Sapphire Coal Co. in Whitesburg plans to close its Advantage mine in the area and lay off its 163 workers.
The company disclosed the actions, which are expected to be taken by June 16, in a filing that government officials require businesses to make before mass layoffs.
Jennifer Guthrie, human resources manager and corporate counsel for Sapphire's parent company, United Coal, declined to discuss the move in detail.
"Primarily, it's market conditions, much like many of the people in the area are seeing," Guthrie said.
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Bill Bissett, president of the Kentucky Coal Association, said the industry is seeing layoffs because of a combination of factors including weaker demand.
He said factors include the "very warm winter, which we all enjoyed but at the same time, that's less use of electricity."
He also cited lower demand from manufacturers, who have struggled in recent years with the economic downturn, and the federal government's stronger regulation of coal-fired power plants.
"I think it's having a real effect, especially on Eastern Kentucky," Bissett said.
Whitesburg Mayor James Wiley Craft said the layoffs will be "devastating" to the community.
"Whitesburg, as well as other towns around us, are so totally dependent on the mining industry, and when 163 men are permanently laid off, it becomes a real, real problem," he said. "We don't have any other industry, particularly here in Letcher County, for them to seek employment at other than government.
"And for the last month, I've had one or two people every day ask me if the city has any openings at all for employment."