Coal Report September 11, 2012

Coal Report 09-11-12 A well-known opponent of mountaintop removal mining has died, reports the Charleston Gazette. Larry Gibson passed away at his home on Kayford Mountain in Raleigh County, West Virginia, a 54-acre Homeplace he spent years defending. He was 66. His home was sort of an island surrounded by large mining operations. Coal companies tried to buy him out; coal supporters targeted him with over a hundred documented instances of violence and vandalism. He steadfastly resisted all pressure to abandon the land his family had held since the 18th century. In the process he became a well-known opponent of MTR mining, speaking against the practice at government hearings, meetings, and in the pages of many newspapers and magazines.

 United Coal Company has put its Letcher County office building up for sale, reports the Mountain Eagle. Known as the Sapphire Coal building, the structure near Isom has 20 offices and six bathrooms. It has belonged to several coal companies since being built in the 1980’s.The building has been empty since United Coal closed down the Sapphire operations this summer. United is owned by the Ukrainian company Metinvest. When the Ukrainians bought United from its American owners in 2009 they said they were mostly interested in metallurgical coal, so Kentucky steam coal was not a major part of their plan.

 Coal has lost a lot of ground to gas in the past year or so. That shift is mostly permanent, according to Moody’s Investors Service. The Bloomberg News Service quotes a Moody’s report to this effect, “Coal will regain a bit of market share as gas prices recover somewhat, but most coal-to-gas substitution to date will be permanent.” That’s for thermal or steam coal. The other big part of the coal market is metallurgical coal, and there too the picture is not bright, due to the worldwide recession. The Moody’s report says, “the prospects for the worldwide steel industry are not encouraging.”

On the other hand, things look brighter in China, according to China Daily. Coal stockpiles at seaports and power plants are declining. It’s not always easy to interpret official Chinese economic reports, so observers sometimes literally observe things like the size of a pile of coal to deduce how fast a power plant is producing electricity—and the amount of electricity used is a pretty good indicator of the overall economy. So if the coal piles are going down, it’s a good sign for the Chinese economy. How good a sign? Opinions differ. The price of Chinese coal has been low, which leads coal producers to cut back production. Observers expect the price to stabilize and maybe inch up a little at the end of the year.

The coal slowdown is having its effect on local governments. The Associated Press reports that Kentucky severance tax receipts will be down $88 million this year. This will hit county governments hard. For example, Harlan County expects to get $700,000 less than last year. Severance taxes pay for a myriad of services for local governments—fire protection, road work, water systems, much more—and counties will be forced to make hard decisions about what gets cut.

The big coal deal between India and Kentucky may be in jeopardy, reports WFPL in Louisville. Last month we heard about an agreement that the Indian company Abhijeet would buy $7 billion worth of east Kentucky coal over the next 25 years. At the same time, a giant coal scandal has been shaking Indian politics. The Indian government had handed out a large number of valuable coal licenses, and they are accused of handing them out to their friends at very low prices in a sort of sweetheart deal arrangement. In recent weeks, the political opposition in India has been howling bloody murder and calling for the ruling Congress Party to resign power. India’s CBI—the equivalent of our FBI—has started looking into the matter. The Hindustan Times newspaper is reporting that the Abhijeet group stands accused of misconduct, and that the Kentucky deal is looking more uncertain. The Indian website Daily News and Analysis reports Abhijeet may have debts much bigger than its assets and may not be able to fill its commitments—including perhaps the purchase of a lot of Kentucky coal.

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