By June 29, 2017 Read More →

EDITORIAL: Coal-production report from WVU brings mixed news for West Virginia

Times West Virginian editorial

The good news involving West Virginia coal is the market has at least stabilized after the deep slump of recent years.

A slight uptick in the coming years is also possible.

The outlook for the long term, however, is not good, and there are significant differences for the northern and southern regions of the state.

These are conclusions from the coal-production report produced annually by the Bureau of Business and Economic Research (BBER) in the College of Business and Economics at West Virginia University.

They clearly illustrate the continued importance of coal to West Virginia along with the critical need to continue to put an emphasis on diversifying the state’s economy.

How deep was the coal slump? Coal mine output, according to the report, totaled 80 million short tons in 2016, just over half of the 158 million short tons in 2008.

What should we expect in coming years? While the baseline forecast calls for statewide coal production to approach 89 million short tons in 2017 and remain in the upper 80 million ton range into the early 2020s, the decline in demand for West Virginia coal will continue and lead to output sinking below 80 million tons by 2030.

The report highlights how the dramatic shifts in market conditions and regulations for domestic power plants have affected and will continue to shape statewide coal production.

Data show that West Virginia’s coal production activity is a tale of two regions. Production in the southern region, the report said, plunged 61 percent between 2008 and 2016, while northern West Virginia coal output has actually increased 8 percent over this same time period. Southern West Virginia mines, which as recently as 2011 accounted for more than two-thirds of the state’s coal output, now produce only 46 percent of the state’s coal. By mid-2015, both northern and southern West Virginia were producing roughly equivalent levels of coal tonnage, but during each of the last seven quarters, northern West Virginia has accounted for most of the state’s total output.

“Over the short term, however, healthier demand and tighter supplies on global metallurgical coal markets will provide a lift to production from some southern West Virginia mines. At the same time, thermal coal output from highly productive mining operations in northern West Virginia should hold steady,” said Brian Lego, BBER research assistant professor and co-author of “Coal Production in West Virginia: 2017-2040.”

“Furthermore, domestic use of coal in industrial applications is expected to pick up through the end of 2018, due in large part to an uptick in steel production.”

Significant change during the coming decade, though, is likely.

“Over the longer term, coal tonnage shipped from northern West Virginia will tick lower due to the likely retirements of coal-fired power plants that consume the region’s high-sulfur coal. Production from northern West Virginia will eventually settle within a fairly close range. Thereafter several mining operations in the region should remain competitive on price for domestic power producers under the market and regulatory conditions expected in the baseline forecast. By contrast, southern West Virginia will see output decline consistently, as rising costs that are attributable to depleted or fragmented reserves make some mines in the region uncompetitive and cause more utilities to shift their coal sourcing to other basins or switch to another fuel source altogether,” Lego said.

“Export prospects will come under pressure as well as the forecast progresses due to these same issues with high production costs, though compared to major met coal exporting countries in this case. Thermal coal exports face even more long-term difficulties since many importing countries have laid out plans to curtail (and in some cases eliminate entirely) coal-fired electricity generation in order to cut CO2 emissions. As a result, statewide coal production is expected to fall below 80 million tons by 2030 and decline further over the remaining outlook period.”

We stress that these are projections and are subject to change for the better or worse when it comes to coal.

Lego pointed out that “while stronger- or weaker-than-expected growth in the U.S. economy will have only a minimal impact on West Virginia coal output, natural gas prices and exports present the largest upside potential and downside risk to production over the long term. More importantly, however, shifts in the assumed trajectory of natural gas prices or coal export shipments will have noticeably different impacts on the state’s northern and southern coal-producing regions during the outlook period.”

We have also seen how political forces have been a part of the factors affecting coal’s viability.

Efforts to mine coal safely and use it efficiently must not be ignored as a push to make the most of other economic engines continues.

See more from the Times West Virginian

Posted in: Latest News, Opinion

Comments are closed.