USA. Leader/Contributors: Jay Martin, Alpha Natural Resources (USA) Deck Slone, Arch Coal (USA)

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1 USA Leader/Contributors: Jay Martin, Alpha Natural Resources (USA) Deck Slone, Arch Coal (USA) The primary energy consumption of the country accounted for 3,287 Mtce in 214. The major part of the energy needs can be covered by indigenous production. Energy imports contributed only with 13% to the total primary energy consumption in Structure of the energy supply by energy sources Coal accounted for nearly a quarter of U.S. domestic energy production in 214, as shown in Figure 1. The U.S. was a net importer of energy last year, primarily due to its continued significant receipt of foreign crude oil, as shown in Figure 2. Figure 1: Energy Production in 214 Figure 2: Energy Exports & Imports In terms of energy consumption, coal ranked third last year after petroleum and natural gas, as shown in Figure 3. Coal remains the dominant fuel in the U.S. for generating electricity, as shown in Figure Data underlying Figures 1-4 from U.S. Energy Information Administration (EIA), Monthly Energy Review, April 215

2 Figure 3: Energy Consumption (214) Figure 4: Electricity Net Generation (214) 2. Coal supply in 214 U.S. recoverable coal reserves of all ranks anthracite, bituminous, subbituminous, and lignite are estimated at the end of 214 to stand at 187,485 Mtce. 2 U.S. coal production for last year totaled 73.4 Mtce. 3 Because of the scale of domestic production, imports to the U.S. last year stood at 8.9 Mtce, fulfilling a niche role supplying primarily power plants along the East and Gulf coasts with access to seaborne supply priced competitively on a delivered basis to indigenous supply. The major origins for coal imports were Colombia and Indonesia. 4 As a result of having a recoverable reserve base supporting more than 25 years of production at current levels, plus access to seaborne supply from around the globe, the U.S. is considered to have very secure access to coal supplies. 3. Role of coal in the energy supply market While 9 percent of coal consumption in the United States goes towards electric power generation, coal has many industrial applications. Coal feedstock is one of the main sources of fuel for U.S. steel manufacturing. In 26, 181 trillion Btu s of coke and breeze were used in steel manufacturing. The steel industry has used 6 percent of the entire coal feedstock used in the U.S. manufacturing sector since EIA coal reserve statistics are reported in short tons (2, pounds per short ton) and the last estimate of total recoverable coal reserves by rank was reported on Jan. 1, 211, at 262 billion tons. Since then, production of 4.1 billion tons has occurred: see and 3 EIA data for 214 on production by rank is not yet available; percentages by rank last year are likely to be similar to those reported in 213: bituminous ~ 47.8%; subbituminous ~ 44.1%; lignite ~ 7.8%; and anthracite ~.2%, see: and 4 EIA, 5

3 In the United States, coal powers 6 million American homes, 3.4 million businesses, and generates 1.85 billion kw hours of electricity annually Coal supply infrastructure The major U.S. coal supply basins are shown in the map below. 7 Figure 5: Map of Coal Supply Basins Over the past 15 years, the U.S. has built a vast infrastructure for extracting, transporting, and utilising coal for electric power generation and industrial processes. The map below shows the 152, kilometers of heavy haul railways and 19,2 kilometers of navigable waterways that link the production areas containing 161 mines 8 with the power plants and transloading terminals National Coal Council, Reliable and Resilient: The Value of Our Existing Coal Fleet, p. 29, (Updated in January, 215) 9 Ibid, p. 3.

4 Figure 6: Map of Infrastructure (Rail and Waterways) The coal infrastructure within the U.S. reliably meets the need of industry to provide an uninterrupted supply of coal. The major rail carriers and barge lines are well capitalized and efficient operators. Many U.S. coal consumers have access to multiple supply basins via multiple modes of transportation minimizing the potential for supply disruptions. 5. Relationship between technology and security of supply Operational installed capacity is estimated at the end of 214 to have been approximately 34 GW s. 1 The weighted average age of this generation capacity is 38 years and is distributed by vintage, as depicted in the chart below. 1 Ventys Energy Velocity database

5 Figure 7: Age of Installed Coal-Fired Capacity in 214 (GWh) Almost 7 percent of this capacity operates in subcritical steam cycle conditions with most of the remainder operating in supercritical conditions. Less than one percent of the currently operating fleet is either ultra-supercritical or integrated combined cycle gasification plants. The weighted average heat rate of the fleet is approximately 1,36 Btu/kWh. 11 Due to competition from natural gas and tightening emissions restrictions, the coal-fueled fleet is experiencing a wave of retirements. Older, less efficient units are being retired, and the units remaining in operation tend to have the capability to convert more of each ton of coal into useful electrical energy than the retired units. This efficiency improvement contributes to the security of supply reducing consumption of the remaining reserve base. Long term, technology is essential to utilising the abundant coal reserves in the U.S. in an increasingly carbon-constrained political environment. While not yet readily available on a commercial scale in the U.S., carbon capture and storage (CCS) has emerged as a promising technology for new plants as well as a retrofit option for existing plants. To derive greater economic value from capturing CO2 and storing it, a variant of CCS known as carbon capture, utilisation and storage (CCUS) has emerged. Presently two CCUS projects are under construction Southern Company s Plant Ratcliffe in Kemper County, Mississippi, and NRG s Petra Nova Project in Fort Bend County, Texas. When operational in 216, the lignite-fueled, 582-MW Plant Ratcliffe IGCC will have the capability to capture up to 65 percent of its CO2 emissions and deliver to a CO2 pipeline for transport to enhanced-oil recovery (EOR) operations on the Gulf Coast. Petra Nova is expected to capture approximately 9 percent of the CO2 emitted from a 24- MW slipstream from NRG s existing Parish Generating Station. The captured CO2 will be transported by pipeline to the depleted West Ranch oilfield for EOR operations. Petra Nova s 11 EPA National Electric Energy Data System (NEEDS) v.5.13

6 construction is underway, and the plant is expected to enter commercial operation in late 216. Coal liquefaction and gasification remain in the U.S. niche areas and do not contribute materially to security of supply. The Dakota Gasification Company in Beulah, North Dakota, and Eastman Chemical at Kingsport, Tennessee, have operated large plants that convert coal to chemicals via gasification processes for decades. As result of low natural gas prices, the chemical and fertilizer industries are not presently focused on coal utilisation. Two additional projects utilising coal gasification technology are under development with federal government support, but they face difficulties in raising adequate private financing. As such, it is presently unclear whether or not they will be built. The Texas Clean Energy Project, near Odessa, Texas, is a proposed 4-MW IGCC plant with CCUS. 12 The Hydrogen Energy California project is a proposed 3-MW IGCC with CCUS that would be sited in Kern County, California Impact on coal of governmental energy and climate policy. Increasing regulatory pressure The abundance of gas at low prices is major driver for the decline in coal share in the US electricity power mix. In addition, the cost reduction of renewable electricity sources, and a slew of regulations from the federal Environmental Protection Agency (EPA) targeting existing and new coal-fired facilities and have caused many units to shut down or projects not be built. Coal s share of electricity generated in the U.S. in 214 was 39 percent. The White House s proposed Clean Power Plan calls for a 3 percent reduction in carbon emissions from existing power plants by 23 (from 25 levels). While the EPA claims the plan will cause the retirement of 5, MW by 22 14, an industry commissioned study suggests that a total of 72, MW of U.S. coal-fuel generation will be shutting down by 225. Of this total, EPA policies have been cited as a factor in the closure of 61, MW of installed capacity. 15 As mentioned earlier, Plant Ratcliffe, in Kemper County, Mississippi, relies on nearby lignite coal as its feedstock. Kemper was granted $245 million from the U.S. Department of Energy s Clean Coal Initiative and is seeking $279 million in tax investment credits once the plant is complete

7 Electricity development plan and expected future energy mix in power generation Coal consumption in the United States could be affected by the announced agreement between the U.S. and China on November 12, 214 to limit greenhouse gas emissions. The United States announced a target cut in emissions of between 26 and 28 percent below 25 levels by 225. In this agreement, China pledged to cap its greenhouse gas emissions by 23 and set a goal of increasing its usage of non-fossil fuels in the country s energy mix to 2% by % would require China to bring on an additional 8 1, gigawatts of zero emission capacity, which is more than all existing coal-fired power plants in China and nearly the total electricity generation capacity in the United States. 18 Together, the U.S. and China account for roughly 45 percent of the world s greenhouse gas emissions. 19 Paris Agreement (COP 21) and its consequences for coal. In December 215, during the United Nations Climate Change Conference (COP 21) in Paris, France, the so-called Paris Agreement was adopted. Given the pledges of countries to reduce greenhouse emissions, in the particular case of United States, the US INDC (Intended Nationally Determined Contribution), coal s role in electric generation could continue to be negatively affected. A note on security of supply The United States has the largest recoverable coal reserves in the world and is capable of meeting domestic demand for roughly 28 years at 213 production levels. 2 The recoverable reserves at producing mines totaled 19,745 million short tons (13,654.6 Mtce), the estimated recoverable reserves totaled 256,79 million short tons (177,526,697.8 Mtce), and the demonstrated reserve base was estimated to contain 479,914 million short tons (331,883.7 Mtce). 21 In terms of production in 213, the Appalachian region of the U.S. produced 271,72, short tons (187.9 Mtce), the Interior (Midwestern) region accounted for 182,549, short tons (126.2 Mtce), and the Western part of the country made up 529,695, short tons, primarily in the Powder River Basin (PRB) which includes the states of Wyoming and Montana (366.3 Mtce) Summary and main messages The United States possesses extensive domestic reserves and boasts the world s largest supply of recoverable coal. The benefits of coal production go far beyond providing safe and reliable electricity to 39% of the domestic market

8 Coal plays an extremely important role in the American economy at large. It is used directly by industries and manufacturing plants, especially those making chemicals, cement, paper, ceramics and various metal products. It provides an important source of coke for the steel industry, and coal byproducts serve as the basis for many day-to-day items, including linoleum, synthetic rubber and insulation and various compounds used in medications, detergents, perfumes, and food preservatives. Mining companies in America also pay a substantial amount in taxes in the communities they operate. Companies paid approximately $46 billion in federal, state and local taxes on revenue and employee wages, property taxes on equipment and structures, and excise taxes on output in 212. Because coal is America s most plentiful and readily available energy resource, research has been directed at finding ways to use coal in a more efficient, cost-effective and environmentally friendly manner. The mining industry joined with the U.S. Department of Energy in the Clean Coal Technology Program (CCTP), a public-private partnership, which has successfully developed and deployed more efficient and cleaner technologies in the marketplace to satisfy America s need for electricity and a cleaner environment. In recent years, the abundance of cheap natural gas combined with government regulations, many of which are implemented at the federal level, are impacting the role of coal as a provider of electricity. In 215, the U.S. Environmental Protection Agency finalized the Mercury and Air Toxics Standards (MATS) which required existing and new coal-fired electric generating units to install emission controls for certain hazardous air pollutants. As of January 215, over 61, MW of coal capacity had announced retirement due to the EPA regulations. For almost all retirements, MATS was named as the cause. Increasing renewable generation and coal plants retirement could threaten reliability, and hence, it is important to monitor grid stability and security of electricity supply if there are significant changes occur in the generation mix.

9 Fact Sheets USA Energy Production in Mtce in 214 Natural gas Coal Oil Renewables Nuclear Natural gas plant liquids Total 3,139.1 Sources: EIA, Monthly Energy Review April 215, Table 1.2 Primary Energy Production by Source, p. 5; EIA has not yet reported 214 coal production by rank Energy Imports in Mtce in 214* Hard coal Lignite Crude oil and oil products Natural gas Other energies Total * Figures for 213 are used in the above chart Sources: EIA Coal = 19,21, Btu per short ton (2, pounds) 23 EIA 24 EIA 25 IEA 26 Energy Exports in Mtce in 214* Hard coal Lignite Crude oil and products Natural gas Other energies Total 138 * Figures for 213 are used in the above chart Source: EIA

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11 Primary energy consumption in Mtce in 214 Oil Natural Gas Coal Nuclear Non-hydropower renewables Hydropower 1, Total 3,537.5 Source: EIA, Monthly Energy Review April 215, Table 1.3 Primary Energy Consumption by Source, p. 7; unfortunately, EIA does not report coal consumption by rank Hard coal in Mt in 214* Surface production Underground production Imports Exports Total supply Domestic consumption Power generation Steel industry Cement industry Chemical industry Fertilizer industry Households and other consumers Others Total consumption ** *** * Figures for 213 are used in the above chart ** Figure represents other industrial consumption *** There is only one chemical facility in the United States that uses coal as a feedstock: Eastman Chemical in Kingsport, Tennessee Source: EIA , NMA Lignite in Mt in 214 Surface production Underground production Imports Exports Total supply

12 Domestic consumption Power generation Steel industry Cement industry Chemical industry Fertilizer industry Households and other consumers Others Total consumption * The United States lignite figures are comprehensive with the exception of a single mine in the State of Louisiana, Dolet Hills. Power capacity (net) in GW at 31 December 214* Natural gas Coal Nuclear Hydro power conventional Wind Oil Hydro pumped storage Wood and wood-derived fuels Solar thermal and Photovoltaic Other biomass Geothermal Other energy sources Other gases Total 1,6.1** *EIA has not yet reported installed generation capacity for 214, 213 figures are presented above. ** Total may not equal sum of components due to independent rounding, all figures are for net summer capacity. Source: EIA, Electric Power Annual, Table 4.3 Existing Capacity by Source, Power generation (net) in TWh in 214 Coal Natural gas Nuclear Conventional hydropower Wind Wood Oil Waste Solar/PV 1, ,

13 Geothermal Other Other gases Hydro pumped storage Total 4,92.9* *Total may not equal sum of components due to independent rounding Source: EIA, Monthly Energy Review April 215, Table 7.2a Electricity Net Generation: Total (All Sectors), p. 15