June 4, 2022 - Coal production is rebounding slowly in McDowell County as well as in the state, but with the current surge in worldwide as well as domestic demand, the potential market for coal is being hindered by many factors, from manpower to transportation.
Jason Bostic, vice president of the West Virginia Coal Association, said major power needs here and abroad have placed a premium on thermal coal especially.
“We have an enormous demand nationally now,” he said, as coal-fired plants in this country need coal because stockpiles are low.
If coal production is not ramped up, the result could possibly be blackouts in the summer heat, he said, as power usage could surge.
“It you told me 10 years ago we ever would see coal shortages at power plants in this country I would not have believed it,” Bostic said, adding that the explosion of natural gas prices has also helped turn attention back to less expensive coal as an energy source.
Coal stockpiles at domestic utility plants fell from almost 90,000 tons sub-bituminous coal (less carbon) in 2019 to just over 40,000 tons last year ,and the stockpile of bituminous coal (high carbon) dropped from about 60,000 tons in 2019 to 30,000 tons in 2021.
The overseas market has also opened up demand, especially in light of the Russian coal export sanctions, he added, driving the price of both thermal and metallurgical coal at never-before-seen levels, with thermal coal reaching $330 a ton this week and metallurgical recently topping $400 a ton.
Thermal coal is mainly used for power generation and metallurgical coal primarily for making steel.
“It is extremely elevated,” he said of prices. “We get calls every day from India. They need coal…”
Although the scenario is ripe for more West Virginia coal production, both thermal (Boone, Logan and Mingo counties and some in Raleigh County) and metallurgical (McDowell County and some in Mercer County), producing more is not as easy as it may seem.
Bostic said that is because of manpower problems, transportation issues, supply chain slowdowns and financing obstacles.
“There are tremendous opportunities,” he said, but these issues are stalling the response. “We are struggling to put back into production units that were idled for years … We cut so much in Southern West Virginia during the Obama Administration.”
Low sulfur thermal coal production is down 50 million tons a year since 2008, he added. “We just can’t flip that switch (of an immediate ramp up in production).”
An aging workforce and finding people to work has been a problem, he said, although the jobs are high-paying, often almost $100,000 a year.
Bostic said railroad transportation has been a “nightmare” in general as surface transportation cannot meet the needs and is slow to change its current structure.
Supply chain issues impact the availability of equipment and supplies coal mines need, he added.
Besides that, banks often don’t want to lend money to mining operations needing capital to get started, he said, because the word “coal” is used when applying.
Bostic said the mines that are operating are doing the best they can to keep up with demand.
But as far reopening mines, it is a slow process.
“If we can staff them and get the equipment and get assurance for transportation, the market is certainly there,” he said, adding that they get both international and domestic calls looking for thermal coal to make up shortfalls.
Bostic said the Coal Association has turned to the state for help.
Association President Chris Hamilton spoke to the state Public Energy Authority last week, he said, explaining the situation and asking for any assistance they can provide, especially in the area of financing.
Short-term, low-interest loans would help to get some operations up and running.
Bostic said the state and country need to keep existing coal-fired plants running, producing the megawatts to help maintain lower prices and provide a stable part of the power grid.
The phasing out of coal-fired plants has exacerbated the grid issue.
West Virginia still has eight coal-fired plants.
As the coal market slowly improves, one of the crucial indicators of coal production in McDowell County is the coal severance tax, money the county collects per ton produced.
Bostic said McDowell County has metallurgical coal and the market is there, if all of the obstacles in producing more can be overcome.
Before the pandemic, the coal severance tax was averaging bringing in over $140,000 a quarter into county coffers, a number that was increasing.
But Cindy Thompson, McDowell County Deputy Tax Officer, said it plummeted in 2020.
For example, the last three months of 2019 (October, November and December) brought in $202,575 to the county from the tax as production was rising.
But for the last three months of 2020 the county saw only $72,208.
However, for those same months in 2021, that number doubled to $146,430.
Thompson said the coal severance tax revenue in October 2020, which was for the prior three months — July, August and September — was $79,661.
For the same three months in 2021, the tax recovered to $122,911.
At the beginning of 2021, January through March, the impact from 2020 was still being felt with the first three months bringing in $82,645. For the first three months this year, however, that number has jumped to $122,340.
“It started going back up last year,” Thompson said of the revenue for the later months in 2021, a trend seen in the first three months of 2022 as well.
Coal severance taxes have always given a boost to a county struggling for revenue because of a sparse tax base.
Frances Hale, director of the county’s Economic Development Authority (EDA), said the organization is partially funded by that tax and it’s been a struggle.
“It has gone up a little from what it was,” she said, but it is especially hard on the EDA, which wants to be in a financial position to bring in new businesses, and new revenue.
After years of struggling with finances, Hale is hopeful, but not sure if the coal tax revenue for the county will keep rising.
“I don’t know how long it’s going to last,” she said. “We almost bottomed out.”
Production statistics for the county were not available for 2020, but in 2019 McDowell County had 1,101 mining industry employees producing 3.8 tons of coal.
In 2021, 945 employees produced 2.7 million tons.
Statewide numbers show total production in 2019 was 100.3 million tons with at least 113 mines operating and total of 53,864 employees (37,127 of these independent contractors).
Almost 70 million tons were produced in 2020 with 89 mines operating and 50,000 total employees.
In 2021, a rebound showed about 80 million tons produced in 111 mines and about 50,000 employees.
In 2022 through May 25, more than 26 tons of coal have been produced with 107 mines operating and 58,744 employees (45,193 of those independent contractors).
Growth is expected through this year into next year, but not at the pace needed.
In the meantime, Bostic said power blackouts, or rolling blackouts, are possible this summer as demand surges, especially in high population areas, and coal-fired plants run low on coal in a national power grid that is already being stressed.