A confluence of economic, environmental and regulatory factors will cause a 39 percent reduction in state coal production since its last high point in 2008, according to a new report from researchers at West Virginia University.
Coal Production in West Virginia: 20152035 was prepared by WVU’s Bureau of Business and Economic Research in spring 2015 to assess the coal production outlook in West Virginia over the next 20 years. The University’s most recent report was conducted in 2012.
The report details significant challenges for the coal industry in West Virginia. It shows large declines in production over the past several years 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 the southern part of the state. The forecast sees, in general, continuing production decline through 2035.
“It is vital that we understand the recent decline in coal output and why it has occurred,” Deskins said. “We need to have a good idea of how much coal production we can expect to maintain in the state as we think about developing our economy going forward.”
Deskins emphasized that demand for coal is affected by a mixture of domestic and international forces, which have shaped not only the downward trend in statewide coal production, but also a divergence in patterns between the state’s northern and southern coalfields.
“One fact that many people do not realize is that the decline in coal production has not occurred evenly across the state,” Deskins said. “The recent decline has entirely been driven by a drop in southern West Virginia coal output, while production in the northern part of the state has actually risen the past few years. This divergence is due, at least in part, to lower levels of productivity in the southern part of the state, which have led to demonstrably higher production costs many of the region’s remaining coal reserves.”
The report shows that electricity generation represents the largest source of domestic demand for West Virginia coal, but sales to that market have declined over the past decade.
Additionally, there has been a significant geographic shift in sourcing for electric utilities toward northern West Virginia coal due to a combination of geological, economic and regulatory factors.
The installation of pollution control equipment has allowed electric utilities to burn the higher sulfur coal more commonly found in Northern West Virginia, where production costs are lower, while still meeting federal clean-air emissions requirements.
Major points of the report include:
- After reaching nearly 158 million short tons in 2008, West Virginia’s coal mine output has tumbled in each successive year to an annual total of approximately 115 million short tons in 2014.
- The baseline forecast calls for state coal production to decline to approximately 104 million short tons in this year before contracting further to 98 million short tons in 2016.
- Coal production in West Virginia is expected to rebound moderately between 2017 and 2020, but for the remainder of the outlook period, statewide coal production is expected to fall, contracting to less than 96 million short tons in 2035.
- The downward trend in statewide production has been much more significant when compared to most of the nation’s other major coal-producing regions.
- While production for the state as a whole has fallen, production trends between the state’s northern and southern coalfields have diverged significantly in recent years.
- As recently as 2011, southern West Virginia mines accounted for 69 percent of coal produced in the state. By 2014, the southern coalfields account for 54 percent of West Virginia production.
- Overall, coal produced by southern West Virginia mines plunged 46 percent on a cumulative basis between 2008 and 2014, falling from nearly 117 million to less than 63 million short tons over this time period. By comparison, at the same time, several of the state’s northern-producing counties have recorded strong increases in coal tonnage. Coal production in Northern West Virginia increased at an average annual rate of nearly 8 percent per year between 2011 and 2014, hitting an estimated 53 million short tons, that region’s highest level of coal tonnage since 1991.
- In addition to the outright decline in use of West Virginia coal by domestic electric utilities, there has also been a significant geographic shift within the state in terms of where coal sourced for electricity utilities is being actively mined. The shift stems from a combination of geological, economic and regulatory factors, particularly the installation of pollution control equipment that has allowed electric utilities to burn higher sulfur coal more commonly found in Northern West Virginia, where production costs are lower, yet still meet federal clean air emissions requirements.
The report also provides alternative coal production scenarios based on deviations in domestic economic growth and global export demand compared to the baseline forecast analysis. In addition, the report examines changes in the regulatory environment and how they will affect coal production in terms of shifting fuel choices made by the electric and industrial sectors.
The full report is available for free download in PDF format on the College of Business and Economics’ Bureau of Business and Economic Research website.
CONTACT: John Deskins, WVU College of Business and Economics
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