There are many different stakeholders who view Appalachian coal supply from entirely different perspectives. Producers fear increased costs and production impediments arising from an expanding regulatory structure, including an increasing difficulty in obtaining the necessary permits to enable production. Conservationists fear the environmental damage that would result from any retreat from a strict regulatory structure. And end-users fear the impact that regulations will have on the purchase price of coal and the continued availability of coal as a dependable and cost effective fuel. Are all of these fears well grounded? Is it a money, supply or environmental issue?

The answer is all of the above. Coal is an abundant resource, however if current regulations stand as they are today, the cost to produce coal in Central Appalachia will significantly increase and in turn will compromise the economic incentives to continue production.

As noted in the chart below, EIA projections through 2035 show Appalachian coal supplies will decline as the markets move away from the high cost of central Appalachian regions to more economical coal supplies from other regions. The EIA chart also illustrates the overall increase in total coal production and depicts the relative growth of coal production in the Midwest and West as compared to the declining production profile in Appalachia.


Source: EIA Coal Projections

Pace Global (an energy consulting and management company) supports this general view of Application coal production, but we do not see this as solely the result of coal regulatory structures. Contributing to this decline has also been the complexion of the Application supply sector itself. It is a community characterized by small, undercapitalized suppliers who have not always proven to be reliable or responsible in their mining techniques or in meeting their customers’ contracted needs. But importantly, the Application region has also been characterized by responsible firms sensitive to the environment, the regulatory process and a commitment to dependable supply. Nonetheless, energy demand along the East Coast is considering the combination of stringent coal regulations and contrasting it with the certainty of natural gas availability from shale formations. These factors are giving responsible, large and long-term energy users an element of pause.

As we see in the forecast, coal supply sources will be available, however supplies that have traditionally been in close proximity will decline and higher cost options from other regions may present significant challenges to consumers. It is imperative that Appalachian coal users consider the reality of their condition and create their business models based on a realization that the market has fundamentally changed.

Comments

  1. Beth Wellington
    Central Appalachia
    January 21, 2011, 1:27 pm

    Not sure, exactly, why the National Geographic’s logo appears on a this piece from an energy consulting and management company. Not exactly journalism. And it tarnishes your brand.