Mining Affairs Forum ~ "Coal Keeps Getting the Shaft"

Coal was forecast to fall below 40% as the supplier of electricity in the United States in 2012 and it would not surprise me if it did for a period, although there are those who say it has now rebounded to 44%. That would be the lowest level since the government began collecting data in 1949. Four years ago, it was 50%. By 2019, it could drop near 30%.

Utilities are abandoning coal in favor of natural gas, which has become cheaper as supplies grow. Canada is sure happy about that! Natural gas produced about 28% of the country's electricity in 2012, up from 20% in 2008. Nuclear accounts for 20%. Hydroelectric, wind, solar and other renewables make up the rest (11% or less).

Companies and States Get Hammered

Appalachia is feeling the crunch unlike any other area of the country, of course, seeing layoffs and reduced production at faster-than-expected speeds than those predicted. One firm, Alpha Natural Resources was expected to produce 11% fewer tons of coal last year because so many customers had requested deferrals. The company announced that 12 mining operations in Kentucky and West Virginia would be idled or slowed, along with 353 jobs cut. Obviously many of those jobs were a continuation of generational miners. Patriot Coal closed a mine in Kentucky, idled even more there and in W. Virginia, and cut 1,000 jobs. Just what does a miner do for a living who has known nothing else? In addition, the company's stock fell below $2, down from $25 a year earlier; today it closed at 17 cents!!! GenOn, a wholesale power producer based in Houston, invoked a legal clause typically used after natural disasters to try to stop suppliers from delivering more coal to already overloaded plants. The CEO simply said they just couldn't physically take it.

Coal's Reputation on the Line

Coal has dominated the U.S. power industry for so long because it is cheap and abundant. The U.S. is the world's second largest coal producer in the world, next to China. Our nation also has enough reserves to last for 200 years! Coal has also had great political support due to the jobs it created, not only in mining, but also in transportation. Just 5-6 years ago, coal was flourishing in the U.S. Utilities had drawn up dozens of plans for coal-fired electric plants. Suddenly, drillers found natural gas reserves which had been hidden for centuries. Now coal is being beaten at its own game. Now natural gas is abundant and cheap, along with being more environmentally friendly.

Coal Vs. Natural Gas

Power plants that burn coal produce more than 90 times as much sulfur dioxide, five times the nitrogen oxide and twice as much carbon dioxide as those that run on natural gas. If you were an electric company, especially with the present administration in charge, what would you choose? Sulfur dioxide causes acid rain, nitrogen oxide causes smog and carbon dioxide is a so-called greenhouse gas that traps heat in the atmosphere.

The EPA Puts the Screws to Coal

A pair of clean air rules enacted by the EPA tightens limits on power-plant emissions of sulfur dioxide and nitrogen dioxide, and places new limits on mercury, a poison found in coal. This will now force between 32 and 68 of the dirtiest and oldest coal plants in the country to close over the next 2-3 years as the rules go to into effect. A year ago, coal was hurt when the EPA issued guidelines that could limit greenhouse gas emissions from new power plants as early as this year. If those guidelines ever go into effect, no coal plants would be built unless utilities can develop a cost-effective way to capture carbon dioxide.

That would be a very expensive thing to attempt. In April, the EPA delayed those new rules when the electric power industry objected on both legal and technical grounds. It is the first time in awhile that someone objected to the obvious illegal work of the EPA. There had been 2 million comments on the rule and no timetable has been set as of right now in regard to re-visiting it. The EPA isn't used to someone testing its illegal tactics so strongly.

One coal executive, Nick DeIuliis, President of Consol Energy, said that he doubts the EPA's restrictions on greenhouse gases would survive long term because of the economic harm he says they will inflict. Consol and other U.S. coal companies hope that exports will keep their companies active and profitable. In 2011, there were 107 million short tons exported and last year it was a record 126 million short tons. Obviously, their plans are working to some degree even though some layoffs continue.

High-grade coal is especially in demand in nations like China, India, and Brazil. DeIuliis said the price of natural gas will rebound over time and that coal will once again account for half the nation's electricity. We shall see… Natural gas futures have doubled in the past year, so maybe DeIuliius is a prophet. In addition, utilities burned 815 million tons of coal last year, yet only 7 million more than in 2011, after it had dropped 19% from 2010. No environmentalist saw that coming!

Coal and Congress clashing

Since the EPA rule is presumed totally illegal, thus thwarting the President's plans for coal in his bid to destroy energy production in the U.S. and move us toward becoming a Third World nation, these trends could give utilities and the coal industry the time it needs to develop new and improved methods for cleaner air-at least something that is more affordable for them. What they need is time. With a President who hates coal and loves to rule by regulation, the challenge is always in front of them. Everyone must be on guard at all times, while seeking new ways of conquering the wild plans of the left.