Coal’s Peak has Passed

One of the most important things to grasp about the new industrial revolution around renewable energy, is that, this is not just a nice thing to do, the right thing to do – it is  essential for the survival of civilization.

Leslie Glustrom has been sounding the alarm about the bogus “200 year supply” of coal for some time now. Here’s an update.

Midwest Energy News:

The report says that the U.S. may have already passed “peak coal,” the point at which production declines rather than increases. It says production may be approaching its peak in terms of volume extracted, and peak coal has probably already passed in terms of total energy content, since modern mining focuses more on low-energy coal than in decades past.

Illinois, the fifth largest coal-producing state, actually passed its coal peak almost a century ago — in 1918, according to the report. Production in 2012 was 46 percent lower than that year.

Top coal producer Wyoming had its peak in 2008, while the rest of the top six coal states are also long past their peaks:–  West Virginia (1947), Kentucky (1990), Pennsylvania (1918) and Texas (1990).

Indiana and Ohio, the number eight and 10 states, peaked in 1984 and 1970, respectively.

The Illinois basin is one of the country’s major coal-producing regions, covering 50,000 square miles over much of Illinois and parts of Indiana and western Kentucky.

Illinois is considered to have the nation’s third largest reserve of recoverable coal, behind Montana and Wyoming, according to the Energy Information Administration.

But based on USGS statistics, the report notes that only 36 percent of Illinois basin coal is technically recoverable, and only 9 percent is likely to be economical to extract. This is a lower percent than four other major reserves: two in Appalachia, the Somerset basin in Pennsylvania, and the Northern Wasatch plateau in Colorado and Utah.

The report notes that even with rising coal prices, the amount of coal in western fields considered economically recoverable has been significantly downgraded. Much of the coal is too deep to mine economically. Strip-mining, the standard method for the West, would involve moving too much dirt; and underground mining or gasification is possible but more expensive than strip mining.

Glustrom predicts the country’s five largest coal mines, all in Wyoming, have only 9 to 13 years of life left before they become no longer profitable. Since some of the same companies mining in the West also run major Illinois basin mines, the economic decline of western mining will have direct ripple effects on Illinois basin mining. Among other things the mining companies face higher interest rates the higher their debt rises, meaning it is harder for them to finance new or expanded mines.

Glustrom’s report notes that Peabody, the country’s largest mining company, “reported just over $1 billion in losses in the fourth quarter of 2012 and $58 million in losses for the year, driving their Adjusted Earnings Per Share down from $3.77 in 2011 to $0.84 per share in 2012.”

Peabody produces 30 million tons of coal from Illinois and Indiana annually, making it the Midwest’s largest producer.

The other two largest companies, Arch Coal and Alpha Natural Resources, also have major Illinois basin operations and have taken serious economic hits in the past few years. Alpha Natural Resources reported a loss of $458 million in the third quarter of 2013, a loss almost 10 times greater than in the third quarter of 2012.

The major energy story of the 21st century has been the natural gas revolution and cheap gas prices undercutting coal-fired power. But the report notes that even independent of competition from gas, the production costs of coal are rising enough to make coal-fired power increasingly uneconomical. Production costs are rising because the coal that’s left is increasingly hard to extract, because of rising transportation costs and other world market factors.

Even in China, coal doesn’t necessarily have a robust future, even as that country is famously adding to its coal fleet. Pollution and economic concerns have driven China to invest in clean energy, and the country’s appetite for U.S. coal will likely decrease as it develops its own coal reserves and has access to nearer sources in Asia and Australia.

In September, Citi Research released a commodities report titled “The Unimaginable: Peak Coal in China,” noting that “significant shifts in China’s economic structure and power sector demand a reassessment of coal’s perpetual climb.”

That’s bad news for U.S. coal companies that have planned to offset reduced demand for coal in the U.S. with exports to China – facilitated by controversial plans to develop export terminals in the Pacific Northwest. Experts say it is unlikely Illinois coal would be exported to China, but if Powder River Basin coal were exported that could theoretically leave a bigger market available for Midwest coal in the U.S.

The Clean Energy Action report cites Great Britain as an example of how coal areas must be forward-thinking to get ready for the time when coal production will drastically shrink or cease. British experts in the 1800s had predicted the country’s coal would last for 1,100 years, but as it turned out the coal industry was virtually dead within 150 years. Privatization of mines, reliance on cheaper imports and other factors that likely could not have been foreseen in the 19th century contributed to the drastic disparity between predictions and reality.

Glustrom notes that Missouri and Oklahoma had robust coal industries in the 1970s and 1980s, but produce very little coal now. Iowa was a major coal producer in 1917, but coal mining is virtually nonexistent there today.