Although the state’s coal industry is stable in the short term, it is declining in the long-term, a West Virginia University report said.
Coal Production in West Virginia: 2017-2040, released Wednesday, produced annually by the Bureau of Business and Economic Research in the College of Business and Economics at WVU.
According to the report, coal mine output totaled 80 million short tons last year, just half of the 158 million short tons mined in 2008.
The baseline forecast calls for statewide coal production to be about 89 million short tons this year and remain in the upper 80 million ton range into the early 2020s. However, the report said, decrease in demand for West Virginia coal will continue and lead to output shrinking below 80 million tons by 2030.
Several factors affect coal production, including the declining use of coal by domestic power plants — which the report says is linked to timing of low natural gas prices and stricter emissions standards —weak export demand and declining productivity from Southern West Virginia coal seams.
The news release said the state experienced steeper decreases in coal production compared to other major-coal producing states, although only a few states avoided double-digit drops in coal output last year.
Coal production activities also differ in the northern and southern regions of West Virginia. The report said in the southern part of the state, production decreased 61 percent between 2008 and 2016. In the northern part of the state, however, coal output increased 8 percent over that same period of time.
The news release said southern West Virginia accounted for more than two-thirds of the state’s coal output as recently as 2011 but now only produces 46 percent of the state’s coal.
The report said these differences between the northern and southern parts of the state will be a theme over the long term as supply and demand continue to weigh heavily on the industry over the next two decades.
Brian Lego, BBER research assistant professor and co-author of the report, said in the long term, healthier demand and tighter supply on global metallurgical coal markets will lift 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,” Lego said. “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.”
Lego said in the long term, coal tonnage shipped from the northern part of the state will decrease because of likely retirements of coal-fired power plants consuming 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,” Lego said in the news release.
“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 went on to say that thermal coal exports face long-term difficulties saying many importing countries have laid out plans to curtail and in some cases eliminate coal-fired electricity generation to cut CO2 emissions.
He said as a result, statewide coal production is expected to decrease below 80 million tons by 2030 and decrease further after 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,” Lego said in the release. “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.”
— Email: alannom@register-herald.com; follow on Twitter @AndreaLannom
