U.S. Coal Production Drops During 2014-2015

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--U.S. coal production levels dropped to the lowest level in five years, with a 3% drop to 960.6 million tons in the 12 months to June 30, 2015.

The first six months of 2015 were dismal, with the collapse in coking coal benchmark prices, the looming finalization of President Barack Obama's Clean Power Plan (CPP), severe cost-cutting among producers, and a wave of bankruptcy announcements.

The hardest hit region, according to SNL Energy data, was Central Appalachia, which saw production during the 12-month period drop 12% to 106.2 million tons, from 121.2 million tons in the same period ended June 2014. Idling and closure of mines were among the key factors, along with power generators turning to gas and cheaper, lower-quality coal from other regions, like the Illinois Basin.

Production at the other largest U.S. basins all saw declines during the same period, with the Powder River Basin down 11%, and Northern Appalachia down 4%.

The Illinois Basin was the only region in the U.S. to post positive growth during the period, with production up more than 2% to 135.6 million tons. It has benefitted greatly in recent years, as generators swap from Central Appalachia to its lower-quality coal. Since 2011, production has grown steadily and is up 21% in the past four years.

Texas has been the hardest-hit state, with production dropping more than 13% to 37.7 million tons from 43.6 million tons during the same period in 2014. The slowdown was attributed to mines owned by Luminant Energy Company (Dallas, Texas), part of troubled Texas Energy Future Holdings Corporation (Dallas). Production from the 10 mines owned by Luminant was down almost 15% year-over-year to 25.3 million tons. Texas, like other states, is being hit hard by U.S. Environmental Protection Agency (EPA) regulations with the release of the final version of the CPP.

The controversial Clean Power Plan (CPP) was finalized at the beginning of August and is the first time the federal government has regulated emissions of carbon dioxide (CO2) from coal-fired power plants. The final CPP aims to cut CO2 emissions from coal-fired power plants by 870 million tons, or about 32%, by 2030 compared to 2005. For additional information, see August 5, 2015, article - Obama Unveils Final Clean Power Plan, But Will it Survive Court Challenge?.

Coal companies, including Alpha Natural Resources (NYSE:ANRZ) (Bristol, Virginia), Walter Energy Incorporated (Birmingham, Alabama) and Patriot Coal Corporation (Scott Depot, West Virginia), have filed for Chapter 11 bankruptcy protection from creditors. The companies are trying to restructure their business, sell assets and close mines.

According to recently released data from the Energy Information Administration (EIA), coal is losing its grip at the top of the electricity mix in the U.S. Industrial Info reported that for the first six months of 2015, coal accounted for 34.5% of U.S. electricity generation, down from almost 40% for the same period in 2014. At the same time, gas jumped to 30.3% from just over 25% in 2014. For additional information, see September 8, 2015, article - Coal Losing Grip at Top of U.S. Power Table.

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