Coal mining operations in Virginia could decline under new federal rules.

By Kenric Ward | Watchdog.org Virginia Bureau

FREDERICKSBURG — Virginia’s coal industry says the state will be among the hardest hit by pending federal environmental regulations.

The National Mining Association warns that “back-door mandates” by the Environmental Protection Agency will force the closure of four coal-fired generating plants in Virginia, reducing generating capacity by 7 percent.

Only Ohio (18 percent), West Virginia (14 percent) and New Mexico (8 percent) would sustain bigger cuts.

“The EPA environmental regulations make it impossible to obtain permits or comply with greenhouse gas standards without reducing production. This creates higher prices for energy because there is not as much coal available,” said Ibbie Hedrick, spokeswoman for Lt. Gov. Bill Bolling.

Coal provides 30 percent of Virginia’s electricity — some 20.2 billion kilowatts, according to the Energy Information Administration. That’s enough to power 1 million homes and 58,000 businesses.

Virginia ranks 12th in the nation in coal production, EIA said. Direct and indirect employment from coal mining account for 45,210 jobs and a combined payroll of $3.4 billion.

But industry payrolls, which have dropped in the past 30 years with the advent of labor-saving technology, could hit new lows under federal regulations that threaten to shutter more mines.

Bristol-based Alpha Natural Resources, which operates several mines in the state, said it will produce 11.5 million fewer tons of coal this year, a decline of 11 percent.

Still, the most valuable mineral resource produced in the state, coal carries an estimated annual value of roughly $2 billion, according to the Virginia Department of Mines, Minerals and Energy.

Virginia’s coal is primarily found in the far southwestern region, which is laden with the low-sulfur, cleaner-burning variety. Even so, the local industry is feeling the heat from Washington, D.C.

“The future is uncertain,” John Belcher, executive director of the Virginia Mining Association, said from his office in Norton. “It’s all up in the air, depending on the regulations.”

Dozens of pending and proposed rules target coal and the electric utilities that burn it. Among the new rules, toughened greenhouse gas standards “would effectively ban any new coal-unit construction,” according to the Brattle Group, an economic consulting firm.

Appalachian Power, which provides electricity to much of western and southwest Virginia, said the effects of tighter rules dating from the Bush administration have changed the energy climate and driven up costs.

Appalachian Power’s Clinch River plant is among the coal-fired generators shutting down in Virginia.

By 2015, the company will close its two remaining coal-fired plants in the state — Clinch River and Glen Lyn  — and convert two units at Clinch River to run on natural gas.

“Natural gas is a much more attractive option than it was just a few years ago,” said Appalachian spokeswoman Jeri Matheney.

“It’s less expensive and it’s inexpensive to build. But it’s not less expensive to build and run than it is to run an existing coal plant,” she said.

Dominion Virginia Power, another major electric utility serving Virginia, also plans to shut down its coal-fired plants at Yorktown and Chesapeake. The two facilities have a combined capacity to generate 1,189 megawatts.

Dominion officials did not respond to Watchdog.org Virginia Bureau‘s requests for comment. But the company announced last month that it had opened a Virginia City hybrid coal-and-biomass power station that would generate 585 megawatts, enough to serve 146,000 homes.

Due largely to tightening regulations, the price of coal soared from $43.75 per ton in 2007 to $63.78 last year.

That 47-percent increase translates into needlessly higher costs for consumers and fewer coal jobs, said Nick Loris, an energy and environmental policy researcher at the Heritage Foundation.

“Coal operations are getting hit from a number of different angles by over-the-top regulations,” he said. “It’s one thing to switch to natural gas for cost, but it’s another when regulatory rules drive prices higher.”

Loris said the Bush administration “ignored” cost-benefit calculations in turning the screws on coal. Critics say Obama’s EPA is even more reckless in promulgating dictates without legislative approval.

“Now the regulations are just getting worse. This administration is taking things to a new level,” Loris said.

Neither Loris nor the utilities could say exactly how much more Virginians will pay for electricity as a result of rising coal prices and generator shutdowns. But, clearly, higher fuel costs will be passed along to consumers.

As Appalachian Power noted, rate increases are “caused almost solely by increasing generation costs.”

It’s small solace for Virginia’s coal industry, but Appalachian and its parent company, AEP, said they will retain coal-fired generators in other states.

“These plants meet all the environmental controls, and we expect them to stay online for another 30 years,” Matheney said.

Appalachian estimates it has spent more than $2 billion complying with federally mandated clean-air rules at its larger coal-fired plants since 2005.

“However, absent a technological breakthrough, and anticipated EPA rules, no new coal plants are likely in the foreseeable future,” the company said in a statement.

Thornton Newlon, legislative counsel for the Virginia Coal Association, said, “There’s no question that there’s a war on coal.”

And Newlon discounted the notion that increased use of natural gas, or renewable energy sources, would yield a significant number of new jobs in Virginia.

“You can’t make a case for job transfers. Natural gas reserves are fairly limited here and natural gas cannot support an employment base like coal,” he said.

Virginia Tech researchers have reported that gas production has increased in recent years, but they found most of that is in the form of coal-bed methane, which is used in association with operating coal mines.

If there’s a silver lining for Virginia coal, Newlon and Belcher of the Mining Association said it’s in the ongoing demand for metallurgical coal.

Accounting for nearly half of Virginia’s total coal production, the metallurgical variety is used for steel production. And while domestic steel jobs have dwindled, overseas demand buttresses the coal industry, as well as Virginia’s rail and port employment.

With Hampton Roads serving as America’s largest coal-loading port, Virginia’s coal continues to find users — even as it leaves the state and country.