West Virginia can expect a slowdown in its energy sector in 2009 as national and global recession cut into demand.

The price of coal already is down, and that puts downward pressure on coal production, said Jim Truman, a coal analyst with Hill & Associates.

Exports, which had been up this year, will suffer next year.

"Global production is down, so exports are not going to be as robust - that's a very safe statement," Truman said.

That likely will affect southern West Virginia mines more than northern, he said, although some northern coal is exported, as well.

And with all that, coal employment can be expected to drop in the state, easing the shortage of experienced miners, he noted, but with the downside of unemployment.

Truman was not willing to put a scale on his expectations for 2009.

Richard Bajura, director of the National Research Center for Coal and Energy at West Virginia University, is generally more hopeful.

"With the economic downturn there's going to be a slight decrease in electric demand or in growth of electric demand, but we still have a service region on the east coast that needs electricity," Bajura said. "West Virginia, being an exporting state, will continue to be a player in that arena, and I think we'll see continued work on how we can use coal to provide electricity for the east coast."

The progress of two Mingo County facilities that might produce liquid transportation fuels from coal - one in development by Rentech Inc. and another announced earlier this month by TransGas Development Systems LLC - could be slowed by the recent low price of the oil for which their product would be a substitute.

Bajura hopes not.

"Is it economically viable given the fact that oil is in the $40s now (since fallen below $34/barrel)? I don't think prices are going to stay that low," Bajura said. "And I think it's important to have a long-term view and forget about short-term blips."

Prices are also down for natural gas.

From a high point above $10 per thousand cubic feet at the wellhead in June, prices are predicted to drop to an average of $6.25/thousand cubic feet in 2009, according to the federal Energy Information Administration.

Some analysts see oversupply and predict lower prices still: possibly as low as $5.50/mcf average in 2009, according to the Houston-based energy research firm Tudor Pickering Holt.

Some operators already left the state in 2008 because of the drop in prices, West Virginia Oil and Natural Gas Association Executive Director Nicholas "Corky" DeMarco said in November

The state's older operators, DeMarco said, are sticking around for what is likely to be a slowdown in production in the coming year.

Relevant to both coal and natural gas, many foresee Congress pushing federal legislation to control emissions of the greenhouse gas carbon dioxide in 2009 or, if not then, in 2010.

When such legislation goes into effect, it is expected to reduce demand for carbon-based fossil fuels, primarily coal.

Some observers see activity coming in energy areas beyond oil and gas in 2009. "We know that (Gov. Manchin) wants a more expansive renewable energy portfolio, so that's something we'll pay attention to," Bajura said.

Jeff Herholdt, who heads up the state Division of Energy, has a similar expectation.

"I think it's going to be a continued push on the diversification of our energy resources," Herholdt said. "I think diversifications are more additive than a substitution" - that is, the state will continue to produce coal and natural gas, but might add, for example, more wind resources and coal-to-liquids or other alternative vehicle fuels, as well.

Copyright State Journal Corporation Jan 2, 2009

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