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US coal supply increasingly dominated by PRB

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World Coal,

Three coal basins dominate coal supply to US coal-fired power plants, according to a new report from SNL Energy. The report shows that coal-fired power plants not scheduled to retire or convert to other fuels source 75% of their coal from either the Powder River Basin (PRB), Illinois Basin or Northern Appalachia. Meanwhile production from higher-cost regions is being phased out amid shrinking domestic demand and competition from natural gas.

Of these three basins, the PRB dominated, serving 47% of the surviving fleet – up from 44% in 2007, before the shale gas boom in the US and the plant closures caused by the US Environmental Protection Agency’s Mercury and Air Toxics Standards. The Illinois Basin served 13% and Northern Appalachia over 14%, up from 7.9% and 9.7% in 2007 respectively.

Central Appalachia will be the biggest loser with its share of coal deliveries dropping to 6.1% from 15% in 2007 on the back of the region’s higher cost of production.

Central Appalachian coal miner, Rhino Resources Partners, recently announced that it was temporarily idling its operations in the region, blaming persistent weakness in the coal markets. “Demand for Central Appalachia [thermal] coal has fallen to unprecedented levels as utilities choose low-priced natural gas for electricity generation and other coal-fired capacity is shuttered due to governmental regulations,” Joe Funk, President and CEO of Rhino's General Partner said in a statement.

Reinforcing this outlook, a recent report from West Virginia University’s Bureau of Business and Economic Research forecast a drop in that state’s coal production – which covers Northern and Central Appalachia – by a third from its peak in 2012 with the southern regions of the state worst hit.

"One fact that many people do not realise is that the decline in coal production has not occurred evenly across the state," said Dr John Deskins, Director of the Bureau of Business and Economic Research. “The recent decline has entirely been driven by a drop in southern West Virginia [i.e. Central Appalachian] coal output, while production in the northern part of the state has actually risen in the past few years. This divergence is due, at least in part, to lower levels of productivity in the southern part of the state, which have led to demonstrably higher production costs in many of the region's remaining coal reserves."

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