Hoppy Kercheval: Coal is running out of friends
Last Wednesday, Patriot Coal issued the required 60-day notice of planned layoffs at two of its Boone County operations.
Just one day earlier, a new company called Moundsville Power announced plans to build a natural gas powered electric generating plant in Marshall County.
The timing of the announcements was a coincidence, but it’s significant. Gas is hot; coal is not.
The natural gas industry is sinking wells in Marcellus and Utica regions, while planning continues for a proposed gigantic ethane “cracker” in Wood County.
The coal industry, meanwhile, is fighting to maintain its energy sector market share.
Whether there is an actual “war on coal” is a semantic debate. It’s more like the old guard energy stalwart is running out of friends.
Utilities migrate toward the lowest price and the fewest environmental hassles. Policy makers outside of the coal fields are, at best, ambivalent about the industry, while the greens, with the help of the White House and the EPA, believe they have coal on the ropes.
Meanwhile, weak demand for steel and an oversupply of metallurgical coal has made that market tougher as well.
Patriot President and CEO Ben Hatfield says the layoffs will come at both steam coal and metallurgical coal operations.
“We’re struggling with mines at those locations that are simply operating at cost levels that exceed the prices that we can get at the marketplace,” Hatfield said. “They’re literally consuming cash.”
About 850 people work at those two Patriot operations. Hatfield says it’s highly unlikely that all workers will lose their jobs, but at least some will. Boone County Commissioner Mickey Brown says the news is devastating.
Nine years ago, the coal industry was booming and so was Boone County. The jobless rate was just over 3 percent. Market and regulatory factors drove the jobless rate to nearly 13 percent in 2012.
It’s settled back down to about 8 percent, but is bound to rise again with the forthcoming Patriot layoffs.
One common refrain during discussions about coal’s decline is, “We have to diversify our economy.” But who is this omniscient “we”? Economies do not respond well to central planning. The marketplace provides for the willing and efficient exchange of goods and services that creates wealth and spurs economic growth.
True, government provides the necessary infrastructure, but it’s notoriously bad at picking winners and losers.
For example, West Virginia didn’t plan to suddenly create a booming natural gas industry; entrepreneurs utilizing the new hydraulic fracturing technique moved to where the gas was located.
Coal, like other commodities, is subject to the price swings of the boom-bust cycle. Historically, those who depend directly and indirectly on the coal industry have been buoyed during lean times by the anticipation of an eventual upward trend.
Here’s hoping, for the sake of Boone County and the rest of the Appalachian coal region, that the industry is not on a permanent downward glide path.
Kercheval is host of Talkline, broadcast statewide by the Metronews Radio Network from 10 a.m. to noon weekdays. Listen locally on WCHS 580 AM.