ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, January 7, 1996 TAG: 9601110006
SECTION: BUSINESS PAGE: D1 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
Nationally, the coal industry expects production to increase slightly in 1996, following a year in which coal tonnage dropped ever so slightly.
In Virginia, however, coal mining is expected to remain a tough business because the state's best reserves have been mined over the last 100 years. The General Assembly is considering a tax credit for coal companies that is intended to stem temporarily the decline in the state's coal production.
Coal mining nationally is expected to increase by roughly 10 million tons in 1996, said Connie Holmes, head of policy analysis for the National Mining Association. Coal production in 1995, when the final accounting is in, will be roughly 1.034 billion tons mined, about the same as in 1994, according to the U.S. Department of Energy.
The small increase in production is anticipated, Holmes said, because of increased demand for electricity, from growth in the overall economy and switching of industries to electricity. Electric utilities burn about 80 percent of the coal mined in the United States, and coal accounts for half the electricity generated.
Holmes said the coal industry will be closely watching, but not necessarily taking a position on, the ongoing deregulation of the electric utility industry this year.
Another governmental policy issue the industry will monitor is an effort to tighten regulations on nitrous oxide emissions. Stricter emission rules could hurt the industry, Holmes said.
The amount of coal going to U.S. steel plants - 32 million tons - will remain flat this year, Holmes said. Coal exports, which fell by one-fourth in the early '90s, grew last year and will continue to grow this year because of increased demand in Europe, Holmes said. Roughly 85 million tons will be exported, she said.
Bill Fox, Norfolk Southern Corp.'s vice president for coal marketing, said the railroad is coming off a good year and is looking for a 2 percent to 3 percent increase in its coal hauling business this year ... "nothing huge, but steady."
Norfolk Southern's trains haul roughly 110 million tons of coal a year. That's more than 20 percent of the coal hauled by U.S. railroads and more coal than all but two of the major U.S. railroads, according to the Energy Department. Coal hauling provides NS roughly 30 percent of its annual revenue.
Working in the coal industry's favor last year, Fox said, was a drop over the summer in utility stockpiles, which had remained high during mild summer and winter in 1994. The opening of a second unit at the Clover Power Station in Halifax County will help boost NS' coal business this year, Fox said.
NS expects to move more export coal, particularly steam coal, to Europe during 1996, Fox said. Increasing coal use by countries on the Pacific Rim will pull coal from competitors such as South Africa and help boost NS' European business, he said.
The outlook for coal producers in Virginia, however, is not as good as that for the nation as a whole. Unless a major market change such as a significant increase in price and demand occurs, the declining trend in Virginia production is expected to continue, said Carl Zipper of the Virginia Tech Center for Coal and Energy Research. Coal production in Virginia peaked at 46 million tons in 1990 and dropped to roughly 38 million tons last year, according to the Energy Department.
Karl Kendig is president of the Pittston Coal Group in Lebanon, one of the state's larger coal producers. Kendig said he doesn't see improvement in the coal business this year.
"I think particularly in Virginia, the coal business is pretty difficult," Kendig said, because a lot of the best coal has been exhausted and what's left is expensive to mine.
A tax credit under consideration by the Virginia General Assembly could keep production at today's levels through the year 2000, Zipper said. The credit would encourage the mining of thinner and tougher-to-mine seams of coal.
Virginia is in worse shape than other Central Appalachian states as far as the depletion of minable coal reserves, but, in general, "the future is not bright for Appalachian coal," Zipper said.
It's certain that in places where mining has gone on for many years, the depletion of reserves will become an issue, said the National Mining Association's Holmes. She noted, though, that higher prices would make it possible to mine some seams of coal that can't profitably be mined at today's prices.
Coal prices have been declining since the early 1980s with the decline expected to continue through 1996, according to the Energy Department. Coal is the least expensive fossil fuel to produce, about one-third as expensive as crude oil and one-half the cost of natural gas. The average price of coal in 1993, about $20 a ton, was 44 percent lower than a decade earlier.
LENGTH: Medium: 87 linesby CNB