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STATE LAW RESOURCES, INC.
FALL 2012 MEETING
PANEL DISCUSSION: “The Future of Coal”
Alexander Macia, Member
Spilman Thomas & Battle, PLLC
P.O. Box 273
Charleston, WV 25321-0273
Fax: (304) 340-3801
(304) 340-3835
THE FUTURE OF COAL: AN OVERVIEW
I. COAL BASICS
II. COAL USES
III. COAL FUTURE
I. COAL BASICS
COAL RESERVES ESTIMATED BY COUNTRY
• U.S. 27.5%• Russia 18.3%• China 13.3%• Other Non OECD
– Europe & Eurasia 10.7%• Australia & New Zealand 8.9%• India 7.0%• OECD Europe 6.5%• Africa 3.7%• Central & South America 0.9%• Rest of World 3.2%
Source: U.S. Energy Information Admin., “International Energy Outlook 2011”
MAJOR COAL DEPOSITS IN THE UNITED STATES
Source: U.S. Energy Information Admin., “International Energy Outlook 2011”
COAL PRODUCING REGIONS IN THE UNITED STATES
• Appalachian Coal Region– More than 1/3 of production– West Virginia is largest coal producing state in region (2nd in the U.S.)– End-users: power plants, steel mills and export
• Interior Coal Region – Texas largest producer in region– Illinois Basin coal is high sulfur
• Western Coal Region– Over ½ of all coal produced in United States– Wyoming is largest coal producer in region and United States– 9 of top 10 largest mines are in Wyoming– Black Thunder Mine and North Antelope Rochelle Mine together produce
more coal than West Virginia
COAL TYPES FOUND IN THE UNITED STATES• ANTHRACITE
– Highest carbon content (86-98%)– Heat value of @ 15,000 BTUs per pound – Used for home heating– Mined almost exclusively in North Eastern Pennsylvania
• BITUMINOUS– High carbon content (45-86%)– Heat value of 10,500-15,5000 BTUs per pound– Used for electricity generation and steel making (as coke)
• Subbituminous– Low carbon content (35-45%)– Heat value of 8,300-13,000 BTUs per pound– Used for electricity generation– Low sulfur– Located primarily in the Western States (Wyoming’s Powder River Basin)
• LIGNITE– Lowest carbon content (35-45%)– Heat value of @ 4,000-8,300 BTUs per pound – Used exclusively for electricity generation
LARGEST COAL PRODUCERS IN THE UNITED STATES
Controlling Company Production (thousands short tons) Percent of Production
Peabody Energy 191,943 17.7
Arch Coal, Inc. 173,295 16.0
Cloud Peak 93,734 8.6
Alpha Natural Resources 80,681 7.4
Consol Energy, Inc. 61,294 5.7
Alpha Appalachian Holdings* 37,793 3.5
* Formerly Massey Energy Co.
HOW MUCH COAL IS LEFT?
• 2011 Annual Production:– 1.1 billion short tons
• Estimated Recoverable Reserves at Producing Mines:– 17.9 billion short tons
• Estimated Recoverable Reserves:– 259 billion short tons
• Demonstrated Reserve Base:– 484.5 billion short tons
• Total Coal Resources– @ 4 trillion short tons
Or…
– 239 years based upon current production and estimated recoverable reserves
II. COAL USAGE
But, in 1st Quarter 2012 coal dropped to 36%
III. COAL FUTURE
• Natural gas prices fell 7.5% in 2011
• Mild winter 2011-2012
• Increasing stockpiles
• Environmental Regulations create uncertainty
• Coal Plant Retirements Since 2010– 106 coal plants (319 units)– 42,895 MW (13%) of fleet)– Average age: 50 + years
THE ENERGY MARKET REACTS
• Spurred by Cheap Natural Gas– Development of shale gases increased production– Leading to drop in prices– 2008 was $12/1,000 cubic feet– 2012 now @ $4/1,000 cubic feet
And….
PRICE PRESSURE INCREASES ON COAL PLANTS
• Mercury Air Toxics Standard– Issued Final Rule 12/11 and set numeric emission limits for mercury, toxic metals, and
acidic gases– Applicable to new sources; targets coal plants– Compliance: 3 years from final rule (3/15)– EPA reconsidering new limits and taking further comments
• Cross State Air Pollution Rule– Requires states to set emission standards for power plants to reduce ozone and fine
particle pollutions– Requiring upwind states to reduce only their own significant contributions to downwind
states non-attainment– BUT, in EME Homer City Generation v. EPA, DC Circuit Court of Appeals struck down the
rule for exceeding statutory authority– Petition for rehearing en banc is pending
INCREASED ENVIRONMENTAL REGULATIONS
