Coal’s peak years in the past, report says

Ralph B. Davis rdavis@civitasmedia.com

October 31, 2013

A report issued Wednesday by an alternative energy advocacy group says government estimates of U.S. coal reserves are vastly overstated and that as a result, coal’s peak years are in the past, with mine closings and bankruptcies in the future.

Citing “immutable geology,” Colorado-based Clean Energy Action — a nonprofit group which advocates moving the United States away from fossil fuels and toward cleaner energy sources — says a U.S. Energy Information Administration estimate that the nation has enough unmined coal reserves to last 200 years is deeply flawed because it does not take into account the cost of extracting that coal.

“Rather than having a ‘200-year’ supply of coal, there is now abundant evidence that the U.S. is rapidly approaching the end of economically recoverable coal …” the report says. “Of significant concern is that about 40 percent of the country’s coal comes from a few large coal mines in the Powder River Basin of Wyoming. The largest of these mines produce more coal than all but the top two coal producing states. Importantly, many of the largest U.S. coal mines appear to have significantly less than 20 years of remaining coal and the coal in proposed expansion areas is buried more deeply than the coal that is being mined currently. Given the current financial strains affecting U.S. coal companies, it is unclear whether they will be able to support the increased capital and labor costs associated with mining coal that is more difficult to access.”

“Economically viable coal is a nonrenewable resource, and after examining currently available geological and financial data, there is good reason to believe we are rapidly reaching the end of U.S. coal deposits that can be mined at a profit,” said Leslie Glustrom, director of research and policy for Clean Energy Action and the author to the report. “If coal can’t be mined at a profit, not much of it will be mined. It is unclear how long the U.S. coal industry will produce large quantities of coal and at what price, but the current financial distress of U.S. coal mining companies could lead to significant changes in U.S. coal production in less than a decade.”

The report notes that coal production across the United States has been in long-term decline for many years, with all coal-producing states — with the possible exception of Indiana — having passed their peak production years.

In Kentucky, coal production has been in freefall since 1990, the state’s peak production year. During that time, coal production in the state has been nearly cut in half, falling from 173.3 million tons in 1990, to 90.6 million tons in 2012.

In West Virginia, the story is a little different, but the ending is the same. That state mined 173.7 million tons of coal as recently as 1997, nearly matching the state’s record year of 176.2 million tons in 1947. Since then, however, production has fallen by nearly a third, to 120.1 million tons.

The biggest reason for the declines, the report says, is that it is simply too costly to extract much of the coal that remains underground.

Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis, noted that the future of coal mining is largely dependent on the cost to mine coal, and that subject is not getting the attention it deserves.

“The rising cost of production is THE sleeper issue for those who follow coal and energy markets in the United States,” Sanzillo said. “It is a geological certainty and an economic fact that as mining activity matures in a region, production typically becomes more difficult and more expensive … (T)he country is going through a transition in its energy mix for electricity. What will emerge is a more diversified set of suppliers for the nation’s electricity consumers. Coal’s relative monopoly at 50 percent of market share is likely to be replaced by growth in renewable resources, efficiency, natural gas and in some regions of the country by hydro … The coal industry will be smaller with less producers, fewer mines and higher prices.”

As a result of the poor outlook, Clean Energy Action says government and business leaders need to be planning now how to continue to power the country, when facing “coal supplies that could become seriously constrained in the not too distant future.”

“The planet is done making coal, at least on any meaningful timeline,” Glustrom said Wednesday in a conference call with reporters.