By May 29, 2015 Read More →

American coal facing tough competition from shale natural gas

American coal companies partly blame Environmental Protection Agency for their woes

American coal producers expect declining production and plenty of job losses as their product is battered by the shale revolution in states like Texas, Pennsylvania, and Colorado.

American coal

Market forces and EPA blamed for coal’s dwindling share of market.

West Virginia University researchers predict that state coal production will drop 39 per cent compared with the industry’s last high point in 2008 – less-than-encouraging news for more than 1,800 coal miners who learned last week they would likely lose their jobs.

Already-struggling southern coalfield counties would bear the brunt of the industry’s downturn, with an expected 29 per cent production drop in 2035, compared to 2014. The dwindling coal industry has ravaged that region with job losses, and has even necessitated cuts to government services.

The report rattles off a combination of familiar economic, geological and regulatory challenges: weak export demand; less use of American coal for electricity amid competition from natural gas; changes in emissions rules for power plants; and worsening geological conditions that make extracting southern West Virginia coal less productive.

The dismal projections don’t even account for a federal proposal to stem carbon emissions from American coal-fired power plants, part of President Barack Obama’s plan to stem global warming.

The report completed by WVU’s Bureau of Business and Economic Research also draws a stark divide between the state’s two coal-producing regions.

Even when assuming a stronger market for exports, in southern West Virginia “some reserves would become too depleted or fragmented to recover at nearly any price,” the report says.

Recently, struggling southern counties have laid off law enforcement officers and made other cuts, attributing them at least partly to falling tax money that comes from companies extracting American coal.

The northern coalfields’ production would remain “relatively stable” by 2035, but that would change with the carbon proposal added to the formula.

The northern region has remained more productive, while the south has struggled to keep mines open.

But because northern West Virginia coal is predominantly sourced to domestic power plants, its production would fall by 28 per cent by 2035, compared to 2014, considering the carbon plan’s effects.

Southern West Virginia coal wouldn’t be as rattled by the carbon plan, with production projected to drop an extra 9 per cent by 2035. Part of the reason is because demand for the region’s power-producing coal will have already dropped significantly, and much of the southern coal is used to produce steel, is exported, or both, the report says.

Overall production levels in 2035 statewide would be trimmed from about 96 million short tons to less than 79 million short tons under the carbon rule.

The report stressed that upcoming federal rules could face more legal challenges, administrative changes and shifts in deadlines to comply.

Both Democrats and Republicans in West Virginia have harshly criticized the proposed carbon limits.

“We recognize market forces play a large role in these decisions; however, the market is also being forced to react to overreaching regulations from the (Environmental Protection Agency),” Gov. Earl Ray Tomblin spokesman Chris Stadelman said in an email.

Northern West Virginia coal suffered the biggest blow in last Friday’s round of layoffs. Murray Energy said it warned 1,417 workers at five underground West Virginia mines of planned layoffs.

On the same day in southern West Virginia, Alpha Natural Resources told 439 workers that it expects to idle Rockspring Development’s Camp Creek underground mine and processing plant in Wayne County.

The WVU forecast says production will fall from 115 million short tons in 2014, to 104 million short tons this year, to 98 million short tons in 2016.

Despite a moderate rebound from 2017 to 2020, production would drop to less than 96 million short tons in 2035.

West Virginia produced 158 million short tons in 2008.

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