US DOE report projects that greater coal production may drop

Jan 23, 2012 12:00 AM

by Ken Ward Jr.

Coal production in Central Appalachia may not decline as sharply over the next five years as previously projected, but the long-term forecast looks even worse, according to a new US Department of Energy report.
DOE's Energy Information Administration increased its estimates of annual regional coal production for each of the next five years, but then projected steeper drops through the rest of the decade, with output reaching a low of 77 mm tons in 2020.

Overall, production from Central Appalachia -- mostly Southern West Virginia and Eastern Kentucky -- is expected to drop to about 86 mm tons, a decline of nearly 54 % between 2011 and 2035. Production in the Northern Appalachian coalfields of Northern West Virginia and Western Pennsylvania is expected to increase over the same period, but not nearly enough to make up the difference.
A larger share of Southern West Virginia's production comes from mostly non-union surface mines, while the northern part of the state remains a stronghold for underground operations that employ United Mine Workers members. Northern West Virginia mines also tend to produce higher sulphur coal, which can become more attractive as more power plants install pollution control scrubbers.

Rory McIlmoil, energy project manager at the Morgantown environmental consulting firm Downstream Strategies, follows coal production trends and co-authored a January 2010 report that warned of major production declines coming to the region's mining industry.
"Our 2010 report used EIA's projections, and since the publication of that report, those projections have come true," McIlmoil said. "Central Appalachian production is on the decline.”

"These projections suggest a far greater decline in coal production for West Virginia than did last year's estimates," he said.
"Therefore, the new projections support to an even greater extent the overall message put forth in our report: That Central Appalachia needs strong policies aimed at diversifying the regional economy and energy portfolio."

The new EIA projections are included in the preview of the 2012 edition of the agency's Annual Energy Outlook, which examines trends and tries to project future developments in energy supply, demand and production.
Overall, the report predicts that the growth of energy use will slow over the next quarter-century, reflecting an extended economic recovery and increasing energy efficiency in end-use applications.

Among other things, the DOE said the energy intensity of the US economy, measured as primary energy use per dollar of gross domestic product, will decline by 42 % from 2010 to 2035.
Over the next 25 years, coal's share of overall electricity generation was projected to fall to 39 %, well below the 49-% share seen as recently as 2007.

EIA cited slow growth in electricity demand, continued competition from natural gas and renewable plants, and the need to comply with new environmental regulations. The EIA analysis, though, does not include impacts from any potential regulation of greenhouse gas emissions or the latest US Environmental Protection Agency air-toxics rule for power plants.
EIA has also noted that the cheapest coal reserves in Central Appalachia have already been extensively mined, and has not said that EPA's crackdown on mountaintop removal is a major factor in projections for future production declines.

EIA analysts projected strong growth for renewable energy sources, from 10 % of US electricity generation to 16 % over the same period.
Natural gas growth was projected as more modest, from 24 % of power generation in 2010 to 27 % in 2035, according to EIA.

In a speech to an industry conference, National Mining Association President Hal Quinn cautioned against looking only at the domestic coal market, arguing that coal exports are going to be a bigger and bigger part of the industry's strategy.
"Asia's voracious appetite for coal to sustain its growth with affordable power logically benefits the country with the world's largest coal reserves," Quinn said. "We have the most of what the fast growing countries want the most of."

But the EIA projects Appalachia will continue to account for a smaller and smaller share of all US coal output. The regional share of domestic coal production, measured in terms of energy output, is expected to drop from 39 % to 29 %, also between 2010 and 2035, the EIA projected.
EIA said the share of domestic coal coming from western mines would increase from 47 % in 2010 to 56 % in 2035.

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