EIA: U.S. Coal Production in 2016 Drops to Lowest Level in Nearly 40 Years

Researched by Industrial Info Resources (Sugar Land, Texas)--U.S. coal production in 2016 is expected to be the lowest level since 1978 as a result of several factors, according to the Energy Information Administration (EIA).

U.S. coal production in 2016 is expected to amount to 743 million short tons, 17% lower than in 2015, and the lowest level since 1978, according to the EIA's Today in Energy, report on Monday. "Falling production in 2016 continues an eight-year decline from peak production in 2008. Production in all major coal regions fell by at least 15%. Low natural gas prices, warmer-than-normal temperatures during the 2015-16 winter that reduced electricity demand, the retirements of some coal-fired generators, and lower international coal demand have contributed to declining U.S. coal production."

Although weekly coal production in most U.S. basins has increased slightly since mid-year, the EIA says, weekly production levels in all areas throughout 2016 have been lower than over the previous five years. "The largest annual decline in coal production in 2016 was in the Powder River Basin, which declined by 70 million short tons (17%) from 2015 levels. Declines in coal production relative to 2015 levels ranged from 16% to 26% in the Northern and Central Appalachian basins, the Rocky Mountain region, and the Illinois Basin."

In the past few years, coal's share of electricity generation has fallen as it has faced increasing competition from natural gas and renewables. The average daily natural gas spot price at the Henry Hub, a key benchmark, fell from $2.63 per million British thermal units in 2015 to $2.40/MMBtu in 2016, the EIA says, resulting in increased natural gas-fired electricity generation.

In 2016, natural gas-fired electricity generation surpassed coal-fired generation for the first time, accounting for an estimated 34% of total electricity generation compared with coal's 30% share, according to the EIA. The agency's most recent Short-Term Energy Outlook forecasts total 2016 power sector coal consumption at about 681 million short tons, the lowest level since 1985.

U.S. coal exports also declined in 2016. The EIA estimates that the U.S. exported 57 million short tons of coal in 2016, a 23% decline from the previous year.

The slump in coal demand has taken a huge toll on producers, many of whom have declared financial bankruptcy and have laid off thousands of workers. For related information, see April 14, 2016, article - Peabody Energy Bankruptcy Filing a Sign of the Times for Coal Industry, August 12, 2016, article - Coal Crisis Threatens to Consume Murray Energy and June 27, 2016, article - Coal Industry in Survival Mode as $10 Billion in Environmental Compliance Projects Planned at U.S. Power Plants.

The coal industry has pinned its hopes for a better future on President-elect Donald Trump, who has promised to bring coal jobs back, in part by doing away with the Obama administration's Clean Power Plan, which is currently in litigation. The Clean Power Plan would reduce carbon dioxide emissions from power plants by 32% from 2005 levels when fully in place in 2030. The plan would put more pressure on power generators to replace their older, coal-fired units with natural-gas fired units and renewables. For related information, see November 16, 2016, article - Trump on Energy: Does Coal Have a Brighter Future in the Coming Administration?.

The EIA's Annual Energy Outlook 2017 report, which was released last week, projects that without the Clean Power Plan, annual U.S. coal production would increase to more than 800 million short tons by 2020, but would then level off to roughly 850 million short tons through 2040. On the other hand, with the Clean Power Plan in place, coal production would still rise to more than 800 million short tons by 2020, but would then drop to slightly more than 600 million short tons by 2040. Coal production would fall primarily in the U.S. western region, according to the report.

Industrial Info is tracking more than $1.3 billion in active coal-mining related projects in the U.S.

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