Skip to main content

Bouncing Back

World Coal,

After a rough year, the US coal sector is facing better prospects. In 2009, total production dropped by 96 million t, with the majority of the loss occurring in thermal coal. That is primarily due to the fact that over 90% of domestic consumption is for electricity generation. In addition to the 4% drop in consumption due to the recession, utilities switched some baseload production to low-cost natural gas, increasing their usage by 5%. Prices for thermal coal in April 2009 averaged US$ 45/t in Appalachia, US$ 40 in Illinois and US$ 10 in the Powder River Basin (PRB).

In December 2009, steam coal’s fortunes began to rise. Cold weather forced up the price of natural gas and the industrial sector clambered back onto its feet, increasing demand for electric generation. According to industry statistics, stockpiles of PRB coal began to draw down at the end of December and fell to roughly nine days below the national average of 78 days. The EIA predicts that consumption in 2010 will increase 3% from 2009 levels, and 1.6% in 2011. Prices for thermal coal in March 2010 had recovered to US$ 60/t in Appalachia, US$ 41.50 in Illinois and US$ 11.90 in the PRB.

Met coal

Met coal represents a much smaller portion of US production. The total for the first eight months of 2009 was down 30% from the previous year. This reflected a slump in the domestic steel industry and increased competition from Asian steel products. Signs of industrial stabilisation and strengthening of demand for steel began to emerge in late 2009, however, and a firming up of the met market is expected over the coming year. The EIA predicts met coal output to climb back 30% in 2010, to 2008 levels.

Rules, rules

Although the worst is over, many challenges remain: “There is a concern that the EPA would regulate coal ash as a hazardous waste,” says Luke Popovich, vice president of external communications for the National Mining Association (NMA).

The NMA is also concerned with water quality legislation and the impact it might have on certain coal mines. The Department of the Interior has pledged to reduce the impact of surface mining, and the EPA has enhanced research to see if the practice can be stopped or modified to protect water quality.

Climate scare

The biggest legislative concern, by far, involves climate change legislation.

Depending upon its final form, climate change legislation could have a profound impact on the coal sector. In order to meet long-term requirements, utilities would have to invest in large scale carbon capture and storage (CCS) technology.

Power plants are well suited to adopting CCS systems, but they are expensive to build and operate. Some estimates place operating costs at over US$ 100/t, and a nationwide system of pipelines and sequestration sites would require several hundred billion dollars in capital investments, as well as complex legal and regulatory frameworks.

To that end, the Obama Administration announced the formation of a task force to develop a comprehensive CCS strategy that will overcome barriers to widespread CCS deployment within 10 years. The goal is to bring 5 – 10 commercial demonstration projects online by 2016. The Department of Energy’s (DOE’s) Fossil Energy Office has already created seven carbon sequestration partnerships.

As part of the programme, the DOE will provide US$ 350 million to support the Texas Clean Energy Project. Other announced projects involve CCS from existing coal-fired power plants and storage in deep saline formations in West Virginia and Alabama.

Still, the NMA believes Government can do more.

The future

In the next 12 months, the NMA perceives a lessening of pressure to advance climate change.

In the next few years, domestic consumption will expand slowly. Industry participants note that roughly 43 million t of new, incremental coal demand should occur between 2010 and 2012 as 13 GW of new US coal-fired power plants come online. Over the next two decades, new uses for coal are expected to emerge. The EIA predicts that by 2030, 161 million t of coal will be converted through gasification into a wide variety of energy and chemical products. In addition, it also foresees 112 million t being used for coal-to-liquid (CTL).

But, for now, the focus is on reducing costs and gearing up for the immediate future.

Author: Gordon Cope

Read the article online at:


Embed article link: (copy the HTML code below):