Coal Supply

The demise of coal available for electrical generation from Central Appalachia runs deeper than the series of environmental regulations coming down the pike.

Production in coal has fallen according to recent reports due, in part, to federal rules but also an expanding global market and the depletion of the Central Appalachia's most recoverable deposits. 

The coal companies concur, saying that development could migrate to regions with more accessible reserves and a lower extraction cost. It's easy to use the EPA as a talking point punching bag, but the industry keeps mum about the dwindling coal supply in a region that has been extensively mined. What little coal is left in Central Appalachia is difficult to extract, the mining process is more labor intensive and ultimately less profitable. 

“Based on historical trend, most of the supply reduction is likely to be permanent,” says Arch Coal in a quarterly assessment. “The 2008-2010 drop is shaping up to be the largest fall-off in production yet,” in reference to Central Appalachia. 

The highest levels of unemployment and lowest levels of income for the Appalachian region tend to occur in areas with the greatest amount of mining. Indeed, counties that produce the most coal in Appalachia often are the poorest in the nation. Consider Kentucky, where the coal industry generated a total of almost $528 million in tax revenue in 2006, yet ended up costing the state $642 million in subsidies that same year—a net deficit of $115 million.In Virginia, the seven coal-producing counties pump out more than 40 million tons of coal a year, but they remain among the poorest counties in the state. 

Although Appalachian coal operators like to blame environmentalists or overzealous federal regulators for the industry's decline, they should spend less time flinging blame toward Washington D.C. and more appropriately send it west to the Powder River Basin of Wyoming where coal seams are closer to the surface and easier, less costly to extract.

Short of mountain-top removal or other forms of surface mining in Central Appalachia, I would be surprised to see the production numbers rebound. Since most coal fired generation is configured for a specific type of coal, I would be similarly surprised if coal-fired generation dependent on lignite coal didn't ramp downward.