Environmental group warns that "peak coal" is past

Nov 1, 2013

Amid a slew of disappointing quarterly financial results from Powder River Basin coal companies, some groups are raising questions about the commodity’s long-term viability.

The Boulder-based environmental group Clean Energy Action released a report Wednesday that predicts the country has already passed “peak coal” and that production will continue to decline because of rising costs. They include Powder River Basin coal in that prediction, even though it has the lowest production costs in the country.

Clean Energy Action Research Director Leslie Glustrom says as companies have to move more dirt to access deeper coal seams, they won’t be able to keep pace with cheap natural gas.

“There’s good reason to believe we are rapidly approaching the end of US coal deposits that can be mined at a profit, and if coal can’t be mined at a profit, not much of it will be mined,” Glustrom says.

Coal production costs are rising, including in the PRB, but most analysts expect them to increase at just one to two percent a year -- while natural gas prices are expected to grow much faster.

John Hanou is an energy consultant who writes an annual report on the outlook for coal.
“The natural gas companies have to make money too," he says." "And you can’t make money at $2, where the price was a year and a half ago. You can’t really make money at $3. You can make money at $3.50, $4, $4.50, and once you have the numbers up there, natural gas really can’t compete.”

The stripping ratio -- the amount of dirt that has to be moved in relationship to the amount of coal recovered -- is the biggest factor in rising production costs. Hanou says the ratio has risen about 2 percent a year in the Powder River Basin for the last twenty years, and he’s expecting it to continue at roughly the same rate.