Coal Mining Costs are on the Rise

There are lots of factors playing into declining coal production in Central Appalachia: low natural gas prices, high stockpiles of coal after a warm winter and new environmental regulations. But a Washington Post story highlights something else that coalfields politicians and regulators aren’t talking about: the simple fact that it costs more to mine in the mountainous regions of Kentucky, West Virginia and Virginia, and easily minable coal seams are running out.

“The issues aren’t mine inspectors and environmentalists. It’s a geological fact of life in central Appalachia,” said Tom Sanzillo, a former senior official in the New York State comptroller’s office and now a financial consultant. “You mine for 100 years and you take a lot of coal. It’s the cost of production. That’s the reality of it.”

Marie Shmaruk, a director at Standard & Poor’s who analyzes metals and mining companies, agreed. “We have been relatively negative on central Appalachia for quite some time because it’s an expensive area to mine,” she said. “It’s been mined out and has thinning coal seams. We’ve been mining there forever.”

Shmaruk said that “central Appalachia is being squeezed the most. At natural gas prices today, the coal in a lot of those mines is not really competitive. And you’re seeing a lot of the utilities in that area have moved to natural gas.”

The Washington Post story quotes the National Mining Association as saying concerns about coal running out are “overdone,” and there’s always new technology being developed to make mining thinner seams profitable. But the Energy Information Administration is also predicting the price of Central Appalachian coal will rise, largely due to increased mining costs.

Erica Peterson

Erica Peterson reports on energy and the environment for WFPL.

@ericampeterson

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