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May 19, 2013

Report shows ‘true drivers’ affecting coal industry

FAIRMONT — A new report examines the major factors causing the significant decline in coal production in the region and the continuing trend into the future.

On May 14, Morgantown-based Downstream Strategies LLC released a report titled “The Continuing Decline in Demand for Central Appalachian Coal: Market and Regulatory Influences.”

Downstream Strategies, an environmental consultant, also has a second office in Alderson. Evan Hansen, president, started the business in 1997, and ran the operations by himself until the company began to grow in 2008.

The business’ 11 staff members work in three main program areas: energy, water and land, he said. Their clients include government agencies and nonprofit organizations at the federal, state and local levels, as well as individuals, attorneys and private businesses.

Most of Downstream Strategies’ projects relate to science and policy. The company does field monitoring of water and soil and provides expert testimony and litigation support related to permit appeals. The recently released coal report is a good example of a policy analysis, Hansen said.

This new study was written by Hansen and his colleagues Rory McIlmoil, Nathan Askins and Meghan Betcher. It is a follow-up to a report that Downstream Strategies authored in 2010 called “The Decline of Central Appalachian Coal and the Need for Economic Diversification.”

“We felt like it’s important for West Virginia and for the people in the Central Appalachian coal region to understand what’s happening with coal production now and in the future because there is a significant shift that’s taking place and that shift has significant impacts for people’s jobs and tax revenues and for the future of coal-producing counties,” Hansen said.

The Central Appalachian coal region is made up of southern West Virginia, eastern Kentucky, Virginia and Tennessee.

A lot of the public debate around the future of the coal industry has been centered on environmental regulations and whether the federal government has been overzealous in its enforcement of laws, he said. Downstream Strategies found that regulatory and environmental issues weren’t the biggest factors causing coal production to decline in the region, and wanted to explain the true drivers.

Hansen said both the 2010 and 2013 studies present projections of the future coal demand using information from publicly accessible databases compiled by the federal government. The government gathers data on shipments of coal from mines to power plants across the country, and past coal production and mining employment by county.

The more recent report includes updated projections, he said.

It also examines electricity-producing power plants that burn coal from this region, and identifies which plants are slated to close in the near future and which ones have the technology installed so they can switch to burning coal from other coal basins.

Downstream Strategies tied that information back to the counties in Central Appalachia to determine which ones are most vulnerable to the decline of coal in the future, Hansen said.

“Mining has taken place in Central Appalachia over so many decades that much of the thickest, easiest to access coal seams have been mined out, which means that it’s more expensive to mine coal here compared with other parts of the country,” he said. “The competition from other coal basins is a significant driver of the decline in coal production here.”

The increased production of natural gas from the Marcellus Shale is another major driver. Some coal-fired power plants are able to switch to burn natural gas, which is very cheap and plentiful right now, Hansen said.

The secondary drivers are related to environmental regulations, which impact how the coal is mined and whether it’s economical for plants to burn coal to generate electricity, he said.

As new regulations are being proposed and existing regulations are being litigated, the big question is how the federal government will address climate change and greenhouse gas emissions.

To categorize the vulnerability of different Central Appalachian counties to the influences on coal demand, Downstream Strategies looked at whether production of coal in the specific county decreased significantly in the last decade, Hansen said.

He said his company also considered if labor productivity in the county is changing quickly, meaning it’s taking more miners to produce coal, which is an indication that the best coal seams are being mined out.

Another factor is whether a large portion of coal is being sold to coal-fired power plants that will close in the near future or can easily switch to coal from other basins or natural gas.

Based on that criteria, Boone, Kanawha, Lincoln, Mingo and Nicholas counties in West Virginia were among the Central Appalachian counties that were categorized as moderately vulnerable.

Hansen said one of the bright spots in the future of the Central Appalachian coal industry is related to metallurgical coal, which is still relatively strong in the region and is responsible for most of the exports of coal from southern West Virginia. If this trend with metallurgical coal production continues or increases, it could provide a short-term boost to the coal industry.

However, the long-term trend is a significant decline in the industry in the region, he said.

Rather than placing blame on the U.S. Environmental Protection Agency, people need to focus on the future of coal, Hansen said. With less coal being mined, leaders need to find some alternatives to help diversify the economies that are so dependent on coal right now.

Downstream Strategies is in the process of distributing its report widely.

“We definitely want policy makers to read it,” he said. “We look forward to talking with any interested parties about our findings and steps forward.”

To access the full report or key findings, visit

Email Jessica Borders at or follow her on Twitter @JBordersTWV.

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