Yesterday, WFPL aired a story about the long relationship Eastern Kentucky residents have had with the coal industry, and where coal’s decline leaves the region.
Both the story and the various economic factors at play in Eastern Kentucky are complicated. But I wanted to call attention to one very important point: that even though there’s been a noticeable decline in the eastern coalfields over the past two years, there’s probably going to be an even greater decline in the demand for Eastern Kentucky coal over the next two years.
New regulations on the amounts of mercury and other air toxins power plants can emit go into effect in 2016. For the past few years, utility companies have been evaluating their fleets and looking at their options. For many of these power plants, it will cost less in the long run to retire their coal-fired units and replace them with natural gas, rather than install pollution controls to comply with the new regulations.
I’ve written about this trend here in Kentucky—both the Cane Run Power Plant and the Big Sandy Power Plant in Lawrence County will stop burning coal. And last month, the Tennessee Valley Authority announced that the Paradise Fossil Plant in Muhlenberg County would shut down two of its three coal-burning units.
So, what will the demand for Eastern Kentucky coal be once these retirements happen over the next two years?
From January 2012 and June 2013, more than 42 million tons of Eastern Kentucky coal was sent to power plants, mills and export terminals. At this point, between power plant retirements and companies announcing a switch away from Central Appalachian coal, the region will lose 35 percent of its customer base by 2016.
The numbers are slightly better for Western Kentucky: only a 13 percent drop.
Of course, there are regulations on the horizon other than the Mercury and Air Toxics Standard, and those could also take a separate toll on coal. But as I noted in the story, these changes to comply with MATS have already been set in motion.
Utility companies have made multi-billion dollar decisions to convert plants to natural gas or close coal-burning units across the country. They’ve told their investors. They’ve begun the regulatory process. At this point, it’s too late to turn back.
And a realistic discussion of coal’s future in Eastern Kentucky won’t solely focus on the harm that these regulations are causing the industry, but will include a realization of what’s already a done deal and what could still be affected by policy changes.
If you’re interested in digging into the data, here it is. If you want a sortable-version of the spreadsheet, send me an email and I’d be glad to share it.
**To compile the data used in the story, I analyzed the information that power plants are required to report to the Energy Information Administration on what are known as 923 forms. These forms include a wealth of data, including where every ton of coal a power plant burns is from, down to the individual mine. The analysis was made easier by the fact that the Kentucky Energy and Environment Cabinet had already calculated the power plant breakdown between Eastern and Western Kentucky coal for 2012 in its annual coal report.