AMERICAN coal companies usually howl and moan at this point of their boom-and-bust industry. There's too much coal. Prices are way down. Smaller companies without long-term contracts face imminent closure. But protests are muted this year. Coal companies are waiting to see how new clean-air laws will affect their business.
``Within the next two years - tops - what will drive the market will be the Clean Air Act,'' says Thomas Hoffman, a spokesman for the Consolidation Coal Company here in Pittsburgh.
``The high-sulfur coal market is going to be a disaster,'' predicts Charles Mann of ICF Resources Inc., a large energy consulting firm in Fairfax, Va.
Sweeping clean-air laws passed last year are forcing coal-fired power plants to cut sulfur-dioxide emissions in half by the year 2,000. The cuts take place in two phases: first in 1995, then again in 2,000. Utilities are scrambling to meet the standard. One solution is to install expensive scrubbers; another is to switch to low-sulfur coal or blend various grades to cut the sulfur content.
One way or another, though, the new law means that the coal industry will undergo a permanent restructuring. The new law will be a boon for areas producing low-sulfur coal, such as Wyoming, Montana, and eastern Kentucky. It will be a blow to high-sulfur coal areas in Pennsylvania, northern West Virginia, Ohio, Illinois, Indiana, and western Kentucky.
The question is how big the industry's restructuring will be.
Mr. Mann of ICF, which researched the topic for the United States Environmental Protection Agency (EPA), estimates that northern Appalachia could see up to 20 percent of its coal industry disappear by 2,000. The Midwest could lose a third or more of its coal industry. But other analysts say those figures may overstate the situation. ``It may not be as onerous as it looks,'' says Jerry Karaganis, vice president of the National Coal Association.
``We will see a shift that is not as dramatic as EPA thought it was going to be,'' says Tom Hewson, a principal in an energy and environmental consulting firm called Energy Ventures Analysis. According to his analysis, demand for energy could grow enough between now and 2,000 to nearly offset the predicted decline in high-sulfur coal consumption.
Coal is an abundant source of hydrocarbon fuel, exceeding reserves of oil and natural gas both in the US and worldwide. The US Department of Energy estimates US coal reserves at about 475 billion tons.
Estimates of future demand are guesswork. A utility's decision depends on a broad array of factors: the rates that railroads charge to bring in western coal, the political pressure from local coal miners, the technical issue of which coals a plant can burn. Furthermore, the utilities have lots of flexibility because the cap on emissions is systemwide.
Thus, a utility could install scrubbers in its biggest and dirtiest plant, eliminating enough pollution to meet its target without converting other plants. Those companies that reduce emissions beyond what the law calls for earn a credit, which they can sell to other utilities or use against the second phase of tightened standards in the year 2,000.
It's too early to tell how many power plants will switch away from high-sulfur coal, coal executives say. Coal-fired plants produce some 300 gigawatts and generate more than half of the nation's electricity in a year.
The focus of concern revolves around some 110 coal-fired plants - the so-called ``big dirties.'' - that are responsible for much of the sulfur-dioxide problem.
Utilities have until 1993 to come up with a plan for complying with the first phase of the new standards. Some utilities, such as the American Electric Power Company in Columbus, Ohio, face special pressures. They will have to weigh the costs of installing scrubbers and charging higher prices to Ohio consumers against the political costs of forcing hundreds, perhaps thousands, of Ohio miners out of work.
Consolidation Coal has four mines along the Ohio River, producing about 10 million tons in all. In the worst-case scenario, where many plants switched to low-sulfur coal, two of those four mines would have to be shut down, Mr. Hoffman says.
The ramifications reach far beyond that local area, he adds. Mines producing high-sulfur coal will often try to find another buyer, usually a power plant already accepting high-sulfur coal, and offer to sell at cut-rate prices. This could lead to severe price-cutting and could hurt all companies selling high-sulfur coal.
Analysts expect low-sulfur coal will sell at a hefty premium over high-sulfur coal.
Concern over the Clean Air Act has overshadowed the industry's current economic crisis. ``It's pretty bad,'' Mann says. Spot prices for coal are the lowest in at least five years.
``It's comparable certainly to what we faced in '82-83,'' says Doug Blackburn, senior vice president of operations for Mapco Coal Inc. in Kentucky. It may be worse in terms of the intensity of the downturn.
Large inventories of coal remain the biggest problem. Utilities stockpiled coal last year in anticipation of work stoppages by union miners. The strike never happened, leaving utilities with lots of excess coal to burn before they buy more.
Mines, especially underground ones, continue to boost productivity. A mild winter has helped make demand sluggish.
Large coal companies are insulated from these fluctuations because they have long-term contracts to supply the utilities.
Small producers who rely on the spot market face the biggest squeeze. Typically, these small mines close during tough times and reopen when the economy improves, says Richard Gordon, professor of mineral economics at Penn State Univeristy.
This time, these small, high-sulfur coal mines also face the threat from the Clean Air Act. No one knows if they can survive this long-term threat.