Analysts blame market, not feds, for coal layoffs; say mid-Appalachia at start of long production drop

Coal train at Cumberland, Ky.
(Herald-Leader photo by Charles Bertram)

The prevailing opinion in Central Appalachia seems to be that federal anti-pollution rules are to blame for the loss of coal jobs — the "war on coal" that officials in the region decry — but independent analysts of the industry say market factors have been more responsible for recent, large layoffs.

Most notably, Bill Estep reports for the Lexington Herald-Leader, they "pointed to historically low prices for natural gas and the unseasonably warm winter, which left power plants with stockpiles of coal. Other factors, such as the slow recovery in manufacturing and the broader economy, also have played parts in the drop in demand for coal." And while that is bad enough news for the region, analysts now say that Central Appalachia is at the front end of a steep, long-lasting drop in coal production. "Some of these mines are not going to come back," said Michael Dudas, a managing director at investment firm Sterne, Agee & Leach, Inc. who follows the coal industry. 

Changes in drilling technology allow companies to unlock vast new sources of natural gas, sending supplies up and prices sharply down. The May price for gas was 43 percent lower than just a year earlier, said Manoj Shanker, one of Kentucky's Education and Workforce Development Cabinet economists. Many U.S. utilities have switched from coal to natural gas for electricity generation as a result.

In April, the national share of electricity generated using natural gas matched coal's share, at 32 percent, for the first time since the U.S. Energy Information Agency began keeping such records in 1973. "The Central Appalachian coalfield, made up primarily of Eastern Kentucky and West Virginia, faces other challenges as well, including competition from cheaper Wyoming coal and relatively high production costs," Estep writes. "It also costs more to produce coal in Eastern Kentucky, in part because the area has been mined for a century. Companies naturally went after the best seams first; those that are left are harder to get at, meaning higher mining costs and lower productivity." (Read more)