Coal decline: About that ‘elephant in the room’

October 18, 2012 by Ken Ward Jr.

There’s another story make the rounds that shows again why making the future of the Appalachian coalfields all about fighting the “war on coal” is a bad strategy. It’s from the folks at SNL Financial, and here’s how it starts:

Calling the uncertain future of Central Appalachian coal mining the “elephant in the room,” industry consultant Alan Stagg said he expects mining in the high-cost region to cease in the next 10 to 20 years.

Speaking at Platts Coal Marketing Days on Sept. 21, Stagg said producers in Central Appalachia need to accept that difficult physical mining conditions, combined with inescapable regulatory restrictions, will soon erase profitability.

“This is the elephant in the room. No one wants to acknowledge that reserve depletion is profound,” said Stagg, president and CEO of Stagg Resource Consultants Inc. “Mining conditions are difficult, and the cost to produce is high. That is a physical fact. It’s not pleasant. Nobody wants to acknowledge it. That is a fact, and companies that ignore that fact will not do so well.”

UPDATED: Pam Kasey over at The State Journal, has an interesting update to this story, reporting:

The State Journal contacted Stagg, president and CEO of Stagg Resource Consultants in Cross Lanes and a sought-after expert on the topic, after noting several recent media references (here and here, for example) in which he is said to have forecast a near-term end to Central Appalachian coal.

“I have seen that in one or two publications or sources and it misquotes what I said in the Platts conference,” Stagg said.

That was last month’s Platts Coal Marketing Days in Pittsburgh. During his Sept. 21 talk there, Stagg said he recalls responding to a reporter’s question about whether he sees Central Appalachian coal running out with something along the lines of “of course it’s going to run out some day — there’s a finite amount of coal — but I don’t see that happening in 10 or 20 years.”

An SNL Financial reporter wrote, “… industry consultant Alan Stagg said he expects mining in the high-cost region to cease in the next 10 to 20 years” — a statement that would rightly generate serious attention, if Stagg had said it.

But the reporter who asked the question, Platts’ Steve Hooks, wrote, “Stagg said he believes there will still be ‘some production’ from (Central Appalachia) in 10 to 20 years from now.”

Pam’s story continues, with Stagg asked what is causing the current Appalachian coal decline and if it’s a “war on coal” by EPA:

“No,” Stagg said emphatically. He has been talking about declines in Appalachian coal production for 10 or 15 years and sees current circumstances as only its most recent challenges.

“You’ve got coal-fired power plants that are closing. Some have been on the board for five years or more to be closed. They’re old, they’re inefficient. It was no secret,” he said.

The extended global and U.S. economic downturn has reduced demand for coal, he continued. Power producers have been lured to cheap natural gas.

And most fundamentally, in Central Appalachia, a century of mining has left thin seams of coal in small blocks that cost more to mine than other coal.

And, she writes:

“And by the way, yes, in my opinion, the Obama administration is against coal, and the Environmental Protection Agency has overstepped its bounds and the courts have pulled them back in,” he said. “But is that what’s caused the coal industry to be in the shape it’s in? No. It’s about markets.”

Stagg is irked when those who are in a position to educate the public and help plan for the decline of Appalachian coal use its decline instead for political gain.

While politicians, coal associations and other cheerleaders of the industry say regulations need to be rolled back in order to bring back Appalachian coal production, he said, “my point is, some of this stuff is structural and it’s not going to come back.

“That’s not to say the coal industry is down the toilet or the U.S. economy is not coming back, but that the Appalachian coal production curve isn’t going to turn and start ramping back up again to the glory days.”

SNL’s Darren Epps continues the story:

Stagg cast such a pall on the Central Appalachia coal industry that West Virginia Coal Association President Bill Raney, speaking later in the day, said he felt like a “funeral director.”


Given the structural changes in the region over the past several years, Stagg asked pointed questions of an industry that he said is reluctant to accept the realities facing the Central Appalachia coal fields.

“Are recent regulatory pressures a straw man in addressing problems facing the coal industry?” he asked. “Even if U.S. coal companies got all of their permits, what would they do with them? You cannot sell that coal at $40, $45 or even $50 per ton.”

This piece only amplifies the points explained in our Sunday Gazette-Mail piece last weekend, in which we reported:

During last week’s gubernatorial debate, Gov. Earl Ray Tomblin tried to offer an encouraging assessment of where West Virginia’s coal industry is headed in the wake of this year’s string of major layoffs.

“We certainly hope that, as the world economy picks back up, that the demand for coal will go back up, and a lot of these miners will go back to work,” Tomblin said.

In the presidential race, Republican candidate Mitt Romney has touted what experts say are greatly optimistic estimates of the life of the nation’s coal supply — if only regulators from the U.S. Environmental Protection Agency would let it be mined and burned. Likewise, President Obama has promoted what he calls “clean coal” as part of an “all of the above” energy plan. Running for re-election, Sen. Joe Manchin, D-W.Va., insists West Virginia coal can help America become “energy independent.”

Across West Virginia’s southern coal counties, such talk suggests that coal’s best days might be just around the corner, if regulators can be made to back off or new technology can capture dangerous emissions.

There’s just one problem: Analysts agree that much of the best coal in Southern West Virginia has already been mined. Thinner and lower quality seams are left, meaning production and productivity are dropping. Tough competition from inexpensive natural gas and other coal basins makes matters worse. New environmental restrictions only add to coal’s problems, and production is headed down regardless of air or water pollution restrictions.

If you want to read any of the reports on this issue for yourself, I posted links to some of them here.

One Response to “Coal decline: About that ‘elephant in the room’”

  1. mike4352 says:

    Many of us have posted for years that we need to diversify our economy in this state, and that not NEARLY enough is being done in that regard.

    I personally think(and have posted numerous times) that much of the time and energy that Environmentalists spend on fighting MTR mining would be better used in “encouraging” our state leaders to work harder to create a better business environment for manufacturing jobs in WV. We rank pretty far down the list in what these companies look for, so there is plenty of work to be done in this regard. More preassure here, and our economic outlook just might be a bit less tied to the fate of King Coal.

    I think everyone would welcome this change, and now is the time to do it (when the manufacturing is allready looking to relocate in many cases, in order to find a way to remain profitable). We have a hard working work force that needs the jobs, we have space for them to build … we just don’t have the legal / tax environment to be attractive.

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