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Ocober 4, 2012

MEMORANDUM FOR: John Conti

Assistant Administrator for Energy Analysis

Alan Beamon

Office Director

 Office of Electricity, Coal, Nuclear, and Renewables Analysis

FROM: Coal and Uranium Analysis Team

SUBJECT: AEO2013 Coal Working Group Meeting II Summary 

Attendees:

*Leslie Coleman (National Mining Association)

Jim Diefienderfer (EIA)

Bob Eynon (EIA)

Eric Eschmann (EPA)

Karen Freedman (EIA)

*Paul Georgia (National Mining Association)

*Eric Grol (NETL)

Tyler Hodge (EIA)

 Elias Johnson (EIA)

*Serpil Kayin (EPA)

Diane Kearney (EIA)

Sikander Khan (DOE: Fossil Energy)

Jordan Kislear (DOE: Fossil Energy)

*Bill Meroney (EPA)

Carrie Milton (EIA)

Sam Napolitano (EIA)

Tien Nguyen (DOE: EE)

*Chris Nichols (NETL)

Nick Paduano (EIA)

*Anthony Paul (Resources for the Future)

*Paul Pierce (USGS)

*Donald Remson (NETL)

Marie Rinkoski-Spangler (EIA)

*Henry Rubert (CSXT)

Dave Schoeberlein (US DOE: Office of Policy and International Affairs)

*non-EIA/DOE attendees
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Presenter: Mike Mellish

Meeting date: 10/4/2012

Topics covered included assumptions and preliminary projections for the Annual Energy 2013.

Key topics of discussion:

1. One participant inquired how the natural gas resource outlook compared to last year. 

The coal team responded that they did not know the specifics of this year’s 

assumptions versus last year’s. One EIA colleague mentioned that EIA staff plans to

review a new USGS gas resource report, and will consider whether its contents 

should or could be included in the assumptions for this year’s outlook.

2. One participant asked why coal consumption is rising over the projection in light of 

the natural gas price and coal regulations. Staff explained that electricity demand is 

projected to rise over the projection, and natural gas prices also rise. Both factors 

contribute to a rising coal outlook.

3. One participant asked how the model determines which ports are used for exports. 

Staff indicated that the coal model does not model exports at that level of detail. 

Instead, the coal model has demand regions which are then aggregated into four 

larger export regions. For example, the U.S. East Coast and the U.S. West Coast

represent two of these larger export regions. Using this regional aggregation, the coal 

model represents domestic rail rates for U.S. supply/demand region pairs and then 

ocean freight rates from the four larger U.S. export regions.

4. A meeting participant inquired how much coking coal is projected to be exported in 

2040. Staff responded that preliminary projection indicated about 70 million tons of 

coking coal and 100 million tons of thermal coal.

5. One participant asked if Slide 13 entitled “Cumulative coal-fired capacity retirements 

by coal demand region, 2012-2035” included both planned and modeled coal-fired 

generating capacity retirements, to which staff responded yes.

6. One participant commented that with a different outlook for fuel prices, the 

projections might yield a different path for retirements. EIA staff indicated that this 

would be the case, and, in fact, was demonstrated in the alternative natural gas and 

coal price cases developed for the AEO2012. 

7. One participant asked if we were including Phase 2 of CAIR. The tighter emission 

cap for Phase II of CAIR takes effect in 2015 and is represented in the current 

AEO2013 modeling runs. Staff responded that in the near-term CAIR is assumed to 

start in 2012. Other staff also mentioned that because pre-CAIR SO2 allowances

(2004-2009) could be used in a 1:1 ratio instead of a 2:1 ratio under Phase I of CAIR

(2010-2014), an early compliance incentive was provided to electricity generators 

leading to a large build of banked SO2

8. One participant asked why there is a dip in coal consumption early in the projection. 

Staff responded that this is primarily due to the low gas prices seen recently. Staff 

mentioned that low gas prices have made modeling coal markets more challenging.

allowances. Staff stated that, in effect, CAIR 

began as far back as 2005, when CAIR was finalized. As a result, staff explained, the 

bank is quite large and it mutes CAIR’s effect until MATS kicks in and the model is 

left with a large bank of sulfur dioxide allowances.
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9. One participant asked what the coal team means when it mentions that western coal 

typically is the marginal coal supplier. The coal team indicated that, as a rule of 

thumb, when there is higher demand for coal in general, western coal typically fills in 

the gap. Likewise, when there is a decline in electricity coal demand, western coal 

typically falls off first.

10. A participant asked if Appalachian prices were driven by changes in prices for 

Northern Appalachia or did prices reflect the changes in all of the Appalachian 

regions. Staff responded that the prices reflect similar trends in all of the 

Appalachian regions, but noted that some of the higher average prices seen in recent 

years also reflect the higher coking coal prices. Staff indicated that higher coal export 

prices in 2011 accounted for much of the roughly $5 to $6 per short ton increase in 

the overall average U.S. minemouth coal price that occurred in 2011.