Old King Coal: WV's Coal Industry Struggles for Stability During Continued Decline
By Charles Young
December 1, 2019 - Anyone who grew up in the Mountain State or has spent any amount of time visiting can probably sing the West Virginia Coal Association’s ubiquitous jingle, “Coal is West Virginia,” from memory.
The succinct song has played over the airwaves for years, reminding all those who hear it of the hundreds of years of coal mining history in West Virginia and the important economic role the industry has played throughout the state’s growth and development.
While the song still can be heard daily on radio and television stations around the state, its message and meaning have started to ring less true as the coal industry struggles to maintain stability and much of the state’s attention remains focused on the oil and gas industry.
While the song remains, the message of coal has become mixed at best.
The coal industry reached a production peak in West Virginia in 2008, when nearly 158 million short tons were mined. Over the next decade, production levels slowed until reaching a 40-year low of just 80 million short tons in 2016.
In 2017, West Virginia was still the second-largest coal producer in the nation, after Wyoming, and accounted for 12% of U.S. total coal production, according to information from the U.S. Energy Information Administration.
One-third of the almost 93 million tons of coal mined in West Virginia in 2017 was exported to foreign markets.
Coal-fired electric power plants accounted for 92 percent of West Virginia’s electricity net generation in 2018, while renewable energy resources — primarily hydroelectric power and wind energy — contributed 5.3 percent, and natural gas provided 2.1 percent.
At the end of October, one of the nation’s largest coal producers, Murray Energy, announced it had filed for Chapter 11 bankruptcy reorganization. Several other major coal producers have filed for bankruptcy protection this year, including Blackjewel Mining in West Virginia and Cloud Peak Energy in Wyoming.
Sen. Joe Manchin, D-W.Va., and Sen. Shelley Moore Capito, R-W.Va., both recently spoke on the Senate floor in favor of the passage of the Bipartisan American Miners Act of 2019. It would secure the pensions of 92,000 former miners and protect the health-care benefits of 13,000 miners affected by coal company bankruptcies.
“If we don’t pass this bill this year, 13,000 miners will lose their health care and 92,000 will see their pensions reduced to pennies. I will not let this happen,” Manchin said. “I will do everything I can to get this fix into the spending bill we’ll need to pass in December.”
Bill Raney, president of the West Virginia Coal Association, said the most recent data shows a continued downturn in the state’s coal production.
“According to the weekly production rates, we are running about 2 percent behind volumetrically than we were last year — somewhere between 1.5 and 2 percent,” he said. “Everybody seems to be holding their own. The price has come down a good bit, and some of that is natural for this time of year as we move into the winter, but it’s got a lot of moving parts that are in one way or the other affecting not only the demand for the coal,but the price.”
It is currently a “difficult time” for the industry as a whole, Raney said.
“We’re seeing several companies work through bankruptcy,” he said. “We’re hopeful that we can maintain and not have to pull back too much. But I think we will begin to see some of the mines cut some production. I can’t quantify that and I don’t know what that will be ...”
Raney said he is hopeful that the Bipartisan Mine Act will be passed before its consequences are felt.
“It seems that it is on track in D.C. to have some approval,” he said. “As I understand, they are going to draw on some of the interest from the Abandoned Mine Lands fund. It’s a matter that is being handled in Washington that is perhaps on a path to some resolution.”
During the upcoming session of the West Virginia Legislature, his organization will closely be following several pieces of legislation relevant to the industry’s interests, Raney said.
“There are always things that keep us out of step with the surrounding states that we compete with. (Severance) taxes of course are one, but the Legislature addressed that in part last year,” he said. “We’re still dealing with a lot of archaic laws that are not really used but are unique to operating in West Virginia and still add to the cost.”
The industry’s future is uncertain, but it presently remains an important economic factor in West Virginia, Raney said.
“We make up a little more than 10 percent of the GDP (gross domestic product) in the state, and I think we’ll continue to do so,” he said. “It’s enormously important to the areas and counties where we mine coal. It’s critically important to the families who depend on a mine operating every day. We’re hopeful that will continue and that we have as much sustained employment as possible.”
Dr. John Deskins, director of the West Virginia University Bureau of Business and Economic Research, said the coal industry is considered “roughly stable.”
“Our high level of production in 2008 was 158 million tons. Production fell down to nearly 80 million tons in 2016 and last year production was at 95 million tons,” he said. “We think production is going to come in this year somewhere in the low 90s, with more gradual erosion over the next few years.”
The oil and gas industry has helped to offset some of the state’s losses in terms of tax collections as coal has continued to decline, but the oil and gas industry has not provided as many new jobs as the coal industry has lost, Deskins said.
“Even though gas employs a lot of people and gas workers are making good money, there’s just not as many employees,” he said. “To produce a unit of output of gas just doesn’t take as many people as it does to produce a ton of coal.”
Much of the demand for West Virginia’s coal now comes from countries like China and India, Deskins said.
“We don’t expect any domestic growth for coal for electric generation. Nobody expects that in terms of analysts,” he said. “But there are still a lot of countries overseas that use a lot of coal. Because we have seen an overall drop in production and we’ve seen exports bounce back up, we’re way more reliant on exports now than we were 10 or 15 years ago.”
These foreign markets tend to fluctuate more than traditional domestic markets, Deskins said.
“The fact that we’re more dependent on domestic exports really exposes us to more volatility,” he said. “Even though it can be fine, it can also drop unexpectedly.”
The industry’s influence and importance is expected to continue dwindling in the decades to come, but coal still will be produced in West Virginia for at least the foreseeable future, Deskins said.
“The one thing that’s for sure is met (metallurgical) coal. The declines that we are talking about are happening with thermal coal. There’s still no alternative for steel production,” he said. “The met coal part of our overall coal production portfolio will be with us for decades to come. Even 40, 50 years from now, West Virginia will still have coal production, but it will be largely met coal.”