Education & Resources

WV Coal: An Opportunity to Lead

Posted by prdoc on March 9, 2013

By CHRIS HAMILTON

Senior Vice President, West Virginia Coal Association

Coal plays a significant role in our state and across the country, and despite the challenges at home, West Virginia stands to be a global energy leader – if we choose to be.

Coal long has been one of the West Virginia’s leading industries. For decades, it has been providing thousands of good-paying jobs, infusing millions of dollars into local and state economies and providing low-cost electricity for its industries and residents. These are facts not subject to debate.

What also is a fact is that a variety of factors ranging from mild weather patterns, an abundance of inexpensive shale gas, a declining reserve base and unprecedented over-regulation has caused West Virginia recently to experience a loss of coal markets and a decrease in coal production.

I include over-regulation in the factors that have contributed to a decline in coal production because let me assure you, the “War on Coal” is real. It has and will continue to hurt the industry and the thousands of families who rely on coal mining to survive. This misguided assault on coal has hurt and will continue to hurt West Virginia.

We are trying to weather one of the fiercest political assaults that any American has ever seen, and it is not over. But I want to assure every West Virginian that their coal industry is surviving, and we are part of the reason why West Virginia is thriving.

COAL SEVERANCE BOOSTS BUDGET

Never before in the state’s history has the coal industry been responsible for a greater share of the state tax revenues or prosperity throughout all facets of state and local government . According to a report by the West Virginia University and Marshall University business research facilities, the coal industry provides more than $3.4 billion in wages and a total economic impact of $26 billion for the state each year.

As a result of significant and sustained increases in coal severance and other business taxes, the state has been one of a few states to have balanced budgets – and budget surpluses — during the current recession years from 2008 to today. West Virginia’s “Rainy Day” has climbed to unprecedented levels because of annual budget surpluses that have been driven in large part by coal severance tax revenues. I say again: This is a fact.

West Virginia’s coal severance tax is levied based on the sale price of coal, so naturally those revenues reflect the cyclic nature of market pricing. But even with that lack of predictability, coal severance collections alone have more than doubled from 2007 to 2012 to an all-time record high of $500 million last year. Property and income taxes from coal have made similar gains during this period.  Even with current loses and predictions of revised downward adjustments in collections, overall taxes from coal remain higher than ever before.

In addition to severance tax revenues, coal and electric utilities account for over 60 percent of all business taxes. Distribution of coal severance dollars to all 55 counties funds education and social programs – and that’s after the first $22 million goes to infrastructure projects.

Clearly, the positive impact coal has on West Virginia’s economy is well-demonstrated, and it should be respected.

Moving beyond our borders, we believe coal will continue to play an important role in our country’s energy mix for decades to come. And we further believe coal will remain viable throughout the world. It continues to be the largest source of electric power generation among all fuels – over 90 percent in West Virginia and 40 percent in the United States. Domestic and world electric demand and steel production continues to grow – and these demands cannot be met without coal.

Today, as an industry, our role is critically important to our nation’s quest to become energy independent and break that unholy grip of our dependence on foreign oil. Coal holds the key to our country’s ability to become energy independent, secure our borders and bolster our nation’s defense system. Renewable fuel sources have a role to play, but they cannot do what coal does. They cannot power America 24 hours a day, seven days a week, rain or shine. Those who claim otherwise are either uninformed or lying.

PREPARING FOR GROWTH OVERSEAS

Without question, coal use will increase around the world. In fact is it already happening.

Gov. Earl Ray Tomblin recently announced that for the third consecutive year West Virginia exports reached a record level, in 2012 – the growth led by coal exports. In just one year, coal exports grew 40 percent, increasing from $5.3 billion in 2011 to $7.4 billion in 2012. West Virginia coal accounted for 49 percent of U.S. coal exports in 2012.

Seaborne coal tonnage will grow over the next five to seven years, and we have to position ourselves to capitalize on that opportunity by cutting costs, becoming more efficient, influencing public policy and becoming more involved in the politics of the industry.

The use of coal on a world-wide basis is already on the rise. Coal is predicted to surpass oil as the world’s energy of choice by 2017 according to the International Energy Agency.

China, India, Africa and other growing regions are using more coal. Why? A big reason is because steel production is up worldwide, and you cannot make steel without coal. This growth is driving increases in metallurgical coal supplies into developing countries. These nations are growing and consuming steel in developing their basic infrastructure. That work requires more power. More steel plus more power means more coal — it’s a simple equation.

Other nations see coal the way America used to view this resource, as an abundant, low-cost and reliable fuel. America became a manufacturing superpower thanks to coal, and is can’t be a coincidence that our global domination waned when we stopped fostering coal industry development.

Thankfully, other nations are not making this mistake. West Virginia is the epicenter of the coal industry, so the opportunity is ripe for us not only to satisfy our domestic energy needs but to capitalize on rising worldwide coal demand.

SEIZING THE OPPORTUNITY

The United States will continue to use coal for years. That is a fact borne out by basic base-load power demands. And globally, coal use will continue to grow. The real questions today are where the coal will come from and who will benefit from the mining jobs and production revenues. Will it be West Virginia or somewhere else? My vote is for West Virginia.

As a state, we have the potential to become the nation’s center for energy and commerce. We have it here if we can compete effectively and sustain our presence in domestic and world markets. We have that opportunity now – if we approach it correctly — with reason, intelligence and common sense.

West Virginia’s coal industry is well-situated to meet the demands of tomorrow, but not without overcoming major challenges on the horizon. The industry has great capacity, committed management, aggressive business plans, a qualified, experienced workforce and a strong will to succeed. And we have pride – we are proud to be West Virginia coal miners. We know we built this state, and we can help rebuild America.

CHALLENGES REMAIN

Now, the reality: The coal industry is being attacked on many fronts today by government and special interests. These attacks have been well documented. And although the industry has always had its share of challenges, never have they been as serious or threatening as they are today.  The United States has its challenges, and West Virginia has its own:

  • Global climate change
  • Cap and Trade legislation
  • Increased renewable portfolio
  • Lack of meaningful national energy policy (including coal-to-liquids technology development and commercialization)
  • EPA’s multi-pronged regulatory assault on Appalachian coal
  • Campaign against mountaintop removal mining

We coined the phrase last fall: “Our government is coming at us by AIR, LAND & SEA!” because the federal government under the current administration was using every resource available to them to harm the coal industry. This regulatory assault settled down while the president was seeking re-election, but the administration has made it clear that it is ready to go back to war with mining.

Even a cursory glance at the “national energy agenda” reveals that federal regulators have created political problems — not technical ones — that caused power plant closings, lost coal production, increased utility rates and fuel switching. These are real threats that have a negative impact on all coal mining in our region and occupy a lot of time within other various legislative and public forums. These are political issues driven by political agendas. They require political solutions supported by educated, brave leaders who look past the rhetoric and focus on the facts.

Closer to home we have our own challenges on top of the regulatory assault. Reports of West Virginia’s declining reserve base have been well documented. Higher production costs and greater geologic and technical challenges mean coal operators are presented with thinner seams and reserves that are more difficult to access. In simple terms, we have mined the easy stuff. But West Virginia has plenty of coal left, and our industry is working hard to bring it to market safely and efficiently.

TIME TO CAPITALIZE

As West Virginia’s immediate future remains challenging, other coal producing regions have a brighter outlook.  The Powder River and Illinois Basins are poised to prosper in the coming years and encroach further into markets heretofore held by West Virginia and other eastern coal producers.

To retain its viability in domestic and world markets, West Virginia’s coal industry must become more efficient and competitive. The industry is committed to operating in the safest and most efficient manner possible with uncompromising detail to environmental quality. Don’t believe the thoughtless banter of those who do not want our miners to work – the coal industry is full of environmentalists, and we take that responsibility seriously.

So the question is: Is our glass half empty or half full? With widespread slow downs, layoffs, mine closures and loss production and growing reports of our demise, some would say our glass appears to be half empty.

But I ask you to look at our industry with fresh eyes. We have the best, highest-grade metallurgical coal and rapidly increasing world demand. As natural gas prices inevitably trend upward, coal will regain market share. In fact, our glass is half-full. Coal production will not return to 165 million tons of annual coal production that we saw in 2008, but we should stay around the 100- to 120-million-ton level. That level is strong and proves that coal will continue to be a major economic driver in our state.

Yes, the coal industry has its challenges at home and abroad, but West Virginia coal can provide for our families, protect America and power the world. The opportunity is before us, and if we do not make the most of it, someone else will. We must work together and make West Virginia the global energy leader we know it can be.

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