Appalachia Today: Part 1 – The Death Of Coal

Photo: Coal miners work on a small local mine in West Virginia in the early 1900s.  

Death of Coal

Coal has been the driving economic force and the major source of mining employment in Appalachia for almost 150 years. Now, however, the industry is dying. Even if coal production stabilized at current levels, there is no viable chance that the current massive mining unemployment would not be affected in any significant way, and indeed it is most likely that employment on the mines will continue to diminish even if production stabilizes.

Several major factors account for the dying industry –

Demand for Coal

Photo: The advent of renewable energy in the form of wind and solar have proven both an economically and environmentally favorable alternative to coal production.

The current dominant use of coal in the U.S. is to produce electric power and the use of coal to produce electricity is on a rapid and perhaps irreversible decline. As late as 2005, coal generated over 50% of US electric power. Only ten years later, coal’s share in electrical production had fallen to 40%, and is projected to fall to 27% by the year 2030.[1]

The primary cause of coal’s precipitous demise is easily found—natural gas. Natural gas prices, the major competing alternative energy source for electric generation, have dropped significantly in the past few years, and this drop has placed great pressure on the demand for coal. At its peak in June, 2008 natural gas prices for electric power were $12.41 per thousand cubic feet. By April 2012, natural gas prices had dropped to $2.81 per thousand cubic feet and, as of 2015, had only recovered to around $5.19. The low price of natural gas coupled with its ability to produce electric power with less pollution has made it much more appealing to energy markets than coal and, as a result, natural gas has significantly cut into the demand for coal.[2]

Natural gas is not the only energy alternative that has negatively affected the coal industry. Solar and wind power have gained momentum as well. New wind power, for example, poses a threat because it is both cost efficient and enjoys strong public support as an environmentally-friendly source of energy.[3] Solar power is also gaining a greater presence as an alternative energy source. As of 2015, more people were employed in installing solar panels than coal miners extracting coal in the US.

Alternative energy sources have reduced coal’s role on the export market as well. China, a major importer of US coal, has recently begun a turn to energy sources other than coal both to improve public health and to lessen the threat to the environment. In Australia, coal mines are struggling to stay competitive in the energy market, just as in the United States [4]

Declining Coal Reserves

For the first time in its history, the coal industry is facing problems related to the depletion of the nation’s economically mineable coal, particularly in central Appalachia. In certain parts of the Appalachian coal basin, coal reserves are already almost exhausted, with active coal mining completely eliminated or reduced to negligible tonnages even in historic mining counties such as Clay County, Knox County, Whitley County and Leslie County in Kentucky, Lee County in Virginia, and Scott and Claiborne Counties in Tennessee. Whatever mining that may occur in the future in Appalachia is likely to be concentrated in a handful of counties which still have significant reserves of coal.

Coal has been mined in Appalachia since the 18th century. To date, about 35 billion tons of bituminous coal has been mined from an original reserve base of some 60 to 90 billion tons. Of the original reserves, perhaps 50 billion tons of recoverable coal remains, as the chart below demonstrates-

Photo: Coal miner working in challenging conditions

As the chart illustrates, the coal reserves[5] in Appalachia have been significantly depleted and the easiest and best coal already extracted. As a result, mining productivity is declining and mining costs are rising, which makes it ever more difficult for Appalachian coal to compete with the large and efficient Western mines for a shrinking steam coal market or with natural gas. Indeed, according to one industry analysis, as of 2018, 70 percent of the coal currently being produced in Central Appalachia will not be profitable at its current price.[6]

Certain parts of Appalachia, particularly eastern Kentucky and Tennessee, now have very limited reserves of economically recoverable coal. Other parts of Appalachia, such as southern West Virginia, have more significant reserves. Thus, it is likely that eastern Kentucky coal production will continue to decline faster than southern West Virginia coal production. However, southern West Virginia coal is in serious trouble as well, both from declining reserves and lower productivity. Production, the tonnage of coal produced per hour of work, plays a significant part in setting the price of coal and determining the costs and profits that will come from mining the coal.[7] Wyoming produces 13 times as much coal per man hour than West Virginia (albeit with less energy content). Even when BTU content is considered, Wyoming coal mining is almost ten times as productive as West Virginia mining. Moreover, the productivity problem in Appalachia is worsening. Between 2000 and 2010, coal mining productivity in West Virginia dropped over 50 percent (from 5 tons per hour to 2.4 tons),[8] with the decline the greatest in the southern coal fields.

According to the Energy Information Agency, the decline in production is likely to continue in all of central Appalachia. EIA projects that production in the region will decline from the 2012 level of 2.01 tons per man hour to .77 tons per man hour by 2040.[9] [10] While in 2005, 110 counties in the Appalachian basin produced coal, only three counties produced more than 20 million tons, and only nine more produced from 10 to 20 million tons.

Whatever the level of production in the region, the Appalachian mines in the future will not be spread evenly throughout central Appalachia. The remaining coal reserves in the region and therefore the location of future mines will vary dramatically from state to state and county to county. It is clear now that almost all mining in the region will be concentrated in a few counties and the mining will be done with ever fewer employees.

Future coal production in Appalachia is likely to be highly concentrated in 10 or so counties[11] in four states.[12] The other historically large coal producing Appalachian counties will fade from the scene and indeed are already fading due to depletion of their reserves and the higher mining costs.[13] When the reserves are depleted in a few decades in the major producing counties (Greene in Pennsylvania, Pike in Kentucky, and Boone and Mingo in West Virginia), the Appalachian basin, according to the USGS, will “enter into a period of steep decline unless large blocks of economically recoverable coal remain in the deep, unmined part of the basin.”[14]

In other words, Appalachian coal mining, as we have historically known it, as the way of life in the region for a century is in irreversible decline.

 

[1] Bloomberg, Michael. “Michael Bloomberg: Obama Didn’t Kill Coal; the Market Did : Ct.” Madison.com. August 6, 2015. Accessed August 21, 2015. http://www.bloombergview.com/articles/2015-08-04/obama-didn-t-kill-coal-the-market-did

[2] Sontakke, Mayur. “Must-know: Why Coal Producers’ Stocks Are Declining.” Overview: The Coal Industry in the US. July 8, 2014. Accessed August 19, 2015. http://marketrealist.com/2014/07/overview-coal-industry-us/

[3] Randall, Tom. “The Latest Sign That Coal Is Getting Killed.” Bloomberg.com. July 13, 2015. Accessed August 19, 2015. http://www.bloomberg.com/news/articles/2015-07-13/the-latest-sign-that-coal-is-getting-killed

[4] Riseborough, Jesse, and Juan Pablo Spinetto. “Three Years Ago This Coal Mine Was Worth $624 Million. Now It Sold For $1.” Bloomberg.com. July 31, 2015. Accessed August 21, 2015. http://www.bloomberg.com/news/articles/2015-07-31/the-600-million-mine-sold-for-a-dollar-underscores-ruin-of-coal

[5]. The term “coal reserves” refers to economically producible coal. The term “coal resources” applies to all coal in the ground, whether economically viable or not.

[6] Sean Cockerham, “More than two-thirds of Eastern Kentucky’s coal output is unprofitable, industry analyst says” Lexington Herald Leader, March 31, 2015 http://www.kentucky.com/2015/03/31/3777965_more-than-two-thirds-of-eastern.html?rh=1.

[7] “7 things you need to know about why coal is declining,” West Virginia Center on Budget and Policy blog, http://www.wvpolicy.org/7-things-you-need-to-know-about-why-coal-is-declining-in-west-virginia-2-of-7.

[8] “7 things you need to know about why coal is declining,” West Virginia Center on Budget and Policy blog, http://www.wvpolicy.org/7-things-you-need-to-know-about-why-coal-is-declining-in-west-virginia-2-of-7.

[9] U.S. EIA, 2014 Annual Energy Outlook.

[10] Determining how much in the way of economically recoverable coal still remains in Appalachia is complicated. First, there is the difference in demand for low sulfur and high sulfur coal. Low sulfur coal has been heavily mined in southern West Virginia, Virginia, and eastern Kentucky because electric utilities prefer it over the alternative of installing scrubbers to clean high sulfur coal in order to bring the coal into compliance with the Clean Air Act. As a result, according to the USGS, only about 10 billion tons of low sulfur coal remain, while there are approximately 40 billion tons of medium and high sulfur coal in the Appalachian basin that the USGS believes is mineable economically.

[11]. Milici and Dennen, Production and Depletion of Appalachian and Illinois Basin Coal Reserves, USGS Professional Paper 1625-F.

[12]. The counties are: PA- Greene; WV- Boone, Kanawha, Logan, Mingo and Monongah; VA- Wise, Buchanan; KY- Perry, Pike

[13]. These include: Fayette, Harrison, Marion, McDowell, Raleigh, and Wyoming in West Virginia; Allegheny, Cambria, Clearfield, Fayette, Indiana, Somerset, Washington, and Westmoreland in Pennsylvania

[14]. Milici and Dennen, at 10.