Coal Demand May Not Help Kentucky Workers

There has been talk, assertions, and wishful thinking concerning the projected demise of coal as a source of energy, but that not only isn't true, it's use is actually growing, according to the International Energy Agency in its latest report, but that may not be as positive an outcome for Kentucky miners as it may first appear.

Over the next four years coal used as fuel will climb by 1.2 billion tons, which would make it the most-used fuel source in the world. So why is it Kentucky will probably be left out of the benefits of all that?

In the United States, it's the discovery of huge deposits of natural gas that is the major culprit, as the lower price has pushed coal demand down in numerous areas of the country. At the same time the coal that was easiest and cheapest to extract is largely gone, resulting in higher costs to produce the coal.

Finally, in the U.S. anti-coal legislation has resulted in it becoming more and more expensive to use the fuel as an energy source, which has forced companies to look elsewhere for the energy needs of the consumers they serve.

Unfortunately for the Kentucky coal industry and its workers, projections are coal use in the U.S. will drop by about half of what it is was in 2010 by the year 2018. Every nation, with the exception of the United States, will increase its use of coal going forward.

Again, the reason this demand isn't positively affecting Kentucky coal fields is because the cheapest coal has already been mined, and only the thin areas remain. That means costs will rise even if the supply was provided by companies mining in Kentucky.

Areas of Kentucky that could continue to do well with coal are those with concentrations of high-grade metallurgical coal, which is used to make steel.

As for China and India, which will lead the demand for coal in the years ahead, the costs are so much less than it is in the U.S., that it makes it difficult to compete with the domestic coal available in those countries, especially in the near term.

If wages and costs rise in the coal industry in these countries, it could provide more competitive costs for American coal, but that's probably many years away, and will do nothing to help the coal industry in Kentucky today.

Another major factor for all U.S. domestic coal is the lack of export terminals. There are five proposed coal terminals in Oregon and Washington, but it's unclear how many of them will be built, and how long it'll take for them to wind through the red tape before they're operational.

Here is another example of some possible benefit over the long haul, but for the next several years at least, we won't be seeing anything resembling positive news for the coal industry of Kentucky. People in the areas of Kentucky that have relied on coal for years will have to brace themselves for a long struggle, and take appropriate and meaningful steps to adapt to those realities.