Coal Fading to Black?
August 27, 2013
In the last week I’ve been getting a stream of notes from anti-coal activist Leslie Glustrom about what may be signs of the inevitable collapse of the market for coal in the US. She writes
Producing coal in the US is now like scraping the bottom of the peanut butter jar–it is getting harder (and therefore more expensive) to produce the coal–which is one of the reasons coal costs are generally rising on average about 7% per year around the country….
Now she’s fleshed it out in a piece for the Boulder Daily Camera:
What was true about coal that was mined in the last century is no longer true; coal deposits that are being mined now are buried deeper and are more expensive to mine. Coal company profit margins are narrowing or even turning negative and the major U.S. coal companies are reporting billions of dollars of losses.
The major U.S. coal companies have lost over 80 percent of their stock value since 2008 and are borrowing money at interest rates of 8-10 percent in order to pay off their staggering debts. Patriot Coal filed for bankruptcy in mid-2012 and other large U.S. coal companies have been put on bankruptcy watch.
In Colorado, average coal costs have gone from 97 cents per million BTU in 2004 to $1.85 per million BTU in 2012. That means coal costs have increased about 3 times faster than inflation and have almost doubled in less than a decade. Similar trends are seen all around the country.
Coal’s woes aren’t just due to “cheap” natural gas or to increasing regulation; the fundamental issue facing the coal industry is that coal is non-renewable and we are scraping the bottom of the barrel of coal that can be mined at a profit. If coal can’t be mined at a profit, not much of it will be mined.
Tellingly, on Aug. 21, the federal government offered about 148 million tons of coal in Wyoming’s Powder River Basin for “lease” and no coal company bid to buy this coal — even though these coal “leases” are widely seen as essentially giving the public’s coal away.
Cloud Peak, the coal company expected to bid on the coal issued a statement saying that given the cost to mine the coal, it could not put together an “economic bid for this tract at this time.”
My elderly mother is using similar reasoning when she jokes that she is so old she doesn’t buy green bananas either. No use in stocking up if you’ll soon be dead.