# Presentation: 642461

## EIA Coal Statistics, Projections, and Analyses:  What They Say About Changes in the Coal Industry 

**EIA Coal Statistics, Projections, and Analyses:  What They Say About Changes in the Coal Industry**

- Rich Bonskowski
- Energy Information Administration
- Presented at SME Central Appalachian Section
- Spring Meeting, April 15-17, 2004

## Agenda

- What is EIA?
- Discuss EIA products—data, analyses, and forecasts
- What these products cover and show
- What are the underlying assumptions
- Recent coal prices and supply issues
- The U.S. coal industry in the future

## What Is EIA?

- Statistical agency of U.S. Department of Energy, created in 1977
- Provides policy-independent data, forecasts, and analyses
- DOE approval not required for EIA products, nor any other U.S. Government approval as to the substance of technical reports

## EIA Products

- Data reports - Petroleum, Natural Gas, Coal, Electricity, Nuclear, and Renewable Energy
- Integrated Energy Forecasts, short term and extended
- Analysis reports on fuel-specific and integrated topics
- Service reports on alternative scenarios for Congress, other Federal agencies

## U.S Coal, 2001-2003 Survey Data

**Source: Quarterly Coal Report, March 2004**

## U.S. Coal Imports and Exports Survey Data

**Source: Quarterly Coal Report, March 2004**

## U.S. Coal Imports and Exports by Month

**Source: Survey Data, Monthly Energy Review, March 2004 & EIA file data for Jan ‘04**

## Average Mine Price of Coal by Supply Region, Survey Data 1999-2002

**Source: EIA-7A Coal Production Report, file data**

**Dollars per Short Ton**

- Average Mine Price of Coal by Supply Region, Survey Data 1999-2002

## Coal Mining Labor Productivity by Supply Region, 1999-2002

- Productivity in short tons per miner per hour

**Source: EIA-7A Coal Production Report, file data**

## Recoverable Reserves at Operating Mines

**Source: Annual Coal Report, November 2003, and previous versions**

## Average Weekly Coal Commodity Spot Prices

**Source: Coal News and Markets Report & Platts Coal Outlook**

## Region to Region:  Average Transportation Rates, Distances, and Costs for Contract Coal Shipments to Electric Utilities  

**NOTE:  2000, 2001 data are preliminary**
**Source:  Coal Transportation Rate Database**

## Coal Production by Region, 1970-2025 with Long-Term Projections (million short tons)

- Coal Production by Region, 1970-2025 with Long-Term Projections (million short tons)

**Source: Annual Energy Outlook 2004, January 2004**

## Coal Production by Sulfur Content, 2002, 2010, and 2025 (million short tons)

**Source: Annual Energy Outlook 2004, January 2004**

## Coal Consumption for Electricity and Other, 1970-2025 (million short tons)

**Source: Annual Energy Outlook 2004, January 2004**

## U.S. Coal Imports and Exports, 2002 and Projections to 2010 and 2025

**Million Short Tons**

**Source: Annual Energy Outlook 2004, January 2004**

## Average Mine Price of Coal, 1990-2025, with Long-Term Projections (2002 dollars/short ton)

**Source: Annual Energy Outlook 2004, January 2004**

## Average Mine Prices in Three Mining Cost Cases, 1990-2025 (2002 dollars per short ton)

**Source: Annual Energy Outlook 2004, January 2004**

## Coal Mining Labor Productivity, 1990-2025 (short tons per miner per hour)

**Source: Annual Energy Outlook 2004, January 2004**

## U.S.Natural Gas Spot Prices(Base Case and 95% Confidence Interval)

**Source: Short Term Energy Outlook, April 2004**

## Total Natural Gas Demand Growth Patterns

**Source: Short Term Energy Outlook, April 2004**

## Total U.S. Electricity Demand Patterns

**Source: Short Term Energy Outlook, April 2004**

## U.S. Coal Demand

**Source: Short Term Energy Outlook, April 2004**

## U.S. Coal Production

- Production forecast to rise 2.8% in 2004, 2.9% in 2005

**Source: Short Term Energy Outlook, April 2004**

## A Crimp in the Eastern Coal Supply Chain?

- Litigation and permitting delays sidetrack mountaintop removal and longwall mines
- Several temporary shutdowns in 2003 due to fires, accidents, or MSHA regulations
- Six major bankruptcies over 24 months, four ongoing, affect prices and deliveries
- Mine expansions deferred over defaults of reclamation bonding companies

- At the source. . .

## Eastern Coal Supply Chain (cont.)

- Numerous “geologic problems” reported, usually signal nearing limits of reserves
- Mine trucks in West Virginia under more restrictive weight limits and license fees
- Large mining companies remain serious about the bottom line; imposed market discipline, took marginal mines off line, sat out low-price contract offers

- At the source. . .

## Eastern Coal Supply Chain (cont.)

- Powder River Basin (PRB) capacity committed for 2004 and heavily contracted for 2005 (some generators can switch or blend coal)
- PRB capacity governed by rail capacity; mines load coal 24/7, cannot catch up declined deliveries
- Colorado bituminous hard-constrained by rail capacity

- Externalities . . .

## Eastern Coal Supply Chain (cont.)

- Natural gas prices up past 2 years, continue above $5.00/thousand cubic feet (mcf)
- Oil prices to rise through 2004; in turn, increases demand for natural gas
- Skyrocketing international coal prices in 2003 due to heat and drought in Europe; in China, sudden withdrawal of coke and coal exports shocked the market, booming steel industry drove up bulk carrier rates

- Externalities . . .

## Eastern Coal Supply Chain (cont.)

- Hot foreign markets bid up and bought available Colombian coal, once considered a safe back-up by some U.S. coastal utilities
- Weak dollar suddenly made U.S. coal competitive again in the export market, especially coking coal, further driving down domestic supply
- Record high prices in SO2 spot and futures markets heightens demand for compliance coal

- Externalities . . .

## From EIA’s Perspective

- Electricity demand will rise
- Natural gas prices in real dollars will rise
- Coal mining productivity will improve further, keeping coal prices relatively low
- Emission caps will shift even more demand to the West
- Industrial coal demand and coal exports decline, coal imports rise

- In the Long Term (to 2025) . . .

## From EIA’s Perspective

- Electricity demand to increase 1.9 percent in 2004, then 2.0 percent in 2005
- Natural gas prices, at about $5.40 per mcf both in 2004 and 2005, are stable but elevated
- Coal demand for electricity generation to grow by 2.8 and 2.9 percent this year and next
- Coal prices expected to increase by 3.4 percent in 2004 (composite of spot and contract) due to soaring spot prices in East and greater effects of recent high gas prices

- In the Short Term (next 18 months) . . .

## Future Pressures for Higher Coal Prices

- New mines in Appalachia will require greater investment—mountaintop mines, deeper mines, thinner beds, longwall reserves dwindling
- EIA forecasts slowly increasing natural gas prices, even with 4 new LNG terminals and more domestic gas from Alaska and unconventional
- Dominant coal companies are determined to be more consistently more profitable
- Down to four major railroads now; they expended a lot in mergers and infrastructure and feel that increases in revenue are overdue

## Future Pressures for Higher Coal Prices

- U.S. economy expected to improve
- China will continue to curtail exports and tie up ocean shipping for a year or more
- Recent rail congestion and delays (UP and CSX)—a trend?
- Farther out, coal synfuel tax advantage due to expire at the end of 2007
- Controversial EPA regulations for mercury and fine particulates

## Wildcards and Unresolved Questions

- DOE support continues for Clean Coal Technology research and implementation
- Last December’s New Source Review rules would encourage continued operation at older power plants in some cases
- Coal industry was affected by failures at Enron and others, financial problems at utilities passed downstream to suppliers
- Surplus of natural gas turbine units vs. long lead times and large investments for coal-fired plants