West Virginia Coal – Back To The Future

The recent announcement that Mylan, now Viatris, will shutter their Morgantown manufacturing facility and eliminate 1,500 jobs in the process leaves us all with an inexplicable empty feeling and sense of hopelessness. It serves as a brutal realization that longstanding state businesses can be ‘here today, gone tomorrow’ due to factors not abundantly clear to us.  

If State leadership had advance warning or insight into the reasons for Viatris’ decision, could they have convinced them to continue operations?  While it appears not, this decision serves as a wakeup call.

Similarly, as we work to diversify our economy and recruit new industries to locate in West Virginia, we must be cognizant of the whims of the marketplace and its impact on new business ventures. Do these prospective ventures have the staying power to ride out a market downturn or the enticement of a merger or, more generally, the lure of greener pastures somewhere else? 

WVCA Requests Federal Action

West Virginia Coal Association Senior Vice President Chris Hamilton wrote to West Virginia’s Congressional representatives this week requesting their assistance on several items of critical importance.  

Specifically, the industry is requesting federal approval or action on several items prior to the Trump Administration leaving office.  These items include EPA approval of West Virginia’s ACE Rule Application and Water Quality Amendment on Aluminum, OSM approval of various state program amendments, and transferring all coal mining-related projects to the Huntington District Office of the US Corps of Army Engineers. 

Hamilton stressed in his letter that “if these federal approvals are not finalized by the current administration, they will likely not be approved under the Biden Administration.  This will set our industry and the State of West Virginia back and leave us vulnerable to federal litigation and enforcement action.”

Hamilton asked our congressional representatives to communicate directly to President Trump or the pertinent contact within his administration on behalf of the industry.  

Weekly Production / Consumption Summary

West Virginia coal production rebounded from the Thanksgiving holiday week, with in-state production increasing +5.5% week over week:  +8% in the NAPP region of the state and +2.7% in the state’s CAPP region.  National coal production increased week over week by +9.5%, with production from the entire NAPP thermal region increasing by +7.2%.  Implied national met production increased by +6% from the previous week.  Year to date, West Virginia coal production is off by -29.1% from last year:  -24.8% in the NAPP region of the state and -33.5% in the state’s CAPP region.  National coal production is down by -24.3% from last year:  -29.2% in the Appalachian region, -29.9% in the Interior basin and -20% in the Western region.  Coal production from the entire NAPP thermal region is off by -28% compared to last year and implied national met production is down -27% from last year.

Appalachian thermal coal prices increased from the previous week:  +3% for NAPP coal and +3.1% for CAPP thermal coal.  Illinois Basin pricing was unchanged and prices decreased by -0.4% for Powder River Basin coal and -0.3% for Western Bituminous coal.  Average natural gas prices increased by 17% from the previous week (+$0.40).

U.S. iron and steel production increased week over week by +1.1% with furnace capacity utilization increasing by 1.1%.  Year to date, domestic steel production is off by -18.2% and capacity utilization is down by almost 16% compared to last year. 

National electric generation increased from the previous week by +11.6%.  Output in the Northeast, Mid-Atlantic and Southeast regions increased by almost 13% week over week.  Generation in the Central Industrial region increased by 12%.

U.S. rail traffic also rebounded from the Thanksgiving holiday week by almost +20%.  Coal loadings increased by +9%, Finished steel and steel raw materials increased by +5.6% week over week, auto parts and finished auto carloads increased by +37%.  

The U.S. Commerce Department released the latest U.S. coal export data (October) last week.  Met coal exports declined by 3% from September.  Thermal coal exports declined by 6% month over month.  Year to date, U.S. exports of metallurgical coal are down by -26.3% and thermal coal exports are off by -36.5% from last year.  Average met coal export prices increased from September by 4% (+$3.78/ton) while average thermal coal export prices fell by -5.4% (-$3.50/ton) from the previous month. 

The World Steel Association published global iron and steel production data for October earlier this week.  Steel production continued to increase month over month in most of West Virginia’s primary met coal markets:  +10% in Europe, +7.2% in North America, +8.3% in South America, +6.3% in India, +11% in Japan, +0.4% in South Korea and +0.1% in Ukraine.  Excluding China, global steel production increased from September by +9.2%.  Chinese iron and steel production decreased by -0.3% from September.  Year to date, iron and steel production is off -12.7% in Europe, -29.8% in North America, -13% in South America, -18% in India, -18% in Japan, -6.7% in South Korea and -5.4% in Ukraine compared to last year.  Excluding Chinese production, total global iron and steel production is off by almost 14% compared to 2019.  Chinese production is up +5.4% compared to last year. 

WV DEP Publishes Draft TMDL for Big Sandy, Lower Ohio River and Twelvepole Creek Watesheds

The WV DEP has published a draft TMDL for select streams in the Big Sandy, Ohio River and Twelvepole Creek watersheds.  Total Maximum Daily Load (TMDLs) are plans to bring streams into compliance with state water quality standards and typically include load reductions that may result in lower NPDES permit limits for certain parameters / activities.  The proposed TMDL is for streams that are not meeting standards for fecal coliform, iron, selenium, pH, aluminum, beryllium and dissolved oxygen.  The comment period on the draft TMDL closes on January 12, 2021.  More details on the draft plan are available at: https://dep.wv.gov/WWE/watershed/TMDL/grpe/Pages/default.aspx

Rulemaking Review Committee Advances Water Quality Standards Changes

On Wednesday the Rulemaking Review Committee of the West Virginia Legislature advanced revisions to the state's water quality standards rule related to human health / consumption.  WV DEP has proposed revisions to 24 human health / exposure standards.  The revisions were supported by the West Virginia Coal Association and were developed by a working group that includes industry, environmental and community representatives.  The rule package will be considered by the full Legislature during the 2021 Regular Session.  More detail on the changes can be found at: https://dep.wv.gov/WWE/Programs/wqs/Pages/WQSpublicmeetings.aspx