In Central Appalachia, coal’s potential troubles are
running much deeper than the proposed environmental regulations. Both
public and private reviews note a reduction in production, citing not
just pending federal rules but also increased competition and the
depletion of the most recoverable deposits.
The coal companies
concur, saying that development could migrate to regions with more
accessible reserves and a lower cost of production. And while the easy
target is the U.S. Environmental Protection Agency that wants to cut
toxic emissions, all are acknowledging that the process is more labor
intensive and therefore less profitable. That’s because the coal there
is much harder dig out, leaving surface mining as the only other
possibility -- an even more controversial technique.
“Based on historical trend, most of the supply reduction is likely to be permanent,” says Arch Coal
in a quarterly assessment. “The 2008-2010 drop is shaping up to be the
largest fall-off in production yet,” in reference to Central Appalachia.
That production is shifting westward, it says, citing statistics that
Central Appalachia annual coal development could fall from around 200
million tons today to 99 million tons by 2035; a decade ago it was 300
million tons.
The U.S. Energy Information Administration agrees,
saying that Central Appalachian coal has “higher cost reserves” that
have already been “extensively mined.” That will result in more
production from western states, and potentially 1 percent more a year
between 2015-2035.
In this country, most of the coal comes from
Wyoming, West Virginia and Kentucky. Wyoming provides about 41 percent
of U.S. coal production, which is an increase from 18 percent two
decades earlier. Today, the roughly 443 million tons of coal mined from the Wyoming Powder
River Basin is shipped to 34 states, including those in the east. With
an expanding rail transportation network, coal emanating from that area
could flourish. It’s also easier to mine.
Underground mining is
one issue. Surface mining, or mountaintop mining, is another that comes
with regulatory impediments. Specifically, proposed EPA rules would
restrict the ability of mining companies to toss aside debris by setting
tougher water quality standards. It would require buffer zones around
the streams while requesting mining enterprises to move in phases so
that they can better monitor their environmental footprints.
Economic Diversification
What
to do? U.S. senators from coal-producing states are trying to stop the
EPA in its tracks, saying that the livelihoods of the affected citizens
would be harmed. But perhaps the longer range view would be the diversification of the economies there, and for them to become net exporters of other fuels.
In fact, the Marcellus Region that
stretches down the east coast is estimated to hold as much as 500
trillion cubic feet of shale gas. Penn State University says that such
assets would create 200,000 jobs and the American Chemical Council says
that 12,000 chemical-related jobs would be formed in West Virginia
alone.
By comparison, the coal mining industry in all of Appalachia employs 31,000 people, says the National Mining Association. As production falls there and as EPA regs kick in, that number will decline.
“The
increased competition from other sources of coal and energy has
negatively impacted production in Central Appalachia, illustrating that
the existence of coal reserves does not guarantee that the coal will be
economical to produce or competitive with other regions,” says a report
by Downstream Strategies.
“The declining competitiveness is due in large part to the increased
cost of producing coal in Central Appalachia, for both surface and
underground mining.”
The Morgantown, WV-based consulting firm
goes on to say that if West Virginia and other Central Appalachian
states are to cope with a perpetual decline in coal production, policy
makers will need to ensure that new jobs and fresh sources of tax
revenue become available.
It is cautioning against an
over-reliance on shale gas, noting the associated water quality issues
surrounding it as well as a history of volatile natural gas prices. The
firm is therefore concluding that the region needs to promote renewable
energy. It is suggesting a renewable portfolio standard whereby
utilities would have to supply a quarter of their power from green
sources by 2025.
Blaming coal’s woes on the proposed
environmental regulations tells only a fraction of the story. The rest
can be explained by competition from other coal states as well as from
cheaper and cleaner fuels. That makes the labor-intensive pursuit for
coal in Central Appalachia a tougher sell and the need for fuel
diversity there more essential than ever.
EnergyBiz Insider
has been been nominated in 2010 and 2011 for Best Online Column by Media
Industry News, MIN. Ken Silverstein has also been named one of the Top
Economics Journalists by Wall Street Economists.
