Geology and Markets, not EPA, Waging War on Coal

With the release of the Environmental Protection Agency’s proposed rules limiting carbon pollution from the nation’s electricity sector, you’ve no doubt been hearing a lot of industry outrage about “Obama’s War on Coal.”

Don’t believe it.

Despite the passionate rhetoric from both sides of the climate divide, the proposed rules are very moderate — almost remedial.  The rules grade the states on a curve, giving each a tailored emissions target meant to be attainable without undue hardship.  For states that have already taken action to curb greenhouse gasses, and have more reductions in the works, they will be easy to meet.  California, Oregon, Washington, and Colorado, are all several steps ahead of the proposed federal requirements — former Colorado Governor Bill Ritter told Colorado Public Radio that he expects the state to meet the proposed federal emissions target for 2030 in 2020, a decade ahead of schedule.  This isn’t to say that Colorado has particularly clean power — our state has the 10th most carbon intensive electricity in the country, with about 63% of it coming from coal — but we’ve at least started the work of transitioning.

Furthermore, many heavily coal dependent states that have so far chosen to ignore the imperatives of climate change (e.g. Wyoming, West Virginia, Kentucky) must only attain single-digit percentage reductions, and would be permitted to remain largely coal dependent all the way up to 2030.  Roger Pielke Jr. and others have pointed out that in isolation, the new rules would be expected to reduce the amount of coal we burn by only about 15%, relative to 2012 by 2020.  By 2030, we might see an 18% reduction in coal use compared to 2012.  Especially when you compare these numbers to the 25% reduction in coal use that took place between 2005 and 2012, and the far more aggressive climate goals that even Republicans were advocating for just two presidential elections ago, it becomes hard to paint the regulations as extreme.  Instead, they look more like a binding codification of plans that already exist on the ground, and a gentle kick in the pants for regulatory laggards to get on board with at least a very basic level of emissions mitigation.

So, in isolation, there’s a limited amount to get either excited or angry about here.  Thankfully, the EPA’s rules will not be operating in isolation!

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In Good Company: A Look at Global Coal Reserve Revisions

In my last post, I recounted some of the indications that have surfaced over the last decade that US coal reserves might not be as large as we think.  The work done by the USGS assessing our reserves, and more recently comments from the coal industry themselves cast doubt on the common refrain that the US is “the Saudi Arabia of coal” and the idea that we have a couple of centuries worth of the fuel just laying around, waiting to be burned.  As it turns out, the US isn’t alone in having potentially unreliable reserve numbers.  Over the decades, many other major coal producing nations have also dramatically revised their reserve estimates.

Internationally the main reserve compilations are done by the UN’s World Energy Council (WEC) and to some degree also the German equivalent of the USGS, known as the BGR. Virtually all global (publicly viewable) statistics on fossil fuel reserves are traceable back to one of those two agencies. For instance, the coal reserve numbers in the International Energy Agency’s (IEA’s) 2011 World Energy Outlook came from the BGR; the numbers in BP’s most recent Statistical Review of Energy came from the WEC.

Of course, both the WEC and the BGR are largely dependent on numbers reported by national agencies (like the USGS, the EIA and the SEC in the case of the US), who compile data directly from state and regional geologic survey and mining agencies, fossil fuel consumers, producers, and the markets that they make up.

Looking back through the years at internationally reported coal reserve numbers, it’s surprisingly common to see big discontinuous revisions.  Below are a few examples from the WEC Resource Surveys going back to 1950, including some of the world’s largest supposed coal reserve holders.  In all cases, the magnitude of the large reserve revisions is much greater than annual coal production can explain.

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A Long Time Coming: Revising US Coal Reserves

In my previous post I highlighted the recent, quiet admission by the US EIA (in a fine-print footnote to Table 15 of their 2012 Annual Coal Report) that they do not know what fraction of our nation’s large store of coal resources might be economically accessible, and thus potentially classified as reserves.

CEA has long highlighted indications that a revision like this might be in the works, including in our most recent round of coal reports issued last fall (see: Warning: Faulty Reporting of US Coal Reserves).  But we’re not the only ones.  Plenty of other people have pointed out the same thing over the years.  Including…

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US EIA on the Economics of Coal: No Comment

At the end of 2013, the US Energy Information Administration (EIA) acknowledged that it does not know whether the vast majority of US coal can be mined profitably.  If coal mining isn’t profitable, then barring some grand socialist enterprise the black stuff is probably going to stay in the ground where it belongs.

You might think this kind of revision would have warranted a press release, but the EIA’s change of heart was buried in a fine-print footnote to Table 15 of their 2012 Annual Coal Report, which tallies up all the coal resources and reserves in the US, state by state.  The new footnote says:

EIA’s estimated recoverable reserves include the coal in the demonstrated reserve base considered recoverable after excluding coal estimated to be unavailable due to land use restrictions, and after applying assumed mining recovery rates. This estimate does not include any specific economic feasibility criteria. [emphasis added]

This stands in contrast to the footnotes for the same table in their 2011 Annual Coal Report, and many prior years:

EIA’s estimated recoverable reserves include the coal in the demonstrated reserve base considered recoverable after excluding coal estimated to be unavailable due to land use restrictions or currently economically unattractive for mining, and after applying assumed mining recovery rates. [emphasis added]

Continue reading US EIA on the Economics of Coal: No Comment

Warning: Faulty Reporting on US Coal Supplies

PEAK COAL REPORT: U.S. COAL “RESERVES” ARE INCORRECTLY CALCULATED, SUPPOSED 200-YEAR SUPPLY COULD RUN OUT IN 20 YEARS OR LESS

Federal Estimates Overstate Reserves by Including Coal That Cannot Be Mined Profitably; Production Already Down in All Major Coal Mining States… And Utility Consumers Are Facing  Rising Energy Bill Prices.

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WASHINGTON, D.C. – October 30, 2013 – America does not have 200 years in coal “reserves” since  much of the coal that is now left in the ground cannot be mined profitably, according to a major new report  from the Boulder, CO-based nonprofit Clean Energy Action (CEA). The CEA analysis shows that the U.S. appears to have reached its “peak coal” point in 2008 and now faces a rocky future over the next 10-20 years of rising coal production costs, potentially more bankruptcies among coal mining companies, and higher fuel bills for utility consumers.

Continue reading Warning: Faulty Reporting on US Coal Supplies

Ripe for Retirement: The Case for Closing America’s Costliest Coal Plants

Ripe-for-Retirement Generating Capacity Is Concentrated in Eastern States
UCS identified up to 353 coal-fired generators nationwide that are uneconomic compared with cleaner alternatives and are therefore ripe for retirement. These units are in addition to 288 coal generators that utilities have already announced will be retired. Under the high estimate, there are 19 states with more than 1,000 MW of ripe-for-retirement coal-fired generating capacity, all in the eastern half of the United States.

The Union of Concerned Scientists has gone through the catalog of America’s coal plants, and found hundreds of mostly small, old, polluting, inefficient generating units that just aren’t worth operating any more, even on a purely economic basis. They looked at several different sets of assumptions, including different natural gas prices going forward, a price on carbon, whether or not the competing natural gas fired generation would need to built new, or whether it existed already with its capital costs paid off, and whether or not the production tax credit for wind ends up being renewed. In all of the scenarios considered, they found substantial coal fired generation that should be shut down on purely economic grounds, above and beyond the 288 generating units that are already slated for retirement in the next few years. They also found that some companies — especially those in traditionally regulated monopoly utility markets in the Southeast — are particularly reluctant to retire uneconomic plants, and suggest this may be because they can effectively pass on their costs to ratepayers, who remain none the wiser.