Declining Demand for Coal Hurts Southwest Virginia

Edited by Lewis Loflin

Alpha Natural Resources headquartered in Bristol Virginia saw its stock price drop from $47.23 a year ago to $6.15 July 25, 2012. Bristol Virginia along with Washington County gave Alpha $20-$30 million in corporate welfare about 2 years ago to move their corporate headquarters from Abingdon to Bristol. (That cost includes cash kickbacks, free land, buying their old building, plus millions in interest payments on borrowed money.) The 120 or so new jobs we were promised went up in smoke.

While Alpha is firing miners, Patriot Coal of St. Louis has filed bankruptcy and Southern Coal has cut wages. Arch Coal will fire 750 workers in Eastern Kentucky. The government is reporting average coal employment has dropped nationally 2.3 percent and 2.9 percent in Virginia. Alpha has so far closed 4 mines and two prep plants also in Eastern Kentucky impacting 436 miners.

The real impact is more devastating in that good coal jobs support two low-end service jobs such as retail or McDonald's. So in reality with just Alpha the local community lost more like 1200 jobs.

While environmentalists are cheering the destruction of the coal industry, they have nothing to offer those that now have no future. 18 months ago mines were advertising trying to get workers.

The causes are many. Over production due to huge price drops in natural gas, a mild winter, and low industrial output across the globe has left mountains of unused coal in China, Australia, and South Africa. Due to new technology such as hydraulic fracturing (so-called hydro-fracking) natural gas prices have plummeted to $2.85 per thousand cubic feet from $4.24 as of June 2012. In June 2008 gas prices were about $12.41 per thousand cubic feet. Ref. Low prices for gas, EPA regulations, and high rail costs are killing coal.

For Southwest Virginia it's another economic train wreck. Wise, Buchanan, Dickenson, Lee, Russell, Scott and Tazewell and other coal communities fear big losses in coal severance taxes that were supposed to be used to diversify the economy away from coal. Instead the funds were spent on every kind of corporate welfare and political pork scam anyone could dream up. This included spending $25 million for an industrial park with no water access that landed about 100 jobs answering the phone for low-wage outsourcer Sykes Communications. Other silly things included farmers markets where there were no farmers.

To quote Alpha's Ted Pile,

"I wouldn't call it a bust, but our boat is definitely being rocked. We have a confluence of forces here in the U.S. - a huge surplus of natural gas and very low prices for that gas being one. Power plants have been shifting from coal to gas to fuel their electricity generation to the point where for the first time in history, the percent of electricity generated by coal and natural gas were at identical levels in April."

The result will more out migration and poverty. While the coal industry may blame the EPA and President Obama, it's really gas prices that are killing them. It's really time to move beyond coal.


Lewis Frog

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