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Hoppy Kercheval: Kicking coal in the gut

In the Vietnam War saga Platoon, Sgt. Elias tells young soldier Chris Taylor the U.S. is going to lose the war. “We been kicking other peoples a---- for so long, I figured it’s about time we got ours kicked.”

Coal has been kicking its share of tail for years as the country’s cheapest and most reliable energy source. But now coal is on the receiving end of the boot.

The U.S. Energy Information Administration estimates that natural gas will surpass coal as the nation’s largest energy source by 2035. If so, that’s great news for West Virginia’s rapidly growing Marcellus Shale gas industry, but devastating for the state’s coal country.

The signs of coal’s troubles are everywhere. Alpha Natural Resources, West Virginia’s largest coal producer, announced last week it may close up to 11 surface mines, idling up to 1,100 miners. Patriot Coal recently pink slipped 75 workers at two mines. Cliffs Natural Resources could be laying off as many as 450 miners later this month at its Wyoming County operation.

Tim Mullaney, writing for the Wall Street Journal’s Market Watch, wrote recently, “The war on coal already happened—coal lost.” Mullaney argues that all the newly available and cheap natural gas “is wiping out coal’s few remaining growth prospects.”

It’s so bad that “Moody’s rates all 13 coal producers it follows as below investment grade,” Mullaney reports. The greens are always going to hammer coal, but when Wall Street gets nervous, you’ve got a real problem.

Add in a host of other factors, including the EPA’s oppressive carbon emission standards for new and existing coal-fired power plants and you have coal taking enough body blows to leave it shaken in the corner.

Historically, coal has always come back. Winters turn cold, summers heat up, the economy takes off and the demand for electricity, and the coal to make it, returns. But the Energy Information Administration forecasts only slow future growth in electricity demand because of new appliance standards and more energy efficient equipment.

What if coal doesn’t rally this time? The economic impact on West Virginia will be the ultimate roundhouse punch.

State revenue figures show direct and indirect economic activity from the coal industry accounts for about 15 percent of the state’s GDP. The industry accounts for about 50,000 direct and indirect jobs.

Coal pays $400 million a year in severance taxes. That money not only pays for the myriad government services, but also keeps residential property taxes low. Coal, in effect, subsidizes West Virginia property owners, whose rates are among the lowest in the nation.

I wouldn’t count coal out just yet. Natural gas prices will rise as demand increases. A change in administrations in Washington may rein in the EPA. Researchers could figure out an economical way to capture and store carbon from coal-fired power plants.

But right now, coal’s normally sturdy legs are wobbly.

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.

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