Don’t count out coal yet
The coal industry is not dying, though the comments last week from a coal company executive might leave you with that impression if they were not considered carefully.
Kevin Crutchfield, chairman and chief executive officer of Virginia-based Alpha Natural Resources, initially offered a dire assessment when he said U.S. coal producers were grappling with a shrinking domestic coal market. It would be understandable for the knee-jerk reaction to be that coal is on the way out.
While Crutchfield went on to say it’s tough right now, he said he sees a “path of hope based on realism and based on what we see happening globally.” The U.S. coal industry has always primarily focused on selling its product in the domestic market. That will have to change. Globally, coal is still the fuel of choice, Crutchfield said, adding that the U.S. Energy Information Administration projects coal will overtake oil as the number one energy source globally in the next three or four years.
The question before coal producers in the United States, he said, is how to take the coal and play internationally. So what happened? Crutchfield explained that the problem rests on “transformational” changes affecting the industry. Those changes “hit hard and fast” in late 2011, as electric utilities announced the closing of coal-burning power plants because of stringent environmental regulations. At the same time, it became apparent cheap natural gas was here to stay.
Coal at its peak held about 52 percent of the domestic market for electric power production, but saw that share decline to about 32 percent by last April. Coal has since regained some of the market, now standing at about 40 percent. But the new reality is that the domestic market is shrinking and no relief is expected either in terms of natural gas prices or environmental regulations on burning coal.
Alpha, which now operates 104 mines, is the country’s second largest coal producer by revenue and third largest by production. It also is the largest supplier of metallurgical coal used in steelmaking. The company has two mines in Greene County, which together employ about 1,400 workers.
Coal is still king in Greene County, yet the major companies have begun to form various types of partnerships with natural gas drilling companies. But Alpha will maintain its focus of the sale of metallurgical coal and, in regard to its thermal coal, which is burned at power plants, the company will focus on becoming more competitive in a smaller U.S. market but also attempt to sell more coal internationally.
Despite the turbulence in the marketplace, coal is indeed not going anywhere soon. But while Crutchfield remains optimistic, he is also cautious. The market is going to do what it’s going to do, he said, and we should expect the coal companies to be responsive to it.