Coal Age

JUN 2019

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18 June 2019 illinois basin Exports Support Illinois Basin Producers During a time of declining domestic demand, exports brought much-needed business and will likely continue to do so by john t. hanou From 2000 to 2014, Illinois Basin (ILB) production, which includes Illinois, Indiana and western Kentucky, was on the upswing. It expanded by more than 50 million tons due to strong de- mand from the scrubbed power plants and export markets. In 2014, ILB pro- duction nearly reached 137 million tons. The momentum carried into the first quarter of 2015 as ILB mines pro- duced 35.4 million tons (142.2 million tons on an annualized basis), but it would not last. Low natural gas prices, subsidized renewables (wind), lower exports and a mild winter burn caused U.S. coal demand to drop dramatical- ly. Stockpiles bulged at both the mines and the power plants. According to stats from the Mine Safety Health Administration (MSHA), ILB production totaled 123 million tons during 2015 be- fore dropping to 98.5 million tons in 2016. A strong export market and higher natural gas prices allowed ILB production to expand to 103.2 mil- lion tons in 2017. Buoyed by stronger exports, year-end 2018 ILB coal production topped out at 107.2 million tons. Fourth-quarter 2018 ILB production was 109 million tons on an annual- ized basis — the highest level since Q1 2017. What does the future hold? Much of that answer lies beyond the control of ILB coal operators, but it's safe to say exports will play a much larger role in the outcome than in year's past. Recent ILB Trends Historically, Illinois has been the larg- est-producing state in the ILB. Indi- ana and western Kentucky vied for the No. 2 spot; however, Indiana has gained the upper hand since 2016. During 2018, 54 mines produced coal in the ILB. Of these, 17 mines produced more than 2 million tons representing 86.6 million tons, or 81% of total ILB production. The larg- est mine is Foresight Energy's Sugar Camp longwall complex, which pro- duced 14.4 million tons in 2018. Alliance Resource Partners' River View mine is the second-largest ILB coal mine. A large room-and-pillar operation in western Kentucky, Riv- er View produced 9.8 million tons in 2018. After adding an 11th continuous miner section, it is expected to pro- duce 11 million tons in 2019. Peabody Energy's Bear Run mine in Indiana produced 7 million tons, making it the largest surface mine currently operat- ing east of the Mississippi River. If Sunrise Coal's Oaktown Nos. 1 and 2 mines were combined, they would be ranked fourth at 7 million tons. The complex could have been the third largest, but the company was forced to reopen its idled Car- lisle mine to retain some coal leas- es that required attention or they would lapse. As a result, the company moved a continuous miner unit from its Oaktown No. 1 mine during the third quarter of 2018 to Carlisle. During 2018, Alliance was the top coal-producing company with 29.9 million tons or 29% of the ILB market. During 2016, Alliance's production

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