Coal is first casualty of energy abundance

The fossil fuel industry is in a death spiral, squeezed between its own carbon costs and profitable alternatives.

By TheStreet Staff Jun 18, 2013 2:13PM

thestreet logoElevated view of freight cars with coal copyright Joseph Sohm-Visions of America, Photodisc, Getty ImagesBy Dana Blackenhorn

 

Increase efficiency, increase renewable energy production, increase production of oil and natural gas, and something has to get squeezed out, right?

 

That something is coal.

 

Over the last few years coal has been losing its U.S. power plant customers, and now export markets are weakening, creating what Michael Forbes of Marketintellegencer calls a "downward spiral."

 

BHP Billiton (BHP), the Australian company that is the only industry player to be opening new mines, is down 20% so far this year, and the company's website is now emphasizing work on oil and sustainability.

 

Mining.Com, quoting the Associated Press, says that Jim Justice, a coal billionaire ranked 292 on the Forbes 400, is having trouble paying his bills and now calls the coal business "terrible." 

 

The industry has seen this coming from a long way away, and has been doing all it could to prevent it. Producers have been advertising the idea of "clean coal" since 1921 (documentcloud.org), the framing shifting with the times.

 

In the 1970s the ads focused on foreign oil producers, in the 1980s they fought acid rain regulation, and over the last decade they've claimed coal has in fact been "cleaned" (quitcoal.org).

 

Coal also competes in Washington. A report in the Motley Fool estimates the industry's lobbying budget at $17 million a year.

 

But it hasn't worked. Patriot Coal has declared bankruptcy. Of the other industry players only Consol Energy (CNX), which also produces natural gas, is near break-even.

 

The rest -- Alpha Natural Resources (ANR), Arch Coal (ACI), and Peabody Energy (BTU) -- are all down at least 35% year to date.

 

There are ways to reduce coal's carbon cost, by turning it into a slurry, as Wikipedia explains, and Pakistan is among the markets trying this, writes PakObserver. But that just reduces the carbon cost, it doesn't get rid of it.

 

For that, you'll want to go to Kemper County, Miss., where Southern Co. (SO) has put $4.3 billion, some of that government money, into turning low-grade coal into gas and selling the carbon dioxide to oil drillers for use in fracking.

 

The plant is due to be completed next May, but the head of the unit building the plant has just retired, amid cost concerns, The Atlanta Business Chronicle reports, quoting The Wall Street Journal.

 

This has industry advocates like Larry Bell, writing for Forbes, livid and unintentionally funny.

 

He's upset that the Administration went along with the Kemper experiment, noting that it makes coal uncompetitive, but eventually he gets back on track by attacking the science of climate change.

 

During the last presidential campaign, James Hansen of NASA's Goddard Institute took to the TV, railing against President Obama and his Republican challenger for not talking about climate change. (See this interview at the Current.)

 

The market is doing some of the talk for them.

 

"Clean coal" does not exist, not at a price we can afford, but environmentalists aren't killing this industry. The market is doing it. Cheap natural gas is doing it, and increasingly cheap supplies of solar and wind energy are doing it. Efficiency is doing it, and business' recognition that there are, in fact, costs to carbon (regardless of the industry's propaganda) is doing it.

 

The value of coal reserves is declining, but those pushing high-price alternatives like Canadian "oil sands" best not laugh.

 

You're next.

 

At the time of publication, the author had no investments in companies mentioned here.

 

 

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3Comments
Jun 18, 2013 8:18PM
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And when the price of NG goes back up? What if oil hits $200 a barrel? What if the cost to produce solar products starts to outweigh it's return. Coals a source of energy and as long as humans exist we'll need energy. As long as humans exist so will greed and the need for the cheapest form of energy. Everything has it's ups and downs.
Jun 18, 2013 2:47PM
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Let coal die away sooner than later. We have the tech to do better, let's start using it.
Jun 18, 2013 5:04PM
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We have better, cleaner, and increasingly cleaner alternatives to choose from for energy sources. This is for the best and just the natural progression of technology, though in this case the sooner the better. Cleaner air is something that benefits all.

It is way past time to get more support behind alternative sources of energy beyond fossil fuels though I realize NG is going to be a big player in the coming years and if that is what it takes to find an even medium then so be it, as long as we can get better at fracking and not waste/pollute so much water to do it.

The future I see includes next gen nuclear; Thorium reactors, with wide spread solar, followed in smaller portions, wind, hydro, and nat gas (multiple sources, PWR's, ground, biogas); no coal, all combined with better energy efficiency and smart grid solutions to form a hybrid power distribution system that can utilize as much as possible the benefits of centralized and decentralized (point of use like solar) energy production.

All can happen if we want it to and ultimately it will be the next big turning point in societies' evolution. Unlock the answer to the energy problem (don't let greed and ignorance; political and non block the path) and the future is bright indeed, the best is we have the ability to do it now.

There will still be a need for coal, byproducts that come from it, but much less. This will have good and bad attributes but a positive in the long run.

Only other thing to do will then be to place tariffs on it (nat gas too in my future) to help spur the alternatives and not sell of our known energy reserves (never know, just in case) to others or just move/continue to ignore the air pollution problem else where.

I do think we can do it. Here's to the future.

I think its time

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