Production Is Booming in Western U.S. to Feed Power Plants at Home and Abroad
Last year was a tough one for the coal industry. James River Coal Co. JRCC +0.71% laid off a quarter of its workers.
Consol Energy Inc., CNX -2.03% which has mined coal since the Civil War, sold five Appalachian mines, representing nearly half its coal output. And more than a half-dozen U.S. coal-mining companies went under, beset by new environmental rules and competition from low-cost natural gas.
But coal isn’t going away. Coal remains the biggest source of fuel for generating electricity in the U.S. and coal exports are growing fast. Even as coal production plunges in the green hills of Appalachia, it is booming in the open-pit mines of Wyoming and under the plains of Illinois and Indiana.
Overall, U.S. coal production is projected to remain relatively constant over the next three decades, according to the U.S. Energy Information Administration.
“Coal’s future is strong; it’s just not a growth story” in the U.S., says Consol President Nick DeIuliis.
Demand is being stoked by the rise of power-hungry middle classes in emerging economies, led by China and India. By the end of this decade, coal is expected to surpass oil as the world’s dominant fuel source, according to a recent study by consultant Wood Mackenzie.
Two-thirds of coal’s growth will be driven by demand for electricity in China, the firm says. “China’s demand for coal will almost single-handedly propel the growth of coal,” William Durbin, Wood Mackenzie’s head of global markets, said in a recent speech.
Concern over the links between climate change and carbon emissions linked to coal could reduce consumption. Assuming weak economic growth and the strictest environmental rules, global coal demand could drop to 3.3 billion tons in 2035 from around five billion today, according to the International Energy Agency. But if politicians and regulators decide that the benefits of coal outweigh the environmental risks and craft looser regulations, coal demand could rise to six billion tons, the agency says.
In the U.S., coal is consolidating. Two counties in Wyoming account for 40% of U.S. coal production. And four companies— Peabody Energy Corp. BTU -1.57% , Arch Coal Inc., ACI -2.26% Alpha Natural Resources ANR -6.20% LLC and Cloud Peak Energy Inc. CLD +0.51% —control 52% of U.S. coal production. Twenty years ago, the top four companies controlled less than 30%.
The decline of the coal industry in the eastern U.S. has hit isolated towns in places like eastern Kentucky and West Virginia’s Mingo County, uprooting families and decimating local economies. The number of people employed in U.S. coal mining has declined to 120,699, down nearly 15% from 20 years ago, although production has increased slightly over that time.
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