Mining layoffs hit home in Kentucky

August 12, 2012 at 12:00a.m.

McClatchy Newspapers

LEXINGTON, Ky.

The impact of an estimated 2,000 mining layoffs this year is hitting home across the mountainous coal counties of eastern Kentucky.

Gary Hall of Pike County, whose job at a coal-washing plant is scheduled to last a few more weeks, might have to tap his retirement nest egg if he doesn’t find mining work.

Kyle Thacker, laid off from his job as a utility worker at an underground mine, has thought about going back to school to become a welder, but said he might have to move from Knott County for work.

Jeremy Slone moved to Lexington with his wife, Marcie, and their 2-year-old son, Braxton, after he lost his job driving a giant dump truck at a Perry County surface mine in April. He’s trying to get on at Toyota in Georgetown.

Other laid-off miners don’t know what they will do.

The cutbacks will ricochet through the economy in an area where good-paying jobs, especially for people without college degrees, were in short supply even before hundreds evaporated.

“It’s going to start hurting Walmart, Lowe’s, all these stores,” said Hall, 51. “I don’t know what all these coal miners are going to do. Some are going to lose their homes.”

The century-old coal industry in eastern Kentucky has always been cyclical, spiking in the 1970s and then dwindling over two decades before swinging back up for a time.

That traditionally has raised hopes for another comeback, but there are concerns employment won’t ever return to the levels of just a few years ago.

Federal analysts project Central Appalachia is at the front end of a steep, long-lasting drop in coal production.

“Some of these mines are not going to come back,” said Michael Dudas, a managing director at investment firm Sterne, Agee & Leach Inc. who follows the coal industry.

The belief in eastern Kentucky is that federal environmental rules are to blame for the loss of coal jobs — the “war on coal” that officials in the region decry. But several analysts said other factors led to the layoffs this year.

Most notably, they pointed to historically low prices for natural gas and the unseasonably warm winter of 2011-12, which left power plants with stockpiles of coal.

Other factors, such as the slow recovery in manufacturing and the broader economy, also have played parts in the drop in demand for coal.

“Current market forces were the prime driver” in the layoffs, said Michael Tian, an analyst with Morningstar.

Changes in drilling technology have allowed companies to unlock vast new sources of natural gas in recent years, sending supplies up and prices sharply down.

The May price for gas was 43 percent lower than just a year earlier, said Manoj Shanker, a state Education and Workforce Development Cabinet economist.

Many U.S. utilities have switched from coal to natural gas for electricity generation as a result, Shanker said.

In April, the national share of electricity generated using natural gas matched coal’s share, at 32 percent, for the first time since the U.S. Energy Information Agency began keeping such records in 1973.

The Central Appalachian coalfield, made up primarily of eastern Kentucky and West Virginia, faces other challenges as well, including competition from cheaper Wyoming coal and relatively high production costs.

Shanker provided figures showing that in early July, the average spot-market price for coal from the Wyoming Powder River Basin was $8.50 a ton, compared to $56.10 a ton for Central Appalachian coal.

Coal from eastern Kentucky burns hotter, but the price difference makes it hard for Kentucky to compete with Western coal, Shanker said.

And it costs more to produce coal in eastern Kentucky, in part because the area has been mined for a century. Companies naturally went after the best seams first; those that are left are harder to get at, meaning higher mining costs and lower productivity.

In a report released in June, the U.S. Energy Information Administration projected that annual coal production in Central Appalachia will drop sharply, from the 2010 level of 186 million short tons to 132 tons in 2015, and to 92 million tons in 2018 — a decline of more than half in the current decade.

After a further drop to 72 million tons in 2024, the agency projected a modest recovery to 88 million tons in 2035, still far below levels seen in recent years.