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Appalachian basin coal seems to be struggling more than coal from other regions

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  • Many WV coal counties losing revenue

    Many WV coal counties losing revenue

    Monday, August 8 2016 10:15 AM EDT2016-08-08 14:15:05 GMT

    As Appalachian coal production continues its drastic decline, West Virginia’s coal-producing counties are  not only losing people as lifelong residents are forced to flee their homes in order to find work, but in many cases, they’re also relinquishing millions of dollars from their budgets.

    As Appalachian coal production continues its drastic decline, West Virginia’s coal-producing counties are  not only losing people as lifelong residents are forced to flee their homes in order to find work, but in many cases, they’re also relinquishing millions of dollars from their budgets.

While the nation's coal industry is seeing a drop in production all around, Appalachian producers seem to be taking the biggest hit. 

In 2012, production in Central Appalachia dropped 16 percent and prices dropped 18 percent, according to the Energy Information Administration. The price decline was the most significant decrease since 2009. In the Powder River Basin, which covers parts of Wyoming and Montana, production dropped 9 percent and prices declined by 30 percent. In the Illinois basin, which includes portions of Indiana, Illinois and Kentucky, production increased by 9 percent while prices decreased by 5 percent.

So why are other coal producing areas not seeing the same problems Appalachia faces?

The issue is a confluence of factors. Coal officials can rattle off a host of reasons why the entire industry is suffering, including a glut of low-priced natural gas, environmental regulations, decreased share of the generation market, mild weather and mining technology challenges. 

Producers throughout the nation also see a variety of legal and environmental challenges they must address. In the West, coal producers are facing challenges from people who want to halt coal exports to Asia by fighting permits for proposed deep seaports in Washington state and Oregon. In the Central Appalachian basin, however, much of the battle focuses on how coal is mined. 

While every basin faces its own unique challenges and feels the squeeze of declining market share, Chris Hamilton, vice president of the West Virginia Coal Association, said those regional challenges pall when compared to Appalachia. 

"Everyone here knows and sees daily the pressures we have converging together that don't exist everywhere else," Hamilton said. "(Other coal basins) may experience just a piece or two of what we deal with."

Hamilton points out that some challenges, such as natural gas prices, weather and thinning coal seams, are unavoidable. The problem, Hamilton said, is the deck currently seems to be stacked against Appalachian coal operators. 

Environmental Fight

Indirectly, Appalachia's long history of mining is partly to blame for its more rapid decline. Not only has a limited reserve been mined for a long period of time, but the mountains over the coal seams also have witnessed a long history of labor and environmental issues.

It doesn't help the region's coal producers that even when the mining versus environment argument is framed nationally, Appalachia is most frequently the battle ground. 

The Sierra Club, one of the biggest opponents of coal mining, operates the Beyond Coal campaign. Its director, Mary Anne Hitt, grew up in West Virginia and is based in the state. 

"While I live in West Virginia, I know that coal mining anywhere causes significant harm to communities, the land and the climate," Hitt said. "Because Appalachian mining is happening close to communities in a region with lots of streams and rivers, it's having severe impacts on human health and water quality. Over a dozen recent peer-reviewed studies have found a clear connection between Appalachian mining, air and water pollution, and human health threats ranging from birth defects to cancer to premature death."

Hitt said that mining in other basins, such as the Powder River and the Illinois basins, also see community members rise up in opposition. When they do, she said, they look to Appalachian coal activists. 

"Around the nation, those threatened by coal pollution get inspiration from passionate Appalachian community leaders like Maria Gunnoe, Judy Bonds and Larry Gibson," she said. 

Hitt said she thinks the nation will begin to move away from coal, even in a state as polarized as West Virginia. 

"Because coal mining has been a big part of Appalachia's history for over 100 years, tackling these challenges is polarized and difficult in our region," Hitt said. 

"But as Sen. (Robert C.) Byrd put it, ‘West Virginians can choose to anticipate change and adapt to it, or resist and be overrun by it.'"

Luke Popovich, vice president of communications for the National Mining Association, said the geography of West Virginia makes it more likely to face environmental scrutiny than other regions where coal mining takes place in more level terrain. In addition, Popovich said, a culture of enjoying the outdoors and natural beauty in the Mountain State may in some ways make "resource extraction more objectionable." 

"The Appalachian terrain brings with it, obviously, an environmental focus on the Appalachian region, particularly in terms of water quality because of the steep terrain and the intermingling of water quality and production," Popovich said. "You don't have quite, particularly with the Powder River basin, quite the environmental problems associated with those mines."

Diminishing Reserves

Different battles in the coal industry versus environmentalists have resulted in a scattering of victories and losses on both sides. Meanwhile, Appalachian coal miners face a potentially greater challenge: The fact that "easy" to mine coal already has been extracted and the resource is getting thinner, deeper underground and farther from key transportation resources.

"We will continue to be challenged here from a mining standpoint because our reserve base is diminishing," Hamilton said. "It's fair to say we have a smaller reserve base that has more geological and technical challenges in the mining of it."

Going forward, Hamilton said the diminishing reserve base in Appalachia will continue to cause problems, regardless of other factors influencing Appalachian coal decline. He said the industry is talking a lot about ways to lower the cost of mining seams that are considered extractable using today's technology but currently aren't economically practical to mine.

"If the price of the product continues to come down, some of these mines, due to thinness of seam or amount of reject and just the daily challenges operation bring about, will make them uneconomical," Hamilton said.

The amount of "reject coal," or coal that is not suitable for sale, these days is "real high," Hamilton said. 

Popovich said that costs of coal in Appalachia, largely a product of more challenging mining conditions, will continue to be a problem in the region. He said that while that might encourage some consolidation, Appalachian coal is expected to continue to be strong.

Hamilton said he thinks the industry will soon see a leveling off of production, though it will not be as high as what the state had become accustomed to a decade ago. He said the state might produce 100 million tons per year versus 155 million tons per year.

Coal Composition

"We still have some things that benefit us," Hamilton said. "We still have some of the best quality coals that are found anywhere in the world. It's a form of coal that is desired worldwide for steel-building."

The composition of Appalachian coal is partly why it can survive despite its higher costs versus other basins. Last week, the average price of Central Appalachian coal was more than $68 per ton, while in the Powder River Basin, coal sold for just more than $10 per ton. Another major competitor of Appalachia is the Illinois basin, where coal prices were around $48 per ton. 

Why are customers willing to pay varying prices? Part of it is transportation costs. Unlike coal from other regions, Appalachian coal has a more direct access to Eastern coal markets and Eastern export ports. 

Another major factor is the type of coal. Appalachian coal has a higher BTU content than both the Powder River Basin coals and coal from the Illinois basin. Powder River Basin coal, Popovich said, also has high water content. 

"Appalachia has very high-quality, high-BTU coal," Popovich said. "A lot of that coal has particular value and demand around the world."

Illinois basin coal also has a high BTU, but contains much more sulfur. That used to mean Appalachian coal was much more desirable. When the Clean Air Act first limited sulfur to prevent acid rain, it caused a boom for low-sulfur over high-sulfur coal.

Then, more regulations related to the Clean Air Act required companies to install scrubbers and other pollution reduction technologies. With nearly all of today's major coal-fueled power plants using scrubbers, the low-sulfur content of Appalachian coal is much less relevant, Hamilton said.

"It's kind of interesting if you follow this thing long enough," Hamilton said. "It's because of the (Environmental Protection Agency's) action with respect to the acid rain provisions of the act that allowed for these large mountaintop mines to develop and flourish."

That's changing, making coal from the Powder River Basin perhaps less of a threat than Illinois coal. The basin has seen a surge in production, pushing its first half of 2012 production to over 13 percent higher than the same period in 2011, according to the EIA. 

"There's still some encroachment of Western (coal) coming further East, but our biggest challenger today is probably the Illinois basin," Hamilton said. "It just so happens that's the president's home town. You can connect some of those dots, but they are doing much better in the Illinois basin than we are here in Central Appalachia."

Illinois, Hamilton said, also provides numerous financial incentives to help companies get permits and invest capital in its mines. 

Regions and Regulations

Federal regulatory standards also handle coal regions differently. Two different agencies are largely involved in different coal regions — the Office of Surface Mining in the East and the Bureau of Land Management out West. 

Popovich also pointed out that most mining activity in the West is done on federal lands. Because of that, not just regulation but leasing of the land and other business done in the Western coal basins often involves the federal government. 

Hamilton said both the EPA and the Mine Safety and Health Administration seem to make it more difficult to mine coal in Appalachia and particularly southern West Virginia. He cited numerous EPA rules and decisions that held up several hundred permits in the region.

He cited deep cut mining — a technique that would allow coal mining companies to cut deeper into coal and move machinery less often — as an example of where MSHA is holding up production in way that uniquely affects Appalachia. Currently, Hamilton said, MSHA has effectively had a moratorium on use of the technique which started in Western regions but was "advanced and perfected" in Appalachia.

"A deep cut mining machine is operated remotely where the operator stands back at a safe distance from the place where the coal is actually being extracted," Hamilton said. "He's under much more competent roof conditions. He's away from the area where the methane gas and the coal dust is being liberated."

He said this process would increase mine safety and production efficiency. The process would greatly aid underground operations, which are more prevalent in Appalachia than in other basins.


With domestic demand declining, all of the basins are looking to the value of exporting coal. Appalachia has somewhat of a head start in exporting its coal, Hamilton said. 

"We account for one out of every two tons of coal, or 50 percent, of all the coal exported from the country," Hamilton said. "There's real interest that we have, and our state government should have, in the state export market."

Hamilton and Popovich said the industry will increasingly look to export markets, particularly developing economies. Both said developing countries would rely on coal for much of new growth. 

According to the EIA, energy exports have continued to go up over the past several years as imports of energy products has decreased. China alone, a recent EIA report pointed out, consumes nearly as much as coal as the rest of the world combined.

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