Coal Age

MAR 2017

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4 March 2017 news EIA: Coal Production to Increase in 2017 Coal production in the United States is expected to increase slightly in both 2017 and 2018, reversing recent declines, primarily because of rising natural gas prices, according to a new report by the U.S. Energy Information Administration (EIA). The federal agency's short-term energy outlook, issued in ear- ly February, said coal output in the nation totaled 739 million tons in 2016, an 18% decline from 2015 and the lowest level of coal pro- duction since 1978. Nowhere was this decrease more pronounced than in Kentucky, once the leading coal producer in the U.S. Ken- tucky's coalfields are located in both the high-sulfur Illinois Basin (ILB) in western Kentucky and Central Appalachia in eastern Ken- tucky. The 42.6 million tons of coal mined in the commonwealth last year was its lowest yearly total since 1939. As the EIA noted, the vast majority of coal produced in the U.S. is used to generate electricity, with smaller amounts of met- allurgical coal marketed domestically and overseas for steel pro- duction. As a result, coal production and coal-fired electricity gen- eration are closely connected. In recent years, coal production has been hurt by utilities switching from coal to gas to take advantage of historically low natural gas prices. But with average gas pric- es forecast to climb well past $3/MMBtu over the next two years, "coal is expected to regain some of the electricity generation mix, and coal production is expected to increase slightly," said the EIA. Largely because of the anticipated increase in gas prices, "the use of natural gas-fired generators is expected to decline slightly in 2017," the EIA said. "However, new natural gas power plants are currently being built, and by 2018, the availability of these units may lead to increases in natural gas-fired generation." As many as 12 new gas plants are under development or con- struction in Ohio, a state that traditionally has relied heavily on coal-fired generation. Any gains in national coal production are not expected to be uniform by region. For instance, the EIA said coal production should increase in the western U.S., going from 407 million short tons (st) in 2016 to 443 million st in 2018, but remain relatively flat in Central and Northern Appalachia and the nation's interior, consisting mainly of the ILB. In the Appalachian region, where 183 million st was produced in 2016, this year's output is expected to fall slightly to 177 mil- lion st. Interior coal production, meanwhile, is forecast to increase from 150 million st in 2016 to 152 million st in 2018. The EIA added that although the relative prices of coal and natural gas are important in determining fuel use, generation trends for these fuels also are affected by changes in generation from other sources, including renewable resources such as wind, solar and hydro, as well as by total electricity demand, which can be significantly affected by both weather and economic factors. Some early signs already are pointing to a potential increase in electricity demand and production in 2017. Ohio-based American Electric Power Co., one of the nation's largest electric utilities, said its regulated coal-burning power plants are expected to consume about 33 million tons in 2017, up from 30 million tons last year. CNX Coal Resources said in a February regulatory filing that it expects to produce a bit more steam coal this year and in 2018, approximately 26 million tons, higher than the 24.7 million tons its three longwall mines in Pennsylvania — Bailey, Enlow Fork and Harvey — turned out in 2016. Alliance Resource Partners, the largest steam coal producer in the ILB, is targeting about 3 million tons of additional production in 2017 over the 35.2 million tons it produced in 2016. Peabody Energy Announces Closing of $1B Offering In mid-February, Peabody Energy closed its previously announced private offering of $1 billion aggregate principal amount of senior b r e a k i n g n e w s American Resources Commences Production at Carnegie Mine American Resources Corp., through its wholly owned subsidiary Quest Energy Inc., has commenced production at its Carnegie mine in Pike County, Kentucky. The Carnegie mine will extract coal from the Alma seam, which is ranked as a high-volatile A/B metallurgical coal. The Carnegie mine is the fi rst of the company's series of mines in the Alma seam that it anticipates bringing into production during 2017. The company forecasts its production costs at the mine to be below $56/ton and will be shipped by rail from the company's McCoy Elkhorn Bevins Branch complex. "We are excited to begin production at the fi rst in a series of Alma seam mines in the area," said Tom Sauve, president of American Re- sources Corp. "I applaud our team for coming in under budget on the development of the mine and achieving a very expedited timeframe to get on production. This mine offers us the ability to create blends with our other metallurgical production at our McCoy Elkhorn facility and offer our customers a very attractive high vol metallurgical product at a time when high vol coal is in demand." American Resources is engaged in diversifi ed energy services including mining, processing and logistics. The EIA sees western U.S. coal production growing by 36 million tons by 2018.

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