POWER October 2015 - 46

FUELS
6. Necessary efficiency. Highly efficient underground continuous mining operations are
the hallmark of the Alliance Resources fleet. Nowhere is this more apparent than in its River
King mine in western Kentucky, where the company uses several super-sections to mine two
seams at once. Courtesy: Lee Buchsbaum
ducers will be the last ones standing. And
Bob Murray himself has repeatedly vowed
to be that person.
Producers like Peabody and Alpha are also
competing with Murray/Foresight and Alliance.
Faced with increasing competition in
the area, Peabody has actually pulled back its
ILB production by several million tons over
the past few years, and other producers have
curtailed their expansion plans. The reason:
They simply cannot compete with the lowcost,
high-quality tonnage being produced
by Foresight, CONSOL, and the recent Alliance/White
Oak combination. Overall, an
estimated 45 longwalls will produce 210 million
tons of coal this year, or about 24% of
total estimated U.S. production.
As Hanou points out, " Now that Murray
controls Foresight as well as the former
CONSOL Pittsburgh Seam longwall mines
in NAPP [that he acquired in 2014], he can
price his NAPP and ILB coal against higher-cost
competition. Murray's total production
now is around 45 mmtpy of NAPP
production and around 35 mmtpy of ILB
production.
it has promised both the federal government
for past violations of the Clean Water Act and
other obligations in CAPP.
With mounting debts, regulators nationwide
are worrying whether Alpha and the
rest of the industry can actually come up
with the necessary funds to clean up their
collective messes. This is a nontrivial concern,
especially in the wake of the August
release of ugly, orange, toxic wastewater into
the Animas River that flowed through southern
Colorado and northern New Mexico.
Though that incident involved a gold rather
than a coal mine, the whole of Appalachia is
a similar environmental time-bomb. Much of
future and current reclamation and oversight
costs are paid by royalties on today's mined
tonnage. But whether the coal is mined or
not, the environment is deteriorating daily
(Figure 4).
Where Will the King Make His Last
Stand?
Historically, coal mining has always been
subject to boom and bust cycles. The last
bust came during the phasing in of the Clean
Air Acts in the 1990s and 2000s, when the
industry underwent a wave of restructurings
and bankruptcies, particularly for mines that
produced higher-sulfur Midwestern and Appalachian
coals. In response to the Clean Air
Acts, however, many power generators simply
switched fuels while slowly installing
pollution controls and scrubbers.
But overall coal demand continued to increase
through the end of the 20th century
into this one, and that's what is fundamen46
tally
different today. Few, certainly not Wall
Street experts, believe there's much growth
left within the industry. " This is the worst
cycle since 1982 and perhaps since the early
1950s when the railroads switched from coalpower
to diesel power, " said Hanou. With an
aging U.S. coal fleet and no new plants being
built, post 2025 " the impact of retirements-
both announced and unannounced-will take
effect. By 2040 the U.S. coal industry will
likely be half or worse of what it is today, "
Hanou predicted.
As the U.S. appetite for coal shrinks, no
doubt PRB coal will be around for decades to
come, but the remaining growth areas in the
industry-and some of the most stable producers-are
actually in NAPP and the ILB.
The best, low-cost, easily accessible,
and high-heat coals remaining in the U.S.
are there-as well as some of the most
advanced underground longwall mining
operations (Figure 5). The April combination
of Robert (Bob) Murray's Murray Energy
and Foresight Energy-both of which
rely heavily on advanced longwalls-may
redefine the industry for the 21st century.
Murray/Foresight is competing against
Alliance Resources Limited Partners (Alliance),
a steady-though by Wall Street
standards boring-risk-averse company.
Both Murray/Foresight and Alliance are
taking advantage of excellent geology and
new technologies to use larger, highly efficient
longwall machines to produce more
coal with fewer workers-another blow to
coal industry jobs, from within the industry.
At the end of the day, the low-cost prowww.powermag.com
Prudent
Producers Are Still
Making a Profit
Murray's combined company will be competing
squarely against Alliance, which uses
a combination of highly efficient super-section
continuous miner operations (Figure 6)
and some longwalls to produce high amounts
of ILB and NAPP coals.
Alliance largely stayed out of the chase
for met and refused to take on significant
debt in order to grow. The 29 steady quarters
of dividends the company has paid out
are indicative of the wisdom of its prudence.
While other companies are struggling, Alliance
just reported another record earnings
quarter. Despite its recent combination with
the White Oak Coal Co., compared with its
distressed peers, Alliance isn't burdened by
high debt levels. A brand new longwall operation,
the White Oak mine in southern Illinois,
may become one of the most efficient
operations in the nation as it eventually hits
its stride.
As King Coal, saddled with debt and battered
tools, slowly loses power in Central
Appalachia and nationwide, he's far from
vanquished. Efficient surface miners out
West and new high-tech longwallers will
ensure that the low-cost producers keep the
King alive for decades to come. ■
-Lee Buchsbaum (www.lmbphotography.
com), a former editor and contributor to
Coal Age, Mining, and EnergyBiz, has
covered coal and other industrial subjects
for nearly 20 years and is a seasoned
industrial photographer.
POWER | October 2015

http://www.lmbphotography http://www.powermag.com

POWER October 2015

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