Rising costs threaten Appalachian coal - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Rising costs threaten Appalachian coal

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The cost to transport coal by rail increased 10 percent each year from 2001 to 2010 in southern Appalachia, a government agency highlighted this morning.

Central Appalachian coals cost the most on a per-ton basis to transport than coal from any other basin from 2001 to 2010.

The Energy Information Administration featured an examination of the price of transporting coal over rails through the past few years in its "Today in Energy" blog. Railroad transport is a significant factor in coal transportation cost, accounting for about 70 percent of coal delivered to the U.S. power sector.

"On average, nominal U.S. rail rates for shipping coal grew from $11.83 to $17.25 per short ton from 2001 to 2010," the EIA wrote. "Rates grew slowly in the beginning of the decade before increasing almost 11 percent in 2005, then continuing to grow at a relatively robust pace until the recession. However, the impact of the recession on transportation rates was short-lived as rates grew more than 9 percent in 2010."

Powder River Basin coal, one of the biggest same-sector competitors for Appalachia coal, experienced a 1.5 percent growth in railroad shipping costs from 2001 to 2010. At some plants where Powder River Basin coal was being shipped, rates were actually lower in 2010 than 2001.

EIA examined the overall cost-competiveness of both Central Appalachian and Powder River Basin coal.

"The resulting assessment shows a stark deterioration in the regional competitiveness of CAPP coal compared to PRB over the timeframe," the EIA said in a report released last week. "(Central Appalachian) delivered coal prices in 2010 ranged from $2.13 to $7.69 per million Btu while PRB costs ranged from $1.80 to $5.16 per million Btu."

Prior to price increases in 2007, the EIA wrote, Central Appalachian coal was price competitive over the Ohio River Valley, the Northeast and most of the Southeast, excluding Mississippi and Alabama. By 2010, Central Appalachia coal was displaced over most of the Midwest outside of the Ohio River Valley.

Outside of the immediate area where the coal was mined, Central Appalachia only maintained a price advantage in the Northeast.

"The decline in competitive market area for CAPP can be attributed entirely to mine price," the EIA wrote in the report. "… In only three years, these higher prices for CAPP steam coal (especially in light of recent low natural gas prices) have eroded much of its domestic market potential."

When comparing all coal basins, the cost of shipping coal went up about 50 percent from 2001 to 2010.

According to the EIA, transportation costs account for about 40 percent of the average overall costs of coal delivered to power plants in 2010.

Transport cost by barge and truck has also increased over the past few years.

Transporting coal from West Virginia to plants in Maryland had the third highest cost increases of any other state-to-state delivery. The highest price hikes were in transports from Virginia to Tennessee and from Virginia to Georgia.