2013-04-03 / Front Page

Coal production is down dramatically here, across region

State reports say Letcher now 11th in coal tonnage, 3rd in joblessness
By BEN GISH

The state has released new statistics showing a staggering drop in coal production and a large rise in unemployment in the southeastern Kentucky coalfields, particularly in Letcher, Harlan, Knott and Perry counties.

The Kentucky Energy and Environment Cabinet (EEC) reports that coal production in Letcher County, long one of the state’s top four coalproducing counties, fell to 2.97 million tons in 2012, a whopping 36 percent drop from the year before. Even worse, the latest tonnage figures show a drop in production of more than 50 percent in Letcher County since 2009, when 6.42 million tons were produced from 25 underground mines and 13 surface mines. (The number of mines still operating in Letcher County in 2012 was not available at press time.)

The statistics also show that for the first time in many years, neighboring Pike County, the state’s largest county in size, no longer leads Kentucky in coal production. That honor now goes to Union County in western Kentucky, where tonnage grew in 2012 by 9.3 percent to 13.5 million tons. That’s slightly more than the 12.9 million tons mined in Pike County, which saw a drop in production of 17.9 percent from 2011. Neighboring Perry County was Kentucky’s third-largest coalproducing county in 2012 with 9.2 million tons mined. However, that number still represents a drop of 30.1 percent since 2011.

Two other western Kentucky counties — Hopkins (8.9 million tons) and Ohio (7.2 million tons) — round out the state’s top five coalproducing counties, followed by neighboring Harlan County with 7 million tons. Harlan’s production fell by 28.1 percent from 2011 while Ohio County’s production grew by 30.5 percent. Rounding out the top 10 Kentucky counties in coal production in 2012 were the western counties of Webster (5.6 million tons) and Muhlenberg (4.9 million tons), followed by the eastern counties of Martin (3.5 million tons) and Leslie (3 million tons).

Letcher County is now the state’s 11th-highest coal producing county, finishing ahead of Knott (2.6 million tons), Floyd (2.3 million tons), and Magoffin (2 million tons).

“Eastern Kentucky coal production decreased in 2012 by 27.6 percent from 2011 to 49.4 million tons — the lowest level since 1965,” the Energy and Environment Cabinet report says. “Production slowed at both underground and surface mines. Eastern Kentucky production has declined by 53.5 percent since the year 2000, and by 62.3 percent since peaking at 131 million tons in 1990.”

Meanwhile, statistics released last week by the Kentucky Education and Workforce Development Cabinet show unemployment in Letcher County has grown to 16.9 percent, the third-highest jobless rate in Kentucky. The state jobs report released March 29 does contain one bit of good news for Letcher County, showing that 7,303 people had jobs in February, up 12 from the 7,291 who were working here in January.

The same employment statistics show that 362 Letcher County residents lost their jobs between February 2012, when the jobless rate here was 12.3 percent, and February 2013. High jobless rates for February 2013 were also reported for the coal producing counties of Leslie (17.3 percent), Harlan (16.3 percent), Knott (15.6), Perry (13.8), and Pike (11.1).

According to the Energy and Environment Cabinet, coal mine employment in Letcher County stood at 583 at the end of 2012, down 34.2 percent since 2011.

“Coal mine layoffs have been concentrated in eastern Kentucky where on-site employment has fallen by 29.9 percent from 13,608 in 2011 to only 9,540 in 2012, a loss of 4,068 employees,” the EEC report says.

Neighboring Knott County suffered the biggest loss in coal employment in terms of percentage from 2011 to 2012, falling 63.2 percent to 330 workers. Harlan County suffered a 37.1 percent loss to 1,367 miners, while Pike County, with 2,316 mine jobs at the end of 2012, and Perry County, with 1,530 coal jobs at the end of the year, suffered losses in coal employment of 28 percent and 27.9 percent, respectively.

At the same time, coal jobs in Ohio County grew 28.6 percent to 710 miners working in 2012, and 11.1 percent in Hopkins County, also located in western Kentucky, with 997 holding coal jobs last year.

The EEC statistics also show that 64 percent of Kentucky’s coal production came from underground mines in 2012. Surface mines accounted for the remaining 36 percent of production.

While bituminous coal is mined in both the eastern Kentucky and western Kentucky coalfields, the production boom in the state’s western coal counties help to demonstrate the nation’s shift toward the low-cost, high-sulfur coal found in the Illinois Basin, of which those counties are a part, and away from the low-sulfur but high-cost coal found in Central Appalachia, says a report by the U.S. Energy Information Administration (EIA). The production increase in state of Illinois was even greater in 2012, the agency reports.

According to the EIA report, the production increase in the Illinois Basin was made possible because domestic utilities that have added scrubbers can now burn high-sulfur coal and still remain in compliance with recent government requirements to reduce sulfur dioxide emissions. The utility plants that burn coal mined in western Kentucky and Illinois were less affected by low natural gas prices because they are larger and more efficient plants with modern pollution controls, the EIA said.

Other preliminary coal production figures show that two Wyoming surface mines accounted for 20 percent of all the coal produced in the U.S. in 2012. Peabody Energy’s North Antelope Rochelle Mine in Gillette, Wyoming, where seams are as high as 80 feet thick, produced 108 million tons of compliance coal in 2012. Arch Coal Inc.’s Black Thunder Mine in Wright, Wyoming was the nation’s second-leading producer in 2012 with slightly more than 93.1 million tons. The EIA says that each of the two mines produced more coal in 2012 than was mined in the entire state of Kentucky (90.6 million tons), which was the nation’s third-largest coal producing state in 2012.

The North Antelope and Black Thunder mines are located in the sub-bituminous Powder River Basin, as are the remaining eight of the Top 10 producing mines in 2012. Nine of the top producers are located in Wyoming while one is located in Montana.

The EIA points out that while Powder River coal is cheap to mine, “long rail transport distances, limited coal export capacity, and the lower heat content of sub-bituminous coal limit its use.”

In terms of demand and production, nearly every Central Appalachian coal county is currently being plagued by resource depletion and stronger environmental regulations for coal-burning plants. As the EIA report says, many power plants which once had to burn low-sulfur Appalachian coal to comply with air-quality regulations have now been replaced or upgraded to facilities with pollution-cleaning “scrubbers” that allow them to burn much cheaper coal that is also much higher in sulfur content.

Completing the perfect storm that is continuing to cause the deep cuts in production in the region is the cheap availability of natural gas. According to the Energy Information Administration, natural gas prices fell by 31 percent in 2012 to $2.77 per million British thermal units (MMBtu), down from an average of $4.02 per MMBtu in 2011.

In a separate report released in January, the EIA said the increased competition from natural gas and a warmer winter in 2011-12 led to lower coal consumption and high coal stockpiles at utility plants through 2012.

As of Monday (April 1), the energy futures price for natural gas had risen to back to $4.02 per MMBtu for May. The energy futures price for a ton of coal for May stood at $57.05 per ton for May.

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