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October 7, 2013

MEMORANDUM 

TO: John Conti

Assistant Administrator for Energy Analysis

Alan Beamon

Director, Office of Electricity, Coal, Nuclear, and Renewables Analysis

FROM: Coal and Uranium Analysis Team

SUBJECT: AEO2014 Coal Working Group Meeting II Summary 

Attendees (31)

Name Affiliation

Greg Adams (Moderator) US DOE: EIA

Vlad Dorjets

Bob Eynon

Elias Johnson (W)

Ayaka Jones

Diane Kearney

Jim Diefenderfer

Mike Mellish

Carrie Milton

Sikander Khan US DOE: FE/HQ

Ehsan Khan US DOE: FE/HQ

Jose Benitez US DOE: FE/NETL (W)

Christopher Nichols US DOE: FE/NETL (W)

Charles Zelek US DOE: FE/NETL (W)

Donald Remson US DOE: FE/NETL (W)

Bill Meroney US EPA (W)

Brian Fisher US EPA (W)

Greg Moxness US DOL: MSHA (W)

Steve Gigliotti US DOL: MSHA (W)

Carl Lundgren US DOL: MSHA

Leslie Coleman National Mining Association (W)

Paul Georgia National Mining Association (W)

Glenn Carlson Union Pacific (W)

Carolyn Evans Norfolk Southern Corporation (W)

Natalie Biggs Wood Mackenzie (W)

Greg Marmon Wood Mackenzie (W)

Jamie Heller Hellerworx, Inc. (W)

James Staudt Andover Technology Partners (W)

Boddu Venkatesh ICF International (W)

Jack Ried Seminole Electric Cooperative, Inc. (W)

Keith Harrison Southern Company (W)

(W) = Participated via WebEx connection.
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Meeting Summary

EIA staff reviewed results from the NEMS model as of the date of the working group meeting held on 

September 26, 2013 at DOE Headquarters. Staff offered several additional points of information during 

the presentation, including:

• Although Two Elk Generating Station appeared as planned in Slide 10, this plant would likely be 

removed in the final AEO run, and on Slide 13 the 2.4 GW mentioned currently includes the 275 

MW Two Elk plant;

• Relative to the AEO2013, less petroleum capacity is expected to retire though 2040;

• More plants in the Georgia/Florida coal demand region are projected to retire in the AEO2014 

compared to the AEO2013;

• The average minemouth price of coal in the preliminary AEO2014 is a little lower than in 

AEO2013 due largely to lower prices for coking coal.

Staff also provided clarifications in response to questions from those in attendance, including:

• Coal plants are allowed to cycle in the model.

• The CO2 rule for existing coal plants is not included in the AEO. Only final regulations are 

included in the AEO Reference case, and the draft New Source Performance Standards recently 

published by EPA would not likely have much of an impact since the model builds very little coal 

in the Reference case;

• EIA does not publish international coal prices, primarily because the modeling of international 

coal markets is not as robust as the modeling of the U.S. domestic coal market. Annual cost 

updates for the international coal export supply curves represented in NEMS are based largely on 

changes in U.S. coal export and import prices (documentation available on the EIA website more

fully explains the method used to model international trade in the AEO – refer to: 

http://www.eia.gov/forecasts/aeo/nems/documentation/coal/pdf/m060(2013).pdf;

• The productivity assumptions are exogenous to the model and do not include a demand feedback 

mechanism;

• The Interior coal price is higher in the preliminary AEO2014 compared to the AEO2013, but in 

combination with higher production levels;

• EIA did not specifically quantify the contributing factors leading to the decline in productivity 

seen for Central Appalachia in the last decade, due in part to the limited data available to EIA; 

staff noted declining seam thickness and tougher mining conditions in the region as contributing 

factors to the declining productivity, in addition to permitting and increased regulatory scrutiny, 

where the region is no longer amenable to longwall mining, and mountaintop removal operations 

in particular are subject to greater scrutiny; a productivity white paper by staff on the subject is 

anticipated sometime in the next year.
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One commenter suggested that lower demand for lower sulfur coal as the result of increased scrubbed 

capacity contributed to the worsening outlook for Central Appalachian productivity, noting the increased 

use of Illinois basin coal. Staff noted that lower production in response to lower demand is one of several 

factors that could be contributing to lower productivity as mines are operated at lower capacity utilization 

or idled in response to the market forces.

One commenter asked if the increase in Western coal for exports was due to an assumption that new coal 

ports would be built. Another commenter specifically asked if there were any port constraints. EIA staff 

replied that no specific assumption regarding ports is included in the AEO assumptions but the 

projections also do not preclude it. The first commenter stated that the quantity projected would seem to 

imply that some capacity would need to be built, citing the expectation that these new ports could handle 

potentially 100 million tons, and noting a concern that limited amounts of Interior coal were projected to 

be exported. Staff stated that transportation costs for exports exist in the model and if prices are 

economic then coal will be exported. The second commenter mentioned that Kinder Morgan is planning 

to double export capacity most of which is out of the Gulf, and posed that it would be conceivable that 

some of this could by Powder River Basin coal.