Report: Feds overstate coal reserves November 11, 2013 By Kathy Helms Diné Bureau navajo1@gallupindependent WINDOW ROCK — America does not have 200 years in coal “reserves” since much of the coal that is left in the ground is buried too deeply to be mined at a profit, according to a new report from the Boulder, Colo.-based nonprofit Clean Energy Action. “Warning: Faulty Reporting of U.S. Coal Reserves,” claims that the Energy Information Administration has misled the United States into thinking it has a 200 year supply of easily accessible coal because it has been referring to U.S. coal deposits as “reserves” when they are more properly classified as “resources.” EIA’s reporting of over 200 billion tons of “Estimated Recoverable Reserves” for U.S. coal supplies has been like a “faulty fuel gauge,” CEA stated in a press release. The report shows that the United States appears to be past “peak coal,” with production falling off significantly since 2008. Data from 2012 for the Four Corners states shows a 44 percent decline in Arizona coal production from its apparent peak year of 2001. Utah and New Mexico also apparently peaked in 2001 and Colorado in 2004. From their peak years, Utah was down 39.3 percent; Colorado, 28.3 percent, and New Mexico, 24.3 percent. The report cites a series of studies by the U.S. Geological Survey which indicate that less than 20 percent of U.S. coal formations will be economically recoverable. “Economically viable coal is a nonrenewable resource, and after examining currently available geological and financial data, there is good reason to believe we are rapidly reaching the end of U.S. coal deposits that can be mined at a profit,” Leslie Glustrom, CEA director of research and policy, and author of the study, said. “If coal can’t be mined at a profit, not much of it will be mined. It is unclear how long the U.S. coal industry will produce large quantities of coal and at what price, but the current financial distress of U.S. coal mining companies could lead to significant changes in U.S. coal production in less than a decade,” Glustrom said. Industry responds BHP spokesman Norman D. Benally said, “By virtue of not being involved in the gathering of the data and research information that was utilized in the report by Clean Energy Action, BHP Billiton cannot validate the conclusions.” Vic Svec, senior vice president of Global Investor Relations and Corporate Relations for Peabody Energy, said the United States has hundreds of years of coal reserves and production ahead of it. “Coal is the world’s fastestgrowing major fuel, and projected to become the world’s largest energy source in coming years. In the United States, coal’s market share has rebounded in 2013, and coal fuels more electricity than any other source thanks to its low cost, abundance and reliability. “U.S. coal demand is expected to expand by some 130 million tons over the next five years. And, while individual producers and regions may have varied futures depending upon their competitive advantages, new reserves continue to be developed and technologies allow producers to access reserves economically. America has 27 percent of the world’s coal reserves – the single largest national energy resource in the world – and they will be accessed for centuries to come,” he said. Digging for profit According to data cited in the report from the USGS’s 2009 National Coal Resource Assessment, in New Mexico’s Bisti coal field, 47 percent of the coal is technically recoverable. However, only 4 percent is economically recoverable. “For Navajo Mine, the Navajo Nation brought in experts to conduct a thorough evaluation of Navajo Mine, including its reserves and resources to evaluate the potential of purchasing the mine. The Due Diligence Team reported back to the Navajo Nation that Navajo Mine’s business is viable,” Benally said. John Head, president and CEO of Behre Dolbear USA, a member of the due diligence team, told delegates in April, “Coal in the ground is an interesting black rock. Until you can dig it up at a profit, then it becomes valuable. So the key for us and for the Nation to understand is: Will there be enough good coal that can be recovered at the right quality to supply the Four Corners Power Plant for the next 18 years or so?” Head also mentioned some technical difficulties, noting that there are six or eight main coal seams, each separated by “interburden,” or waste rock. “It’s difficult, quite frankly, to dig out those little sections of coal, throw away the waste, go back into the next seam of coal and throw away the waste, and keep on going down through the coal seams.” It was mentioned that some specialized equipment might be needed later on. Rocky future The CEA report suggests that America faces a rocky future of rising coal production costs, potentially more bankruptcies among coal mining companies, and higher fuel bills for utility consumers. It also recommends that decision makers at all levels take a hard look at coal cost-and-supply issues, considering both geology and finance, and begin thinking about scenarios to move the United States beyond coal in less than 20 years. “Given the current financial strains affecting U.S. coal companies, it is unclear whether they will be able to support the increased capital and labor costs associated with mining coal that is more difficult to access,” the report states. In 2012, the top three coal companies – Peabody Energy, Arch Coal Inc. and Alpha Natural Resources – all reported losses, according to the report. Peabody, which operates the Kayenta Mine, reported just over $1 billion in losses in the fourth quarter of 2012 and $585 million in losses for the year. The cost of coal used by electric utilities has been rising in almost all states at a rate of 6-10 percent per year, or two to three times faster than inflation over the last decade. Since 2004, average U.S. delivered coal costs have increased at a rate above 7 percent per year, which could mean that coal costs will double in less than a decade, as they have done in a number of states since 2004, according to CEA. “The rising cost of production is THE sleeper issue for those who follow coal and energy markets in the United States,” Tom Sanzillo, director of finance at the Institute for Energy Economics and Financial Analysis, said. “It is a geological certainty and an economic fact that as mining activity matures in a region, production typically becomes more difficult and more expensive.” In transition Sanzillo said the country is going through a transition in its energy mix for electricity and what will emerge is a more diversified set of suppliers for the nation’s electricity consumers. “Coal’s relative monopoly at 50 percent of market share is likely to be replaced by growth in renewable resources, efficiency, natural gas and in some regions of the country, by hydro ... The coal industry will be smaller with less producers, fewer mines and higher prices,” he said. Zane Selvans, Ph.D., geologist and assistant director of research at CEA, said the point of the report is that the fundamental constraint on coal is not from natural gas prices or government regulations. “The fundamental fact is that most of the coal in the U.S. is buried too deeply to be accessed easily and we are rapidly approaching the end of accessible U.S. coal deposits that can be mined profitably. Independent of arguments about climate change and clean coal, coal’s days are very likely numbered due to questions of economic supply. Even if coal were perfectly clean – or could be made to be so — it would still be the wrong choice due to serious questions about long-term U.S. coal supplies,” Selvans said. Information: cleanenergyaction. org
Posted on: Thu, 14 Nov 2013 18:02:42 +0000
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