Coal Tattoo

Will production decline bring more coal jobs?

September 13, 2012 by Ken Ward Jr.

The good folks over at the West Virginia Center for Budget and Policy have just posted a fascinating piece by Sean O’Leary that looks at how the coming decline in Appalachian coal production might affect jobs in the industry. Here’s how it starts:

The projected decline of Central Appalachian coal production is one of the biggest challenges facing the state in the near future. While there are many reasons for the decline, some are irreversible, as much of the easy to reach coal has been mined out. This has prompted a great deal of concern in the state, chiefly regarding the potential loss of coal mining jobs, as it is assumed that as coal production falls, so will employment.

But that may not necessarily be the case. Some numbers suggest that while there may be an initial decline in employment, the job numbers may  bounce back, and actually increase in the future. The reason? Falling productivity.
Using new data from the Energy Information Administration, Sean did some calculations of what coal-mine employment mine look like in the region, based on EIA production and productivity numbers, and past EIA data on productivity. He found:
While employment falls along with production in the first part of the projection, employment starts growing again in the second part, as production stabilizes but productivity continues to fall. In fact, there may be 10,000 more coal jobs in Central Appalachia in 2035 than there were in 2010, despite production falling by 100 million tons, because of falling productivity.
For example, he found that Central Appalachian jobs would decline from 35,408 in 2010 to 25, 190 in 2020, but then increase again to 45,450 in 2035. Sean writes:

Granted, these are really rough estimates, but it does demonstrate that there are a lot of factors at play regarding the future of coal in West Virginia, and we really don’t know how it will all shake out. The mix of falling production and falling productivity may eventually increase jobs, but even in that case it takes years for the initial losses to come back.

It’s also important to note that the type of coal being mined in Central Appalachia is also changing. In 2010, about 51 of the 186 million tons, or 27%, of coal mined in Central Appalachia was premium or metallurgical coal, which is used to make metallurgical coke for steel making, as opposed to steam coal, which is used for electricity generation. However, the EIA projects that premium coal’s share of total Central Appalachian production is going to increase, reaching over 50% of total Central Appalachian production in the next few years.

And premium coal is sold at a much higher price than steam coal. In 2010, the minemouth price of premium coal in Central Appalachia was $100.94 per ton, compared to Central Appalachia’s average price of $77.10 per ton. And the price of premium coal mined in Central Appalachia is projected to continue to increase, reaching $184.16 per ton in 2035, while Central Appalachian steam coal prices stay flat.

This means that even if production costs rise in Central Appalachia due to falling productivity with more miners mining less coal, it may be feasible to mine Central Appalachian coal at a profit, due the growing prominence of the more valuable premium metallurgical coal.

He concludes:

The coal industry in WV, particularly southern WV, will be dramatically changing, and soon. That’s why it is so important to ask questions like “what is the effect on employment?” and prepare for that transition. While no one knows if these projections will occur as predicted, it is vital that the we take action, like our suggestion for the state to form a coal mining transition taskforce to help communities look for viable ways to ease the possible impact and search for viable economic alternatives and the creation of a Future Fund that ensures that communities and the state build assets from depleted coal resources.