Regional State of the State: Association Leaders Look to the Future

First, there is an abundance of coal in Illinois. According to the Illinois State Geological Survey (ISGS), at one time there were about 210 billion tons of coal beneath the state’s borders. To put in round numbers, Illinois has about 100 billion tons of recoverable coal or enough to meet the country’s needs for over 100 years. The energy content in Illinois’s coal reserves is greater than the energy content of the oil in Saudi Arabia and Kuwait combined.

Second, Illinois coal operators know how to get their product to the end users. For over 25 years 85 percent of the coal produced in Illinois has gone out of state. The Illinois coalfields have logistics alternatives and are bounded by the Ohio and Mississippi rivers and provide a way to get the product anywhere in the country and the world at a reasonable cost.

Gleason – Our regulators need to recognize that not only do our operators compete against operators in other coal-producing states, but we also compete against an abundance of natural gas which has led to low gas prices and the development of gas-fired electric generating facilities. Competition with natural gas is what a competitive market demands, but when government offers massive subsidies for renewable electricity that distorts the market by incentivizing generators to sell power below the actual production cost, or states like Pennsylvania mandate renewable production, the market is disrupted and consumers lose.

Thus, absent reforms to level the playing field and make competition fair, we must focus on the cost of production. By ensuring the cost of production is not excessive due to over-regulation and other requirements, our producers have a better chance of competing and operating within their margins to provide thermal coal for affordable electricity generation.

Raney – While we are confident coal reserves are available to meet an increased demand, a portion of the market has been forever lost as a result of the Obama-era regulations, particularly MATS. Some portion of the domestic utility market is gone, but given West Virginia’s coal quality, we could regain some share of the demand that remains if we can lower our regulatory costs (regulation and severance taxes).

Deti – No serious person involved with Wyoming coal believes over-regulation to be the sole cause of the industry’s downturn. The rise in the competitiveness of natural gas is a huge market factor, but fair competition in the market is a good thing. Easing unfair, punitive regulation intended solely to make coal less competitive is also a good thing and should not be downplayed.

We must also not forget the rise in renewables is a perfect illustration of government playing favorites through tax breaks, subsidies, mandates and favorable regulatory treatment. But all of the special treatment in the world cannot make these power sources reliable.

Headley: Where do you see your state and region’s coal industry in 20 years?

Gonet – Illinois coal mines are among the most productive mines in the country when measured by tons produced per man-hour. Most Illinois underground coal mines have seams that exceed six feet, making the coal relatively easy to extract. In a shrinking market, the low-cost producer will prevail. The near-term prospects for the Illinois coal industry are positive.

Gleason – Opportunities for metallurgical coal are often market-driven, and companies need to be structurally well positioned to survive the ebbs and flows of pricing and demand, both domestically and globally. While over- regulation impacts the cost of doing business, it also impacts our customers, such as iron and steel manufacturers, who, like coal, face some of the most stringent state-imposed regulations in the country. When those industries are competitive and thriving, and when investments are made in infrastructure and manufacturing, a demand for coal is created, industry confidence is secured, steel is being made, bridges and pipelines are being built, and cars and refrigerators are being manufactured.

Raney – Hopefully, with a bigger piece of the remaining domestic thermal coal demand as the remaining power plants seek the highest quality coal for their feedstock. As the world demands more energy, coal is the most available resource and West Virginia offers the best coal, with an established export infrastructure and workforce in place.

West Virginia will continue to dominate the domestic met and export met markets, provided action is taken to stem the closure of U.S. power plants and regulatory costs and government burdens (severance taxes) are reduced/rationalized.

Deti – While Wyoming coal is indeed operating with a “new normal”, coal mining remains a bedrock industry for this state and the nation. And it will remain so for the foreseeable future. It is far, far too early to write its epitaph.