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The WV Coal Equation: Living With Past Peak Production

April 17, 2010

We now see clear evidence that the WV coal industry is in decline.  This is not to say that the industry is going away any time soon.  WV coal production peaked at 181 million tons in 1997. Production in 2008 was 165 million tons.  Like the arrival of peak oil production around the world, the passage of the peak of the West Virginia coal resource is now clear.

Here are the changes peak coal has wrought:

  1. For the last 20 years, coal mining in WV has metastasized  into mountaintop removal in which 40 feet of unproductive overburden must be removed to mine coal seams as thin as 18 inches.  The WV Legislature actually created a tax credit on the state’s severance tax that was available to mountaintop removal operations for mining these “thin seams”.  Mountaintop removal requires massive amounts of diesel fuel, for both equipment and blasting.  When diesel gets too much more expensive, mountaintop removal will no longer be profitable.  Peak coal production is now subject to the laws of peak oil.
  2. For the last 20 years, underground coal mining has only been economically viable with the removal of the UMWA from most WV mining operations.  Mining coal with miners who can protect themselves is more expensive than non-union mining in which miners live in constant fear of losing their jobs.
  3. Both mountaintop removal mining and underground mining only remain economically viable in WV if state and federal regulators subsidize mining by radically reducing enforcement of laws and regulations.  Corporate giveaways and tax cuts have also undermined enforcement as all regulatory agencies are forced to reduce inspection staff.
  4. Coal mining in West Virginia only remains economically viable if state political leaders and our Congressional delegation constantly browbeat career regulators into allowing coal operators to break the law.  No career regulator will stick his neck out to fight the people who provide his/her paycheck.  Both Davit McAteer and Jack Spadaro are good examples of regulators who were pushed out of federal agencies because they did their jobs too well.
  5. Governor Manchin, the WV PSC, Congress and the Federal Energy Regulatory Commission design new schemes, like PATH and TrAIL, to prop up demand for coal and to sustain obsolete coal-based electrical power technologies by subsidizing and promoting Project Mountaineer’s “coal by wire.”  Pushing crazy coal projects like “clean coal”, “coal to liquids” and “coal gasification” starves real non-coal alternatives of needed investment, insuring that coal maintains its “low price” in the marketplace.

Peak coal is a simple economic proposition.  The quality of the coal resource in WV is now so inferior, compared to what it was 40 years ago, that the mining industry must push more and more of its costs off onto communities where it operates and the miners who actually do the work.  Coal companies can’t do anything about the decline of their resource so they continue their push to viciously cut costs.

A.T. Massey and Don Blankenship realized in the 1980s that coal mining in West Virginia could only continue if the cost of mining coal were cut radically by destroying the UMWA in the state and by massively expanding new mountaintop removal techniques that would physically devastate southern West Virginia.  Unless costs of extraction could be driven down, largely by eliminating miners and mining jobs, coal mining in WV would not be economically viable.

Don Blankenship, and his Massey Energy Frankenstein monster, was created by all of the West Virginia politicians and federal elected officials, with the notable exception of Ken Hechler, who actively promoted Massey’s outlaw agenda with regard to federal law and safety regulations.

Instead of drawing a line and facing the realities of peak coal, West Virginia’s political leaders chose to support Blankenship’s agenda to drive down costs of production without regard to our state’s welfare.  The chickens have come home to roost.

It is actually a rather simple mathematical equation.  As the coal seams get more expensive to mine and poorer in quality, other costs, such as mine safety and compliance with surface mining laws, must be reduced if the profits of mining companies are to be maintained.  These profits do not have to be huge, they just have to be high enough to produce a return on investment that can compete with other industries.

If the West Virginia coal industry cannot generate a high enough return on investment, the banks, pension funds and equity funds will simply invest their capital elsewhere.  Instead of protecting West Virginia from the coal industry’s race to the bottom, and insuring a measured shift in the state’s economy away from coal, our political leaders have chosen to bleat about the “war on coal”, while miners are killed and communities and our lands are destroyed.

So “coal by wire” power lines, killing miners and destroying southern West Virginia are all part of the same system of subsidies that have been piled on the coal industry (including the electrical power giant AEP and Allegheny Energy, soon to be swallowed by another giant, FirstEnergy).

Since the 1980s, we have seen the face of peak coal in West Virginia, and it isn’t a pleasant face.  Things will only get worse, as the coal and electrical industries devour more land and destroy more lives.

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