By Steve Fiscor, Editor-In-Chief

Seeing the coal industry lose market share to new found, inexpensive natural gas last year was tough. Bracing for another four years of over regulation by the federal government was one thing, but to see long-time customers switch fuels crushed what little enthusiasm remained. Then, when coal and gas consumption reached parity in late April, reality hit home. During that period of market uncertainty leaders emerged with words of encouragement. Executives at the National Mining Association (NMA) cautioned utilities against putting too many eggs in one basket. Executives from Peabody Energy and Alliance Resources projected a return to coal and it looks like those forecasts are starting to materialize.

The U.S. Energy Information Administration (EIA) recently reported that coal and other fossil fuels have displaced natural gas energy in nearly every state during April. Mayor Bloomberg and our friends in New York City were paying an average of $10.46/MMBtu in February 2013. Coal provides electricity at average cost of $2.40/MMBtu and natural gas futures are currently trending upward from $4/MMBtu.

In a recent earnings statement, Peabody Energy said that U.S. coal fundamentals have improved from a year ago. They also said they see demand starting to grow in certain markets abroad. The company believes that the coal industry will recapture the vast majority of its 2012 demand lost to natural gas. U.S. coal consumption for electricity is expected to increase 7.3% to 885.2 million tons in 2013 overall, according to a recent U.S. Department of Energy report.

Tragically, however, the industry has incurred quite a bit of collateral damage. Readers will note that U.S. production is down 7.6% year to date and that Wyoming and Kentucky lead the pack with deficits of 9% and 8.2%, respectively (See Top 10 Coal Producing States, p. 7). Kentucky will have a hard time recovering from the 2012-2013 market dip. Last year was the worst year for coal production in the Commonwealth in almost half a century. Total output was down 16.3% from 2011 (See Tough Times for Kentucky Coal Business, p. 14). The silver lining is that, if a coal operator managed to survive during the last year, they could reap long-overdue rewards if conditions continue to improve.

The coal industry was reminded once again in April that the administration and the Environmental Protection Agency are still in charge. A Washington, D.C., appellate court overturned a lower court decision and re-revoked a Clean Water Act 404 (c) permit after prior issuance by the U.S. Army Corps of Engineers. (See Dateline Washington, p. 16). Arch Coal and the NMA expressed their disapproval, but it falls on deaf ears.

The economy seems to slowly plod along. Electricity demand here in the U.S. has reached the lowest point in three years, which is probably the best indicator that the American economy is still in the tank. Unlike the unemployment figures, the government has trouble fudging these numbers, which correlate directly with gross domestic product. Certain sectors are reporting signs of recovery and, if this trend continues, demand for power could start to grow again.

Steve Fiscor, Coal Age Editor-In-Chief