Friday, May 10, 2013

The Illinois Basin Has Plenty of Coal ... Combined with Other U.S. Mines, That Means Export Possibilities Galore

Coal is an energy source used throughout the world and the U.S. has plenty of it. Illinois is an excellent source.

Although generally ignored, when combined with our oil and gas potential, exporting coal could help change our U.S. energy and financial outlook immediately and dramatically.

As we've note previously in other areas of government involvement, maybe it's time for the politicians to take the Hippocratic Oath in Illinois, and not only with respect to dealing with that state's ~$100 billion funding shortfall for public sector pensions.

In the Midwest, Coal Stages a Comeback is subtitled 'New Technologies Remove a Barrier to Mining in the Illinois Basin, Boosting Output and Bucking the Overall Trend':

"Coal has been losing favor as an energy source for a few years, thanks to relatively cheap and clean-burning natural gas and stricter environmental rules. But at least in this part of the country, mining is a booming business.
One coal mine in (a) farming community southeast of St. Louis is part of an energy project that has added 580 jobs and helped fund a high school and court building. In McLeansboro, 70 miles to the east, a mine under construction has brought jobs and several new businesses. A Peabody Energy Corp. mine farther east, in southern Indiana, is now the biggest coal mine east of the Mississippi.

Last year, overall coal production in the U.S. fell 7% from a year earlier, with the biggest decline in Wyoming's Powder River Basin and in Central Appalachia mines of West Virginia and eastern Kentucky. But in the Illinois Basin, which includes southern Illinois and Indiana and western Kentucky, coal output rose by 10% last year, and the region over the next several years is projected to surpass Central Appalachia in coal output for the first time ever.


New technologies are the primary reason for the boom. The Midwest boasts easily accessible deposits of coal that tend to be thicker than the more depleted eastern coal fields. Mining companies long ignored coal in Illinois and surrounding states because of its high sulfur content, but with utilities adding new equipment called scrubbers that remove sulfur to meet emissions standards, they can burn Illinois Basin coal more efficiently. It costs roughly half as much to dig coal out of the ground here as it does in Central Appalachia, industry analysts say.

"The widespread deployment of scrubbers removes the major barrier—sulfur dioxide—to Illinois Basin coal use," said Vic Svec, a senior vice president at Peabody Energy. The nation's biggest coal company has recently ramped up production in the region.

Most coal mined in the Illinois Basin is sold to power plants in the southeast that once bought coal from Central Appalachia. Even after adding the cost of sending Illinois Basin coal by train over longer distances, it still typically costs utilities less than Central Appalachia coal, said Lucas Pipes, an analyst with Brean Murray, Carret & Co.

Miners in the Illinois Basin are generally nonunion, which also keeps operating costs lower than in Appalachia. About 6% of employees at coal mines in Illinois belong to the United Mine Workers of America, compared with 27% at coal mines in West Virginia, according to the Energy Information Administration.

Phil Smith, a spokesman for the UMWA, said it lost 20,000 members in the Illinois Basin in the 1990s following the passage of the Clean Air Act, which forced companies to shut mines there. He said companies reopening mines there are resisting organizing drives by the union. "We continue those efforts nonetheless," he said.

Companies are expected to mine about 980 million tons of coal in the U.S. this year, down from 1.1 billion tons in 2011, according to Energy Ventures Analysis, a consulting firm in Arlington, Va., although a recent rise in natural-gas prices prompted a number of utilities to switch to more coal. So far this year, coal generation has risen 8%, compared with an 8% decline for natural gas.

This year, mines in Illinois are projected to produce 56 million tons of coal, up 70% from 33 million tons in 2010. By contrast, production of West Virginia mines is expected to fall 14% to 79 million tons this year from 92 million tons in 2010.

"We have been fortunate in this area," said Jerry Cross, mayor of Marissa, just southwest of Lively Grove. A former coal miner himself, he noted the area saw a steady decline in mining starting in the 1980s and '90s. Now, he said, "More mines are going in. It has come back.""


Now let's focus on where all this coal can be sold --- Europe. In addition to natural gas and lots of oil, Europe needs low cost coal, and Illinois and other U.S. locations have plenty of it to sell.

Shale Boom a Bust for Europe's Gas Plants says this about the export opportunities:

"The ripples of the North American shale boom continue to spread, as a growing number of European utilities are forced to mothball modern gas-fired power plants that can't compete with growing imports of cheap coal dislodged from the U.S.

Norwegian state energy company Statkraft said Wednesday it has idled a gas-fired power station in Germany that couldn't compete with its coal-fired rivals, while German utility E.ON SE said it is seriously considering mothballing more gas-fueled plants, including a state-of-the-art facility in Slovakia.
Other European utilities have taken similar action, presenting policy makers with a dilemma—cheaper coal-fired power could provide some relief for the region's struggling economies, but might be incompatible with long-term goals for carbon emissions and renewable energy.

The closures across Europe are another example of the far-reaching effects of the North American energy-supply boom. Surging supplies of natural gas in North America, unlocked from shale rock by a new combination of technology known as hydraulic fracturing, have prompted many U.S. power generators to switch away from coal, pushing increasing amounts of the fuel into Europe as cheap imports.

In 2012, U.S. exports of coal to Europe rose 23% to 66.4 million short tons, according to data from the U.S. Energy Information Administration.

Much of this coal is displacing natural gas as a fuel for electricity generation in Europe."
Summing Up

The global market for energy works economic 'miracles' when given an opportunity to do so by governments. Along those lines, America's abundant energy supply needs to be exploited to the maximum extent possible, including exports.

At a more fundamental level, the lesson is that the U.S. private sector participants, capital providers and entrepreneurs excel at finding and introducing innovative uses of technology to do old things in new ways.

Private sector led creativity and investment, when combined with globally competitive costs, will make for a winning combination with respect to North American energy development and distribution, including exports.

These are simple keys to enhancing greatly our nation's overall prosperity, jobs, fiscal responsibility and national security.

If the politicians would adopt the Hippocratic Oath and resolve to "First, do no harm" the American people would take over and we'd all be the better for it.

And we'd also quickly become energy independent with lots of good jobs and a solid and rapidly growing economy as well.

That's my take.

Thanks. Bob.

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