Published in the March 2011 Coal USA Magazine

Research and development in areas literally nonexistent a decade ago, such as enhanced communications and tracking and proximity protection, are now at unprecedented levels, while other areas of technology such as remote operations and cutting-edge mine design are also constantly in focus.

Pair this momentum of industry enhancements with a changing regulatory environment that is forcing the hand ofmany companies to make things safer, easier, more efficient and less expensive while maintaining a comprehensive, robust design.Underground coal mining is in a perfect storm scenario that has resulted in a brighter outlook.

CoalUSA Magazine took on the future in this year’s Consultant Survey, asking some of the top US consulting firms to look into their crystal balls and outline what’s ahead for the nation’s industry.

To find those answers, some looked back at how we got to where we are, while others looked at current issues to predict what’s down the road.

We asked: Taking into consideration the many recent changes in technology, regulations, design and other factors that have made their footprint on today’s mining operations, where is the underground coal mining industry headed?

Marshall Miller & Associates

During 2010, Marshall Miller & Associates observed numerous changes in the underground coal industry, which experienced one of the most difficult – if not the most challenging – year for mine safety since the late 1960s.

In business terms, underground coal mining, especially in the central Appalachian region of the US, is a mature industry in that it operates with experienced personnel, uses well established mining systems, operates the most technologically advanced equipment, and produces steam and metallurgical products that are in high demand both internationally and nationally. Investment in the US coal industry by foreign companies continues at a fever pitch as we continue to see a growth rate in the international market.

Despite increasing production and consumption in China, India and other developing countries, US coal mining companies struggle to compete under an anti-coal administration at the federal level, an ever-increasing onslaught of environmental restrictions and regulatory changes, and with changes in mining conditions in coal seams that in many instances are unprecedented.

These challenges create the need for a more technologically advanced miner and engineer using state-of-the-art measurement systems, computer analysis and mine monitoring, as well as implementing old techniques in innovative ways to safely mine coal underground today and in the future.

Mining conditions have changed in the last decade and this is especially true in the central Appalachian Basin. Due to the rich mining heritage in the Kentucky, Virginia and West Virginia coalfields, it is truly rare to find an unmined coal seam in any area of these states that has not been previously overmined, undermined, or more typically both.

This is not just a US problem. While speaking with some Russian miners earlier this year, we observed that our fathers mined the best coal first, to which they resoundingly replied, “Yes, and so did ours”. All of this undermining and overmining has brought mining complexities and conditions to coal seams that previous miners experienced only on an occasional basis, but are now regular occurrences rather than the exceptions.

These changes fall into three categories: subsidence in seams lying above the previously mined lower seam; pressure concentrations from barrier pillars in overlying coal seams upon lower coal seams; and methane migration from areas previously mined in lower seams to overlying seams or to strata traps above the previously mined areas in underlying mines.

Subsidence of the surface is a well understood phenomenon occurring above longwall panels or areas where pillar extraction or retreat mining is practiced. However, the impact upon coal seams as well as upon the roof and floor strata overlying such full extraction areas is less well understood.

Due to the frequency of mining above full extraction areas, prediction of potential roof problems, especially with lateral changes in roof lithology and selecting the types of roof support needed for strata reinforcement, is critical for profitable mining. Available geophysical tools, such as a sonic velocity can measure changes in the speed of sound in strata that is used to predict rock strength and strata integrity, and the acoustic televiewer that profiles the surface of the borehole, mapping not only the occurrence of fractures, but their orientation and inclination needed for determining the direction of principle stresses.

At the very least, such measurements are beneficial in critical mine locations for understanding the nature of potential mining problems and designing appropriate control measures.

Pressure concentrations below barrier pillars in overmined coal seams often cause mining problems including roof falls and pillar failure in underlying underground mines, especially where the depth of the mine is more than 500 feet below the surface. Computer analysis and modeling techniques can be used to not only predict where stress concentrations might occur, but the level of such concentrations.

More frequent use of these methods is necessary to properly design stable room and pillar systems underneath such barrier pillar areas.

During 2010, several methane gas outbursts were investigated in coal seams which were undermined, but where the prior methane gas emission history of the overlying coal seam being mined was considered low to almost non-existent. The sources of such trapped methane are difficult to trace and are often unknown even with advanced laboratory testing and analysis.

Such unpredictable outbursts in mining areas with insufficient ventilation to dilute such concentrations of methane could result in an ignition with serious safety implications, injuries, or fatalities. Ventilation simulation programs successfully predict the robustness of a modeled underground ventilation system to dilute possible rapid methane releases and to mitigate any serious consequences.

Understanding the nature and occurrence of difficult mining conditions, such as those described above, as well as others, presents some of the challenges facing underground coal mining in mature coal basins. It is necessary for miners to understand these potential problems, and for regulators and safety inspectors to assist in their prediction and investigation.

Through the determination of the underground miner to succeed, by his awareness of these potential problems, his cooperative efforts to mitigate any adverse effects, and his use of improved andinnovative measurement techniques and predictive tools, future underground coal mining can return to its previous historical record of decreasing accident rates, achieving zero accidents, and improving safety for all.

Norwest

Norwest believes there are growing opportunities in the expanding world coal market. The evolving US coal industry will apply safety and technology to strengthen its position in this arena.

Trends supporting this optimism are pronounced. Worldwide demand is accelerating.

Even with domestic coal production exceeding three billion tons annually, China remains an importer. India’s rate of increasing demand nearly matches that of China, but India’s domestic production base is currently limited.

The opportunity for US producers can be seen in the 72% increase in our coal exports over the first 10 months of 2010 compared to the same period in 2009.

In the first 10 months of 2010 the value of US coal exports exceeded $8 billion. Growing exports and foreign acquisitions of US coal reserves demonstrate the current and future opportunity.

While some may not readily see the advantages of increased foreign investment, in reality it is an advantage to the US to have large, well-capitalized foreign investors to expand the capability of developing coal reserves for export. This results in increased direct and indirect employment opportunities and foreign capital invested into US operations and is a boon to the domestic coal industry.

Although declining, the US reserve base is ample to meet the potential needs of the world market. Our high quality coals and demonstrated technological capabilities allow us to continue to be an efficient and safe source for satisfying the world’s needs, even as remaining reserves become more challenging.

While our higher quality surface mineable coal reserves are becoming limited, underground reserves are substantial. The US Energy Information Agency recently estimated a bituminous coal demonstrated reserve base of nearly 250 billion tons, much of which is deep mineable.

Increased efficiency and supply reliability are being realized due to several factors. A prominent factor is the consolidation of the US coal industry. Larger businesses have greater access to capital markets.

They also have multiple production sources which provide customers with greater confidence in the security of supply. Through diversification of supply sources, larger companies minimize risk; disruption of production at one source has less impact on profitability than if there are fewer sources.

Larger companies are also more capable of developing innovative mining processes. They are more willing than the smaller producers to take, what are for them, relatively small risks with new technology.

The declining reserve base is also a major driver in greater use of technology. Challenges of thinner and deeper coal seams necessitate creative, innovative mining systems. A declining reserve base also provides fewer opportunities for the smaller and less efficient operators; the easily accessed seams are less available.

As a result, large operators are becoming more dominant producers, and these are the operators with the resources and commitment to advance technology.

The nation’s legislated requirement for wireless communication is driving technological advancements in the much needed area of workforce safety.

American manufacturers are very near to devising compliant systems.

When the regulations were enacted, the closest to compliant systems were foreign-developed and manufactured. Since the imposition of the new regulations, domestic communications development has made great advances. This trend will continue.

Major change in improved safety is taking place among domestic coal producers. These operators are becoming more creative and less reliant on the regulators to establish safety standards and programs.

Risk management is becoming a more accepted principle among the safer coal producers. They are increasing their willingness to self-regulate.

While regulatory compliance is a prime concern, these operators are creating new and more effective processes for protecting the health and safety of their miners.

The considerable environmental pressures being imposed on surface mining may result in an increased reliance on production from underground mines. Coal will be a prime source of domestic energy and exports for many years to come.

This demand will likely be met by a reversal of the last two decades when surface mining as a percentage of our production grew in both the east and the west. While the Powder River Basin will remain the largest source of production by volume, in other regions underground coal mining will begin to displace surface coal; this is recently being seen in the Illinois Basin.

The worldwide demand for coal will not subside in our lifetime, and this demand can only be met by increasing international trade. The US underground coal industry is well positioned to be a major and growing player in this trade.

Our mines remain the most efficient in the world. Though declining, our reserves are extensive.

Developing countries, most notably China and India, have requirements which greatly exceed their foreseeable supply capabilities. The low cost, reliable source of supply for these countries will be the US.

John T. Boyd

There has rarely been less clarity in the direction of future trends in the coal mining industry than what is observed today in the US due to a diverse range of factors.

Coal is demonized as an outdated fuel by the media. Unrelenting environmental opposition is forcing compromises in mining plans while delaying approvals and permits.

New safety regulations and unprecedented changes in enforcement contribute to an increasing cost structure. The financial community has suddenly become averse to risk, and the availability of financing to mine operators has tightened following the 2008-09 economic meltdown.

And tomorrow’s coal reserves are less attractive than yesterday’s, thus constraining productivity.

But the simple fact remains that coal is still the world’s most significant fuel source for power generation, and global growth in coal consumption continues unabated. While there are concerted efforts to “save the planet” by eliminating coal use, it will not happen in the foreseeable future given the fundamental that there are no practical alternatives to coal.

Coal mines will continue to operate and new mines will be developed to meet the world’s insatiable demand for energy.

Boyd believes non-mining factors (such as permitting, financial parameters and coal prices) will have a greater influence on future coal mining operations than technological improvements and operational changes. In particular, the precarious balance between supply and demand over the past decade has resulted in significant swings from high to low prices and back again.

These variations influence the design, development, and operation of coal mines. It has long been recognized that high production coincides with economies of scale and low unit operating costs.

However, it will be difficult for anyone other than large mining companies to develop high-volume, long-life mines. Mine operators that currently operate such mines will have the ability to achieve high margins, thereby enabling investment in technologies and infrastructure that extend mine lives into thinner and more difficult reserves.

In contrast, there will also be a place for high-cost, short-life mines that have relatively compressed lead times. During periods of high prices, these small mines, while relatively inefficient compared to the high-volume longwall mines, will become economically viable and will be developed to meet peak demand.

The biggest casualty of price volatility will be mid-size mining operations. There will be exceptions, but CM mines that operate multiple sections will be at a disadvantage to lower-cost longwall mines that can survive during price declines.

Likewise, these mid-sized mines cannot be constructed and brought to full output as quickly as the small-scale mines that periodically are developed during price peaks.

We do not anticipate significant breakthroughs in underground mining equipment or technology. While refinements in equipment and mining techniques will continue, it is probable that average costs will rise.

This is due to the fact that technological improvements will not keep pace with the ever-challenging nature of geology being faced by most mine operators. The progression into thinner and less attractive coal reserves will prompt mine operators and equipment manufacturers to evaluate opportunities to pursue innovations in production equipment.

Thin-seam longwall equipment and “mini-walls” (short faces) are examples. Mine operators that have existing infrastructure (preparation plants, load-out facilities) and continuous mining equipment – and can achieve reasonable production volumes – are the most likely candidates for such new systems.

Alternatively, we foresee other mine operators continuing to use existing higher-profile CM and longwall equipment to mine thinner coal reserves.

These operators will cut significant and increasing amounts of out-of-seam dilution, and will accept declining preparation plant yields in return for the higher advance rates that cannot be achieved with new, low-profile equipment.