At last -- coal is back
BY GREG EDWARDS
Industry resurgence is seen as a tonic for the state's sagging production. Virginia coal companies are scrambling to find more miners. The U.S. coal industry is now seeing its first good times marked by sharp price increases for coal -- since the early 1980s. Virginia coal companies are sharing in the long-overdue recovery of domestic and export coal markets.
The upturn in the business, which began in late 2003 and has continued since, has prompted companies to open new mines, buy new equipment and hire more workers.
Coal-mining employment has increased by roughly 1,000 workers in the past two years, according to the Virginia Employment Commission.
Michael Quillen, president of Alpha Natural Resources Inc. of Abingdon, believes the current coal boom is not about to bust. It has staying power.
For one thing, Quillen said, coal com panies are prevented from oversupplying the market now -- as they did in response to past market improvements -- because of the long time it takes to increase production.
Companies can expect to wait for three years on permits to open mines and 18 months for delivery of new equipment, he said.
Also, the inability of U.S. railroads to react quickly to the increased demand for coal has held the industry back.
Katharine Kenny, a spokeswoman for Massey Energy Co. of Richmond, said her company would have shipped roughly 5 million more tons of coal last year except for the lack of rail service.
Still, steady growth demand for electricity to feed homes and businesses has the industry's future looking bright, Quillen said. Conservation could curb that growth, but Americans, he noted, don't do that well with conservation.
Coal is burned to produce more than 50 percent of the nation's and 48 percent of Virginia's electricity. Competing sources of energy, such as nuclear and hydroelectric power and power generated by burning oil and natural gas, account for most of the rest.
Of the 1.1 billion tons of coal mined last year, 1 billion was sold to electric utilities.
Power plants operating on cleaner-burning natural gas have cut into coal's market share in recent years. But as the price of natural gas has more than doubled, power producers have turned their focus back to coal, for which the nation has an estimated 240-year supply.
A more immediate factor in coal's comeback has been the growing economic strength of China, Quillen said.
China no longer exports coal because it needs the resource for its own growth, and the loss of imported Chinese coal brought the Japanese and Koreans back to the United States in search of coal for their steel mills and power plants.
Last year's return of the Japanese and Koreans to the U.S. market drove the price of metallurgical coal used to make steel from $40 to $80 per ton and in some cases as high as $120 per ton.
Prices increased for steel-making coal an average of 21.5 percent in the domestic market and 50.4 percent in the international market, according to the U.S. Department of Energy. Virginia has high-quality, low-sulfur coal reserves that bring premium prices in both the steel and utility markets.
Accompanying the increased demand for coal has been an increase in coal-mining jobs.
After World War II, the number of coal miners in Southwest Virginia began to decline as mechanization replaced the old pick-and-shovel way of mining. Oil and natural gas also supplanted coal as the fuel of choice in many industrial and utility boilers.
The number of Virginia coal miners hit an all-time peak in 1942 at 19,416 but had declined to 9,454 by 1968.
Coal production began a comeback in the early 1970s to feed new coal-burning power plants and, in some cases, to replace oil, which had been hit by the first of two Middle East-related oil crises during the decade. The'70s saw an increase in coal employment, including the return of some miners who had left Southwest Virginia years earlier for jobs in Northern industrial plants.
During the 1980s and 1990s, production of cheaper (but lower-quality) coal from Western states, such as Wyoming, roughly doubled. At the same time, the export market, particularly in Asia, declined and several developments contributed to increased domestic coal supplies and lower prices for competing fuels such as oil and natural gas.
As a consequence, the price for central Appalachian coal settled in the $20-per-ton range, where it stayed for two decades.
According to the Virginia Center for Coal and Energy Research at Virginia Tech, the price received by Virginia mines for a ton of coal in 2000 was less than half what they received in 1980 when adjusted for inflation.
Low coal prices helped cause the closing of many small, less-efficient mines.
The decrease in mine numbers was accompanied by an increase in the dominance of larger producers and changes in the way coal is mined to increase efficiency and productivity.
Production by surface mines, which tend to produce more coal per employee, increased and more productive equipment was installed underground where conditions allowed.
Virginia coal-mining employment peaked a second time at 15,742 in 1977 and began a steady decline into the new millennium. By 2003, the number of coal miners in Virginia had fallen to 4,353.
In 1980, Virginia had more than 800 licensed mines, but by last year the number had fallen to 292. For a while, even as the number of mines and miners dropped, Virginia coal production began to increase, hitting an all-time annual peak in 1990 at 46.5 million tons.
Since then, however, production has trended downward with 30.5 million tons produced last year, the lowest annual production since 1963.
The drop in Virginia production can be attributed to a decline in the number of mines but also to the depletion of the state's best coal reserves.
Over the course of more than a century of mining in Southwest Virginia, the thicker, easier-to-mine coal beds, known in the industry as seams, were mined first. The tougher and more-expensive coal to mine is what remains.
The recent price increase, however, and accompanying increase in production should help stem the decline in Virginia coal production as the thinner seams can now be mined profitably.
Even as coal production declined in Virginia over the past 15 years, coal production and consumption remained strong nationwide.