Coal operator predicts current struggles will continue

The U.S. coal market has always been a boom or bust industry. During the past 100 years good times and hard times have gone hand-in-hand in coal towns across West Virginia, but the present hard times appear different for some operators.

“I think it’s different this time for central Appalachia,” said Jim Bunn II, co-owner of Coal River Energy. “Yes, we’re competing with gas and that has taken some of our market share for power generation, but coal production in the Illinois basin has replaced more central Appalachian coal than gas has and that will continue to be that way.”

During the 1980s when the Clean Air Act was in its infancy the new law required power plants to meet certain SO2 emission levels. The least expensive answer in those days was to buy coal with a lower sulfur content. The regulations crushed coal production in southern Illinois and northern Appalachia mines. Power companies sought the low sulfur coal of southern West Virginia and eastern Kentucky which was within compliance.

“Power companies could pay for central Appalachian coal and not add a billion dollar piece of equipment to their power plant and still comply,” Bunn said. “Now, all coal has to be scrubbed so why buy the compliance coal when you can buy the cheaper Illinois basin coal.”

The costs of production in the central Appalachian region, which includes the southern West Virginia coalfields, has steadily increased. Bunn blamed an array of factors. The EPA’s intensified regulations are only part of the story. Bunn said EPA has impacted the market for coal, but he said MSHA requirements have impacted their direct costs of mining.

“After the Sago disaster Congress passed the Miner Act. There were a lot of components to that act that really didn’t improve mine safety, they just added cost,” he said.

Bunn pointed toward the required purchase of additional Self-Contained Self-Rescuers to be stored underground as one of those costs.

“It would probably kill you to consume as many as we have for all the miners. They were a thousand dollars a piece. You buy a thousand of them and there’s a million dollars,” he said. “Most of them are never used, ever. You hope you never have to use them.”

Bunn said the downturn hasn’t been enjoyable. He was forced to downsize his operations in Boone and Lincoln counties from 450 workers to 100 in the past year. He called the effort one of the more painful experiences of his life because it affected so many families.

“We’ve reached this point that we’re not competitive at $40-a-ton any more,” he said.

The one bright spot seems to be the coal of northern Appalachia, which includes some northern West Virginia mines will continue to be marketable into the future under the current conditions.