Production
Coal production in the United States and West Virginia has experienced a significant decline in recent years Between 2001 and 2016, West Virginia's coal output decreased by 50%, highlighting the challenges faced by the coal industry in the region.
From 2011 to the present, US coal production has significantly decreased, dropping from 1.2 billion tons to 728 million tons, a decline of over 35 percent Notably, West Virginia's coal output has seen a staggering 41 percent reduction during this period, falling from 135 million tons.
1300 Short Tons - US (millions, annual)
Source: US Energy Information Administration
Short Tons - WV (millions, annual)
The decline of coal production has significantly impacted the Central Appalachian coal basin in southern West Virginia, where output plummeted from 125 million tons in 2001 to just 36 million tons by 2016, a staggering decrease of over 70% In contrast, northern West Virginia experienced stable production levels, increasing from 43 million tons to 47 million tons during the same timeframe Notably, in 2008, the southern coalfields produced nearly three times more coal than the north; however, by 2016, northern counties had overtaken the south, producing nearly 11 million tons more.
Figure 4: Coal Production by Region
35 Millions of Short Tons (quarterly)
Source: US Mine Safety and Health Administration
The decline in southern West Virginia's coal region is primarily attributed to reduced productivity at local mines, largely due to the depletion of accessible coal seams after years of extraction Although southern coal is known for its higher quality and hotter burning properties, the most easily reachable seams have been exhausted, leaving only thinner, harder-to-access seams for mining This decrease in productivity has likely increased the cost of southern coal compared to other regions, placing it at a price disadvantage amid a national decline in coal demand.
In 2001, worker productivity in West Virginia was comparable in both the northern (4.6 tons per worker hour) and southern regions (4.4 tons per worker hour) By 2016, however, productivity in the southern mines plummeted to 2.2 tons per worker hour, a decrease of nearly 50% In contrast, northern mine productivity initially declined until 2012 but rebounded to reach a similar level by 2016, remaining higher than the state average.
US productivity mirrored the pattern seen in northern West Virginia during this period, falling through
8 Short Tons per Worker Hour (annual)
Source: US Mine Safety and Health Administration
West Virginia is known for its high-quality coal, which has commanded a price premium in the electric power sector compared to competing regions From 2008 to 2016, U.S coal prices averaged around $40 per short ton, while West Virginia coal prices peaked at approximately $76 per ton in 2011 However, by 2016, the average price had declined to $59 per ton, marking a 22 percent drop Consequently, the price differential between West Virginia coal and the U.S average decreased from about $30 per ton before 2013 to less than $20 per ton.
Figure 6: Average Price for Coal Shipments to Electric Power Sector
90 Dollars Per Short Ton (quarterly)
Source: US Energy Information Administration
Exports
One factor that supported West Virginia’s coal industry during and immediately after the Great
Between 2008 and 2012, West Virginia's coal exports surged by over 255%, increasing from approximately $2.1 billion to nearly $7.5 billion, driven by favorable global market conditions, particularly supply disruptions in Australia However, as these conditions stabilized, international demand for coal declined significantly, resulting in exports plummeting to just under $1.3 billion.
2016, well below the level of exports in 2008
Figure 7: Value of West Virginia Exports of Minerals and Ores
For an in-depth analysis of how international demand influences coal production in West Virginia, refer to the study by Brian Lego and John Deskins titled “Coal Production in West Virginia: 2016-2036,” published by the WVU Bureau of Business and Economic Research The full report is available at http://busecon.wvu.edu/bber/pdfs/BBER-2016-03.pdf.
8 Billions of Current Dollars (annual)
Source: US International Trade Administration TradeStats
The international coal export landscape has significantly changed from 2012 to 2016, with China and Japan, once major importers of West Virginia coal, now absent from the top 10 export destinations Although countries like the Netherlands, India, and Brazil remain important importers, they have all drastically reduced their coal consumption by 70 to 80 percent.
Table 1: Top 10 Export Destinations for West Virginia Minerals and Ores
Employment
Between 2001 and 2008, total coal production remained stable, but employment in the mining sector, encompassing both mining and support activities, mirrored the trends observed in coal exports.
Between 2003 and its peak in 2011, employment in the coal mining sector surged from just under 16,000 to nearly 25,000 jobs, marking a 59 percent increase However, since then, the industry has experienced a significant decline, losing approximately 13,000 jobs, which equates to over 52 percent, ultimately leaving employment levels nearly 4,000 jobs below those recorded in 2003.
Support Activities for Coal Mining
Over the past 15 years, the southern coalfields of West Virginia have experienced the most significant employment losses in coal production From 2001 to 2012, mining employment in both northern and southern regions rose in response to increasing export demand, with a more notable increase in the southern coal basin However, starting in early 2012, southern coal counties saw a rapid decline in employment, while the northern region has faced a more gradual decrease in the last two years.
Figure 9: Coal Mining Employment by Region
2 Data in Figures 9 and 10 may not match totals in Figure 8, as they are derived from different sources
Source: US Mine Safety and Health Administration
As with production, coal sector employment losses have been particularly high in southern West
Virginia's Boone County has experienced significant employment declines, losing 3,300 jobs, which represents nearly 80% of its mining workforce Additionally, Mingo and Logan counties each reported losses exceeding 900 mining jobs during the same timeframe Fayette, Wayne, Monongalia, and McDowell counties also faced substantial reductions, with each losing over 700 mining jobs since 2011, accounting for more than half of their respective mining employment.
Figure 10: Coal Employment Change by County, 2011-2016
Source: US Mine Safety and Health Administration
West Virginia has emerged as a key player in the natural gas industry, leveraging advanced horizontal drilling and hydraulic fracturing techniques to access substantial reserves in recent years The state is located above three significant shale formations: Upper Devonian, Marcellus, and Utica, with the Marcellus formation being the largest, producing approximately 6.6 trillion cubic feet (Tcf) in 2016 Notably, the Utica shale has experienced the fastest growth in the U.S., increasing from about 993 billion cubic feet (Bcf) in 2015 to over 1.4 Tcf in 2016, marking a remarkable growth rate of over 43 percent Consequently, West Virginia has ascended to the eighth-largest natural gas producer in the nation, rising from 15th place in 2010 This article examines the growth of West Virginia's natural gas sector through various economic indicators, including production levels, reserves, pricing trends, and pipeline developments.
Production
Between 2010 and 2016, natural gas production in West Virginia surged from 265 Bcf to nearly 1.4 Tcf, more than quadrupling during this period However, since mid-2015, production growth has stagnated, remaining relatively flat This decline can be attributed to decreasing natural gas prices, which have made further drilling less profitable, as well as producers potentially awaiting increased pipeline capacity to facilitate gas sales to northeastern US markets.
Figure 11: Natural Gas Marketed Production
Source: US Energy Information Administration
West Virginia's natural gas boom has significantly impacted the Northern Panhandle and North-Central regions, with Doddridge, Wetzel, Harrison, and Marshall counties leading production, each exceeding 100 billion cubic feet in 2015 This shift highlights a dramatic change from a decade earlier when the top producers were located in the southern part of the state, specifically Wyoming, McDowell, Kanawha, and Lewis counties.
Figure 12: Natural Gas Production by County
Source: WV Department of Environmental Protection
New drilling techniques described above have caused experts to increase the estimates for West
Virginia's recoverable natural gas reserves have seen significant fluctuations over the years Proved reserves, which are deposits expected to be recoverable with current technology and economic viability, increased dramatically in West Virginia, soaring from just under 3 trillion cubic feet (Tcf) in 2001 to over 31 Tcf in 2014, before declining to approximately 22 Tcf in 2015 During this same timeframe, natural gas reserves across the United States also experienced growth.
Between 2001 and 2015, natural gas reserves increased from 192 trillion cubic feet (Tcf) to 324 Tcf However, in 2015, the reserves in the US and West Virginia experienced a decline primarily due to falling natural gas prices, rendering some reserves economically unviable for production.
Figure 13: Natural Gas Proved Reserves
In 2015, the U.S experienced a decline in proved reserves of oil and natural gas due to falling prices, as reported by the U.S Energy Information Administration For more details, visit their article on the topic.
450 US, trillions of cubic feet (annual)
Source: US Energy Information Administration
WV, trillions of cubic feet (annual)
Natural gas prices are primarily determined by a national market, with the Henry Hub in Louisiana serving as the benchmark However, significant regional price variations exist, as evidenced by mid-2017 data showing that local producers in the Marcellus region received about $1 to $1.25 less per unit for natural gas entering the Tennessee Zone 5 pipeline compared to Henry Hub prices.
Between 2001 and 2016, the citygate price of natural gas in West Virginia displayed significant volatility, reflecting the costs distributors incur when purchasing gas from pipeline companies The average monthly price surged from nearly $5 per thousand cubic feet (Mcf) in 2001 to over $10 per Mcf in 2008, just before the recession Following this peak, prices plummeted between mid-2008 and May 2009, and have since experienced a gradual decline, with the average citygate price in 2016 showing a continued downward trend.
Figure 14: Citygate Natural Gas Price
Source: US Energy Information Administration
In Figure 15, we report the number of natural gas and oil drilling rigs in operation nationwide between
Between 2001 and 2016, natural gas drilling activity surged prior to the Great Recession, driven by significant price increases However, as natural gas prices declined, drilling activity decreased sharply, resulting in fewer than 100 operational drilling rigs by 2016.
Figure 15: Oil & Gas Drilling Rigs in Operation, US
Source: US Energy Information Administration
Natural Gas Pipelines
The growth of West Virginia's natural gas industry heavily relies on the expansion of pipeline infrastructure to access markets beyond the region Between 2011 and 2015, West Virginia increased its outgoing pipeline capacity by over 1,100 Bcf per day, marking a 12 percent rise Upcoming major projects, including the Atlantic Coast Pipeline and Mountaineer XPress, are projected to add an impressive 18,650 Bcf per day in capacity within the next two years, effectively more than doubling the current total This enhanced pipeline capacity is anticipated to help local producers reduce the price disparity between the Henry Hub natural gas price and those at regional trading hubs.
Figure 16: Natural Gas State-to-State Pipeline Transmission Capacity
Petroleum Liquids and Oil
West Virginia has seen a significant increase in the production of natural gas liquids (NGLs) alongside its natural gas output NGLs, including ethane, butane, and propane, are byproducts of natural gas drilling and can enhance revenue for the oil and gas industry, even though they are not the primary focus Historically, West Virginia has played a minor role in the petroleum sector, but recent years have marked a resurgence in both the petroleum and natural gas industries, highlighting their growing importance to the state's economy.
12 Billions of cubic feet per day (annual)
Source: US Energy Information Administration
West Virginia's natural gas liquids (NGL) production saw significant growth from 2000 to 2015, increasing from 6 million barrels to 57 million barrels, marking an impressive 850 percent rise By 2015, West Virginia accounted for approximately 4 percent of the total NGL production in the United States, positioning it as the ninth-largest NGL producer in the country Despite this growth, NGL production remains a minor component compared to crude oil production, which exceeded 3.4 billion barrels nationally and reached about 8 million barrels in West Virginia in the same year.
Figure 17: Production of Natural Gas Liquids
West Virginia's crude oil production, while modest compared to national levels, has significantly increased due to the natural gas boom, rising from 2.5 million barrels in 2012 to approximately 8 million barrels in 2016—a remarkable 220 percent growth However, the state's crude oil reserves remain limited, totaling around 12 million barrels as of 2015.
Source: US Energy Information Administration
Figure 18: Field Production of Crude Oil
Source: US Energy Information Administration
Source: US Energy Information Administration
West Virginia's electric power industry has experienced a notable decline in both capacity and employment in recent years, largely driven by national trends affecting coal-fired power across the United States The primary contributor to this decline is the increased availability of inexpensive natural gas, resulting from the shale gas production boom, which has become a significant competitor to coal in electricity generation This article explores national generation trends and their impact on West Virginia's coal-fired power market, highlights the state's rapidly rising electricity prices that could threaten economic growth, and examines the implications of national environmental policies on the state's utility sector.
US Electric Power Industry Trends
For decades, coal has been the largely unrivaled fuel used for electricity production in the United States
In 2008, coal accounted for nearly 50% of the United States' power generation, while natural gas represented less than 20% However, by 2016, coal's share of power generation had decreased to approximately 30%, and natural gas had increased to 34%, marking the first year it became the largest source of electricity in the country.
Figure 20: Share of US Electric Power Generation by Fuel Type 4
4 Other sources not shown include nuclear, hydroelectric, fuel oil, and other fossil fuels
Source: US Energy Information Administration
The significant decline in natural gas prices over the past decade has propelled its rise as a preferred fuel for power generation Advances in horizontal drilling and hydraulic fracturing have greatly increased the supply of natural gas, leading to lower prices Notably, the price of natural gas has decreased dramatically compared to coal, with the cost ratio dropping from over five times higher in 2005 to below 1.5 by 2016, as illustrated in Figure 21.
Figure 21: Ratio of Fuel Cost for Natural Gas to Coal in Electricity Generation
A crucial threshold for fuel switching between natural gas and coal has been established at a price ratio of 1.5 For further insights, refer to the study by Brian Lego and John Deskins titled “Coal Production in West Virginia: 2016-2036,” published by the WVU Bureau of Business and Economic Research.
Source: US Energy Information Administration
*2017 ratio based on first quarter data
The decline in coal-fired electric generating capacity has been significant, dropping from 315 gigawatts in 2001 to 279 gigawatts in 2015, a reduction of approximately 11 percent In contrast, natural gas capacity has surged by 74 percent, rising from 253 gigawatts in 2001 to 439 gigawatts in 2015 Additionally, renewable energy capacity, which includes wind, solar, geothermal, and biomass, has experienced remarkable growth, increasing more than fivefold from around 16 gigawatts in 2001 to over 102 gigawatts in 2015.
Figure 22: US Nameplate Electric Power Capacity by Fuel Type 6
6 Other sources not shown include nuclear, hydroelectric, fuel oil, and other fossil fuels
Source: US Energy Information Administration
Over the past 15 years, the growth of energy demand in the United States has significantly slowed, remaining largely flat for the last decade Since 2007, total electricity sales in the US have stabilized at approximately 3.8 billion megawatt-hours (MWh) Residential electricity demand has seen minimal change, increasing by around 12 million MWh to reach 1.4 billion MWh In contrast, commercial electricity use has grown by about 24 million MWh, rising from 1.33 billion MWh to 1.36 billion MWh However, industrial electricity consumption has experienced a notable decline due to the recent recession, dropping from 1.03 billion MWh in 2007 to 987 million MWh in 2016, a decrease of 41 million MWh.
Figure 23: US Electricity Sales by End-User Type
4.0 Billions of megawatt hours (annual)
Source: US Energy Information Administration
Trends in Electric Power Generation in West Virginia
The West Virginia electric power generation sector is primarily driven by coal-fired plants, which are crucial to its energy landscape Additionally, there is potential for the expansion of natural gas-fired generation capacity in the state, indicating a shift towards diversifying energy sources.
Total electric power generation in West Virginia fell significantly during the Great Recession of 2008-
Since 2009, West Virginia's power plants have not fully recovered from a significant decline in net generation, which decreased from nearly 95 thousand MWh in 2002 to approximately 76 thousand MWh in 2016, representing a 20 percent drop This decline coincided with a sharp fall in natural gas prices relative to coal prices, impacting the overall energy landscape in the region.
Figure 24: WV Electric Power Generation
Source: US Energy Information Administration
In 2016, coal-fired power plants dominated West Virginia's electricity generation, contributing approximately 94 percent of the total output However, there has been a notable increase in the share of non-coal energy sources in recent years Renewable energy now represents about 1.9 percent of the state's power generation mix, a significant rise from its negligible presence in 2001 Additionally, natural gas has grown from less than 0.5 percent in 2001 to around 1.6 percent of the state's generation by 2016.
Figure 25: Share of WV Electric Power Generation from Non-Coal Fuels Rising
Coal Natural Gas Renewables Other
Percent of Total Generation Represented By Fuel
Source: US Energy Information Administration
The decline in demand for coal-fired generation has led to reduced utilization of the nation’s coal plants
In 2008, the average capacity factor for coal-fired power plants in the US was 0.68, indicating they operated at 68% of their potential output However, by 2016, this figure had dropped to 0.48, showing that plants were generating less than half of their capacity Similarly, West Virginia coal plants experienced a decline from an average capacity factor of 0.67 in 2008 to 0.52 in 2015, reflecting a significant decrease of 15 percentage points.
Figure 26: Average Capacity Factor at Coal-Fired Power Plants
Due to declining generation and capacity factors, along with regulatory changes, many utilities have determined that operating coal plants is no longer financially viable A notable instance occurred in 2015 when American Electric Power decommissioned three coal power plants in West Virginia—Kammer, Kanawha River 7, and Philip Sporn—resulting in a loss of over 1,800 megawatts of capacity, which represented approximately 10 percent of the state's total capacity at that time.
7 Kanawha River is scheduled for official retirement in December 2017
Source: US Energy Information Administration, Author Calculations
Since 2010, the total coal-fired capacity retirements in the US, particularly in West Virginia, have been on the rise due to declining natural gas prices and capacity factors This trend accelerated significantly in 2012, resulting in around 37 gigawatts of coal-fired capacity being retired from 2012 to 2015.
In West Virginia, around 2.4 gigawatts of coal-fired capacity, representing approximately 14 percent of the state's total capacity, were retired during this period The significant increase in retirements in 2015 was largely driven by the implementation of new regulatory requirements aimed at reducing mercury emissions, which became fully effective that year For more details on this regulation, refer to our discussion on the Mercury and Air Toxics Standards in subsection 5.4.1 below.
Figure 27: Coal-Fired Power Plant Nameplate Capacity Retirements
Source: US Energy Information Administration
West Virginia has seen significant gains in natural gas production, leading to the announcement of several new natural gas-fired power plants in the state Quantum Utility Generation, under the name Moundsville Power, plans to launch a natural gas combined cycle plant in Moundsville with a net summer capacity of 580 MW, scheduled to open in 2019 Additionally, Energy Solutions Consortium is in the permitting phase for two more plants: one in Harrison County with a capacity of 525 MW, expected to begin operations in 2020, and another in Brooke County with a capacity of 766 MW, anticipated to open in 2021 If these projects proceed as planned, they will replace over 75% of the coal-fired capacity that has been retired since 2012.
Table 2: Proposed Natural Gas Electric Plants in West Virginia
Plant Name Net Summer Capacity County Planned Operation Year
ESC Harrison County Power 525 Harrison 2020
ESC Brooke County Power I 766 Brooke 2021
Source: US Energy Information Administration
Electricity Prices
Over the past decade, West Virginia has seen a significant increase in electricity prices, which may hinder the state's economic development initiatives In 2008, the state enjoyed relatively low electricity costs compared to the national average, but this advantage has diminished Between 2001 and 2008, average retail prices for residential, commercial, and industrial consumers remained stable However, from 2008 to 2017, prices surged by more than 6 percent annually across all categories, marking the highest growth rate in electricity prices nationwide during this period.
Figure 28: Average Electricity Price by Consumer Category
12 Cents per Kilowatt-Hour (quarterly)
Source: US Energy Information Administration
The industrial sector has experienced significant electricity price increases, making industrial users—who are the largest electricity consumers—particularly sensitive to these changes Since 2009, West Virginia has seen a notable rise in industrial electricity prices, escalating from an average of 4.21 cents per kilowatt-hour (kWh) in 2008 to 6.76 cents in early 2017, reflecting a 61 percent increase Consequently, average prices in West Virginia now meet or exceed the national average.
Figure 29: Ratio of West Virginia to US Retail Electricity Price for Industrial Consumers
Source: US Energy Information Administration
Recent hikes in electricity prices have caused West Virginia's rates to surpass those of several neighboring states In 2008, the state boasted the third-lowest average electricity rates in the nation, but by the first quarter of 2017, it had fallen to 21st place.
Figure 30: Average Electricity Rates for All End Users by State (2017 Q1)
West Virginia's regulated electricity market grants utilities a local monopoly on retail service territories in exchange for oversight by the West Virginia Public Service Commission (PSC) Regulated utilities can build cost increases into their rate base to ensure a minimum return on investment, but any rate hikes must receive PSC approval through a rate case proceeding Over the past decade, the PSC has permitted electric companies to transfer several increased costs to consumers, contributing to the rise in electricity prices in the state for at least three primary reasons.
New Hampshire New Jersey Maryland* California New York Vermont Maine
The article presents a list of states in the United States, including the District of Columbia, South Carolina, North Carolina, Pennsylvania, North Dakota, South Dakota, West Virginia, New Mexico, and Washington, along with their average electricity costs measured in cents per kilowatt-hour It highlights the US average alongside specific states such as Mississippi, Minnesota, Tennessee, Wisconsin, Oklahoma, Kentucky, Delaware, Wyoming, Nebraska, Louisiana, Michigan, Montana, Colorado, Arkansas, Alabama, Missouri, Virginia, Georgia, Arizona, Nevada, Indiana, Oregon, Florida, Kansas, Illinois, Idaho, Texas, Ohio, Utah, and Iowa.
Source: US Energy Information Administration
* States bordering West Virginia in green
Between 2008 and 2010, coal prices from West Virginia mines to utilities increased significantly from an average of $65 to $74 per ton, marking a rise of over 13 percent During this time, the Public Service Commission (PSC) permitted utilities to pass these increased costs onto electricity consumers in the state Following the recession, coal prices declined, leading to a reduction in state electricity prices; however, they did not revert to their pre-recession levels.
• Utilities also incurred significant capital costs to pay for emission control technologies in order to comply with environmental regulations
Low natural gas prices have led to decreased capacity factors at coal-fired power plants in the state, resulting in reduced revenue for the coal fleet As utilities typically make long-term capital investments, these plants risk becoming "stranded" due to technological advancements like hydraulic fracturing, which alter profit expectations Consequently, falling capacity factors may prompt utilities to seek ways to recover lost revenue from these stranded assets.
Rising electricity rates in West Virginia pose a significant challenge, potentially hindering economic growth as industrial companies seek more affordable options in neighboring states Additionally, consumers are facing higher electricity costs in their homes, which may lead to reduced disposable income for other expenditures.
Further investigation is essential to understand the impact of various factors on electricity prices in West Virginia and to explore potential public policies that could address this issue Future research should focus on specific areas that could shed light on these dynamics.
• What are the root causes of the electricity rate increases experienced over the last decade?
• Why have West Virginia’s rates risen faster than neighboring states, such as Kentucky, which has a similar coal-fired power plant fleet?
• How have policies implemented by the PSC contributed to rate increases, if at all?
• What is the appropriate level of compensation, if any, for power plant assets stranded by technological advancement?
• Would some form of utility restructuring result in lower rates, and what form would that take?
Implications of Environmental Policy on West Virginia Utilities
During the Obama administration, the US Environmental Protection Agency (EPA) implemented several environmental regulations that notably affected West Virginia utilities These regulations faced numerous legal challenges, and the Trump administration announced intentions to revoke some of the previous rules This article focuses on two critical regulations that significantly impact the sector: the Mercury and Air Toxics Standards (MATS) and the Clean Power Plan.
5.4.1 Mercury and Air Toxics Standards
In 2011, the US EPA established the Mercury and Air Toxics Standards (MATS) to reduce mercury emissions from power plants, primarily targeting coal-fired facilities due to their significant mercury content The initial compliance deadline was set for April 2015, with a possible extension into 2016 However, the rule faced legal challenges, and the Supreme Court determined that the EPA did not adequately assess the economic impact of plant closures as mandated by the Clean Air Act Despite these challenges, the Court permitted the rule's implementation to proceed, reaffirming this stance in March 2016 In April 2017, the Trump administration sought to suspend the rule for review, a request that was subsequently approved by the Washington DC Court of Appeals.
Following the implementation of the MATS rule, numerous power plants have either closed or installed scrubbers to mitigate mercury emissions This scrubbing technology demands substantial capital investment, especially for aging facilities It remains uncertain if any of these plants would resume operations if the Trump administration repeals the rule As of June 2017, West Virginia utilities have no plans for additional plant retirements.
In August 2015, the EPA implemented two rules under the Obama Administration's Clean Power Plan aimed at reducing carbon emissions to mitigate climate change effects This plan mandates a 32 percent decrease in carbon emissions from existing power plants by 2030, significantly impacting coal-fired plants, which account for approximately 68 percent of emissions in the power generation sector Each state has specific emissions targets, with West Virginia required to lower the carbon intensity of its power plants by 29 to 36 percent, depending on the chosen compliance strategy.
In 2015, the EPA finalized a rule to regulate carbon emissions from new power plants, originally proposed in 2012 and revised after public comments This rule, released alongside the Clean Power Plan, sets a carbon emissions limit of 1,400 pounds of CO2 per megawatt hour for newly constructed coal plants Achieving this standard would require carbon capture and storage technologies, making the construction of new coal-fired plants unlikely in the near future However, the EPA's economic impact study suggests that the rule will not significantly affect the short-term energy landscape, as most new power generation projects are opting for natural gas over coal.
In February 2016, the US Supreme Court temporarily halted the implementation of the EPA Clean Power Plan (CPP), a stay that was still in effect as of June 2017 West Virginia and several other states have filed lawsuits to prevent the enforcement of the EPA's New Source Performance Standards The Trump administration has expressed intentions to review and potentially repeal the Clean Power Plan regulations, aiming to lift some or all restrictions on carbon emissions.
8 Natural gas contributes about 30 percent of carbon emissions, with small amounts from petroleum and fossil- based waste fuels
West Virginia's energy sector plays a crucial role in shaping the state's economic landscape This analysis provides forecasts for employment and production across the three main energy industries in West Virginia Additionally, we explore the broader implications of the energy sector on the overall economy of the state.
Coal Industry Forecast
Coal production in West Virginia has significantly decreased over the past decade; however, there has been a slight rebound in 2017, with forecasts indicating a production level of approximately 87 million tons Despite this temporary increase, it is expected that production will gradually decline over the next twenty years, reaching around 78.5 million tons by 2036.
The economic forecasts presented in this section are based on research conducted by Lego, Brian, and John Deskins, specifically their studies on coal production in West Virginia from 2016 to 2036 and the state's economic outlook for 2017 to 2021, published by the WVU Bureau of Business and Economic Research.
Note: Forecast period designated by shaded area
Source: US Energy Information Administration, WVU BBER Coal Production Forecast
Millions of short tons (annual)
Forecasts indicate that coal-mining employment will remain stable over the next five years, with approximately 11,000 jobs expected to persist through 2021.
Source: US Bureau of Labor Statistics; WVU BBER Econometric Model
Natural Gas Industry Forecast
Since 2010, West Virginia's natural gas industry has experienced significant growth; however, production stalled in 2015 and remained flat for two years Forecasts indicate that growth will resume in 2017, continuing to rise through 2021 It is projected that natural gas production will increase from approximately 343 Bcf per quarter (1.4 Tcf annually) in 2016 to over 507 Bcf per quarter (2 Tcf annually) by 2021, reflecting an average annual growth rate of about 8 percent.
Figure 33: Natural Gas Production Forecast
Quarter Billions of cubic feet (quarterly)
Source: WVU BBER Econometric Model
Natural gas employment is projected to mirror production trends, having decreased in the past two years due to reduced drilling activity in the state's shale region However, we anticipate a turnaround in employment starting in 2017, with a steady increase expected over the next five years By 2021, natural gas industry employment is forecasted to reach approximately 8,800 workers, up from around 7,000 in 2016, representing an average annual growth rate of about 4.6 percent.
Figure 34: Natural Gas Employment Forecast
Source: US Bureau of Labor Statistics; WVU BBER Econometric Model
Utilities Industry Forecast
As coal-fired power plant capacity has been retired in recent years, utility employment has followed suit
Between 2001 and 2016, the utilities industry experienced a decline in employment from approximately 6,800 to 4,800 employees, averaging a decrease of 2.6 percent annually Looking ahead, we anticipate that employment in this sector will continue to decrease over the next five years, albeit at a reduced rate of 0.7 percent per year, resulting in an estimated loss of around 200 jobs.
Figure 35: Utilities Employment, History and Forecast
Source: US Bureau of Labor Statistics; WVU BBER Econometric Model
West Virginia's energy trends are largely influenced by national and international market forces that impact the state's economy Although state policymakers have limited control over these external changes and broader energy policies, there are several state-level policy options that could be explored to adapt to evolving energy market conditions This section outlines potential policies for consideration, while emphasizing that, as a non-partisan research organization, we do not endorse any specific policy recommendations.
As the coal industry has seen a decline in employment over the past five years, many mining workers are facing the threat of long-term unemployment To assist these workers in securing new jobs, increasing funding for job training programs could be a viable solution However, research indicates that the effectiveness of these programs on the incomes of displaced workers is mixed While some individuals successfully acquire new skills and transition into other sectors, these new roles often offer lower wages compared to their previous manufacturing or mining positions Additionally, studies suggest that workers who pursue higher education, such as community college courses, tend to earn higher incomes than those who engage solely in skill-based training.
West Virginia's severance tax on minerals and natural resources accounted for approximately 8% of the state's tax revenue in fiscal year 2017, generating around $321 million In recent years, lawmakers have considered various modifications to this tax, including the elimination of a surcharge in 2016 intended to address the state's worker compensation debt Additionally, during the 2017 legislative session, Governor Justice proposed a tiered severance tax rate that would increase taxes as coal prices rise While these changes aim to boost coal demand by lowering production costs, research from the BBER suggests that reductions in severance tax may have a limited effect on in-state coal sales.
Researching the increase in electricity rates is vital for West Virginia, as understanding the underlying causes and the rapid rise compared to neighboring states is essential Further investigation is necessary to identify potential policies to mitigate these higher rates, which may involve new Public Service Commission regulations or a restructuring of the state's electricity markets.
10 For a useful summary, see Jacobson, Louis, Robert J LaLonde, and Daniel G Sullivan “Is Retraining Displaced Workers a Good Investment?” https://www.chicagofed.org/publications/economic-perspectives/2005/2q- jacobson-lalonde-sullivan
11 See for example Bowen, Eric, Christiadi, and John Deskins “Government Incentives to Promote Demand for West Virginia Coal.” (January 2015) http://busecon.wvu.edu/bber/pdfs/BBER-2015-01.pdf
Since the enactment of the Public Utility Regulatory Policy Act in 1978, many states, particularly in the northeastern United States, have restructured or deregulated their electric utility sectors, with several bordering West Virginia adopting retail deregulation While West Virginia's power generators participate in the PJM wholesale market, the state still regulates retail electricity sales for local consumers Research suggests that effective retail deregulation policies can foster competition among providers and lower prices for consumers, but additional studies are necessary to assess the potential benefits of restructuring for both utilities and consumers in West Virginia.
REDEVELOPMENT INCENTIVES FOR RETIRED COAL-FIRED POWER PLANTS: The retirement of several
West Virginia's coal-fired power plants present opportunities for redevelopment into alternative uses Policymakers in the state could provide incentives to encourage the transition to natural gas-fired power generation or facilitate brownfield redevelopment, allowing for the establishment of non-utility businesses that can leverage the existing infrastructure.
12 See Joskow, Paul L "Markets for Power in the United States: An Interim Assessment." The Energy Journal 27, no
1 (2006): 1-36 http://www.jstor.org/stable/23296974
Natural gas is typically measured in thousand cubic feet (Mcf), with the prefixes MM, B, and T representing million, billion, and trillion cubic feet, respectively Crude oil volume is standardized in barrels, with one barrel equating to 42 gallons.
2,000 pounds Differentiated from a long ton, which weighs 2,240 pounds, and a metric ton, which is 1,000 kilograms (approximately 1.1 short tons) Generally used to measure coal by weight
A British thermal unit (BTU) quantifies the heat necessary to increase the temperature of one pound of water by one degree Fahrenheit This measurement is essential for evaluating the heat output generated from burning fossil fuels for electricity production.
Megawatts A measure of electric generating capacity Equal to 1 million watts, or 1,000 kilowatts
Megawatt-hour A measure of electricity production or consumption Equal to one megawatt operating for one hour.