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Amid coal market struggles, less fuel worth mining

Amid coal market struggles, less fuel worth mining thumbnail

Vast coal seams dozens of feet thick that lie beneath the rolling hills of the Northern Plains once appeared almost limitless, fueling boasts that domestic reserves were sufficient to power the U.S. for centuries.

But an exhaustive government analysis says that at current prices and mining rates the country’s largest coal reserves, located along the Montana-Wyoming border, will be tapped out in just a few decades.

The finding by the U.S. Geological Survey upends conventional wisdom on the lifespan for the nation’s top coal-producing region, the Powder River Basin. It also reflects the changing economic realities for companies seeking to profit off extracting the fuel as mining costs rise, coal prices fall and political pressure grows over coal’s contribution to climate change.

“You’re looking at a forty-year life span, maximum, for Powder River coal,” said USGS geologist Jon Haacke, one of the authors of the analysis.

Claims that the U.S. had reserves sufficient to last as long as 250 years came from greatly inflated estimates of how much coal could be mined, Haacke added. They were based on data put out by the U.S. Energy Department last updated comprehensively in the 1990s.

USGS study leader James Luppens said the Energy Department estimates were in “desperate need of revision.” But there are no immediate plans to do so or to incorporate the new findings, said Lance Harris, a supervisor with the Energy Department’s coal team.

For decades, the agency has made little distinction between coal reserves that reasonably could be mined and those that could not.

The perception of coal’s abundance began to shift in 2008, when the USGS team released initial data that called into question the longevity of U.S. supplies.

Yet assertions that America was the “Saudi Arabia of coal” persisted, including in 2010 by President Barack Obama and continuing in recent months by industry supporters. The Department of Energy states on its website that based on current mining rates, “estimated recoverable coal reserves would last about 261 years.”

Belying that outlook is both the USGS assessment and the industry’s recent changes in fortune. Mine production has dropped after many electric utilities switched from coal to cheaper natural gas. Two of the three biggest domestic coal companies, Arch Coal and Alpha Natural Resources, declared bankruptcy in the past 18 months.

Leslie Glustrom, an environmental activist from Boulder, Colorado, who has urged the Energy Department to change how it tallies up the nation’s untapped resources, said she believes the end for the Powder River Basin is coming even more rapidly than the USGS study suggests. And she said it has little to do with a “war on coal” that Republicans frequently accuse the Obama administration of waging.

“This is not a political problem. It’s a geologic problem,” Glustrom said.

In Wyoming, which produces about 40 percent of the nation’s coal, State Lands Director Bridget Hill said she had no reason to dispute the USGS findings, but found no cause for alarm. Flagging global demand could rebound, she said. Proposed coal ports now stalled on the West Coast could get built. And a rise in oil and gas prices could make coal competitive again.

“The economics might be different from what we know now,” Hill said.

It’s been four decades since its low-sulfur content first made Powder River Basin coal the fuel of choice among electric utilities that needed to cut their sulfur dioxide pollution. Sprawling strip mines in the region have since removed more than 11 billion tons of coal, the equivalent of 95 million loaded rail cars.

To gauge how much coal remains, USGS researchers since 2004 have analyzed the geology from minerals removed by 30,000 holes drilled deep into the earth. The data revealed almost 1.1 trillion tons of coal buried across the 20,000-square mile Powder River Basin. Of that, only 162 billion tons is within coal seams considered thick enough and close enough to the surface to make extracting them worthwhile.

The amount drops even more drastically when the coal’s quality is factored in and compared against current prices. When the USGS data was first compiled, in 2013, Powder River Basin coal was selling for $10.90 a ton, resulting in about 23 billion tons being designated as economically-recoverable.

With coal prices down to $9.55 a ton, the reserve estimate has plummeted to just 16 billion tons, Haacke said. That’s equivalent to 40 years at the current production pace of 400 million tons annually from the basin’s 16 mines in Wyoming and Montana.

Meanwhile, mining costs have trended up. That’s been driven by an increase in the “stripping ratio” – how many tons of earth must be removed to mine a ton of coal — as the region’s thick coal seams curve gradually deeper into the earth.

Before it went bankrupt, Arch Coal saw its profit margin in the Powder River Basin slide from $1.67 per ton to 26-cents per ton, according to company filings with securities regulators. Other companies have reported a similar trend.

“It became two to one, then three to one, then three-and-a-half to one,” Haacke said of the stripping ratio. “That becomes a dirt-moving operation rather than a coal-moving operation.”

14 Comments on "Amid coal market struggles, less fuel worth mining"

  1. makati1 on Sat, 27th Feb 2016 8:45 pm 

    Last year the world used about 7,500,000,000 TONS of various coal types or about 1 TON per capita.
    Interestingly, the US and China both use about the same amount of coal, per capita.

    Anthracite Coal: Best quality, now almost gone.

    Bituminous Coal: Hot and plentiful … until now.

    Lignite: One step above peat and not good for most uses.

    Peat: Low quality net energy, also not available in huge quantities.

    Wood: Fuel of last resort. Low net energy. Limited supply. Think Easter Island for our future.

  2. Go Speed Racer on Sun, 28th Feb 2016 2:26 am 

    as the energy squeeze tightens,
    we will chop down all the trees.

    we can also burn dried cow-piles.

  3. bug on Sun, 28th Feb 2016 6:20 am 

    Go, as we get to the point where we are burning cow pies, we will also be burning bodies left over from riots.

  4. Kenz300 on Sun, 28th Feb 2016 8:37 am 

    Fossil fuels are poisoning the planet………….

    It is time to transition to safer, cleaner and cheaper alternative energy sources.

  5. JuanP on Sun, 28th Feb 2016 9:40 am 

    We will burn all combustible materials we can get our hands on down to the last grass blade. Optimists who think we will stop burning stuff before making the biosphere uninhabitable to humans and most other species are underestimating our human capacity for destruction.

    It is thousands of times easier to destroy an ecosystem than it is to destroy it. It took hundreds of millions of years to create the Amazon jungle, the most biodiverse ecosystem on Earth, but it will take one 5-10 year drought to destroy it.

  6. JuanP on Sun, 28th Feb 2016 9:41 am 

    I meant to say than it is to create it, of course.

  7. rockman on Sun, 28th Feb 2016 3:18 pm 

    Not sure if these folks are illiterate or just liars. Directly from the mouth of the USGS 2015 Powder River Basin assessment: total COMMERCIALLY recoverable coal = 162 BILLION stns.And according to the EIA total US coal consumption last January was 60 million stns. So the math seems rather simple: 162 billion ÷ 60 million = 2,700 months = 225 years. But even that’s not accurate: Texas is by far the largest coal consuming state but little or none comes from the PRB.

    But let’s not forget the boom in US coal exports: topped out at 30 million stnz/yr but now around 16 million stns/yr. So let’s split the difference and assume future exports around 25 million stns/yr.

    60 mm stns/yr + 25 mm stns/yr = 85 mm stns/yr. So 162 BILLION stns ÷ 62 mm stns/yr (25 mm stns ÷ 12 months = 2 mm stns/month) still north of 200 years of USGS estimated coal reserves.

    Might check my math but the official USGS and EIA numbers seem clear.

  8. Rick Bronson on Sun, 28th Feb 2016 6:05 pm 

    Low depth high quality coal should have been mined already.

    Still there is plenty of coal relative to oil. All this death of coal industry is premature.

    As more electric vehicles hit the roads and the power consumption increases, the coal will have a comeback soon.

    Big Oil has taken over many natgas companies and so they want natgas to take over coal’s share in power generation.

    What if the price of natgas increases again.

  9. makati1 on Sun, 28th Feb 2016 6:38 pm 

    Rick, what powers the coal mining machines? Oil in huge amounts.

    You are obviously a tech junkie. There will not be enough ‘electric vehicles hit the road’ to be noticeable.

    “Coal power in the United States accounted for 39% of the country’s electricity production in 2014. … Utilities buy more than 90 percent of the coal mined in the United States.” WIKI

    Do you really believe that the 500+ coal fired power plants in the US are going to ‘convert’ to nat gas? I don’t.

  10. Kenz300 on Sun, 28th Feb 2016 9:33 pm 

    Quote “Coal use has already been dropping, generating 37 percent of the country’s electricity in February -– down from over 50 percent in 2007, according to the EIA.”

    US Clean Power Plan Will Double Coal Plant Closures – Renewable Energy World

  11. Alpha9 on Tue, 1st Mar 2016 7:54 am 

    Solar is already at price parity with coal.
    Wind is cheaper.

    There is no economic advantage to continuing this energy source, that pays massive bribes into the political system to stay viable, and not clean up it’s expensive waste products.

  12. Kenz300 on Tue, 1st Mar 2016 8:31 am 

    If the world is to have any hope of dealing with Climate Change it will need to stop building any more coal fired power plants and begin to shut down the oldest and dirtiest ones until they are all gone……..

    Wind, solar, geothermal and hydro can provide all the energy the world needs.

  13. Davy on Tue, 1st Mar 2016 9:09 am 

    The scale of time and resources will not allow this current global arrangement to transition away from coal beyond a certain threshold. The numbers are too big. The time too short before the terminal decay of globalism commences with a fury. The built out existing coal infrastructure is too large. Alternative energies are wonderful in the right places and the right amount. Mainline power generation from coal is just too important.

    This will of course change with the economic descent we are in. Both will diminish. We are likely going to have a power glut because economic activity is going to fall so much. Power sources are going to be stranded for lack of customers. Coal power sources will likely continue in many places because they will be the default power option.

    Alternative energy is going to hit a brick wall of economic deflation. Alternative energy infrastructure is expensive and resource intensive initially. It takes a global industrial effort to deliver all the various inputs. Cost are heavy in the beginning before a return is realized. I do not see a significant build out of alternative energy at some point once the global economy is clearly and terminally descending in economic decay.

    This paradigm shift from growth to decay is why currently it is so important any build out of alternative energy possible is made. This is true of society at large and individually. If you can invest in alternative energy do it now while you can. It is an excellent resource for a resilient and sustainable preparation for collapse. Whatever that collapse turns out to be. I see little chance of the green utopian world the cornucopians love to talk about but we will still likely have a world and anything that can facilitate survival is vital.

  14. Apneaman on Wed, 2nd Mar 2016 10:47 am 

    Greenpeace says China increasing coal-fired capacity

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