Among the stories I missed while I was out last week, and didn’t include in a brief roundup on Monday, was this interview that Alpha Natural Resources CEO Kevin Crutchfield did with The State Journal. Taylor Kuykendall reports:
The coal industry is undergoing sweeping and significant changes, bringing challenges coal companies are attempting to navigate without collapse.
Alpha Natural Resources, America’s second-largest coal producer by revenue, generated $7.1 billion in total revenue in 2011. The company is the largest supplier of metallurgical coal in the nation.
Just last week, however, Alpha had some bad news for Central Appalachia. It is “reshaping mine operations.” That move included mine idlings and production curtailments but also about 1,200 jobs lost by early 2013.
The move reflects an attempt to re-focus on metallurgical coal and to “tap into new thermal markets overseas.”
The reduction represents the elimination of about 9 percent of Alpha’s current workforce.
Alpha Natural Resources CEO Kevin Crutchfield was in Charleston last week and spoke with the State Journal about some of the challenges faced by Alpha and the industry itself. Crutchfield said that at the national level, coal has had a hard time selling its merits to the consumer. The result has been extreme pressure on an industry that many are not upset to see on the decline.
An April survey by Rasmussen Reports found that 53 percent of likely U.S. voters favor new regulations restricting emissions and only 29 percent oppose the regulations.
“I don’t think there’s any doubt” the industry has had difficulty selling itself to the public,” Crutchfield said. “Coal’s punched above its weight for a long time. Up until recently, we were 50 percent of the nation’s electricity; it came from coal. April of this year it was down to 32 percent. We’ve got to do a better job of telling our story – what we’ve done on the coal mining side and what the utilities have done, frankly.”
Crutchfield continued his previous struggle with understanding the pretty basic and clear science of global warming:
“Is something going on with the climate? It feels like it at times,” Crutchfield said. “Does man contribute to it? Most likely – it’s what we do. We’re impacting things just by our very existence. Are we the direct cause of it? That’s the question I have. I don’t really know, and more importantly, can we change it?”
Large-scale emissions reductions, Crutchfield said, are possible.
“It can be done. We have the technology,” Crutchfield said. “The question is do we really have the will, as a nation, to support it, or is this really something bigger than just coal.”
And he had some interesting remarks about the driving forces behind coal’s current decline in our region:
Coal, particularly coal mined from the Central Appalachian basin, has been on a long-term decline. Recently, dramatic drops in use of coal for domestic energy have some worried that this is not part of a cycle but the beginning of the use of sufficiently less coal regardless of the outcome of political debates.
“This one is a little different,” Crutchfield said of recent market decline. “The cyclical stuff we deal with. The economies go up and they go down. Natural gas prices go up and go down. The weather is hot; the weather is cold. We’re used to that in this business. What we’re not used to is the structural changes we see occurring through the manifestation of these regulations coming our way designed to restrict the use of coal for electricity.”
That’s not the only problem coal faces in Central Appalachia.
“Coal miners are pretty smart guys. They mine the good stuff first and save the rest for later,” Crutchfield said. “Over 100 years, what’s left are the thinner seams, seams that have more inherent ash in them, deeper, under drainage, harder to get to. It takes more capital to get to them, so when you’re talking about geological challenges, it’s actually more of a function of a deterioration along a continuum of really high quality coal and good conditions degrading over the passage of time.
“You still have a lot of great reserves, but they’re more costly to mine today just giving some of these physical and geographic characteristics.”
Alpha has exposure in three coal basins, including the Powder River Basin where coal seams, while containing lower-quality coal, are thicker and easier and cheaper to mine.
“Look, Central Appalachia, at its peak, was mining 300 million tons per year. It’s probably on pace this year to mine 160 million tons. It’s almost half of what it was back in 1997,” Crutchfield said. “That’s a function of a globally competitive marketplace and these deteriorating mining circumstances.”
But perhaps the most interesting parts of the story were one about politics and about the industry’s anti-Obama/EPA rhetoric:
It may be too late to reverse the decline of coal with political action. Would there be a full recovery under Mitt Romney as a president?
“I think under a Romney administration, the perception is that things would probably improve around coal,” Crutchfield said. “I think that’s probably right. I’ve read his energy policy. I believe he does understand the importance of coal and an all-of-the-above energy strategy not being just a bumper sticker but something we can put into practice. But then again, there’s been a lot of regulations put in place that are going to permanently alter the landscape.
“We can’t be fooled into thinking that this whole thing is going to get turned on its head … because it won’t.”
Despite using the word “war” himself in reference to agency efforts, Crutchfield said there is a need for less “divisive” rhetoric in the debate.
“I think to characterize it as a, I mean understand that everybody is talking about the War on Coal, but that’s just by its very definition a divisive phraseology,” Crutchfield said. “What we need to do is sit down and work together as adults and solve problems. … We need to sit back and have adult, constructive discussions around solving problems and it doesn’t seem Washington is capable of doing that right now for whatever reason. Everything is so divisive and so toxic, our nation can’t move forward like that.”