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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--For coal companies and their employees, geography is, to some extent, destiny. Demand for thermal coal by U.S. electric utilities is expected to drop 50 million tons this year, as low-cost natural gas and tighter federal environmental rules combine to squeeze King Coal. Mining companies have announced the closure of several mines in the Eastern U.S., although a few new mines have opened or re-opened there as well. Meanwhile, in the Western U.S., prospects continue to brighten for low-sulfur coal mined from the Powder River Basin and other formations, driven by rising domestic demand, as well as strong overseas demand.
CONSOL Energy Incorporated (NYSE:CNX) (Canonsburg, Pennsylvania), last month announced plans to expand its Wind Ridge Bailey Underground Mine in Greene County, Pennsylvania. When the Bailey expansion is completed by mid-2014, it will increase the mine's thermal coal production by 5 million tons per year, Lynn Seay, CONSOL's director of media relations told Industrial Info. The expansion, which will add a fifth longwall mining machine to the mine, will create about 60-80 new well-paying jobs, she added. CONSOL's capital budget for 2012 includes $205 million for projects to increase the company's coal production. The company sold about 50 million tons of thermal coal to utilities in 2010. For more on CONSOL's capital program, see January 11, 2012, article - CONSOL Energy Approves $1.7 Billion in Planned Spending in 2012. However, on Tuesday, CONSOL announced that it would reduce production and idle a portion of its Buchanan metallurgical coal mine in Virginia because of lower demand, particularly overseas, for met coal.
In Colorado, coal production jumped 10% in 2011, to nearly 28 million tons, after seven years of decline, The Denver Post reported. The construction of four new mines and expansions of eight existing mines are in the planning stage, led by the recent decision by Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri) to invest about $200 million to expand production at its Twentymile Mine in Routt County. For more on this planned mine expansion, see February 7, 2012, article - Colorado's Twentymile Mine Given New Lease on Life with New Coal Contracts, Expansion Plans.
"After some tough years, this is good news," Stuart Sanderson, president of the Colorado Mining Association, told the Post. "Colorado coal is low in sulfur and high in heat value, making a very good product."
Employment at the state's 10 mines rose 12% to 2,363 in the first nine months of 2011, according to Colorado's Division of Reclamation Mining and Safety.
Prospects are somewhat bleaker at Alpha Natural Resources Incorporated (NYSE:ANR) (Bristol, Virginia), which last month said it would immediately idle four mines in Kentucky and West Virginia, citing weak demand from electric utilities. An additional two mines in those states will be idled sometime over the next 12 months, it added. Several other mines will alter work and production schedules in the face of a soft market for thermal coal. All told, the cutbacks are expected to lower Alpha's thermal coal production by about 2.5 million tons per year, the company said in a statement.
"A business decision like this is so difficult because it impacts people and their families, but adverse market conditions left us no choice," Kevin Crutchfield, Alpha's chief executive, said in announcing the cutbacks. "Several mines are encountering weak demand for their products. We examined all options but in the end these operations had to do what was necessary to preserve a sustainable business plan in a challenging environment."
Arch Coal Incorporated (NYSE:ACI) (St. Louis), one of the largest U.S. coal mining companies, reduced its workforce in eastern Kentucky by about 105 jobs late last year in response to weak market demand and low coal prices, spokeswoman Kim Link said in an interview. Some of the affected mines in Kentucky include Knott County, Raven, Clayhole Flint Ridge, Hazard and East Kentucky. The company also will reduce output at its Wellington Dugout Canyon Underground Coal Mine in Utah during the first half of 2012. About 114 jobs will be lost when that reduction happens, she said. The company projects it will produce between 142 million and 158 million tons of thermal coal in 2012.
Arch CEO Steven Leer reportedly told Wall Street analysts that additional cutbacks might be necessary: "We'll further evaluate market conditions as the year progresses to make appropriate adjustments as necessary, including potentially pursuing further supply rationalization." For more on Arch's production strategy, see February 23, 2011, article - Facing Soft U.S. Coal Market, Arch Coal Seeks to Boost Exports.
Another coal company, Patriot Coal Corporation (NYSE:PCX) (St. Louis), last month idled its Seth Big Mountain No. 16 Underground mine in Boone County, West Virginia. The decision, effective immediately, removes about 1.8 million tons of thermal coal per year from the Appalachian market. With the idling of the Big Mountain mine, the company expects thermal coal production of 20 million to 21 million tons this year.
In announcing the idling, Patriot Chief Executive Richard Whiting said, "the domestic thermal coal market is likely to remain depressed for an extended period. Headwinds created by low natural gas prices, mild weather, and weaker international and domestic economies impacted coal markets during (2011), and market weakness continues as we enter 2012. In thermal markets, we believe that while the domestic market will remain depressed for some time, international markets will present profitable export opportunities in the future for Eastern U.S. coals."
In announcing its mine closure, Patriot Coal noted that while the U.S. thermal coal market is going through its challenges, "long-term fundamentals in coal markets remain intact. Seaborne thermal coal demand is expected to grow by 200 million tonnes, or more than 25%, to over 950 million tonnes by 2020," it said.
Arch's Leer projected that Appalachian thermal coal production could drop by 25 million to 30 million tons this year, while other U.S. coal-mining regions could see production declines 20 million to 25 million tons. U.S. thermal coal consumption is expected to be about 916.4 million tons, the lowest level in two decades, according to the U.S. Department of Energy (DoE) (Washington, D.C.).
Leaders of state coal-mining associations in Eastern and Midwestern states interviewed by Industrial Info were generally gloomy in their assessment of how employment and production in their states would fare going forward. However, as utilities change their coal burn to increase the use of low-sulfur coal to comply with EPA regulations, prospects are expected to be brighter for coal mines in the West that produce low-sulfur coal.
"Everything in the coal industry is predicated on whether President Obama gets a second term," said Mike Carey, president of the Ohio Coal Association (Columbus, Ohio). "Most of the coal mined in Ohio goes to power plants that have scrubbers," so recent power-plant closure announcements have not much affected the ranks of Ohio coal miners.
Right now, Ohio has about 3,500 coal miners, down dramatically from the 15,000 or so the state had in the 1970s, Carey continued. "We were thrown out of several markets when the original Clean Air Act was implemented and then amended," he said. "Today, 89% of Ohio's electricity comes from coal. The EPA's regulations will add another brick to the load being carried by businesses and consumers in our state."
George Ellis, president of the Pennsylvania Coal Association (Harrisburg, Pennsylvania), predicts a "dramatic" loss of coal mining jobs in his state, if recent rules from the U.S. Environmental Protection Agency (EPA) (Washington, D.C.) are allowed to stand. He was referring to the Cross-State Air Pollution Rue (CSAPR), which has been temporarily stayed by a federal court, and the Mercury and Air Toxics Standards (MATS) rule. For more on CSAPR, see October 13, 2011, article - EPA Proposes Technical Changes to Finalized Cross-State Air Pollution Rule. For more on the MATS rule, see December 27, 2011, article - Environmental Protection Agency Finalizes Mercury and Air Toxics Standards.
"Our state could lose up to 30% to 40% of our coal mining jobs in the next five years," Ellis said in an interview. Pennsylvania now has about 8,700 coal miners, about 50% less than the recent peak of 14,000 jobs in 1990, he said. "But the prospects for coal miners will improve if common sense returns to public policy."
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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
CONSOL Energy Incorporated (NYSE:CNX) (Canonsburg, Pennsylvania), last month announced plans to expand its Wind Ridge Bailey Underground Mine in Greene County, Pennsylvania. When the Bailey expansion is completed by mid-2014, it will increase the mine's thermal coal production by 5 million tons per year, Lynn Seay, CONSOL's director of media relations told Industrial Info. The expansion, which will add a fifth longwall mining machine to the mine, will create about 60-80 new well-paying jobs, she added. CONSOL's capital budget for 2012 includes $205 million for projects to increase the company's coal production. The company sold about 50 million tons of thermal coal to utilities in 2010. For more on CONSOL's capital program, see January 11, 2012, article - CONSOL Energy Approves $1.7 Billion in Planned Spending in 2012. However, on Tuesday, CONSOL announced that it would reduce production and idle a portion of its Buchanan metallurgical coal mine in Virginia because of lower demand, particularly overseas, for met coal.
In Colorado, coal production jumped 10% in 2011, to nearly 28 million tons, after seven years of decline, The Denver Post reported. The construction of four new mines and expansions of eight existing mines are in the planning stage, led by the recent decision by Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri) to invest about $200 million to expand production at its Twentymile Mine in Routt County. For more on this planned mine expansion, see February 7, 2012, article - Colorado's Twentymile Mine Given New Lease on Life with New Coal Contracts, Expansion Plans.
"After some tough years, this is good news," Stuart Sanderson, president of the Colorado Mining Association, told the Post. "Colorado coal is low in sulfur and high in heat value, making a very good product."
Employment at the state's 10 mines rose 12% to 2,363 in the first nine months of 2011, according to Colorado's Division of Reclamation Mining and Safety.
Prospects are somewhat bleaker at Alpha Natural Resources Incorporated (NYSE:ANR) (Bristol, Virginia), which last month said it would immediately idle four mines in Kentucky and West Virginia, citing weak demand from electric utilities. An additional two mines in those states will be idled sometime over the next 12 months, it added. Several other mines will alter work and production schedules in the face of a soft market for thermal coal. All told, the cutbacks are expected to lower Alpha's thermal coal production by about 2.5 million tons per year, the company said in a statement.
"A business decision like this is so difficult because it impacts people and their families, but adverse market conditions left us no choice," Kevin Crutchfield, Alpha's chief executive, said in announcing the cutbacks. "Several mines are encountering weak demand for their products. We examined all options but in the end these operations had to do what was necessary to preserve a sustainable business plan in a challenging environment."
Arch Coal Incorporated (NYSE:ACI) (St. Louis), one of the largest U.S. coal mining companies, reduced its workforce in eastern Kentucky by about 105 jobs late last year in response to weak market demand and low coal prices, spokeswoman Kim Link said in an interview. Some of the affected mines in Kentucky include Knott County, Raven, Clayhole Flint Ridge, Hazard and East Kentucky. The company also will reduce output at its Wellington Dugout Canyon Underground Coal Mine in Utah during the first half of 2012. About 114 jobs will be lost when that reduction happens, she said. The company projects it will produce between 142 million and 158 million tons of thermal coal in 2012.
Arch CEO Steven Leer reportedly told Wall Street analysts that additional cutbacks might be necessary: "We'll further evaluate market conditions as the year progresses to make appropriate adjustments as necessary, including potentially pursuing further supply rationalization." For more on Arch's production strategy, see February 23, 2011, article - Facing Soft U.S. Coal Market, Arch Coal Seeks to Boost Exports.
Another coal company, Patriot Coal Corporation (NYSE:PCX) (St. Louis), last month idled its Seth Big Mountain No. 16 Underground mine in Boone County, West Virginia. The decision, effective immediately, removes about 1.8 million tons of thermal coal per year from the Appalachian market. With the idling of the Big Mountain mine, the company expects thermal coal production of 20 million to 21 million tons this year.
In announcing the idling, Patriot Chief Executive Richard Whiting said, "the domestic thermal coal market is likely to remain depressed for an extended period. Headwinds created by low natural gas prices, mild weather, and weaker international and domestic economies impacted coal markets during (2011), and market weakness continues as we enter 2012. In thermal markets, we believe that while the domestic market will remain depressed for some time, international markets will present profitable export opportunities in the future for Eastern U.S. coals."
In announcing its mine closure, Patriot Coal noted that while the U.S. thermal coal market is going through its challenges, "long-term fundamentals in coal markets remain intact. Seaborne thermal coal demand is expected to grow by 200 million tonnes, or more than 25%, to over 950 million tonnes by 2020," it said.
Arch's Leer projected that Appalachian thermal coal production could drop by 25 million to 30 million tons this year, while other U.S. coal-mining regions could see production declines 20 million to 25 million tons. U.S. thermal coal consumption is expected to be about 916.4 million tons, the lowest level in two decades, according to the U.S. Department of Energy (DoE) (Washington, D.C.).
Leaders of state coal-mining associations in Eastern and Midwestern states interviewed by Industrial Info were generally gloomy in their assessment of how employment and production in their states would fare going forward. However, as utilities change their coal burn to increase the use of low-sulfur coal to comply with EPA regulations, prospects are expected to be brighter for coal mines in the West that produce low-sulfur coal.
"Everything in the coal industry is predicated on whether President Obama gets a second term," said Mike Carey, president of the Ohio Coal Association (Columbus, Ohio). "Most of the coal mined in Ohio goes to power plants that have scrubbers," so recent power-plant closure announcements have not much affected the ranks of Ohio coal miners.
Right now, Ohio has about 3,500 coal miners, down dramatically from the 15,000 or so the state had in the 1970s, Carey continued. "We were thrown out of several markets when the original Clean Air Act was implemented and then amended," he said. "Today, 89% of Ohio's electricity comes from coal. The EPA's regulations will add another brick to the load being carried by businesses and consumers in our state."
George Ellis, president of the Pennsylvania Coal Association (Harrisburg, Pennsylvania), predicts a "dramatic" loss of coal mining jobs in his state, if recent rules from the U.S. Environmental Protection Agency (EPA) (Washington, D.C.) are allowed to stand. He was referring to the Cross-State Air Pollution Rue (CSAPR), which has been temporarily stayed by a federal court, and the Mercury and Air Toxics Standards (MATS) rule. For more on CSAPR, see October 13, 2011, article - EPA Proposes Technical Changes to Finalized Cross-State Air Pollution Rule. For more on the MATS rule, see December 27, 2011, article - Environmental Protection Agency Finalizes Mercury and Air Toxics Standards.
"Our state could lose up to 30% to 40% of our coal mining jobs in the next five years," Ellis said in an interview. Pennsylvania now has about 8,700 coal miners, about 50% less than the recent peak of 14,000 jobs in 1990, he said. "But the prospects for coal miners will improve if common sense returns to public policy."
View Plant Profile - 1042024 1024804 1033884 1516039 3003073 1518451
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
