HUNTINGTON - When Service Pump & Supply in Huntington started out, the company mainly supported the coal mines with its products and services.
When West Virginia's coal sector began its steady decline in recent years, president and owner Patrick Farrell recognized his company had to change as well.
"Coal is the largest single driver of West Virginia's economy, and when coal is adversely affected, it affects more than just coal miners and coal companies," he said. "It has effects on all small businesses and workers, as well as the entire community."
The company's primary service is moving water.
"Everyone needs water, and most certainly the coal mines," Farrell said. "They need to get it to some place or away from some place. Every natural gas frack site needs millions of gallons of water in and out, as well as municipalities. Water has to get to a house and then get away from it and be treated."
The company's customers also include hospitals, industrial sites and just about anyone that needs water or has water problems.
Farrell said the coal market and government regulations on coal, as well as small business, are some of the biggest challenges the company is facing today.
"Because of the economic downturn in coal, we geographically diversified by moving up toward the Marcellus shale area in Pennsylvania and diversified to southern Illinois," Farrell said.
The company is headquartered in Huntington and also has locations in the Danville area of Boone County, West Virginia, as well as a location in Kentucky, just outside Hazard.
Farrell's story echoes that of many businesses throughout the state, even beyond the mining companies themselves.
After consistent and healthy job growth between 2010 and mid-2012, West Virginia has seen employment decline for much of the past three years, with a cumulative loss of nearly 8,000 jobs, according to the 2016 West Virginia Economic Outlook report by West Virginia University College of Business and Economics.
"A significant portion of the state's job losses can be traced to the downturn in the coal industry, as well as weak levels of construction activity," the report said. "Over this period, job gains have been recorded in the state's oil and gas industry, as well as a handful of service-providing industries, but these gains fail to offset the losses in coal."
Jared Colker, president of West Virginia Electric Supply in Huntington, said his company's business has changed tremendously and continues to transition and diversify due to changes in the industry as well as the downturn in the coal market.
"Coal mines used to be a large part of our business," Colker said. "Today, the company is a full-line electrical distributor, supplying the West Virginia, Kentucky and Ohio region through our eight locations. We serve the region with an inventory of over 20,000 products from over 160 manufacturers. Diversification and adjusting to a changing market is something we must continue to do."
The decline in coal production was reflected in rail car loadings, which were off 37.8 percent from 2014 to 2015, according to the latest reports from the U.S. Energy Information Agency (EIA). This decline in rail traffic is almost entirely due to the decline in coal production and resulted in CSX recently announcing major restructurings. The rail company this year announced layoffs and restructurings at its regional headquarters in Huntington.
Huntington District Waterways Association President Bill Barr said coal tonnage being shipped through the Port of Huntington Tri-State is much less than five years ago.
"Five years ago, the nation was producing 1.2 billion tons of coal annually, and today we are producing 600 million," Barr said. "All due to lack of demand for export tonnage, reduction in steel making requiring metallurgical coal and reduced demand for thermal coal to generate electricity."
Coal exports for the month of January (the most recent data available) were sharply below last year. Metallurgical coal exports are off by 38.5 percent from January 2015 and steam coal exports are off by 54 percent. Imports of coal into the U.S. were down for the month by 46.4 percent.
According to the West Virginia Office of Miners' Health Safety and Training, coal production in the state stood at 11.66 million tons through March 24, 2016.
"Of that total, 9.66 million tons was mined by underground operations and 2.01 million tons was produced by surface mining," the report said. "Only 62 mines reported production in December 2015. Several large operations have idled production in 2016 due to financial restructuring or in response to slack demand."
Many of West Virginia's industries, especially manufacturing, rely heavily on the coal industry for business, which has made them vulnerable to the impacts of the volatile coal industry.
"Companies that manufacture or machine goods used by the coal industry have certainly felt the effects of the decline of the industry," said Rebecca McPhail, president of the West Virginia Manufacturers Association. "Some companies were able to adjust and explore other manufacturing markets.
"Some adapted well, taking advantage of the growing oil and natural gas industries," she added. "Still others are forced to make difficult decisions, including reduction of workforce, organizational restructuring, and in some instances closing their doors."
While not all manufacturers in the state necessarily deal directly with the coal sector, McPhail said the entire manufacturing industry has felt the effects of coal's steady decline.
"This is an issue that has a ripple effect on industry as a whole," she said. "Just about every manufacturer is a significant user of energy related to the manufacturing process."
The state's manufacturing sector as a whole has dropped from more than 72,000 employees in 2001 to only 47,651 in 2014.
"Mines shutting down and jobs lost trickles down to those that support mining operations," McPhail said. "Manufacturers aren't the only businesses affected by coal's demise; nearly every West Virginia business is touched by coal in some way."
Several speakers at the West Virginia Chamber of Commerce's 80th Annual Meeting and Business Summit at The Greenbrier in White Sulphur Springs last week talked about the need for diversification of the state's economy.
"I don't think there is going to be a single silver bullet to solve West Virginia's economic issues right now with the downturn in coal and natural gas," Dr. Jerome Gilbert, president of Marshall University, said at the chamber event. "I think it's going to take a combination of different types of jobs that are created with diversification of the state's economy."
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