NEAL CONAN, HOST:
This is TALK OF THE NATION. I'm Neal Conan, in Washington. In many parts of the country, coal has been king for many years, but that's changing. Ten years ago, coal fired half the U.S. electrical power plants. Now that's about a third and dropping. As coal companies switch to cheaper and cleaner natural gas, some coal companies in the east are closing mines and laying off workers.
It's a different story out west, with a different customer. We ship massive amounts of Western coal to China. We get cleaner air and produce less greenhouse gas when we burn less coal, but the climate equation tips the other way when China burns more, and in places like West Virginia, Ohio and Kentucky, people feel their way of life is being threatened.
If you're involved in the coal industry, if you mine it or ship it or burn it, tell us what's changed, 800-989-8255. Email us, talk@npr.org. You can also join the conversation on our website. Go to npr.org. Click on TALK OF THE NATION. Later in the program to Moscow and the mystery of the acid attack on the artist director of the Bolshoi Ballet.
But we begin in Lexington, Kentucky, with Bill Bissett, who's president of the Kentucky Coal Association. Good to have you with us today.
BILL BISSETT: Good afternoon, Neal.
CONAN: And if you could point to one thing that's changed, what would that be?
BISSETT: Well, it's changed in two ways. I'm going to kind of divide your question in two coal fields, if I could, and our eastern is exactly, the Appalachian Coal Basin, what you're talking about. We're seeing a loss of production, a loss of jobs and literally people hurting when you look at eastern Kentucky and also in my home state of West Virginia.
Conversely, you look at our western coal field, which is Illinois Coal Basin, it's booming. It's doing very well. It's a higher sulfur coal, but right now especially domestic use of that coal, as well as some international, are on the increase. So we're kind of - Kentucky's kind of caught between that very economic dynamic you were just discussing.
CONAN: And are you seeing people move from eastern Kentucky, where the mines are deeper, and the coal's a little harder to get to, better coal, but are they moving out to the west?
BISSETT: They are in some cases. It's important to remember that a lot of folks in Appalachia are third- and fourth-generation. They don't want to leave, you know, family who are there, and that's basically where they've lived most of their lives. So there's a resistance to that movement, although in some cases economically they have to.
But where coal very much is the dominant employer in that area, it doesn't just affect the coal mines, it affects all the support industries and everything from restaurants to car dealerships to really the entire community is affected. When coal declines, that community declines.
CONAN: And the coal in the western part of the state, as you say, higher sulfur content. Is that being burned in power plants here in this country?
BISSETT: It is, but with a lot of the technology we have now, with scrubbers and other ways to retrofit existing coal plants, you're able to use that now. So the competitive advantage of low-sulfur eastern coal is no longer the same in the market. And that's been a real game-changer for our east and west coal fields.
CONAN: Even so, that coal in the western part of your state has less kick, fewer BTUs per ton, than the harder coal or indeed than the natural gas.
BISSETT: Absolutely, but again when we had that period of time where it wasn't used as much, you have more attractive coal reserves that can be mined more easily, more cost effectively, and that allows them to compete in the marketplace in a better way, especially against very low-cost natural gas.
CONAN: So are you seeing competition from natural gas? How is that changing your environment there in Kentucky?
BISSETT: We absolutely are, especially when you look at the utilities we sell primarily most of our coal to. Right now natural gas is very low in cost, about $3, and while we expect that to increase for a number of reasons. One is overseas rates for natural gas are very high, $10, $14, $18 even in some cases. We think that will go up, but the question of when that cost will increase, that will have an effect not only with the utilities but also the people that pay for electricity.
CONAN: And as you say, the knock-on effects, well, throughout a community but also through industries like shipping, barge traffic, things like that are all affected.
BISSETT: It even affects population centers like Lexington and Louisville, were there's lawyers, engineers, accountants. It has a real ripple effect. Interestingly, earlier this morning I got a call from a son of a coal truck driver who's been out of work since November wanting help submitting an application to scholarships.
So really it's having an effect in higher education, in K-12, in so many different ways that my industry's been very connected to a lot of the altruism that helps eastern Kentucky.
CONAN: And as you look at the future of those two different areas, what do you see?
BISSETT: Well, I think west will continue to expand. I think you're going to see more of that. I think the big variable, which I think is important here, is what does the international market mean? I mean, although much like you said, Neal, the United States seems to be moving away from coal the rest of the world's going the other direction.
And when you look at a possible five billion tons consumed by China by 2030, they can't mine that much coal. So the three big questions we ask all the time are: How much coal can Kentucky mine; how can we mine it; but most importantly who will be the end user for that product?
CONAN: Well, joining us now is James Stevenson, the associate director of coal at the consulting firm IHS CERA, where he leads coal market analysis. He's on the line with us by Skype from Houston. Good of you to be with us today.
JAMES STEVENSON: My pleasure, Neal.
CONAN: And is our guest Bill Bissett right? Is that east-west divide in Kentucky, does that mirror the United States?
STEVENSON: I'm sorry, repeat that?
CONAN: Does that east-west divide in Kentucky where there are problems in the eastern part of the state, but the western part of the state - does that mirror the rest of the United States?
STEVENSON: Yeah, no it really does. And what we're seeing in general is a decline of eastern coal's full power generation. They're still fairly strong for steel-making, but a decline of eastern coal for power generation and a rise of Illinois Basin, as the other speaker mentioned, and also in the west, Powder Riven Basin, mined mostly in Wyoming is very cheap. And it's not a coal that currently has that same upside that we're seeing in the Illinois Basin, but it is very cheap to mine, and it'll be around for a very long time.
CONAN: And as those trends continue, is this going to develop into more and more of an export industry?
STEVENSON: I think it really has to. The question really then becomes, you know, do overseas countries need it. I think U.S. coal exports will remain strong. I think they'll be a little off the levels, the record levels that we saw last year. But they'll remain strong for some time. I don't know that there's a big sort of boom story there, though, but at the same time I don't really see them declining drastically.
CONAN: And how much of a role do federal regulations play? The EPA has already issued new regulations for new power plants. They're expected to shortly issue regulations for older power plants that could put coal in even more jeopardy.
STEVENSON: Yeah, that's right, and at IHS we're seeing a large amount of retirements, mostly to do with the mercury and air toxics rule that the EPA is bringing in mid this decade. And, you know, that predominately hits mostly Appalachian coal-burning units. So yeah, and it accentuates the decline.
CONAN: And Bill Bissett, when James Stevenson says retirements, he's talking about power plants switching from coal to natural gas or shutting down altogether.
BISSETT: In many cases shutting down altogether, and we're even seeing that with some power plants located literally within our coal field, which is very concerning when you have a large utility like AP saying that it economically cannot burn coal to create electricity within our own coal field. That's a serious concern.
And do we lay some of the blame of that to the administration, to the president? Absolutely. When they've enacted environmental rules that only affect eastern Kentucky and West Virginia and only the industry of coal mining, we feel very put upon, and that's one of the reasons we often sue them.
CONAN: We want to hear from those of you who work in the coal industry, one aspect or another. If you mine it or ship it or burn it, give us a call, tell us what's changed, 800-989-8255. Email us, talk@npr.org. You can also join the conversation on our website. That's at npr.org. Click on TALK OF THE NATION.
And James Stevenson, when you look at these retirements, is Mr. Bissett right? There was a lot of complaints during the last election by some in the coal industry, particularly in the eastern part of the United States, about a war on coal.
STEVENSON: Yeah, it's difficult to come at it exactly that way. A lot of the units that are being retired are older ones that were somewhat inefficient anyway. And - but certainly the ones that are being impacted are mostly eastern units that are central Appalachian burning. And now part of that is that, you know, unfortunately central Appalachian mines are more expensive than mines in other parts of the country, and that feeds, you know, the difficult economics that they face particularly in a climate of very cheap natural gas.
CONAN: Particularly in a climate of very cheap natural gas. As you look at those economics, Bill Bissett, how does that eastern coal, eastern Kentucky coal, West Virginia coal, Pennsylvania, Ohio, how does it compete?
BISSETT: Well, that's a serious concern, as Dr. Stevenson mentioned. I think you look at met coal, that will continue. We really don't have that in Kentucky the way they have it in West Virginia.
CONAN: Met coal, you mean metallurgic...
BISSETT: Metallurgical coal used to make steel, which internationally of course is, you know, can be in great demand. It has a bit of a slump recently. But really the concern for us is I think it's at three tiers here. There's a concern for Kentucky by the economics of coal production and coal usage and what it does for us as a commonwealth.
There's also kind of the national debate that's going on as the country seems to move from the administration away from coal. But internationally again we're seeing that trend of increased coal usage, and I think Dr. Stevenson's right. You know, you look at these older coal-fired facilities, they're being taken offline, but at the same time we're not really building anything new to provide the electricity that the demand is only going to increase in this country. So I think the serious concern for everybody is not only the production of energy but also the reliability of that production.
CONAN: Let's get a caller in on the conversation. We'll go to Ryan(ph), and Ryan's with us from Sheraton, Wyoming.
RYAN: Hi, gentlemen. Hey, this is interesting. I'm traveling, actually, between two power plants right now. I work for a company that sells equipment to power plants. And my comment is this, is the power plants, from what I can tell, they're willing to invest, you know, in the better, cleaner-burning technologies like low NOx burners, scrubbers and, you know, other technologies that will make the emissions cleaner.
But from what I can tell, their fear is this, is even if we do invest in these technologies, who's to say that they're not going to be shut down shortly after spending this money on these new technologies.
CONAN: In other words by new regulations, ever, ever more strict regulations.
RYAN: Yes, ever more strict regulations, thus negating, you know, the money, the millions that they spent on these newer technologies.
CONAN: James Stevenson, does he - is the concern well-placed?
STEVENSON: Yeah, the one area that really isn't regulated so far is carbon, and that absolutely could impact a future generation. And it's just a very, very big unknown. But really the bigger picture problem is that coal plants are also expensive to build, and when you incorporate the costs of building a coal plant that just the construction will probably take you four years and then a few years in planning versus an efficient gas unit, you know, which the actual construction only takes one year, coal has difficulty competing on that cost of capital basis.
So almost regardless of whether or not carbon or, you know, some other regulation could impact new or existing units, coal units are fundamentally expensive to build.
CONAN: Ryan, good luck to you, drive safely, thanks very much for the phone call. We're talking about changes in coal and coal country. Stay with us. It's the TALK OF THE NATION from NPR News.
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CONAN: This is TALK OF THE NATION from NPR News. I'm Neal Conan. It's worth mentioning coal is not the energy source to fall victim to cheaper natural gas. So is nuclear power. An article this week in the Washington Post pointed out that five years ago, executives and politicians promised a nuclear renaissance in this country. Now several nuclear plants are being shut down. Their owners say they can't compete with natural gas. Safety, of course, is also a concern for many.
Our focus today, though, king coal. If you're involved in the coal industry, if you mine it, ship it or burn it, tell us what's changed, 800-989-8255. Email us, talk@npr.org. You can also join the conversation on our website. That's at npr.org, and click on TALK OF THE NATION. Bill Bissett is president of the Kentucky Coal Association. Also with us, James Stevenson, associate director of coal at the consulting firm HIS, where he leads coal market analysis.
And this email is from Jason(ph), who reflects a lot of messages we're getting: I can't believe you're not calling people out on just how horrible coal is for the ecosystem. So what if it gives jobs? Bill Bissett, how do you answer that?
BISSETT: Well, I think that's easy to say if you don't live in Kentucky or one of the coal-producing states or more importantly a coal-using state. And every form of electricity production has some kind of economic and environmental cost to it. And that to me is a whole issue to itself, let alone the issues of reliability and scope: How much electricity can it produce, and how consistently can it produce it?
And that becomes what kind of world do we want to live in, literally? I mean, you know, electricity benefits all of our lives. We've got nearly two billion people on this planet that don't have electricity. They don't live as long as we do, and they don't have the same quality of life. So at the end of the day, yes it does have a price, but it's a price that does benefit our lives.
CONAN: And James Stevenson, it's also worth pointing out even shipping coal by train to West Coast ports to send it to China, that causes pollution problems, too. Those cars are open, and there's coal dust spread all around the track and into the air.
STEVENSON: I think those stories are probably a little overstated. Coal producers do, I think, a good job of spraying sealants on coal, and I think that's a story that gets a headline, but it's a bit of a beat-up over and above reality. I don't think there's that much dust pollution.
CONAN: So as you look, though, at the environmental impact, that is another factor in coal's ability to compete.
STEVENSON: Certainly, certainly, and, you know, we certainly see that more currently in Europe, you know, where we're seeing a carbon thrust coming in later this decade that will close the gap between coal and gas, coal being cheaper in Europe. Here in the U.S., environmental costs have really been more in the form of regulations that are driving, you know, the retirements that we talked about earlier.
CONAN: Here's an email question from Max(ph) in Charleston, West Virginia, and he directs it to Bill Bissett: How much of a negative impact have the EPA regulatory initiatives had on Kentucky's coal severance tax revenue? What segments of Kentucky's populace suffers the most as a result for coal severance tax revenue? You're going to have to explain to us first: What's the coal severance tax?
BISSETT: Sure, for every ton of coal mined, a tax is placed on it when it leaves the portal, and that way, really in many ways that money is cut in half in Kentucky. There are different formulas for different states. But half that money goes back to the community where the coal was mined.
And in the past that money was used kind of for additional benefits: playgrounds, things needed for the community. Now a lot of that money goes literally to operating costs for the county. So there's a serious concern, especially in the eastern Kentucky coal-producing counties, of how are they going to run their county and local governments without this severance tax.
So Max is right. It's a very serious concern in both eastern Kentucky and West Virginia as state budgets have waned, and we've seen that in Kentucky. It really has an impact locally, but also as coal has suffered, it further chokes out the one remaining revenue stream.
CONAN: Let's get another caller in. This is Mike(ph), and Mike's with us from Lincoln, Nebraska.
MIKE: Yes, I'm a locomotive engineer for the Burlington Northern Santa Fe. And although it hasn't impacted us significantly yet in Lincoln, you can see it coming. There are - we've got a significant number of coal trains parked and out of service, and although you don't see it yet, the future, I believe 2015, 2016, power plants in Iowa, Georgia, Alabama, they're all converting to natural gas.
I know there's nuclear power plant permits being let out I believe in Georgia or Alabama, one of those big power producing areas down there. I guess it's a catch-22 for me. It's my livelihood on the one hand; on the other hand, you know, it's an environmental issue. But I guess that's just my comment there.
CONAN: How has - you say there's idle coal cars in the yards. There have to be fluctuations in the amount of coal being shipped anyway, right?
MIKE: That's true, but the reduction in the number of trains passing through is more than your normal fluctuation. And I think that's - you know, it's probably got a lot to do with the price of natural gas and that type of thing and, you know, these new air pollution regulations that have been imposed.
CONAN: OK, Mike, thanks very much for the call.
MIKE: Yes, thank you.
CONAN: And James Stevenson, it was just, what, several, five, 10 years ago we saw a great expansion in the amount of rail capacity for specifically shipping coal.
STEVENSON: That's right. You know, I think certainly the eastern railroads have taken a pretty hefty hit. Rail car loadings are down, you know, 15 percent, 15, 20 percent this year, you know. And rails are sort of in a way the forgotten loser in all of this. Obviously coal producers hurt, and coal-burning utilities hurt, but the, you know, the rail companies and the barge companies that transport the coal, trucking companies, hurt, as well.
You know, I do think that, you know, with the export story and, you know, potential growth of exports out of the West Coast, certainly the Burlington Northern has a bit of upside there. But, you know, eastern railroads I think are hurting disproportionately more just as the eastern coal companies are.
CONAN: Bill Bissett, as the Powder River Basin ships to China, are there markets for that - those coal fields in the East?
BISSETT: Well, and that's one of the questions we're looking at right now. As you look at - you know, you talked about the criticism of dust off coal trains. In the West, I mean, we're wondering if there is some type of blockade in Washington state and Oregon, does that create a better market for our eastern coal? And that's the kind of issues we're watching that are going to have a dynamic.
But I think at the same time, that overall global demand for electricity is expected to increase greatly, and with the coal in the ground here in Kentucky, it remains our hope that in sort of a long-term planning stage, that can produce more opportunities for us.
CONAN: And getting back to politics just for a moment, we saw obviously it - the war on coal mantra that ran through the election last November, we're coming up on midterm elections in a couple of years. Do you see coal playing a factor in, for example, the Kentucky Senate race?
BISSETT: Well absolutely. You have Republican leader Mitch McConnell, who's been a very stalwart friend of coal, I think, during his time frame, you know, in the Senate, who might possibly run against Ashley Judd, who, you know, is a big supporter of UK basketball but is very anti-coal in her beliefs and also kind of considered very out of step with a lot of conventional, let's say, philosophy here in Kentucky.
So I think again, much like we've seen in other races, I think coal will be a big factor, especially when you consider that, you know, the president only carrying four out of 120 counties here in Kentucky.
CONAN: Ashley Judd has not declared for that seat yet. So...
BISSETT: She has not.
CONAN: And would have to win I think a primary in order to get the nomination. So that's a long way from decided as yet. But as you look, is this just going to be a struggle for dwindling markets?
BISSETT: I think it's going to be a struggle, and one of the things that we look to in a second-term President Obama was kind of who he (technical difficulty) say a message to us, and with Gina McCarthy, who was sort of the right hand many people consider of Lisa Jackson, the former EPA administrator, it's a serious concern.
And where, you know, we feel very strongly in Appalachia that they've focused on eastern Kentucky and West Virginia, as they now move more to a climate change policy or, if you will, a carbon tax, the concern is there's going to be more of a national campaign to simply move us away from coal by any political means necessary.
CONAN: And here's an email from Daniel(ph) in Danville, Kentucky: Please do not forget to mention the environmental and health impact of mining coal, especially mountaintop removal. This has great economic impact on the people who live next to those sites and those of us who live downstream and get our water from rivers that source in the mountains. Kentucky's currently discussing relaxing the selenium standards for rivers and streams, which impact our wildlife and drinking water, and MTR has ruined people's property and livelihoods who live near these sites. Mr. Bissett does not represent all of us Kentuckians.
BISSETT: I don't represent all Kentuckians, but I can tell you that the person writing that email represents very few. When you look at topography being one of the things that have kept us really from seeing much economic advantage in Appalachia, it is that flatland development that's helped us a great deal. And I think when you look at surface mining 50 years ago to what it is today, it's come a long way. And specifically, the mountaintop mining that he references, that's less than 3 percent of our coal production here in Kentucky. So it's a very small percentage of what we use to extract coal now.
CONAN: Let's get another caller on the line, and we'll go to Chris, and Chris on the line with us from Lexington, Kentucky.
CHRIS: Yes. Hello?
CONAN: You're on the line. You're on the air, Chris. Go ahead.
CHRIS: Yeah. I work for CSX Transportation, and the rail industry is really hurting because of all of the, you know, the regulations and stuff. They have the EPA. And I mean, this - it's not just hurting the miners. I mean, it's hurting everybody.
CONAN: And the CSX is the old Chessie System, right? The...
CHRIS: Yeah, yeah, old C&O, yeah.
CONAN: And where do you work?
CHRIS: I work on the maintenance side. I travel, you know?
CONAN: And how does that diminishment - how do you see it?
CHRIS: Oh, layoffs, getting laid off early in the year. Usually, they hardly ever lay off, but this year, there's a lot of guys sitting at the house.
CONAN: At the house, you mean waiting around...
CHRIS: Yeah.
CONAN: ...the union shop, waiting for an offer?
CHRIS: Yeah, waiting on the good call to come to work, yeah. I mean, it's bad.
CONAN: And do you see any prospect for improvement?
CHRIS: Say again, now.
CONAN: Do you see any hope that it will get better?
CHRIS: I hope it does. Well, with all the regulations and stuff going on, I don't know, so. You know, I'm a Democrat by heart, but I mean, you know, they're not doing nothing to help us. So, I mean, hopefully, it gets better, but I mean that's in the government's hands, you know, not mine.
CONAN: All right, Chris, and when you say it gets better economically, on the other hand, I'm sure you know about the environmental impact of all that coal?
CHRIS: Oh, yeah, yeah. I mean, the environment, you know, like - I mean it's not as bad as what everybody thinks it is. Like, I mean, nuclear power plants, just look in Japan for what happened, you know, a meltdown or something like that. It's going to hurt worse than, you know? You know, a hundred coal plants or, you know, fire plants will do.
CONAN: Well, Chris, thanks very much and we wish you the best of luck.
CHRIS: Yeah. Have a good day. Thank you.
CONAN: All right. Thank you. We're talking about the future of American coal. Our guests are Bill Bissett, who's president of the Kentucky Coal Association, with us on the phone from his office in Lexington; James Stevenson is also with us, associate director of coal at the consulting firm IHS CERA with us by Skype from his office in Houston. And you're listening to TALK OF THE NATION from NPR News.
This email from Gary: I grew up in Ashland, Kentucky, whose radio station is WCMI, Where Coal Meets Iron. I'm more than a little incensed to hear someone say that the principal societal cost of coal is the cost of regulation. My mother died in her early 70s when a new pulmonary doctor in Ashland described her lungs as being so terrible that he never even heard such a condition described. And, yes, there are environmental hazards to all kinds of energy production, Bill Bissett, as you said, coal certainly has some, and they are measured in lung and heart disease too.
BISSETT: Absolutely. But I think the key is to look at 21st century coalmining in addition to 21st century coal usage. And, you know, being from West Virginia, I know the kind of stories the gentleman was talking about from Ashland, but I think we also, you know, when you travel through Hazard or Lynch, you know, or any - Pikeville right now, it's a very different setting than it was 40 years ago. It's cleaner. The air is cleaner. The water is cleaner. And I think our industry gets no credit for that because everyone I think everyone is still going from the black-and-white photographs from 50 years ago, and that's not a real true representation of what's going on.
And the thing I stress to everyone, you know, granted I speak for the industry, but talk to someone who actually lives there, and the vast majority of folks will tell you, much like you heard from the gentleman with the railroads, we're hurting here, and we believe in coal is the way that we can earn a good livelihood and help the nation.
CONAN: Let's go next to John. John with us from Greenwich, Connecticut.
JOHN: Yeah. I just want to bring a couple of points up, Neal. Number one, we're working here in Greenwich on the old Cos Cob power plant, which was the first coal to electric plant in the United States of America. It went into operation in 1906. And because of the fly-ash deposits, they are still remediating and need to remediate arsenic and heavy metals that come from that coal. It's a long-long-long-term pollution issue, and it stretches out. I want to also point out that the Kingston Fossil Plant in Tennessee that had the coal slurry dam burst that has cost over a billion dollars so far in reparations and damages to people that had their property (technical difficulties) to cleaning for the slurry.
And also point out that some of the cleanest coal technology in the world is actually in South Africa and the South African company SASOL takes coal and makes a liquid fuel from it. And the United States has never embraced that technology. We've looked at it. It's very costly, and it was actually invented by the Nazis by I.G. Farben when they were using Silesian coal to gasify and make (unintelligible) fuels during the bit between the First and Second World Wars. So I just take my comments off the air, but I'd like to hear your comments on that.
CONAN: All right, John, to be fair, the cleanliness of power plants has improved a lot since 1906. But I wanted to ask you, James Stevenson, about the gasification of coal. Yes, that was a technology invented some years ago.
STEVENSON: Yes. There are a number of technologies that, you know, helped to make coal cleaner. And, you know, to be clear, U.S. utilities, U.S. coalmines have adhered with every regulation that's been placed upon them. And, you know, they've done that successfully. Really, it just comes back to an economic story. You know, we have, you know, fluidized bed technology. You know, there are a few others, and they do help. They just have to be economic, and that really is the thing that new units struggle with, is economics. Those are the new natural gas units.
CONAN: And as you look at the future of the industry, we just have about a minute left, what do you see? Is it going to be an export industry?
STEVENSON: Yeah. Look, I think, domestically, we're going to have slow decline. We have a strong Western coals, like I said. I think there is an interest in Powder River Basin coal, in particular, from Korean utilities and Taiwan, lesser extent, Japan and much lesser extent, China. So there's a (unintelligible) story out through the West Coast, but others domestically a declined. And then exports, you know, hopefully, making up a little bit of that decline.
CONAN: James Stevenson, thanks very much for your time today.
STEVENSON: Yeah, my pleasure, Neal.
CONAN: James Stevenson, again, of the consulting firm, IHS CERA, with us from his office in Houston. Bill Bissett, thank you.
BISSETT: Thank you, Neal.
CONAN: And Bill Bissett, president of the Kentucky Coal Association, with us from his office in Lexington. Coming up next, after the brutal acid attack on the artistic director, David Remnick takes us behind the scenes at the Bolshoi Ballet. Stay with us. I'm Neal Conan. It's the TALK OF THE NATION from NPR News. Transcript provided by NPR, Copyright NPR.