A C.S.X. train loaded with coal winds its way into the mountains in this Nov. 21, 2004 file photo taken near the New River at Cotton Hill in Fayette County, W.Va. (AP Photo/Jeff Gentner)
West Virginia’s coal industry has seen production decline significantly over the past several years. After climbing to nearly 158 million short tons in 2008, the state’s coal mine output has tumbled in each successive year to an annual total of approximately 115 million short tons in 20141─or a cumulative decline of 27 percent. The overall rate of decline was much smaller during 2014, as mines in the state produced roughly 0.8 percent fewer tons of coal in comparison to 2013. Unfortunately, however, this slower rate of decline is expected to be temporary and preliminary data already indicate mine output fell 4 percent on a year-over-year basis during the first quarter of 2015 to an annualized rate of 110 million short tons.
While coal production within West Virginia has declined rapidly over the past several years, the downward trend in statewide production has been much more significant when compared to most of the nation’s other major coal-producing regions. Aggregate non-West Virginia coal production in the US was estimated to have increased 1.7 percent during calendar year 2014, leaving it at about 87 percent of production levels achieved during 2008. As a result, this has caused West Virginia’s market share of total U.S. coal tonnage to fall appreciably over the past several years, retreating from 13.5 percent in 2008 to 11.5 percent in 2014.
Why is this happening?
The fall-off in the state’s coal production has been driven by a combination of weak export demand, declining domestic use of coal in electricity generation, changes in emissions compliance standards for utilities and increasingly challenging geologic conditions in Southern West Virginia.
The short-term forecast:
The baseline forecast calls for state coal production to decline to approximately 104 million short tons in calendar year 2015 before contracting further to 98 million short tons in 2016. Numerous factors are expected to weigh on West Virginia coal production over the next two years, with declines likely in both the state’s northern and southern coalfields. After replenishing their coal stockpiles following an extremely cold first quarter of 2014, inventories of coal at electric utilities grew appreciably over the latter half of the year and have stayed at relatively high levels through the first several months of 2015 due to increased use of natural gas. Utilities are expected to draw down from existing stockpiles slowly in 2015, which will weigh heavily on thermal coal production. Domestic industrial use and export demand for coal are also expected to remain weak during the next two years.
And the long-term forecast:
Coal production in West Virginia is expected to rebound moderately between 2017 and 2020, rising to an annual average of nearly 105 million tons in 2020. Retirements of coal-fired generation will taper off and, while no measurable amount of capacity additions to the coal-fired fleet are likely, an expected increase in natural gas prices should allow coal to regain some share of electricity generation. For the remainder of the outlook period, statewide coal production is expected to fall, contracting to less than 96 million short tons in 2035. This will be driven entirely by losses in production in the state’s southern coalfields. Northern West Virginia production will likely experience a solid rebound through 2020 that will then remain relatively stable level over the remaining portion of the forecast.