well — upwards of $70,000 a year. The loss of mining jobs means less spending in restaurants and stores, and it is hard to replace those jobs with employment that can pay as well, Childress said.

“It’s hard to bring a job in to replace what the miner makes. And mines aren’t being idled — a lot of mines are being completely shut down and pulled out,” he said. “And when you turn around, the market has to be awful good to start all of that infrastructure to get back into the mining area.”

The decline

A few factors can be blamed for the decline of coal mining in this region, according to Crutchfield and Childress.

One of them is an abundance of cheap natural gas, Crutchfield said.

Alpha does have some gas production in the Marcellus shale in Pennsylvania. The company doesn’t have any in Virginia.

“It’s kind of a … hedge against coal,” Crutchfield said of the ability to produce gas as well. “Our goal is to try to grow that in our portfolio.”

CONSOL Energy has also moved toward gas in the past few years, and is on track to expand operations more, according to company data. The company produced more than 235 billion cubic feet equivalents of gas in 2014, and expects to increase that number again this year.

Rayola Dougher, a senior economic adviser at the American Petroleum Institute, said energy forecasts, drawn from sources like the U.S. Energy Administration, indicate there will be a relatively flat demand for oil in the next 20 to 30 years, but an uptick in natural gas use, at the expense of coal, which is expected to make up a smaller share of the U.S. energy market during that time frame.

Several companies have announced they will convert coal-fired plants to natural gas, like American Electric Power, which will convert two units of the Clinch River Power Plant to natural gas in the next couple of years.

Jeff LaFleur, vice president of generating assets for the company, said a year ago that one unit of the half-century-old plant will go offline this fall to start the conversion process, and the other is expected to be converted in early 2016.

A third unit at the plant was slated for retirement. After the units are converted, AEP won’t have any coal-burning power plants in Virginia. And it doesn’t seem like any company has plans to build one anytime soon.

“No CEO of any utility in his or her right mind would build a coal plant right now,” Crutchfield said. “This is the only time I can think of there’s no coal plant going online.”

The second main reason coal has declined so drastically, according to Crutchfield and Childress, is federal regulation that has made it increasingly difficult to mine and burn coal in compliance with those regulations.

Crutchfield called them “overt rules against coal.”

“If you lose the battle based on free-market forces, we don’t have a problem with it,” Crutchfield said. “Energy in the U.S., and frankly, the world, touches every aspect of our lives. Part of my job is to protect coal, but part of it is to be a pragmatist. Costs are going to go up as a result of these actions.”

Cost of mining

Central Appalachian coal is expensive to mine, compared to coal in the Illinois Basin and the Powder River Basin, Childress said.

“It’s just difficult,” he said of mining here. “[There are] thinner seams and the conditions are hard because there’s a lot more rock.”

For a while, he said, Central Appalachian coal was on the rise, because the high-sulfur coal out of the Illinois Basin didn’t meet federal compliance with the Clean Air Act. But coal plants have since purchased scrubbers, which cleans the sulfur and other chemicals released into the air from the coal-fired power plants, and the mining industry has picked back up in the Illinois Basin.

“The Central Appalachian region produced low-sulfur, high-BTU, high-quality coal, and a lot of utilities went to that and [were] burning that, but now that they’ve got the scrubbers in place, they’ve switched back to the cheaper coal in the Illinois Basin,” Childress said. “It’s easier to get to, it’s easier to mine, the conditions are better, the seams are thicker [and] they’re not taking as much rock or surrounding matter with it. There are huge, large mountains of coal, and most of it can be gotten in the slopes, you don’t have to shaft down deep to get it.”

Crutchfield said Appalachian coal production peaked in 1997, and has been declining since. The Appalachian coal basin is the oldest in the U.S. and has been mined for more than 150 years.

“By definition, you mine the good stuff today and save the rest for later,” Crutchfield said. “It’s gotten more geologically challenging [to mine what’s left] and the cost structures have changed dramatically.”

source: http://www.roanoke.com