Coal Report September 24, 2012

Coal Report 09-24-12 Alpha Natural Resources announced last week that it will shut down a number of mines in Virginia, West Virginia, and Pennsylvania, laying off 1200 miners. The cutbacks will be complete by early 2013. Eight mines were shut down right away. The Coalfield Progress reports that two of them are in Wise County, Guest Mountain numbers 8 and 9. The mines employed 110 people; Alpha announced it has found other jobs for all but ten. Alpha CEO Kevin Crutchfield said that the company is cutting high-cost steam coal operations both here and out west. It will concentrate on metallurgical coal, exports of steam and met coal, and likely looking to lock in long-term contracts with electric utilities.

Virginia politicians were quick to respond to Alpha’s news, reports the Coalfield Progress. Congressman Morgan Griffith attacked the Obama administration for placing what he called “additional burdens” on an industry already hit hard by competition from natural gas. His challenger, democrat Anthony Flaccavento, called the layoffs “devastating for miners, their families, and our communities” and called on coal producers to invest in new job opportunities for the region. Republican Senate candidate George Allen attacked the administration’s environmental regulations; Democrat Tim Kaine—acknowledging the effect of cheap gas—pledged to work with coal leaders to keep coal with “an important role in our energy future.”

On Friday the House of Representatives passed the “Stop the War On Coal Act,” a bill that, according to the Associated Press, echoes Republican campaign ads. If it became law it would bar restrictions on greenhouse gasses, block fuel efficiency standards for cars, and give sates control over disposing of coal waste. The House passed it on a mostly party-line vote before leaving town. It goes to the Senate where it has no chance of passing. In the Senate, West Virginia Democrat Jay Rockefeller announced yet another effort to promote carbon-capture and storage technology. Rockefeller derided the House Republicans for “pushing bills they know won’t become law instead of working to find actual solutions.”

A big environmental lawsuit in Kentucky has reached a settlement, reports the Lexington Herald-Leader. International Coal Group, or ICG, has agreed to pay over half a million dollars in fines for thousands of false water-pollution reports. In 2010, a coalition of environmental groups prepared to sue ICG and a second company, Frasure Creek Mining, for large numbers of false reports. In last week’s settlement, ICG will pay Kentucky’s PRIDE program $350,000 to help eliminate sewage “straight pipes,” and another $240,000 to help the state assess the effect of surface mining on Kentucky streams. The other company, Frasure Creek, did not reach a settlement, saying it doesn’t have that sort of money. Frasure Creek has said it lost a major sales contract, is facing numerous lawsuits, and has stopped mining in Kentucky.

The current slowdown in coal has hurt the stock price of most big coal producers. The financial website Seeking Alpha writes that, while gas prices have risen a good deal since April, coal stocks are not recovering as many had expected. The reason, according to analyst Christopher Wallace, is that utilities that have switched to gas are not switching back to coal even as gas gets more expensive. Not only is gas itself still cheap, but gas-fired plants are cheaper to build, more efficient than coal burners, and more flexible in handling the ups and downs of power demand. Wallace predicts that a coal stock rally is coming but won’t be as strong as many had hoped.

Metallurgical coal has been one sector of the coal market less affected by the current slowdown. That may change, reports the Reuters news service. Following talks in Japan between steelmakers and coal producers, prices are expected to drop as much as 25 percent in the near future. The global recession has hurt the steel industry, and recently steel making has slowed in China and India, which had been red-hot importers of met coal. The Reuters article mentioned Consol’s decision to idle the giant Buchanan mine in southwest Virginia for at least 30 days.

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