Virginia CoalCoal Production:
The U.S. is among the world’s major coal producing nations. In recent years, U.S. annual coal production has totaled over one billion tons, while Virginia production totals have been in the 30- to 40-million ton range. Virtually all of Virginia's coal production today takes place in the southwestern coalfields . The majority of Virginia’s production takes place in Buchanan, Dickenson, and Wise Counties .
Over the past 15 years, U.S. coal production has increased steadily. In contrast, Virginia's total coal-production has decreased. Virginia's peak production year was 1990, when the state's mines produced over 46.5 million tons. By 2004, Virginia's production had declined to 31 million tons. In 2004, surface mines produced 33 percent of the coal mined in Virginia.
While the nation’s top coal mining state, Wyoming, is in western U.S., the number 2 and 3 producers - our neighboring states of West Virginia and Kentucky - are home to Virginia mines’ major market competitors.
Patterns of U.S. coal production have changed dramatically over the past 20 years. In 1980, Appalachian mines produced 438 million tons of coal; over half of the 825 million tons of coal produced nation wide, while western U.S. coal mines produced 210 million tons, 25 percent of the U.S. total. By the year 2000, Appalachian coal production had not changed substantially, totaling 419 million tons, while western production had more than doubled.
A major reason for this change in production patterns is mining cost. Most Appalachian coal is in relatively thin seams, which can only be accessed with costly underground mines. In contrast, most western production comes from surface mines, and western coal seams can be far thicker than any seam in Appalachia. As a result, western coal can often be mined for far less cost than Appalachian coal.
In Virginia's case, a number of factors in addition to seam thickness increase mining costs. Examples include steep terrain in the state's coal-mining areas, geologic conditions that are unfavorable to mining (such as a number of minor faults), and reserve depletion that has occurred because of the state's long coal-mining history. U.S. coal prices have declined steadily over the past 15 years. One reason for this trend has been the shift of coal production westward. Prices received by Virginia mines have also declined over this period.
U.S. coal prices have declined steadily over the past 15 years. One reason for this trend has been the shift of coal production westward. Prices received by Virginia mines have also declined over this period.
The combination of declining coal prices and declining coal production has had a profound effect in Virginia, both within the coal industry and in southwestern Virginia's communities. Throughout the 1990s, some of the state's highest unemployment rates have been in coalfield counties.
Virginia's coal industry itself has also changed. In 1980, Virginia had over 800 licensed mines. By 2001, the number of Virginia licensed mines had declined by more than 50 percent to 328, only 204 of which produced marketable coal. Only those mining firms able to achieve improved operating efficiencies have survived this period.
In response to declining prices and market competition, many mining firms have installed new technology to enhance worker productivity. Over the past 10 years, the number of coal-mining jobs in Virginia has declined by more than 40 percent, while the average number of tons produced by each miner ("productivity") has increased steadily. The modern mining equipment required to remain competitive in today's coal markets is expensive, and the mining industry is subject to strong environmental protection and worker-safety laws. The result has been a consolidation of the industry, as efficient coal-mining firms with access to investment capital have expanded and other firms have ceased operations.
The vast majority of Virginia coal is shipped from mine to market by railroad. An intricate rail network covers the southwestern Virginia coalfield, and extends to major markets and ports. Two railroad firms serve Virginia's mines - Norfolk Southern Corporation and CSX Corporation. Over 90 percent of Virginia's coal production is hauled to market by Norfolk Southern.
The Port of Hampton Roads, at the mouth of the Chesapeake Bay, is among the world's foremost coal-shipping facilities. Coal mined in Virginia, West Virginia, and Kentucky is transported to the Port of Hampton Roads by rail, where it is loaded onto large ships called "colliers." The colliers transport the coal to markets including domestic coal purchasers, primarily electric generators located close to east coast shipping lanes, and overseas purchasers. Shipments to overseas customers make up the majority of Hampton Roads coal shipments , while domestic shipments have increased over the past decade.
Coals mined in Virginia are generally high in quality. Relative to coals mined in other areas of the country, Virginia coals tend to have high energy contents and low sulfur contents, making them ideal fuels for electricity generation. Many Virginia coals are also well suited for producing "coke," which is used in the manufacture of steel.
The two major markets for coal, both in the U.S. and throughout the world, are electricity generation and steel production. Minor quantities of coal are also used by industries other than steel and electricity, usually for space and process heat. A small number of institutional users (such as Virginia Tech) burn coal in central plants for space heating and hot water. Use of coal in individual homes, formerly common, has virtually ceased.
The distribution of markets for Virginia coal is very different from the U.S. average, as a much higher percentage of Virginia's production is shipped to coke- and steel-making facilities. Considering Virginia producers' domestic and export markets , between one-third and one- half of Virginia’s production in recent years has been sold for use in producing steel. Although Virginia produces high-quality coal, Virginia coal producers experience high mining compared to costs experienced by producers in other areas of the country. Because steel-making (“metallurgical”) markets demand high-quality coal products, they tend to pay higher prices. The world’s highest-quality metallurgical coals are mined in Virginia, and in neighboring West Virginia and Kentucky.
Many of the steel-makers served by Virginia producers are located in the Great Lakes region. Coal is shipped by rail from Virginia mines across the midwest to reach these customers. Most of Virginia’s metallurgical coal production occurs in the northern portion of Virginia's coalfields, including Buchanan and Dickenson Counties. One facility in Buchanan County processes metallurgical coal to make "coke," which is then shipped directly to steel producers.
Most of Virginia mines’ sales to electric utilities are shipped to buyers in the southeastern states; most of the Virginia coal sold to these markets originates in the Wise and Lee County areas. Virginia mines’ major competitors for southeaster electric-utility sales are southern West Virginia and eastern Kentucky producers. A substantial portion of Virginia mines’ electric utility sales are to power plants in Virginia itself. Mines in the southern end of Virginia's coalfields can ship coal to many southeastern power plants for less cost than Kentucky and West Virginia mines because of location.
Another major market served by Virginia coal producers is the industrial segment. Large industrial facilities, usually manufacturers, burn coal for process heat; some also generate electricity for both internal use and off-site sales.
Virginia’s coal exports are primarily metallurgical. Except for shipments to Canadian purchasers, all of Virginia’s international coal sales are transported by rail to the Port of Hampton Roads where they are loaded onto ocean-going vessels. Most of Virginia’s Canadian coal sales are shipped by rail to the Great Lakes region.
Major customers for Virginia's metallurgical coal exports are located in the industrialized nations of Europe including Italy, Spain, Netherlands, and France. Virginia producers’ domestic competitors for these markets are located in West Virginia and Kentucky; their major international competitors are located in Australia. Brazil’s steel industry is also a major purchaser of Virginia's metallurgical coals.
Asian customers are located in Japan and South Korea; both of these nations utilize large quantities of steel in automobile manufacturing. Japan is the world’s largest metallurgical coal importer. Because of shipping distances, Virginia mines experience higher transportation costs to Asian markets than their Australian and western Canadian competitors.
Despite declining price, production, and employment trends, the Virginia coal industry contributes substantially to the state’s economy. A 1995 VCCER study concluded that the Virginia coal industry and its employees supported approximately 3 non-mining Virginia jobs, for each job in the mines. The non-mining jobs supported by coal mining are in coal transportation, equipment suppliers, and businesses frequented by coal-mine employees. Taxes paid by the coal industry support local and state government, and contribute to economic diversification of the coalfield region through the Virginia Coalfield Economic Development Authority.
For information on the quality of coal across the United States, visit USGS's National Coal Resources Data System at http://energy.er.usgs.gov/products/databases/CoalQual/intro.htm.
Virginia Coal Flow Diagram, 2005
(Thousand Short Tons)
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