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Page added on May 31, 2014
Peak Coal: Will the US Run Out of Coal in 20 Years or 200 Years?
“Most U.S. coal is buried too deeply to be mined at a profit.”
U.S. coal production has peaked, and the miscalculations that have led to estimates of a 200-year supply could create a serious electricity deficit for the nation, according to a new report from advocacy group Clean Energy Action.
“The belief that the U.S. has a ‘200-year’ supply of coal is based on faulty reporting by the EIA,” concludes the report, Warning: Faulty Reporting of U.S. Coal Reserves. “Most U.S. coal is buried too deeply to be mined at a profit and should not be categorized as reserves, but rather as ‘resources.’”
“The U.S. Energy Information Administration’s estimate of the nation’s coal is ‘a faulty fuel gauge’ because the U.S. is rapidly approaching the end of economically recoverable coal,” explained report co-author Leslie Glustrom of Clean Energy Action. “We’re acting like we have a full tank. No one knows exactly when empty will come, but we should be prepared.”
The economic viability of the U.S. coal resource is compromised because “it is buried too deeply and costs too much to mine it,” Glustrom said. Peabody Coal CEO Greg Boyce’s Q3 2013 earnings report call remarks about reduced capital expenditures in Wyoming’s Powder River Basin seem to confirm that coal is becoming “too expensive to mine,” according to Glustrom.
“Nationally, coal production appears to have peaked in 2008 at 1.171 billion tons,” the report states. “U.S. coal production in 2012 had fallen by about 155 million tons to 1.016 billion tons.”
EIA data puts production for the first half of 2013 at 488 million tons, Glustrom added. “We are not even on track to get to a billion tons. That would be back to 1993 levels.”
Source: Clean Energy Action’s Warning: Faulty Reporting of U.S. Coal Reserves
The EIA’s projection of a 200-year supply of coal is overly dependent on data from the 1980s and 1990s, when the price remained around $1.00 per million British thermal units (MMBTU) because coal producers were “ripping open surface mines,” Glustrom said.
But there was an inflection point in 2004. Since then, the cost of coal used by electric utilities rose more than 7 percent per year, two to three times faster than inflation, the reports states. Three key factors continue to drive costs up and production down: increased production costs, increased transportation costs, and increased export pressure.
“Easily accessible coal has already been mined and burned. Now reaching the remaining coal is becoming increasingly difficult and expensive,” the report claims. And the price of diesel fuel for the trains that transport most U.S. coal is rising. Finally, supply-constrained European, South American and Asian countries “are often willing to pay more for coal.”
The top sixteen states, which combined produce over 95 percent of U.S. coal, are cumulatively “past their peak production,” the report asserts.
Eastern coal is typically in the $3.00 per MMBTU to $4.00 per MMBTU price range. Western coal is slightly less, but its cost is rising, especially in states that incur transportation costs by importing from the West.
Examples are New Jersey, where the price rose 7.5 percent per year to $4.05 per MMBTU since 2004, and Mississippi, where coal it rose 12.5 percent per year to $4.45 per MMBTU.
New technology is not a viable solution, according to the report: “Even if coal were perfectly clean — or could be made to be so — it would still be the wrong choice due to serious questions about long-term U.S. coal supplies.”
Source: Clean Energy Action’s Warning: Faulty Reporting of U.S. Coal Reserves
Another factor compromising coal’s economic viability is that the top three U.S. coal companies have huge debts coming due between now and 2021 at interest rates much higher than those available to better-positioned companies, the report contends.
Peabody Energy, the biggest U.S. coal company, has $650 million of 7.375 percent debt due in 2016; $1.5 billion of 6 percent debt due in 2018; $650 million of 6.5 percent debt due in 2020; and $1.34 billion of 6.25 percent debt due in 2021.
Second-ranked Arch Coal Inc. has $600 million of 8.75 percent debt due in 2016; $1 billion of 7 percent debt due in 2019; $375 million of 9.875 percent debt due in 2019; and $500 million of 7.25 percent debt due in 2020.
“U.S. coal production very likely has peaked,” Glustrom said. “And it is no longer cheap. Arch, they say, is in the land of the walking dead.”
U.S. decision-makers should, the reports says, develop “scenarios that require moving the U.S. beyond coal in significantly less than twenty years.”
Based on recent wind and solar bids in the western United States, the report adds, once coal costs rise above about $1.50 per MMBTU, “it can no longer be assumed that coal is the lowest-cost way to generate electricity.”
25 Comments on "Peak Coal: Will the US Run Out of Coal in 20 Years or 200 Years?"
Davy, Hermann, MO on Sat, 31st May 2014 7:23 am
Heinberg and others have well documented the global issues with coal. We probably have seen peak coal in the US for above and below ground reasons. PO will ensure peak gas, coal, and AltE. The financial crisis coming soon will be another nail in the coffin of any kind of growth in coal. We are seeing the twin pressures of environmental policies and market distorting Wall Street policies promoting gas impacting coal. Both of these policies will be short lived when the grid stutters and flickers. The cost of capex needed to finance and run coal operations is going up dramatically and markets are shrinking. This is a bad combination. I know coal because my family sells equipment to Illinois Coal operators. I did 20MIL deals back when I was Finance manager for the family business 10 years ago. Strip mining coal is a capital intensive endeavor requiring large capex and energy intensity. PO and a financial crisis will be a severe headwind for the industry. I imagine government intervention at some point. Without the grid the game is over folks. Coal is a must have in the grid energy mix. There will be a mass die-off without a grid.
rockman on Sat, 31st May 2014 8:08 am
The story might accurately characterize the future of coal in the entire country but not in Texas. We are the largest consumer of coal by a huge margin compared to even the #2 state. And all our huge coal (lignite actually)reserves are very shallow and easily stripped mined. And we’re taking serious efforts to minimize GHG production: a $400 million pipeline is under obstruction to send the GHG from the SECOND LARGEST GHG SOURCE in the US to be sequestered in an old oil field.
And even though Texas has as much wind power as the #2 bad #3 states combined it hasn’t been used to eliminate coal sourced electricity but supplement our rapid growing power consumption. The rest of the country might be moving away from coal but it has a continued future in Texas.
Perk Earl on Sat, 31st May 2014 9:06 am
“And even though Texas has as much wind power as the #2 bad #3 states combined it hasn’t been used to eliminate coal sourced electricity but supplement our rapid growing power consumption.”
That is exactly the problem as I see it, i.e. renewables simply being added rather than replacing FF. If it doesn’t replace FF then no carbon emission advantage has occurred. People do all these calculations that X amount of renewables = Y amount of reduced carbon footprint, but the reality is in many cases it’s just a boost, an add on form of energy.
It all comes down to economics as to what will give an extra bang of energy for the buck, and if renewables pencils out as profitable then they get installed, but they don’t necessarily replace dirtier forms of energy production. All we can be assured of is humankind wants more, more of everything it can get it hands on that will add power and profit.
diemos on Sat, 31st May 2014 9:17 am
Energy is wealth.
Since no one is going to voluntarily choose to be poor you can be certain that everything that can be dug up and burned will be dug up and burned.
Plantagenet on Sat, 31st May 2014 11:01 am
It doesn’t matter if oil and coal has peaked because Obama has promised us we have another 100 years supply of natural gas. With cheap clean abundant NG the future still looks bright
bob on Sat, 31st May 2014 11:13 am
What I can’t understand is the part about what is affordable to mine etc…if I told you that you need surgery to live another 10 to 20 years….I bet you will come up with the money somehow…..money and markets are manipulated to fit the picture, they always have been and always will….yes we will have power struggles but in the end people and countries will capitulate because you can either lose your hand or your head….most countries and people will choose to lose the hand….my friends tell me I am a conspiracy nut…but I tell them I am just basing my viewpoints based on facts…On another note I can’t understand why MSM has a concerted effort to lie to people about how much oil we have…
Dutch on Sat, 31st May 2014 11:41 am
The US will never ‘run out of coal’, but this is irrelevant. Relevant are future production figures. The Berlin based Energy Watch Group, backed by industrial and political heavyweights, predict global peak coal ca. 2025. Peak coal US will probably occur a little later.
http://deepresource.wordpress.com/2013/03/29/energy-watch-group-updates-their-2008-scenario/
baldwincng on Sat, 31st May 2014 12:21 pm
Shale gas in US leading to CCS – Coal Can Stayunderground
Shale gas saving the planet
Feemer on Sat, 31st May 2014 12:28 pm
bob, certain resources aren’t economically recoverable. It is technologically challenging/not possible to do, or the price of extraction is simply to high and people won’t pay for it. For example, if all our oil came from tar sands oil prices would be at least $200 a barrel, which people will not pay. And as the price of coal rises, people will see that solar, gas, wind (which is already evenly priced with coal) is staying the same or even decreasing in price while coal goes up so people will switch, decreasing the price of wind even more. And if the new EPA carbon limits are not repealed by republicans then natural gas and wind have a very bright future.
rockman on Sat, 31st May 2014 12:48 pm
bob – Good point. A similar and simple question: if oil were $25/bbl how many years of production would we have from the US shales?
J-Gav on Sat, 31st May 2014 3:00 pm
Davy – “Coal is a must have in the grid energy mix. There will be a massive die-off without a grid.”
True enough. But then, with coal, there will be a massive die-off too – (perhaps a bit later) through climate change, barring multiple volcanic eruptions, a nuclear winter or a big meteorite strike … Ah, how to get out from between that rock and that hard place?
bobinget on Sat, 31st May 2014 3:11 pm
Feemer points out because Saudi Arabia can ship oil thousands of miles at world price of $109. Suncor (SU) or Imperial (IMO) can’t make a profit selling oil, even yesterday, UNDER $100 per barrel, (landed).
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=ICA0000008&f=A
Suncor the biggest pure play oil sands operation has been mining bitumen since 1969.
Coal pollution, not Alberta’s localized contamination, is directly responsible for tens of thousands of US deaths annually. Oil sands, because so few American voters work there or have bribed congressmen, is simply a easier target then coal.
PrestonSturges on Sat, 31st May 2014 3:49 pm
America would get a couple years of breathing room when China implodes and goes dark.
Keith_McClary on Sat, 31st May 2014 6:44 pm
November 8, 2013
http://peakoil.com/geology/peak-coal-report-u-s-coal-reserves-are-incorrectly-calculated-supposed-200-year-supply-could-run-out-in-20-years-or-less
Norm on Sat, 31st May 2014 8:20 pm
it doesnt matter if we run out of coal. Can burn up the garbage from all the cardboard packing boxes from all that junk we buy at Wal Mart.
Makati1 on Sat, 31st May 2014 8:24 pm
How is that Texas coal going to be mined? Human labor with picks and shovels or machines powered by oil, manufactured by oil powered factories with oil provided metals and minerals and repaired with oil powered stuff?
Human power will be costly in lives and the resources to feed, clothe, and support the families that will be the miners. Last time coal was mined by hand, it was a lot closer to the surface and was real coal, not a semi-wood substitute. Texas will go at the same time as the rest of the country.
energyskeptic on Sat, 31st May 2014 8:37 pm
many others have been written about Peak Coal as well:
http://energyskeptic.com/2013/peak-coal-is-already-here-or-likely-by-2020-ipcc-100-year-projections-too-high/
Northwest Resident on Sat, 31st May 2014 8:54 pm
Test Question: If oil were $25/bbl how many years of production would we have from the US shales?
Answer: Zero years
Bonus points: Explain why.
peterjames on Sat, 31st May 2014 9:35 pm
Bob, I think that chart is a good example of how little benefit canadian tar sands do provide. In 2008 it cost $90 to land a barrel of oil, in 2009 it cost $57. Ie, we use a hell of alot of oil derived products, to get our oil out of the ground.
synapsid on Sat, 31st May 2014 10:57 pm
Makati,
Texas coal is strip mined, and has been for decades. It’s a mature technology.
rockman on Sun, 1st Jun 2014 3:16 am
Syn – Not only that but it’s typically only 30′ to 150′ below the surface. And to save on transport cost/fuel the power plants are often built in the lignite fields themselves. And I suppose if diesel ever gets in really short supply they could run the mining equip off batteries since they produce a lot of electricity right on site.
In essence the lignite mining industry runs on about the same tech as a garbage dump landfill. Not exactly rocket science. That’s obviously why we continue to burn so much low grade material despite low NG prices…it still works. And when NG prices eventually increase we’ll burn even more. Which is also why Texas is leading the country in GHG sequestration.
peterjames on Sun, 1st Jun 2014 4:44 am
Texas (and many otger staes) does also rely on alot of coal coming fromthe powder river basin, so I assume strip and rip poor quality coal is a little harder than strip and rip better quality coal and use heaps of diesel to cart it thousands of kilometres. Not to mention that PRB producers arent even making money with all the tonnes they produce. Which begs the question, if money cant be made from coal extraction, is it recoverable?
synapsid on Sun, 1st Jun 2014 2:58 pm
rockman, peterjames,
Indonesia just announced a few days ago that the country is looking to increase burning low-thermal-content coal for power generation, giving as a reason that they have a lot of it. Two big 115-MW plants planned for Aceh.
There couldn’t possibly be a connection with China’s new environmental plan effectively ruling out Indonesian coal, which China will no longer import. Could there?
peterjames on Sun, 1st Jun 2014 8:29 pm
Syn, Indonesia has alot of all grades of coal. They export alot of higher grade quality to china. As Rock Alluded to, most of the poorer grades tend to have power stations built next to them, as it doesnt make sense to transport it over long distances. Using Australia as an example, in the south east, theres an abundance of low quality coal, very close to the surface (open cut), and within 30 to 40 kilometres from shore. The power stations built next door, power a great deal of
south east australia. Not one kilogram of this coal has been exported in over 80 years.
In Northern Australia, they are planning to build
coal mines 400 kilometres in land, build ports that will kill of the great barrier reef and are heavily reliant on diesel/ jet fuel to get workers to site, or the coal to market. Even with all of
todays technologies, alot of these qld mines
closed for many months, when flooded in 2011 (it was what caused the huge jump in coal prices). It took alot of diesel to keep those
pumps running. The world will probably be able to produce poor quality coal (and use it), long
after the SHTF, but it wont take much for alot of
the good quality stuff to be locked away for ever.
PRB, North Australian, Indonesian high calorie coal is dying a fast death (its been slowed by companies running at losses, long term unbreakable contracts etc), but soon we will run out of this coal, even tho theres alot still in the ground.
Makati1 on Sun, 1st Jun 2014 8:41 pm
Dream on Texans. That semi-coal will never be mined when the big machines stop.