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Thursday, March 22, 2012

Appalachian coal taking it in neck from natural gas

The natural gas boom is threatening coal production in Appalachia as utilities are favoring the cheaper energy source, Sonja Elmquist of Bloomberg News reports. The amount of coal mined for electricity production will fall 5 percent this year to less than 900 million tons, the lowest in 16 years, according to the U.S. Energy Information Administration.

Appalachian coal companies have cut 21 million tons of production, and the industry will need to cut about 90 million more to "stem losses." Production from Appalachian companies Alpha Natural Resources and James River Coal have fallen 18 percent and 14 percent, respectively. Cris Ritchie of the Hazard Herald in Hazard, Ky., reported that Alpha recently cut hundreds of workers and closed four mines in the region.

Coal-mining costs in the region rose 9.2 percent to $60.28 a ton last year, while gas futures dropped 51 percent during the same period. Utilities are switching to gas and are only building new gas burning plants, Elmquist reports. Recent focus on coal-mine safety has perhaps added to the decline in production. Coal companies also face lower export prices, as domestic fuel inventories rise toward a 10-year high. (Read more)

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