David Roberts of Grist: “Big Coal in big trouble as coal production costs rise”

Over at Grist, David Roberts has a fascinating post on an important subject that has received too little attention – namely, that Big Coal is in “big trouble as coal production costs rise.”  I strongly recommend you read the entire piece, but for now here are a few key points.

  • The U.S. coal industry is under pressure from cheap natural gas,  no doubt, but also for another basic reason: “Coal is getting more expensive to produce.”
  • The main reason coal’s getting more expensive to produce? Because “the easiest-to-reach coal has been mined, which means coal companies have to dig deeper and go after thinner seams and smaller deposits. That costs more, in both energy and money.”
  • “It has gotten the point where, in some areas, profit margins have flipped: coal is now selling for less than it costs to produce.
  • The economics of coal are seriously hurting the “big three coal companies: Peabody Energy, Alpha Natural Resources, and Arch Coal.” Simply stated, they “can’t hack it in these market conditions.”
  • The economics are particularly dire with eastern/Appalachian coal, but “the same forces are at work” with western coal as well, as “profit margins are already slim and the coal that’s left to mine is deeper and more difficult to reach.”
  • Without increased coal exports, the industry would be in even worse shape than it already is. This means that “[i]f climate activists succeed in bottling the coal up, preventing the West Coast escape hatch, the U.S. coal industry — faced with rising production costs, vicious competition from natural gas, and new EPA regulations — could collapse in on itself”