For Central Appalachian coal, bad news continues

October 21, 2013 by Ken Ward Jr.

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The bad news just keeps coming for the Appalachian coal industry. First, there was this report from the Columbus Dispatch:

American Electric Power Company Inc. CEO Nick Akins shared his vision for where the Columbus-based utility is headed Wednesday, and his priority list didn’t include coal, AEP’s traditional go-to fuel source for its power plants. “We see the future for us being natural gas, energy efficiency, smart-grid activities and renewables,” he said during a Columbus Metropolitan Club program.

Contrast that to the coal cheer leading that Nick Akins was doing not so long ago in an appearance here in Charleston:

Although the amount of energy produced by coal will decrease in the nation — from 45 percent today to 39 percent by 2020 — a top electric utility company CEO said there is definitely a future for coal.

“Coal is naturally going to come down, natural gas will be the choice, but they’re really marginal,” said Nick Akins, president and chief executive officer of American Electric Power. “Once technology is proven, you’ll start to see coal come back. We still need coal . . . . If someone is trying to eliminate that, it’s just not going to happen.”

 And then there was this report from Erica Peterson at WFPL in Kentucky:

Eastern Kentucky’s coalfields are struggling…last year, coal production dropped to the lowest level since 1965, as utilities shift toward natural gas. Now, in the wake of news of mass layoffs in Eastern Kentucky’s coalfields, two of the nation’s larger utility companies are essentially pulling out of the region.

The Tennessee Valley Authority has already stopped buying Central Appalachian coal. Southern Company’s subsidiaries got 18 percent of their coal from Central Appalachia in 2012, but plan to reduce that to only one percent by 2016. Instead, both utilities will rely on coal from the Illinois Basin, which includes parts of Western Kentucky, as well as the Powder River Basin out west. Illinois Basin coal has a higher sulfur content than Central Appalachian coal, but updated pollution controls on most power plants allow them to burn the dirtier high sulfur coal and still comply with the Clean Air Act.

It’s interesting that the Columbus piece puts one face on the reasons for these changes:

Akins didn’t seem happy about leaving coal off the list, but he said it is being “taken out of the picture” as a fuel for power plants because of federal air quality regulations, especially proposed rules on carbon dioxide emissions.

While Erica’s story explained it this way:

James Stevenson is an analyst with IHS Global Insight. He says it all comes down to cost.

“Central App[alachian coal] is expensive,” he said. “It’s a region that is…people don’t use the term ‘mined out,’ but it’s heading in that direction. A lot of the areas that are being mined have been mined three or four times before.”

Market conditions used to favor Appalachian coal, because of the relatively high BTU and low sulfur content. But with updated technology, production in the Illinois Basin—where it’s cheaper to mine—is increasing.

“You’ve seen a big increase in acceptance and appetite for Illinois Basin coal,” Stevenson said. “A lot of plants are building scrubbers, which means they’re more or less agnostic to sulfur content.”

Of course, there are many reasons for the decline of Central Appalachian coal, as Downstream Strategies has explained in its two detailed reports on the issue (here and here).

It’s hard to escape the notion that folks in Southern West Virginia and Eastern Kentucky need to step up the work on projects to try to diversify the region’s economy, as the Mountain Association for Community Economic Development suggested in a new report last week. The Gazette noted in a recent editorial:

As we’ve said before, it’s time for West Virginia leaders to stop trying to blame the retreat of coal on federal pollution controls. Instead, they should launch intelligent planning for the altered economy that is taking shape before everyone’s eyes.

One Response to “For Central Appalachian coal, bad news continues”

  1. Steve says:

    Of course Mr. Akins vision for the future of AEP’s go to fuel will be natural gas. What else can he say, if its true that air quality regulations and rules on carbon dioxide emissions are playing a part.
    One must ask themselves if Mr. Akins really cares what fuel source his company uses, as long as the customer is served.
    The question will be at what cost will it be to the consumer? Natural gas will take a 13% increase in price this winter alone.
    Does the consumer have a choice?
    Technology may allow scrubbers to clean Illinois Basin coal, and it may be cheaper to purchase, but technology can’t raise the BTU rating. More will have to be burned. That holds true for natural gas also.

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