By Jennifer Jett Prezkop
When one stops to consider the impact coal has had on the development of the modern world, it is hard to imagine where civilization would be without this fossil fuel. More than heating homes and providing electricity, coal has inspired—and driven—innovation in other industries such as transportation, steel production and manufacturing throughout history.
Coal is extremely susceptible to market influences from around the world, and as such it is forced through a period of evolution about once every 30 years. Changes in policy and fluctuations in demand for goods like steel put additional burden on an industry that has faced out-right challenges to its mere existence in recent years. Despite downturns in production, a movement toward natural gas and the challenge of achieving a cleaner product, the industry continues to evolve, confirming its relevance in today’s world market.
Despite the ups and downs of demand and the arguments against the use of this fossil fuel, coal has persevered, re-inventing itself time and again to match industry needs in order to find new market relevance for continued demand. Looking back through history, the cycles of evolution undergone by the coal industry are a fascinating study in persistence. Where there is a will, there is a way, as they say, and the coal industry continues to evolve with the times, finding new markets and new relevance as a feedstock and energy source.
The Cycles of Coal
The first major shift in the coal industry was the mechanization of mining, which took place after World War II. The new technology and processes that came with mechanization in the 1930s and 1940s resulted in more efficient production and safer work conditions. At the same time, the U.S. experienced the rise of a new industrial era: steel.
“We were making a whole lot of steel to build the world’s strongest nation, and steel became our steady market,” says Jason Bostic, vice president of the West Virginia Coal Association. “Metallurgical coal became the natural solution. It has very specific chemical properties and can be heated to very high temperatures without burning, shedding its volatile properties and turning it into almost pure carbon.”
In the 1950s and 1960s, the railroads transitioned from coal to diesel gas to fuel their trains. Around the same time, the home heating industry switched from coal to heating oil. This forced the coal industry to seek out a new purpose: fueling heavy industry through the production of high-quality thermal coal for baseload power generation. This was a pivotal move at a time when the nation was electrified with the construction of new coal-fired power plants.
The 1970s and 1980s brought the collapse of the steel industry, triggered by the rise of foreign steelmakers like Germany, Japan and China. Feeling the brunt, the coal industry experienced its own downturn as a result.
Fortunately for West Virginia and its coal miners, that decline was offset by Congress’ passage of an amendment to the Clean Air Act in 1990 that introduced regulations on sulfur dioxide and acid rain emissions that directly impacted the coal used by electric utility companies. These utilities were required to either install emission control technology to remove the sulfur dioxide properties of their emissions or switch to low-sulfur coal. As a result, the coal industry turned to providing steam coal for electricity because of its low-sulfur dioxide composition and ability to burn quickly at very high temperatures. This industry shift transitioned the mining priority in Southern West Virginia away from metallurgical coal used for steel and back toward steam coal. West Virginia’s overall coal production during this time increased from 122 million tons in 1980 to 171 million tons in 1990.
“The amendments to the Clean Air Act hurt production in other states with higher sulfur coal, but it helped us in West Virginia,” says Bostic. “As a matter of fact, that huge demand for low-sulfur steam coal probably saved Southern West Virginia because metallurgical coal demand nearly evaporated during that time.”
The 2000s brought another halt in the demand for coal due to proposed changes in environmental policy regulations. The Mercury and Air Toxic Standards rule, announced by the EPA in March 2011, called for a reduction in emissions from coal- and oil-fired power plants. The proposal, if passed, would have required utility companies to install another type of scrubber technology to remove mercury from their emissions.
Despite litigation delays, electric utility plants pursued measures to comply with the new standards. About 400 power plants opted to close around the U.S. instead of installing the expensive emissions control technology, which would have cost approximately $1 billion per plant. This eventually lowered the number of power plants receiving shipments of West Virginia coal from 165 in 2008 to 51 in 2018.
In 2015, the Supreme Court ruled that the EPA unlawfully failed to consider these costs when deciding to regulate the emissions from the power plants. Unfortunately, the closure of power plants prior to this decision had already halted the demand for steam coal, resulting in record layoffs and record- low production.
“Unfortunately for West Virginia, the power plants that were closed were the ones that didn’t already have the scrubbers, which eliminated the need for low-sulfur steam coal,” says Bostic. “The mercury regulation wiped out the demand for our steam coal.”
The Challenges of Today’s Market
Today, coal is once again experiencing an upturn, thanks to global demand for the fossil fuel. According to the West Virginia University Bureau of Business and Economic Research’s “2018-2022 West Virginia Economic Outlook Report,” after falling rapidly from 2013-2016, coal exports have surged in recent years due to new growth in global steel production and steam coal shipments. Overall coal production in the Mountain State increased to 97 million tons in 2018, up from 85 million tons in 2016, due to this growing demand.
Stateside, steam coal sales to domestic utility companies comprise 46 percent of West Virginia’s total coal production, according to the West Virginia Coal Association. However, that share of the domestic electric utility market continues to decline because of domestic competition, specifically West Virginia’s nearest neighbor to the north: Pennsylvania.
“We’ve gained a threat from our neighbor who is providing the same quality of coal,” says Bostic. “Pennsylvania has the same seam of coal we mine in West Virginia, but it is mined without a severance tax.”
The West Virginia Legislature attempted to circumvent that competition by passing House Bill 3142 during the 2019 legislative session to lower the state’s coal severance tax from 5 percent to 3 percent over a period of two years.
“That reduction in severance tax should allow West Virginia to compete more effectively with not only Pennsylvania but also—to a lesser extent—Illinois, Indiana and eastern Kentucky,” says Bostic. “It will also help us compete in international markets. There’s coal found all over the world, so anything we can do to lower our costs is going to help us.”
Using the Past to Predict the Future
While Bostic says West Virginia has enough coal at current consumption levels to last another 200 years, two significant challenges facing the state’s coal industry—and its future—are aging infrastructure and the depletion of accessible reserves. To address these challenges and keep up with international demand, he believes the state needs to move forward with making improvements to the industry’s rapidly aging infrastructure.
The growing market for steam coal is creating additional challenges. Steam coal is now competing with metallurgical coal for dock space at existing deep-water ports where the coal is loaded onto ships for transport. Lack of available blending capacity, which is the infrastructure and space through which coal from multiple sources is blended to meet the specific needs of a customer, is another obstacle. As the steam coal export market develops, blending capacity is becoming just as important for it as it is for metallurgical coal because different sources of steam coal must be blended to achieve the specifications required by overseas orders.
The coal industry, as evidenced by the many changes in market presence it has experienced over the years, is determined to ensure a demand for West Virginia coal. A long history of reinventing itself in order to maintain relevance has paid off, and Bostic is optimistic this will continue to be the case.
“Coal has gone through multiple cycles as the energy needs of both the country and the world have changed, and these cycles demonstrate that we can meet the demand whenever and wherever it may be,” he says. “Given the fact that West Virginia has the best coal anywhere in the world and because developing nations are rushing to supply folks with dependable power and consumable steel, there will continue to be a demand for our coal.”
