Coal Forum reviews states export successes, looks to future - Beckley, Bluefield & Lewisburg News, Weather, Sports

Coal Forum reviews state's export successes, looks to future

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With tightening domestic markets putting a pinch on the state's coal industry, officials and industry are looking at markets across the sea for the solution to its decline.

The West Virginia Coal Forum recently hosted a meeting to discuss the role of coal exports in West Virginia. The Coal Forum is group that represents both industry and labor groups in West Virginia.

Coal used for electricity generation has been largely on the decline. That pattern has been particularly pronounced with coal mined in the Central Appalachian region.

"It's impacting all of us," said Gov. Earl Ray Tomblin while speaking at the coal forum. Tomblin added that the state's finances have become very tight as coal production has been on the decline.

Many of the speakers at the export-themed forum also spoke about domestic coal policies – specifically the work of the Obama administration and the Environmental Protection Agency.

"It's really frustrating to me when someone can sit in an office in Washington and make decisions about our future and what's going on without looking at the economic impact," Tomblin said. "…They don't look at those tears in the wives' eyes when there husband comes home and says ‘I've lost my job. The mine's closing down.'"

Tomblin said the Obama administration has issued regulations that are impersonal and doesn't take into account for the local economic impacts of a hobbled coal industry.

While the nation's coal companies deal with environmental regulations that favor fuel resources that are less carbon intensive, Central Appalachia has also faced hardship from environmental opposition, geological challenges and a dwindling reserve base that is increasingly difficult to reach.

The coal industry is a major driver in the state's economy and a central source of state revenue. As the industry has declined, the state has began to suffer budget shortfalls West Virginia largely avoided throughout the recession.

Coal exports have been one of the few bright spots in recent numbers coming from Central Appalachian coal producers.

Exports in West Virginia grew from $9 billion in 2011 to $11.3 billion in 2012 – driven mostly by a 40 percent increase in coal exports from 2011 to 2012. West Virginia exports about 49 percent of that left the U.S. in 2012.

Coal exported from West Virginia is primarily sent to Netherlands, Italy, India, China, Brazil, South Korea, United Kingdom, Turkey, Japan and France.

"At the end of the day, all of these positive numbers meant that West Virginians are on the job, making a living, and it's thanks to coal," Tomblin said.

Tomblin said other countries have a "huge interest in West Virginia coal" and that the state should continue to support efforts to engage in global coal markets. He added that he was "a friend of coal and I always will be."

Kelly Goes, state director for Sen. Joe Manchin, D-W.Va., spoke on Manchin's behalf. She also touted coal exports while calling Obama's recent speech encouraging climate action a shock of "cold water" thrown on the industry.

"We are not going to let this war on coal be the defeat of our stat.," Goes said. She said Manchin believes Obama's climate agenda is a "pie in the sky" plan that "ignores reality."

Mary Elisabeth Eckerson, a representative of Rep. Shelley Moore Capito, R-W.Va., read a statement on Capito's behalf. The statement was largely critical of the Obama administration, particularly the EPA. Capito's statement also praised coal exports from West Virginia.

"Exports have played an important role in maintaining jobs in the West Virginia coal industry," Capito's statement read. "…Our economic situation would be far worse if it were not for coal exports."

Fred Tucker, a retired United Mine Workers of America member and co-chair of the West Virginia Coal Forum, said that in turning its back on coal, the nation "has forgot who brought them to the dance."

"The miners provided the opportunities the utility companies with the coal and built what they have today," Tucker said. "They built that on the backs and the sweat of the people who mined the coal. I think they need to take a look at themselves and see if we can work out something that will make coal meet the environmental requirements."

Tucker said all coal miners and the industry want is a "level playing field."

Bill Raney, president of the West Virginia Coal Association, said production is down about 3 percent this year. That decline has been occurring for several years, but has been masked by stable coal revenues. The reason for the discrepancy has been price increases that outpaced losses from volume.

"It's clearly coming to everyone's attention now," Raney said. "Not only are we losing volume, we're losing dollars because the price is not nearly as robust or as strong as then."

Raney said the federal government should be encouraging both domestic and international use of coal.

"It's amazing to me that everyone else in this world wants it," he said. "…It makes absolutely no sense to me."

Raney said he remains optimistic.

"We are hopeful against hope all of this is going to turn around," he said.

Jack Porco, president and CCO of Xcoal, a company dealing largely in export coal, said current export challenges include a market that had been oversupplied in anticipation of demand increases.

"We've had some good times. … I want to tell you we're in a challenging moment," he said. "They're not challenges we can't overcome, but there are challenges."

Porco said current market conditions have more to do with the oversupply of coal than a softening of demand. Demand for coal has steadily increased globally while falling in the U.S.

"The industry has invested about $50 billion worldwide gearing up for what it thought was going to be ever-increasing demand from China," Porco said. " … What's happened is that China's demand for imported coal has leveled off."

Strong competition from Australia, where production is ramping up and a weak dollar has influenced price, is also a threat to U.S. coal exports. Adding to that concern, Canada, once considered a small competitor for global coal markets has "come back with a vengeance," Porco said.

Another chance, Porco said, will be a change in contracts that will focus on quarterly and spot prices versus annual prices. Low-costs mines will thrive, while high-costs mine suffer, he said.

"Companies are going to have to manage their coal mines on a short-term basis because that's the way prices are going to be," he said. "You're going to see prices change on a quarterly basis or a spot basis. … Only the low-cost producers are going to survive. Not everyone is going to survive this market."

Porco said that recovery for the coal industry is going to require a level regulatory playing field but also a broader economic recovery.