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24 www.coalage.com August 2016 u.s. coal report The U.S. Coal Industry Shrinks by steve fiscor, editor-in-chief The fact that the coal industry has been under siege for the last four years has been well documented. With the President Barack Obama administration pursuing a climate change agenda that likely has no merit, the scale has been tipped in favor of natural gas and away from coal, the base- load fuel that provided most of the power for America's growth during the 20 th cen- tury. The U.S. natural gas industry has dis- covered and tapped huge reserves, bring- ing more of a competitive fuel to market, while keeping costs low. Faced with an onslaught of environ- mental regulations and declining power consumption from a moribund economy, most U.S. power producers selected the path of least resistance. Almost all of the new power capacity was switched to either natural gas or nuclear. Older coal-fired power plants that would have required a significant investment for pollution con- trol systems were replaced with new natu- ral gas plants. In some cases, utilities have switched from existing coal-fired capacity to natural gas to comply with the proposed environmental regulations. Even though some of the regulations have been over- turned by the courts as being unfair, the damage these policies have inflicted on the U.S. coal industry cannot be undone. This year will be the year the coal busi- ness will really feel the pain — more than it has felt in more than 50 years. The warn- ings began to surface last year as several of the large coal companies filed for Chapter 13 bankruptcy protection to reorganize debt. In hindsight, many of them had over- paid for assets acquired during a merger and acquisition frenzy. When the market began to soften, they could no longer ser- vice the debt. Compared to five years ago, the bot- tom has fallen out of the coal market. Choose any statistic — demand, employ- ment, prices or production — the figures are staggering. Total U.S. coal production this year will likely be less than 700 million tons, the lowest level since the late 1970s. Granted, 700 million tons is still a signifi- cant amount of coal. For an industry that had grown accustomed to 1.1 billion tons per year (tpy), however, it's a more than 36% drop in five years. Just like the world that surrounds it, the difference between the coal business today and the late 1970s has also changed significantly. Today, 20 large western sur- face mines in the Powder River Basin (PRB) are capable of producing 375 million tpy. Construction was just beginning on those mines in the late 1970s. Likewise, the 100 or so longwall mines that were commis- sioned in the 1980s have been replaced by 50 more efficient longwalls that produce twice or three times as much coal. Togeth- er, those longwalls account for roughly 200 million tpy of production capacity. That leaves roughly 125 million tpy in produc- tion capacity to be filled by the remaining 300 mines capable of producing 100,000 tpy or more. Large PRB mines, like the Belle Ayr mine (above), are capable of mining near half of the total U.S. output in 2016. Financially reorganized coal operators deal with reduced market share and leveling demand Table 1 — Total Annual U.S. Coal Production (Thousands of Short Tons) 1950 560,388 1987 918,762 2002 1,094,283 1960 434,329 1988 950,265 2003 1,071,753 1970 612,661 1989 980,729 2004 1,112,099 1975 654,641 1990 1,029,076 2005 1,131,498 1976 684,913 1991 995,984 2006 1,162,750 1977 697,205 1992 997,545 2007 1,146,635 1978 670,164 1993 945,424 2008 1,171,809 1979 781,134 1994 1,033,504 2009 1,074,923 1980 829,700 1995 1,032,974 2010 1,084,368 1981 823,775 1996 1,063,856 2011 1,095,628 1982 838,112 1997 1,089,932 2012 1,016,458 1983 782,091 1998 1,117,535 2013 984,842 1984 895,921 1999 1,100,431 2014 1,000,049 1985 883,638 2000 1,073,612 2015 895,936 1986 890,315 2001 1,127,689 2016e 687,000 Source: Energy Information Administration