Eastern Kentucky’s coalfields are struggling…last year, coal production dropped to the lowest level since 1965, as utilities shift toward natural gas. Now, in the wake of news of mass layoffs in Eastern Kentucky’s coalfields, two of the nation’s larger utility companies are essentially pulling out of the region.
The Tennessee Valley Authority has already stopped buying Central Appalachian coal. Southern Company’s subsidiaries got 18 percent of their coal from Central Appalachia in 2012, but plan to reduce that to only one percent by 2016. Instead, both utilities will rely on coal from the Illinois Basin, which includes parts of Western Kentucky, as well as the Powder River Basin out west. Illinois Basin coal has a higher sulfur content than Central Appalachian coal, but updated pollution controls on most power plants allow them to burn the dirtier high sulfur coal and still comply with the Clean Air Act.
James Stevenson is an analyst with IHS Global Insight. He says it all comes down to cost.
“Central App[alachian coal] is expensive,” he said. “It’s a region that is…people don’t use the term ‘mined out,’ but it’s heading in that direction. A lot of the areas that are being mined have been mined three or four times before.”
Market conditions used to favor Appalachian coal, because of the relatively high BTU and low sulfur content. But with updated technology, production in the Illinois Basin—where it’s cheaper to mine—is increasing.
“You’ve seen a big increase in acceptance and appetite for Illinois Basin coal,” Stevenson said. “A lot of plants are building scrubbers, which means they’re more or less agnostic to sulfur content.”
Last year, only about one percent of the coal burned in TVA’s power plants came from Appalachia. But Southern Company’s subsidiaries burned more than 10 million tons of Appalachian coal. Their purchases accounted for about 10 percent of Eastern Kentucky’s coal production for that year.