By July 13, 2016 Read More →

WVU Report: Coal industry struggles expected to continue through next decade

By WVU Today

MORGANTOWN, W.Va. — The downward trend for coal production in West Virginia is expected to continue in both the near and extended future, as significant declines in the state’s coal mining will continue to weigh heavily on the industry over the next two decades.

The coal production report, written by the Bureau of Business and Economic Research in the College of Business and Economics at West Virginia University, outlines major production declines in the recent past that will carry over for years to come. The decline is primarily attributed to the diminishing use of coal by domestic power plants driven by the coincident timing of stricter emissions standards and low natural gas prices, as well as weak export demand and challenging geologic conditions in southern West Virginia.

“After reaching nearly 158 million short tons in 2008, the state’s coal mine output has plummeted to 95 million short tons in 2015,” read the study. “The drop in statewide coal production has even accelerated in recent quarters, falling to an annualized pace of less than 73 million short tons through the first half of 2016.”

The study shows that West Virginia’s coal production is a tale of two regions. “As recently as 2011, southern West Virginia mines accounted for more than two-thirds of state coal production, but that share fell to roughly half by 2015 as southern West Virginia mines produced 59 percent less coal tonnage since 2008. Northern West Virginia coal production increased 16 percent between 2008 and 2015, though mine output has fallen appreciably over the past few quarters,” the report stated.

The long-term forecast shows even greater differences between the two regions. The southern coalfields will account for all of the downward trend in coal production, while production in northern West Virginia is expected to remain relatively stable.

In the short term, the forecast calls for coal production in West Virginia to continue to slow to a total of less than 68 million short tons for 2016 as a whole — likely an historical low. “Absent any unexpected improvements over the remainder of the year, total coal tonnage in 2016 could fall to its lowest, non-strike influenced level in nearly a century,” said Brian Lego, BBER research assistant professor and author of the coal production report.

The report forecasts a slight increase during 2017 up to nearly 70 million short tons, followed by weak domestic and global market conditions for both of the state’s coal-producing regions going forward. “Large stockpiles of coal at mines and power plants, along with the precipitous drop in coal use by utilities will weigh heavily on thermal coal production,” the report read. “At the same time, domestic industrial use and export demand for both metallurgical and thermal coal will remain weak well into 2017.”

The long-term baseline forecast sees a brief tick upward in West Virginia coal production. The industry will see a “temperate rebound” between 2018 and 2020, eventually climbing to an annual production total of 75 million tons in 2020. Retirements of coal-fired generation facilities will taper off and an expected increase in natural gas prices should allow coal to regain some share of electricity generation, while global market conditions for thermal and metallurgical coal should also stabilize. For the remainder of the outlook period, after 2020, statewide coal production is expected to fall, contracting to less than 67 million short tons in 2036. The state’s southern coalfields will account for all of the downward trend in production, as northern West Virginia production should remain at a relatively stable level over the remaining portion of the forecast, the study said.

The report also considers several alternate scenarios that could affect coal production in the long-run. The outlook will be substantially weaker if the EPA’s Clean Power Plan is eventually implemented as currently structured, falling to a low of 57 million short tons in the long run. On the positive side, stronger than expected export demand or higher than expected natural gas prices could boost coal production noticeably above the baseline forecast.

The full report is available from the WVU Bureau of Business and Economic Research for free download in PDF format at http://be.wvu.edu/bber/pdfs/BBER-2016-03.pdf. For further information about the WVU College of Business and Economics, follow B&E on Twitter at @wvucobe or visit be.wvu.edu.

-WVU-

CONTACT: Brian Lego, WVU College of Business and Economics brian.lego@mail.wvu.edu or 304.293.7829

 

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