[R-G] [BillTottenWeblog] Coal in the United States

[Bill Totten]

by Richard Heinberg

MuseLetter #194 (June 2008)

Note: The HTML version of this article contains several graphic
illustrations not included in this text-only version. See
http://globalpublicmedia.com/museletter_194_coal_in_the_united_states


Because the US has the world's largest coal reserves, it has sometimes
been called "the Saudi Arabia of coal". It is the world's second-largest
coal producer, after China, but surpasses both the number three and four
producer nations (India and Australia) by nearly a factor of three.

Wood was this nation's primary fuel until the mid-1880s, when
deforestation necessitated greater reliance on abundant coal resources.
Coal then remained America's main energy source until the 1930s, when it
was overtaken by oil. Today coal fuels about fifty percent of US
electricity production and provides about a quarter of the country's
total energy.

The US currently produces over a billion tons of coal per year, with
quantities increasing annually. This is well over double the amount
produced in 1960. However, due to a decline in the average amount of
energy contained in each ton of coal produced (that is, declining
resource quality), the total amount of energy flowing into the US
economy from coal is now falling, having peaked in 1998. This decline in
energy content per unit of weight (also known as "heating value")
amounts to more than thirty percent since 1955. It can partly be
explained by the depletion of anthracite reserves and the nation's
increasing reliance on sub-bituminous coal and even lignite, a trend
that began in the 1970s. But resource quality is declining even within
each coal class.

While there are coal resources in many states, the main concentrations
are in Appalachia, Illinois, Wyoming, and Montana (see map below). The
53 largest coalmines in the US, located in just a few states, account
for almost sixty percent of total production.

Three states (Pennsylvania, Kentucky, and West Virginia) produce 52
percent of the higher-quality coal in the US. All three of these states
seem to be in decline or plateau. Since the Northeast was the area of
the nation earliest settled and was long a primary center for industrial
manufacture, it is not surprising that the coal of this region was
exploited preferentially. Today, Pennsylvania's anthracite is almost
gone. Mining companies there are now exploiting seams as thin as 28
inches. West Virginia, the second largest coal-producing state (after
Wyoming), where much coal is surface mined in an environmentally ruinous
practice known as mountaintop removal, is nearing its maximum production
rate and will see declines commence within the next few years, according
to a recent USGS report. (www.byronwine.com/files/coal.pdf)

The interior region - consisting of Illinois, Arkansas, Indiana, Kansas,
Western Kentucky, Louisiana, Mississippi, Missouri, Oklahoma, and Texas
- is the smallest coal producer of the three main producing regions. The
Illinois basin boasts large reserves of bituminous coal, but production
has fallen there since the mid-1990s. Its coal generally has a high
sulfur content (three to seven percent), which runs afoul of US
environmental laws, especially the Clean Air Act of 1990. Prior to this
legislation, power plants burning high-sulfur coal released emissions
resulting in acid rain that decimated forests throughout much of the
nation. The lignite steam coal of Louisiana is an exception within the
region: its sulfur content is low and so production has risen
substantially in recent years. After 2018, sulfur scrubbers will be
mandatory for coal-fired power plants in the US, perhaps facilitating a
move to increase production of coal from the Illinois Basin.

Wyoming has some bituminous coal, but most of its reserves consist of
sub-bituminous and lignite. Production from the state (primarily from
the Powder River Basin) has increased sharply since 1970, because its
coal is abundant, cheaply surface-mined, and low in sulfur. Wyoming is
currently responsible for eighty percent of coal production west of the
Mississippi.

Montana also has large deposits of lower-quality coal (sub-bituminous
and lignite), but these have not been tapped. The current state
governor, Brian Schweitzer, is pushing for development of these
resources using gasification and carbon sequestration technologies, but
there are reasons to doubt whether this will occur soon or on a
meaningful scale. Montana's coal contains salts that will almost
inevitably find their way into the environment if widespread surface
mining occurs, contaminating rivers and creating problems for cattle
ranching - the state's economic engine and a locus of considerable
political clout.

For the nation as a whole, future supply hinges on the question of how
long rising production of lower-quality coal from Wyoming - supplemented
in the future perhaps by coal from Montana and the Illinois Basin - can
continue to compensate for declining amounts of high-quality coal from
the East. Clearly, the US has the potential to produce enormous
quantities of coal. But the gradual depletion of coal with higher
heating value is already necessitating the mining of larger quantities
of lower-quality coal to yield an equivalent amount of energy, and as
coal is sourced more from Montana and the Illinois this will require the
building of more rail transport infrastructure and the overcoming of
environmental problems and regulatory hurdles.

Over sixty percent of coal mined in the US is dug from the surface. This
is a higher percentage than in most nations, and it is largely due to
the contribution of Wyoming. In the eastern states, most coal still
comes from deep mines, which are moving toward the recovery of
ever-thinner seams. Highwall mining systems and new technologies for
longwall mining may lead, ultimately, to remote-control mining involving
few or no personnel working underground. These new and more efficient
technologies will enable some coal to be mined that would otherwise be
left behind, but they are unlikely to be applied throughout the entire
industry due to high up-front investment costs.

In surface mining, the largest extraction cost is often incurred in
removing overburden (soil and rock). Over the years, the coal industry
has introduced ever-larger earth-moving machines for this purpose.
However, truck size has probably reached a practical maximum, as the
biggest vehicles cannot be maneuvered on roads.

However coal is mined, the industry must always confront the bottom
line: the cost of getting coal out of the ground cannot exceed the
market price for produced coal. Thus the current price determines
whether marginal coals will be mined profitably, or simply left in the
ground. On the other hand, however, as the costs of bringing coal to
market rise, this can cause the price of coal to increase - unless and
until higher prices suppress demand. Given that demand for electricity
continues to expand, and that cheap alternatives to coal for power
generation do not exist in sufficient quantity in the short run, there
seems to be no near-term cap to coal prices. As a result, marginal
coalfields are now more likely to be mined.

During the two-year period from January 2006 to January 2008, prices
rose from about $100 a ton to $250 a ton for high-quality metallurgical
grades of US coal. Central Appalachian steam coal is currently selling
for about $90 a ton, up from $40 two years ago. During this time
production costs have risen as well, though not at the same pace.

The cost of producing coal is related to the price of oil. Consider the
case of Massey Energy Company, the nation's fourth-largest coal company,
which annually produces forty million tons of coal using about forty
million gallons of diesel fuel - about a gallon per ton (the company
also uses lubricants, rubber products, and explosives, all made from
petroleum or natural gas). If the price of diesel goes up one dollar,
this translates directly to $40 million in increased costs; indirectly
related costs also climb.

These costs and prices need to be seen in proportion: while coal
generates half of America's electricity, in effect providing much of the
essential basis for all economic activity within the country, US coal
industry revenues are only about $25 billion - one-tenth those of WalMart.

During some recent years, the US was a net coal importer, since coal
brought by ship from South America was often cheaper to supply to
coastal cities than US coal moved there by rail. This was partly a
result of rail transport bottlenecks that are now being addressed with
the laying of more rails and the construction of more coal cars. Now,
however, with coal prices high and imports growing in China and India,
the US has begun exporting larger quantities. Mines are employing more
workers and production is booming.


History of Reserves Estimates

The US has seen a long controversy between coal resource optimists and
pessimists - a controversy that is somewhat mirrored in the global coal
resource picture.

In 1907, Marius R Campbell, Director of the USGS, headed the first
attempt at a scientific survey of US coal, concluding that ultimately
recoverable reserves amounted to 3157.2 billion tons. Since production
in that year was 570 million tons, simple arithmetic yielded an R/P
ratio of 5500/1, which was interpreted as meaning that the nation had a
5,500-year supply. That implied an effectively limitless amount for the
practical purposes of economic planning.

Campbell did hedge his estimate by pointing out that much of this coal
was not minable, or was inaccessible for other reasons. He also wrote
that "... the bulk of coal being mined today is the best in the country,
and before long, perhaps before fifty years [that is, by 1959], much of
the high-rank coals will be exhausted". (Putnam 234) Still, Campbell's
figure for total reserves was for many years taken at face value.

Soon, state surveys began gathering more detailed and accurate
information, which resulted in the downgrading of regional reserves.
Thus when the US Coal Commission mounted a new survey in 1923, it
reduced all state reserves figures and dropped some states entirely from
its list of active or likely coal producers. Yet through the early
decades of the 20th century, the USGS and the Bureau of Mines stuck to
the position that America would have plenty of coal for several millennia.

Shortly after World War Two, Andrew B Crichton (a coal engineer and mine
operator in Johnstown, Pennsylvania) undertook a state-by-state informal
review of existing reserves estimates, publishing his results in an
article titled "How Much Coal Do We Really Have? The Need for an
Up-To-Date Survey", in Coal Technology (August 1948). Crichton minced no
words:

"It was asserted at the Denver [USGS] meeting last October that no one
should have the temerity to question the Government figures unless they
submitted maps and records proving their statements. Well, that is quite
a burden to impose upon an individual to justify an opinion regarding
our coal reserves. But that is exactly what could be done in many cases
in the east where many have knowledge of the wide discrepancy between
the Government figures and private records based on prospecting and
actual development. It is these wide differences that prompt the fears
and lead to the belief that these fantastic and unbelievable figures of
the United States Geological Survey are wrong and dangerously misleading
and should be corrected promptly."


Citing instance after instance in which USGS reserves figures for
well-mined regions had turned out to be highly inflated, Crichton went
on to offer his own estimate of national coal reserves as 223 billion
tons - a number not that much smaller than the current official estimate.

Crichton's article, while causing understandable consternation and
embarrassment for the USGS, could not be ignored. It was cited
repeatedly in Palmer Putnam's authoritative book Energy In the Future
(1953), which also offered pessimistic assessments of US oil and natural
gas supplies. Indeed, Putnam demonstrably erred on the conservative
side, forecasting that America's oil production would peak between 1955
and 1960 (the actual peak was in 1970); and that coal production would
begin to decline by 1990 - whereas, as we have seen, actual produced
amounts continue to grow annually.

The USGS and the Bureau of Mines, which was later absorbed into the
Department of Energy, responded by gradually reducing estimates of coal
reserves figures for many states and the nation as a whole. Yet through
the 1950s, national reserves remained at well over 500 billion tons -
still above 1,000 years in terms of R/P forecasting.

In the 1960s, concerned that reserves figures were not making sufficient
allowances for factors that would prevent much of the resource from ever
being produced, the USGS commissioned surveys by geologist Paul Averitt,
culminating in the publication, in 1975, of Coal Resources of the US. By
now the official estimate of recoverable reserves had been whittled down
to the current range of 260 to 275 billion tons. This was seen as no
cause for alarm, as the reserves-to-production ratio forecast remained
at comfortably above 200 years; also, it was believed that new
technologies (such as longwall mining and underground gasification)
would eventually be able to convert substantial quantities of resources
back into reserves.

In 1995, the USGS began work on the National Coal Resource Assessment
(NCRA), a multi-year effort to create a digital assessment on a
region-by-region basis, which is still in process, with few of the
crucial results currently publicly available.

According to the EIA website, as of January 1 2007 the Estimated
Recoverable Reserves for the US amounted to 267 billion tons. Since
production for 2006 was 1,162,750 tons, that would indicate an R/P ratio
of about 230/1.

A graphic from the Department of Energy (EIA), using 2005 data, is
helpful in visualizing the various categories within the overall coal
resource base.  See
http://globalpublicmedia.com/museletter_194_coal_in_the_united_states

As we are about to see, the long process of revising national coal
reserves figures downward may not be at an end.


New Studies

1. Coal: Research and Development to Support National Energy Policy
(National Academy of Sciences [NAS], July 2007, http://books.nap.edu/).
This book-length report concluded that "there is no question that
sufficient minable coal is available to meet the nation's coal needs
through 2030", and also that "there is probably sufficient coal to meet
the nation's needs for more than 100 years at current production levels"
- though this latter judgment does not appear to be based on a peaking
analysis. In sum, however, the report is a plea for better, more
realistic reserves estimates:

"[I]t is not possible to confirm that there is a sufficient supply of
coal for the next 250 years, as is often asserted. A combination of
increased rates of production with more detailed reserve analyses that
take into account location, quality, recoverability, and transportation
issues may substantially reduce the estimated number of years supply.
This increasing uncertainty associated with the longer-term projections
arises because significant information is incomplete or unreliable. The
data that are publicly available for such projections are outdated,
fragmentary, or inaccurate."

These doubts about current reserves figures were based upon recent Coal
Recoverability Studies undertaken in Kentucky, Illinois, Pennsylvania,
and Wyoming - in effect, spot checks to determine whether reserves
figures were indeed reliable within restricted areas where coal
recoverability could be determined with some accuracy as the result of
mining experience.

"A total of 65 areas in 22 coal fields have been analyzed, and these
studies suggest that eight to 89 percent of the identified resources in
these coal fields are recoverable and five to 25 percent of identified
resources may be classified as reserves. Because they are based on
site-specific criteria, these studies provide considerably improved
estimates compared to the ERR [Estimated Recoverable Reserves]."

One such study, of the Matewan quadrangle of eastern Kentucky,
concluded: "a strong argument can be made that traditional coal
producing regions may soon be experiencing resource depletion problems
far greater and much sooner than previously thought".
(http://pubs.usgs.gov/)

The NAS report enumerates the problems that the US coal industry will
face in coming decades:

"Almost certainly, coals mined in the future will be lower quality
because current mining practices result in higher-quality coal being
mined first, leaving behind lower-quality material (for example, with
higher ash yield, higher sulfur, and/or higher concentrations of
potentially harmful elements). The consequences of relying on
poorer-quality coal for the future include (1) higher mining costs (for
example, the need for increased tonnage to generate an equivalent amount
of energy, greater abrasion of mining equipment); (2) transportation
challenges (for example, the need to transport increased tonnage for an
equivalent amount of energy); (3) beneficiation challenges (for example,
the need to reduce ash yield to acceptable levels, the creation of more
waste); (4) pollution control challenges (for example, capturing higher
concentrations of particulates, sulfur, and trace elements; dealing with
increased waste disposal); and (5) environmental and health challenges."


2. Coal: Resources and Future Production (Werner Zittel and Jörg
Schindler, Energy Watch Group [EWG], March 2007,
www.energywatchgroup.org/). This report contains ten pages of analysis
specific to US coal supplies. The EWG authors note,

"Until the year 2000, productivity [the amount of coal produced per
worker hour] steadily increased for all types of coal produced covering
surface and subsurface mining. But since then productivity has declined
by about ten percent ... The decline in productivity can only be
explained by the necessity of rising efforts in production. This might
be due to deeper digging and/or to a higher level of waste production.
Are these already indications for the era of 'easy coal' drawing to a
close?"

The EWG report offers several peaking scenarios for US coal. The most
optimistic shows a peak in 2070.

However, the authors warn that "Even if volumetric production rates can
be increased by about sixty percent until 2070 to 2080 before decline
sets in, the corresponding energy production will increase only by about
45 to fifty percent due to the increased share of sub-bituminous coal
and lignite". Like the National Academy of Sciences, the EWG authors
believe that the official estimated recoverable reserves figure is too
large. They offer two alternative scenarios for future production: one
in which only recoverable reserves at existing mines are considered
producible (peak in 2015), and the other in which reported estimated
recoverable reserves are all producible, but regional production trends
are taken into account (peak in 2040). They suggest that "The real
profile will be somewhere between these two extremes".

A third peaking forecast is based on an LBST (German renewable energy
consultancy Ludwig Bölkow Systemtechnik) analysis, which is itself based
on USGS production forecasts in 2000 using 1995 data. The USGS forecast
is corrected for actual production in the intervening years, and a
future production profile is chosen in accordance with past production
trends and likely production growth (Montana and Illinois are assumed to
provide only marginally increased amounts). It is this fourth scenario,
with a peak around 2025, that the EWG authors appear to consider most
reasonable.

The authors conclude:

"Considering the insights of the regional analysis it is very likely
that bituminous coal production in the US has already peaked, and that
total (volumetric) coal production will peak between 2020 and 2030. The
possible growth to arrive at peak measured in energy terms will be
lower, only about twenty percent above today's level ... [T]he 250
billion ton figure [the current official estimate of recoverable
reserves] should not be the basis for energy planning."

The various EWG scenarios suggest that if Montana and Illinois can
resolve their production blockages, or the nation becomes so desperate
for energy supplies that environmental concerns are simply swept away,
then the peak will come somewhat later, while the decline will be
longer, slower, and probably far dirtier.


3. Lignite and Hard Coal: Energy Suppliers for World Needs until the
Year 2100 - An Outlook(Thomas Thielemann, Sandro Schmidt, and J Peter
Gerling, German Federal Institute for Geosciences and Natural Resources
[BGR], International Journal of Coal Geology Volume 72, Issue 1, 3
September 2007, http://www.sciencedirect.com/). This paper forecasts no
bottleneck in coal supplies and a large potential for expanding
coal-to-liquids (CTL) production. It offers relatively little detail for
individual producing countries and makes no attempt at a peaking
analysis. For the US, the explicit conclusion is that there will be no
coal supply problems this century.


4. A Supply-Driven Forecast for the Future of Global Coal Production
(Höök, Zittel, Schindler, and Aleklett; Energy Policy, in press,
www.tsl.uu.se/). Much of this report repeats data and arguments from the
prior EWG publication. The conclusions for the US are also similar:

"It is reasonable that USA with its huge energy consumption will be
among the first in the Big Six to peak in coal production. All major
coal-producing states, except Wyoming, seem to be near or past peak
production. It should however be noticed that environmental laws and
other socioeconomic restrictions probably prevent a significant amount
of coal from being produced in the near future, especially high-sulfur
coals. A relaxation of the restrictions will therefore probably be able
to increase the reserves, but whether this relaxation will happen or not
is hard to tell and not considered in the forecast ... The decline in
heat value shows that the best American coals are gone and that poorer
and poorer coals are exploited each year. The decrease in mining
productivity is an also in line with the fact that the most
easy-accessible coal is gone."

"A Supply-Driven Forecast" contains two new charts, one a high-case and
the other a low-case scenario. The higher case "depicts a continued
rapid expansion of Wyoming together with a build-up of the capacity in
Montana". The lower case "does not envision a dramatic increase of the
Montana coal production and consequently the production level from
Montana remains at its current level". In the higher case, production
peaks around 2040; in the lower case, which the authors regard as "more
realistic", the decline commences around 2030.


5. Hubbert linearization and curve-fitting (Rutledge and Laherrère).
David Rutledge, Tomiyasu Professor of Electrical Engineering at the
California Institute of Technology and Director of Caltech's Lee Center
for Advanced Networking, in a presentation at Caltech in October 2007,
used Hubbert linearization analysis to estimate future global coal
production (http://rutledge.caltech.edu/). Rutledge argues that, in any
region for which we have something close to a complete production
history (that is, production has declined substantially due to resource
depletion - for example, British coal or US lower-48 oil), historic
reserves estimates typically have turned out to be too high. As we have
seen, this position is now in effect supported by NAS on the basis of
recent site-specific case studies. Rutledge goes on to argue that
Hubbert linearization often yields a more accurate forecast of
ultimately recoverable reserves.

Rutledge applies linearization to North American coal producing regions,
"with trends for the East (40Gt), West (25Gt), reserves for Montana
(68Gt), and trends for Canada and Mexico (2Gt total)". This results in
an estimate of total ultimately recoverable reserves of 135 billion
tons, roughly half the reserves figure now used by official agencies.

Veteran petroleum geologist Jean Laherrère has charted two Hubbert
curves for US coal ("Combustibles fossiles: quel avenir pour quel
monde?" http://aspofrance.viabloga.com/), one assuming an ultimate
production of 150 billion tons (which is roughly in line with Rutledge's
conclusion just cited), and the other assuming 300 billion tons (which
is somewhat more than the current official ERR). The production peak in
the former case occurs in 2025; in the latter case, decline commences
after 2060.


Implications

With oil and natural gas prices rising at alarming rates, the return of
the US to a greater reliance on coal might seem inevitable. The nation
is currently paying over $620 billion per year for petroleum imports,
and this ongoing transfer of wealth abroad cannot help but have a
substantial negative impact on the domestic economy. There are three
ways to moderate that impact: reduce consumption of liquid fuels through
conservation; produce more fuels domestically; or electrify transport,
which will require more electricity. Coal could help with either of the
latter two strategies. Given that the nation possesses so much coal, and
that energy from coal is still relatively cheap, it would seem
inevitable that strong arguments will be made for a dramatic increase in
coal production to help solve the nation's energy problems.

Yet if most of the recent analyses cited here are correct, this strategy
has a short shelf life. Within the planning horizon for any coal plant
proposed today lie much higher coal prices and perhaps even resource
scarcity.

The sheer amounts of coal that will be needed in order to offset any
significant proportion of oil (and perhaps also natural gas)
consumption, and to meet the projected increased demand for electricity,
are mind-boggling. Coal is a lower-quality fossil fuel in the best case,
and America is being forced to use ever lower-quality coal. Just to
offset the declining heating value of US coal while meeting EIA
forecasts for electricity demand growth by 2030, the nation will then
have to mine roughly eighty percent more coal then than it is doing
currently. If carbon sequestration and other new technologies for
consuming coal are implemented, they will increase the amount of coal
required in order to produce the same amount of energy for society's
use, since the energy penalty for capture and sequestration is estimated
at up to forty percent. A broad-scale effort to produce synthetic liquid
fuels from coal (CTL) will also dramatically increase coal demand. If
the current trend to expand coal exports continues, this would stimulate
demand even further. Altogether, there is a realistic potential for more
than a doubling, perhaps even a tripling, of US coal demand and
production by 2030 - which would hasten exhaustion of the resource from
many current mining regions and draw the inevitable production peak
closer in time.

Assuming this higher demand scenario (from CTL, increased exports, and
growing electricity consumption), by 2030 the nation's dependence on
coal will be much greater than is currently the case, and coal's
proportional contribution to the total US energy supply will have grown
substantially. But at the same time, prices for coal are likely to have
increased precipitously because of transport bottlenecks and higher
transport costs (due to soaring diesel prices), falling production
trends in many current producing regions, and the lack of suitable new
coalfields. The interactions of high and rising coal prices with efforts
to maximize output are hard to predict.

As limits to domestic coal production appear, exports could diminish and
there could instead be efforts to import more coal, probably from South
America. But in that case the US economy would suffer increasingly from
economic dependencies and geopolitical vulnerabilities that already
hobble the nation as a result of its oil imports.

It may be tempting to think of coal as a transitional energy source for
the next few decades, while a longer-term energy strategy emerges. But
in that case, an important question arises: Will there be sufficient
investment capital and technical resources in three or four decades to
fund the transition to the next energy source, whatever it may be? By
that time (assuming EIA projections are reasonably accurate), demand for
energy will be higher. The price of oil, gas, and coal will be higher -
perhaps much higher - and so the nation will be spending proportionally
much more of its GDP on energy than it does now. Meanwhile, the energy
cost of building new infrastructure of any kind will be higher.
Therefore it is likely that insufficient investment capital will be
available for the large number of new energy projects required. The
transition if deferred will thus be more expensive and difficult than it
would be now. Indeed, the longer a transition to an ultimate (and
sustainable) energy regime is put off, the harder that transition becomes.

Coal currently looks like a solution to many of America's fast-growing
energy problems. However, this is a solution that, if applied on a broad
scale, seems certain only to exacerbate the nation's energy dilemma in
the long run, as well as contributing to an impending global climate
catastrophe.

_____

Note: This article is a draft chapter from a forthcoming book, currently
titled Coal's Future/Earth's Fate, to be published by Post Carbon Press
in spring 2009. The author wishes to thank Werner Zittel, David
Rutledge, Jean Laherrère, David Strahan, Julian Darley, and Jason Brenno
for assistance with this article.

Previous MuseLetters on global coal supply issues are archived on Global
Public Media (www.globalpublicmedia.com):

* MuseLetter #193: It's Happening,
* MuseLetter #190: The Great Coal Rush (and Why It Will Fail), and
* MuseLetter #179: Burning the Furniture.

http://globalpublicmedia.com/museletter_194_coal_in_the_united_states


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