Appalachia Coal Mining-to Marketing Training Library/Research/Coal...Appalachia Coal Mining-to Marketing Training September 24, 2015 NETL Pittsburgh, PA 10/15/2015 1 National Energy

Appalachia Coal Mining-to Marketing Training

September 24, 2015

NETL Pittsburgh, PA

10/15/2015

1

National Energy Technology Laboratory

Driving Innovation ♦ Delivering Results

Mike Mosser

Project ManagerU.S. Department of Energy


U.S. Coal Mining Methods Deployed in

the United States

2National Energy Technology Laboratory

Presentation Outline

• Statistics

• Coal Characteristics

• Coal Mining Methods– Underground Mining

– Surface Mining

• Coal Preparation

• Environmental– Reclamation

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2


Statistics – World Coal Reserves

• U.S. has the highest coal recoverable reserve – 237 billion tons

– Enough for mining 200 ‐ 300 years

– Only the good seams are mined currently

• China has the third largest reserve – 115 billion short tons

– 50 more years


Statistics – World Coal Production

• China: No. 1 coal producer– 2002: 1,380 million tons

– 2004: 1,950 million tons

– 2013: 3,561 million tons

• U.S.: No. 2 coal producer– 2002: 998 million tons

– 2013: 904 million tons

• India: No. 3 coal Producer– 2002: 356 million tons

– 2013: 613 million tons

PR China 3561Mt Russia 347Mt

USA 904Mt South Africa 256Mt

India 613Mt Germany 191Mt

Indonesia 489Mt Poland 143Mt

Australia 459Mt Kazakhstan 120Mt

Top 10 Coal Producing Countries

World Coal Association

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Statistics – U.S. Coal Fields

Average Heat Value• Anthracite

12,700 BTU/lb

• Bituminous 13,100 BTU/lb

• Sub‐bituminous 9,500 BTU/lb

• Lignite 6,700 BTU/lb

usgs.gov


Coal Production in the U.S.

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Coal Power Sector Generation


Some General Facts

Surface Mining 67%

Underground Mining 33%

Longwall mining 50%

Continuous mining 45%

Conventional mining 4.5%

Others 0.5%

Coal Mining Methods (2013 by Annual Production)

Source: energy information administration (EIA)

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Coal Mining Industry

• Main features of U.S. mines

– No or very few non‐production personnel at mine level (e.g., about 300 employees at Cumberland Mine producing 6.5 million tons clean coal/year)

– Mine life varies from several years to 30 years depending on the reserves and market forces

– Mine size varies from several thousand tons to 111 million tpy

– Common design tasks handled at corporate level

– Contractors are heavily used for special or difficult tasks


Coal Mining Industry

• Main challenges of the U.S. Coal Industry– Mine Safety is first priority

– Ground control problems

• Roof falls, cutter roof, floor heaving

• Entry stability in deep mines (>500 m)

• Surface subsidence, especially in the east, mid west

• Longwall tail entry support

– Environment limitations

• Air and water pollution

• Permitting issues

• Environment groups

– Depletion of good coal and good geologic conditions

– Competition from gas industry

– Longwall mine production limited by ventilation capability

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Safety is Important Phase of Mining Methods

Raspadskaya Mine, Russia March 2010 – 66 killed


Coal Mining Methods

Uky.edu

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Underground Coal Mining Methods

• Room and pillar method

– Very flexible, good for mining small and irregular reserves

– Development mining only

• Low recovery ratio, normally < 50 %

• Not intend to cause surface subsidence

– Development with pillar retrieving

• Pillars are partially recovered

• Higher recovery ratio

• Normally cause immediate surface subsidence

– Traditional (Drill, blast, load and haul operations) almost none now

– Continuous miner (Miner = cut and load, hauling remains to be only non‐continuous operation)

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Early Coal Mining Methods



Traditional and Continuous Miner Room and Pillar Mining Methods

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Continuous Mining Machine



Continuous Miner

Shuttle Car

Joy Manufacturing

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Dual Boom Roof Bolter with TRS

Miner Bolter

Roof bolting operation could be the bottleneck for room and pillar mining operations


Longwall Method Panel Layout

MAINS

BLEEDERS

SR

SR

SR

SR

SR

RR

RR

RR

RR

No. 3 Panel

Direction of Mining

No. 5 Panel

RR B.P.

B.P.

B.P.

B.P.

B.P.

No. 4 Panel

W

WP

H

T

L

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A Longwall Face in a Coal Mine

A Double Drum Longwall Shearer



Longwall Shield

Battery HaulerMajor equipment for speedy longwall move

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Longwall Panel Development

• Primary support are roof bolts which are installed on cycle during development

23


Longwall Panel Development

• Roof bolting key to the success of high productive longwall mining

• About 100 million pieces of roof bolts consumed per year in U.S.– Mechanical bolts 40%

– Resin bolts 40%

– Specialty bolts. 20%

• Bolt length– Bolt length: 4 ft (1.2 m) ~ 16 ft (4.9 m)

– Max. bolt length < Mining height.

– If bolt length is longer than mining height, bolt notch or sectioned bolts (normally 4 ft 1) are used.

– Majority are 1.5–2.5 m long.

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• Longwall Mining Method– All equipment becomes larger and more automated

• 40 inches (1.07 m) cutting web

• 1,000‐ton shields

• Wider shield (5.5 ft or 1.68 m)

• 2‐leg shields

• 72 inches (1.83 m) belt conveyors, 6,000 tons/hour capacity

• Batch shield moving system (8–10 shield per one operation)

• Fewer workers in one crew (5–6 persons per shift)– 2 shearer operators– 1 shield operator– 1 headgate operator– 1 mechanic – 1 helper (optional)


Longwall Mines 2014

• No. of Longwall Mines – 42

• No. of Longwall Faces – 47

• Ave. U.S. Longwall mine produces 4.4 million tpy

• Ave. cutting height 91.4 inches

• Ave. Panel width – 1,228 ft.

• Ave. panel length – 12,117 ft.

• 17 walls operate in the Pittsburgh coal seam

• Max. overburden on average reaches 1,145 ft.

• Deepest longwall is 3,000 ft. overburden (West Ridge, Utah)

• Top 3 operators are Murray Energy, CONSOL Energy, and Foresight Energy

• State of WV has 13 faces, PA has 7, Illinois has 7 and Alabama has 5

• Highest horse power shear has 2,805 HP

• CONSOL Bailey and Enlow Fork produced 12.3 million tons of clean coal

Coalage.com

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Longwall Mines

• Daily advance rate– Range: 15–35 m/day

– Average: 23 m/day

• Daily production: 18,000 tons (4 million tons/year)

• Main reasons– Favorite conditions for longwall mining: inclination <5o, height most

between 1.4 ~ 2.1 m

– Relatively shallow overburden: average about 240 m

– Low gassy mines

– Normally single seam mining

– Equipment automation

– Mixing of room & pillar and longwall mining methods: Longwall in good areas and R & P in left‐over areas.


Mountaineer II Mine, WV – Mining Two Seams With Different Methods

FACE16

FACE14

FACE13

GATE17

GATE16

GATE15

FACE12

GATE14

LW16

LW14

LW13

LW12

FA

CE

11

FA

CE

10

FA

CE

9

FA

CE

8

FA

CE

7F

AC

E6

MA

IN

GATE7

GATE8

GATE9

GATE10

GATE11

GATE12

GATE13

LW6

LW7

LW8

LW9

LW10

LW11

FA

CE

1

FA

CE

2

FA

CE

3

FA

CE

4

GATE1

GATE2

GATE3

GATE4

GATE5

LW1

LW2

LW3

LW4

GATE18

FA

CE

15

GATE20

GATE19

LW15

LW17

LW18

E LE VA TO R SH AF T

P RO P OS E D A IR S HA F TS

C ED A R G R OV E SH AF T

T O P EL E V. -105 0 ft .B O TT O M EL EV .-7 30 ft.DE PT H -32 0 f t.

GAT E _3

GA T E _4

GA T E_ 5

L W_ 2

FAC E_2

F ACE _3

L W_ 3

LW_ 4

F ACE_4

BL EEDER SH AFT

B L EE D ER _1

B LE E DE R_ 2

F ACE_6

F ACE_7

R OOMS_

1

R OOMS

_ 2

ROOM S_6

RO OMS_5

R OOMS _4

ROOM S_3

ROOMS _7

R OOMS_ 8

ROOM S_9

RO OMS_10

ROOMS _11

ROO MS_12

RO OMS_13

FACE_ 8

R OOMS_1 4ROO MS_15ROOM S_16RO OMS_17

GA T E _1 1

FAC E_9

ROOMS _18

ROOM S_19

RO OMS_20

ROOMS _21

ROOM S_22

RO OMS_23

GA T E _12

FACE_1 0

GA T E _1 3

F ACE_11

R OOMS_2 4

ROOMS _25

ROO MS_26

R OOMS_ 27

L W_1 0

L W_ 11

ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7

GAT E _1

GAT E _2

ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7

FA C E_ 16

F ACE_ 14

F ACE_ 13

F AC E _1 2

FACE_ 15

ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7

LW _ 12

LW _1 3

L W_ 14

L W_ 16

ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7

G AT E _16

GA T E_ 17

ROOMS _7ROOMS _7

FA CE _17

FAC E_1 8

G A TE _ 21

L W_ 17

LW_ 1 8

G A TE _ 22

G A T E_ 23

R O OM S _36

R O O MS _3 7

ROO M S_ 38

RO O M S_ 39

R O OMS _40

R OOM S_ 41

RO O M S_4 2

ROO MS_43

ROOM S_44

R OOMS_45

RO OMS_46

R OOMS_47

RO OMS_48

R OOMS_49

ROO MS_50

ROOMS _51

ROOMS_52

ROOMS _53

ROO MS_54

R OOMS_55ROOMS _56

ROOMS _7

S U B MAI N_ 2

S U B MAI N_ 2

S UB M AIN _3

PA N E L_ 24

P A N E L_ 25

P A N E L_ 26

P A NE L _2 9

P A N EL _ 28

P A N EL _ 27

P A NE L _3 0

P A NE L _3 1

P AN E L _3 2

P AN E L _3 3

P AN E L _34

P ANE L_4 5

P ANEL_4

4

PANEL

_ 43

PA NEL _46

PA NEL _47

PANEL

_4 8

PA NEL _49

P AN EL_5 0

P ANE L_

51

PAN EL_

52

P AN EL_5 3

PAN EL_

54

P AN EL _3 6

P AN E L_3 7

P AN E L_38

P AN E L_3 9

P AN E L_ 40

P ANE L_ 41

P AN E L_ 42

P ANEL_69PA NEL_68PAN EL_67

FA CE_ 1

ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7

GA TE _ 20

GA T E _1 9

G A TE _1 8

L W_ 15

ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7ROOMS _7

G AT E_ 14

GA TE _1 5

S LOP E_B OT

RO OMS_28

R OOMS_ 29

ROO MS_30

RO OMS_31

ROOMS _33R OOMS_ 32

M AIN _ 5-3

M AI N_ 5- 3_1

MAI N_5 -4

M AIN _ 5-3

ROOMS _7

S UB MA IN_4

M AIN _ 6

S UBMA IN_ 5

L W_ 1

MA IN _ 5- 1

MA IN _ 5-2

S UB MA IN_4

PA NEL_55

P ANEL_56

PANEL_57

PANEL_5 8

PANEL _59

PANE L_60

PAN EL_61

PANEL_63

PANEL_6 4

PANEL _65

PAN EL_67PANE L_66

PA NEL_68

P ANEL_69

M AIN _ 6

P AN E L_ 42

P ANE L_ 41

P AN E L_ 40

P AN E L_3 9

P AN E L_38

P AN E L_3 7

P AN EL _3 6

P AN EL _3 5

S UB M AIN _3

S U B MAI N_ 2

S UBMA IN_ 5

MAIN_

1

MA I N_ 7

P ANEL_62

MAIN_

8

ROOMS _7

MAIN_3

MA IN_4

MAIN_3

MAIN_

4- 1

GA TE _ 9

GAT E _ 10

L W_ 6

L W_ 7

L W_8

L W_9

ROO MS_1

RO OMS_2

ROOMS _3

ROO MS_4

RO OMS_5

ROOMS _6

RO OMS_7

R OOMS_8

ROOM S_9

ROO MS_10

R OOMS_ 11

ROOM S_12

ROO MS_13

R OOMS_ 14

ROOM S_15

RO OMS_16

ROOMS _17

ROO MS_18

R OOMS_1 9

ROOMS _20

ROO MS_21

R OOMS_ 22

ROOM S_23

ROOM

S_23-1

ROO MS_2_1ROOM S_1_1

ROOM S_4_1RO OMS_3 _1

ROO MS_16_1ROOMS _15_1RO OMS_14_ 1ROO MS_13_1R OOMS_ 12_1ROO MS_11_1ROOMS _10_1R OOMS_ 9_1RO OMS_8_ 1ROOM S_7_1R OOMS_6 _1RO OMS_5_1

R OOMS_ 23_1ROO MS_22_1ROOMS _21_1R OOMS_ 20_1ROO MS_19_1ROOMS _18_1RO OMS_17 _1

ROOMS _7

GA T E_ 7

GA T E _8

S UB MA IN_ 1

ROOMS _7ROOMS _7

M AIN_2

X 837BM

821BM

X

GNIHSAW

NAGOL

934BM

X

BM 855 X

X811BM

806BMX

823XBM

796BMX

NOT

948BM

X

X 918BM

903BM

X

873BM

X854X

BM848

XBM

BM990

X

BM1008 X

B IA S T RA CT

300

FT

CE ME TERY

300 F

T

A LMAA IR SHAF T

B IA S T RA CT

300

FT

CE ME TERY

300 F

T

A LMAA IR SHAF T

N

NAY

854BM X

AGOL

934BM

X

BM 855 X

X811BM

806BMX

823XBM

X 918BM

903BMX

873BM

X854X

BM848

XBM

BMX1021

BM990

X

BM1008 X

BM BM1095 X

PANEL 1

PANEL 3

PAN

EL 2

PANEL 8PANEL 12

PANEL 35PANEL 36PANEL 37PANEL 38

PANEL 149PANEL 148

PANEL 147

PANEL 31

PANEL 146

PANEL 63PANEL 62

PANEL 39

PANEL

40PAN

EL 41

PANEL

42

PAN

EL 43

PANEL

67PAN

EL 69

PANE

L 71

PANEL

73P

ANEL 75

PANEL

77PA

NEL 79

PANEL 61PANEL 60PANEL 59PANEL 58PANEL 57PANEL 56PANEL 55PANEL 54PANEL 53PANEL 52PANEL 51PANEL 50PANEL 49PANEL 48PANEL 47PANEL 46PANEL 45PANEL 44PANEL 82

PANEL 128PANEL 127

PANEL 126PANEL 125

PANEL 124PANEL 123PANEL 122

PANEL 121PANEL 112

PANEL 131PANEL 130

PANEL 129

#1 M

AINS

P 4

P 5

P 6

P 7

P 9

10

11

13P

14P 1

5

P 16

P 1

7P

18

P 19

PANEL 20

21

P 2

2P

23

24

25

26

27

28

29

30

P 32

P 3

3P

34

PANEL 83PANEL 84PANEL 85PANEL 86PANEL 87PANEL 88PANEL 89

P 94

P 95

P 96PA

NEL 97

PANEL 98

PANEL 99

PANE

L 100P

ANEL 101

PAN

EL 102PAN

EL 103P

ANEL 104

PANE

L 105

PAN

EL 106

PANE

L 107

PANEL

120

PAN

EL 11

9P

ANEL

118

PANE

L 11

7PA

NEL

116

PANE

L 11

5PA

NEL

114

PAN

EL 1

13

PAN

EL 1

40PA

NEL

139

PANEL

138 PA

NEL

137

PAN

EL 1

36PAN

EL 1

41

PANE

L 14

2

PAN

EL 1

43

P 1

44

145

P 64

PANEL

65PAN

EL 6

6PAN

EL 70

PANEL

72PAN

EL 7

4PAN

EL 76

PANEL

78

PANEL

80

PAN

EL 68

PANEL

81

PANEL 90PANEL 91PANEL 92PANEL 93

PAN

EL 108PA

NEL 109

PAN

EL 110PA

NEL 111

PANEL 132

PANEL 135PANEL 134

PANEL 133

ALMA SEAM CEDAR GROVE SEAM

PLANT SITE

MINE PORTAL

PLANT SITE

MINE PORTAL

N N

LEA

SE

LINE

LEASE LINE

LEASE LINE

LEASE LINE

LE

AS

E LIN

E

LEASE LINE

Lower Seam mined with Longwall method 11 m above Alma seam, R&P method used

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Surface Mining

• Coal surface mining methods

– 67% of the coal production

– Mining methods

• Open‐pit

• Area Mining

• Contour mining

• Mountain top removal mining

• Highwall Mining


Surface Mining – Coal

Cast

Dozer

Dragline

Cast Profile

Dragline

Dozer

Cast

Spoil

Coal

Overburden

Pre-Bench

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Surface Mining Equipment

Typical Equipment Used for Overburden Removal


Surface Mining

MaximumCapacity(tons)

360 ton

340 ton

260 ton240 ton

190 ton170 ton

400 ton

1985 1990 1995 2000

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Surface Mining

• Some trends in surface mining

– Digital drives on shovels and draglines

– Larger trucks

– Global positioning systems

• Driverless trucks

• Collision avoid radar for large mobile equipment

– High voltage equipment


Area Mining ‐ Peabody Coal CompanyPRB Coal in Gillette, Wyoming

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Mountain Top Mining

Mountaintop removal mining (MTR), also known as mountaintop mining (MTM), is a form of surface mining that involves the mining of the summit or summit ridge of a mountain. Coal seams are extracted from a mountain by removing the land, or overburden, above the seams.

Mining in Process


Mountain Top Mining

Restoration in Process

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Highwall Mining

Coalcountrythemovie.com


Coal Preparation

Modern coal processing plants incorporate a complex array of solid‐solid and solid liquid separation processes.

• The processes remove unwanted impurities such as ash, sulfur, and moisture from run‐of‐mine (that is, unprocessed coal) feedstocks to improve coal utilization properties.

• Separation technologies used by the coal industry include screening, classification, dense medium separation, gravity concentration, froth flotation, centrifugation, filtration, and thickening.

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Prep Plant Statistics

• Operators

– ANR – 33 plants

– Patriot Coal – 16 plants

– Murray Energy – 15 plants

– Blackhawk Mining – 14 plants

– Arch and Alliance – 12 plants

• No. of U.S. Coal Prep. Plants – 268

– 19% reported as idle

– WV 80, KY 56, PA 44, VA 18, IL 16 and IN 14


Coal Preparation – Separation Processes Used for Coal

SieveBends

Dense MediaCyclone

BasketCentrifuges

Dense Media Vessel

DewateringScreens

Raw CoalScreens

Coal Spirals Screen‐BowlCentrifuges

ClassifyingCyclones

Med

ium

Solid‐Solid Solid‐LiquidSize‐Size

Coarse

Fine

Ultrafine Froth

FlotationDisc Filter

Increasing Difficulties

VT.edu

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Coal Preparation – Images


Environment and Reclamation

Returning the land to as good or better condition than before mining

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Mining ReclamationMining is Temporary Land Use

Mylan Park Twisted Gun Golf Course

Mount Olive Prison Logan WV. Airport

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Driving Innovation ♦ Delivering Results

Perry Bissell

September 24, 2015

Appalachia Coal Markets


Presentation Outline

• Overview of Appalachia Coal Markets and Infrastructure

• Reasons for Decline in Appalachia Coal Markets

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Quick C.V.

• PhD, Mineral Economics, Penn State

• Director, Market Development and Analysis, CONSOL Energy

• Senior Energy Market Analyst, John T. Boyd Company

• Senior Director, Coal, PIRA Energy Group


U.S. Coal Producing Regions

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Appalachia Coal Quality v. Other Major Basins

Heat Content (Btu/lb) SO2 Content (lbs/MMBtu)

Basin Low High Low High

Central Appalachia 11,500 13,000 1.2 3.0

Northern Appalachia 11,500 13,000 2.5 7.0

Illinois Basin 10,000 12,500 4.0 6.5

Powder River Basin 8,300 8,800 0.7 1.0

Quality estimates are for illustrative purposes and represent "typical" low and high values. These are not intended to

represent lowest and highest potential quality.


Central Appalachia Mines and Preparation Plants

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Northern Appalachia Mines and Preparation Plants


Appalachia Coal Production,1990‐2014

Source: Ventyx Energy Velocity

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Central and Northern Appalachia Coal Production, 1990‐2014



Central Appalachia Coal Production by Mine Type, 1990‐2014


0

50

100

150

200

250

1990 1993 1996 1999 2002 2005 2008 2011 2014

To

ns

of

Co

al i

n M

illi

on

s

SMineType:

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Central Appalachia Coal Employees,1990‐2014

0

10000

20000

30000

40000

50000

60000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

To

tal N

um

ber

of

Em

plo

yees



Central Appalachia Coal Mine Labor Productivity, 1990‐2014


0

5

10

15

20

25

30

35

1990 1993 1996 1999 2002 2005 2008 2011 2014

To

ns

per

Man

Day

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Summary Data for Central Appalachia, 1990 and 2010

Sources: Ventyx Energy Velocity

Metric 1990 2010 2014

Production (Million Tons) 291 185 117

Number of Mines 1,837 736 490

Employment (Average Number of Employees 55,359 34,503 24,005

Productivity (Tons per Man Day) 20.15 17.77 16.83


Power Plants Receiving Appalachia Coal, 2014

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U.S. Electricity Generation by Fuel, All Sectors, 2004‐2014

Source: EIA Short Term Energy Outlook, August 2015

17.9% 18.8% 20.1% 21.6% 21.4% 23.3% 23.9% 24.8% 30.4% 27.8%27.5%

49.8% 49.6% 49.0% 48.5% 48.2% 44.4% 44.8% 42.2% 37.5% 39.0% 38.8%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Th

ou

san

d M

egaw

atth

ou

rs P

er D

ay

Coal

Natural Gas

Petroleum

Nuclear

Power

Renewable Energy

Other Sources

Note: Labels show percentage share of total generation provided by coal and natural gas.

Sectors:


Monthly Share of Total Power Generation by Fuel (Percentage of Total Generation)

0

0.1

0.2

0.3

0.4

0.5

0.6

1990 January

1990 September

1991 M

ay

1992 January

1992 September

1993 M

ay

1994 January

1994 September

1995 M

ay

1996 January

1996 September

1997 M

ay

1998 January

1998 September

1999 M

ay

2000 January

2000 September

2001 M

ay

2002 January

2002 September

2003 M

ay

2004 January

2004 September

2005 M

ay

2006 January

2006 September

2007 M

ay

2008 January

2008 September

2009 M

ay

2010 January

2010 September

2011 M

ay

2012 January

2012 September

2013 M

ay

2014 January

2014 September

2015 M

ay

Coal Gas

Source: Energy Information Administration, August 2015 Monthly Energy Review, Table 7.2a_Electricity_Net_Generation_Total_ All_Sectors.xls

In April 2015, U.S. generation of electricity from natural gas exceeded coal‐fired generation for the first time since the start of EIA's monthly generation data in 1973.

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U.S. Electric Power Sector Coal Consumption, 1990‐2014

Source: Energy Information Administration

0

200

400

600

800

1,000

1,200

Million Tons


U.S. Coal Exports by Coal Type, 2002‐2014

Source: EIA, Historical Coal Exports, Data from: Quarterly Coal Reports 2002 through Q1 2015 http://www.eia.gov/coal/data.cfm#imports

0

10

20

30

40

50

60

70

80

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

To

ns

of

Co

al i

n M

illi

on

s

Metallurgical

Steam

Coal Type:

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Central Appalachia Coal Prices, 2004‐YTD

Source: EIA: NYMEX Central Appalachian Coal Futures Near‐Month Contract Final Settlement Price History

$0

$20

$40

$60

$80

$100

$120

$140

$160

To

tal C

oal

Pri

ces


Major Factors Behind Decline of Appalachia Coal

• Regional Competition

• Natural Gas

• Tightening Environmental and Safety Regulations

• Declining Export Markets

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U.S. Coal Production by Region,2009‐2014

Sources: Ventyx Energy Velocity, EIA Annual Energy Outlook 2012


Major Coal Basins – Win, Lose or Draw?

GRAPH of CAPP, NAPP, PRB, ILB, CO/UT production

0

100

200

300

400

500

600

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

To

ns

of

Co

al i

n M

illi

on

s

Central Appalachia

Illinois Basin

PRB

Northern Appalachia

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Costs of Central Appalachia Production

Source: Patriot Coal “Changes Underway in the Central Appalachia Coal Industry, July 14, 2014

WV coal producer: “You cannot mine CSX [12,500 Btu/lb] coal and sell it for $45/st. You can't.”, Platts Coal Trader, 8/24/15


Central Appalachia Production Cost Drivers

• Resource depletion

• Higher wages from prior labor shortages

• Mine safety and environmental regulations

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Henry Hub Natural Gas Spot Price (Dollars per Million Btu)


0

2

4

6

8

10

12

14

16

Jan‐1997

Jul‐1997

Jan‐1998

Jul‐1998

Jan‐1999

Jul‐1999

Jan‐2000

Jul‐2000

Jan‐2001

Jul‐2001

Jan‐2002

Jul‐2002

Jan‐2003

Jul‐2003

Jan‐2004

Jul‐2004

Jan‐2005

Jul‐2005

Jan‐2006

Jul‐2006

Jan‐2007

Jul‐2007

Jan‐2008

Jul‐2008

Jan‐2009

Jul‐2009

Jan‐2010

Jul‐2010

Jan‐2011

Jul‐2011

Jan‐2012

Jul‐2012

Jan‐2013

Jul‐2013

Jan‐2014

Jul‐2014

Jan‐2015

Jul‐2015


Illustrative Examples of “Breakeven” Delivered Costs of Coal Versus Gas

Central Appalachia

Northern Appalachia Illinois Basin

Powder River Basin Natural Gas

Fob Mine ($/Ton) $ 70.00 $ 60.00 $ 50.00 $ 15.00 na

Transportation ($/Ton) $ 20.00 $ 20.00 $ 20.00 $ 35.00 na

Delivered Cost ($/Ton) $ 90.00 $ 80.00 $ 70.00 $ 50.00 na

Delivered Cost ($/MMBtu) $ 3.60 $ 3.08 $ 2.97 $ 2.84 $ 2.85

Assumed Heat Content Btu/lb

Central Appalachia 12,500

Northern Appalachia 13,000

Illinois Basin 11,800

Powder River Basin 8,800

Source: LTI Estimates

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Central Appalachia Coal Exports

• Global markets have weakened

– Lower‐than‐expected Chinese coal imports

• Supply has increased

– Expanded production in Australia and Indonesia

• As the “swing supplier” in international coal markets, Central Appalachia exports have fallen dramatically


Growth in Chinese Coal Use is Slowing

Source: Energy Information Administration, Today in Energy, September 25, 2015

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Australia Coal Production


Tightening Environmental and Safety Regulations

• Environmental regulations have tightened on both producers and consumers of coal

– Power plant emissions

– MSHA safety regulations following 2010 UBB disaster

– Valley fill permitting

– Water treatment costs

• Prospects for additional tightening discourage investments

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Five Visuals Explaining Decline in Central Appalachia

0

10

20

30

40

50

Jan‐00

Nov‐00

Sep‐01

Jul‐02

May‐03

Mar‐04

Jan‐05

Nov‐05

Sep‐06

Jul‐07

May‐08

Mar‐09

Jan‐10

Nov‐10

Sep‐11

Jul‐12

May‐13

Mar‐14

Jan‐15

Antrim (MI, IN, & OH)Bakken (ND)Woodford (OK)Barnett (TX)Fayetteville (AR)Eagle Ford (TX)Haynesville (LA & TX)

Thin seams, tough mining compared to thick PRB seams and longwalls in other regions

Plant retirements in core marketsThe rise of shale gas


West Virginia Mine Entrance

Source: TechCorr, http://www.techcorr.com/news/Articles/Article.cfm?ID=388

Approximate Seam Height

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Peabody Coal CompanyPRB Coal in Gillette, Wyoming

Truck

Approximate Seam Height


Longwall Mining Drives Northern Appalachia and Illinois Basin

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Monthly Dry Shale Gas Production (Billion cubic feet per day)

Source: EIA, Natural Gas Weekly Update, http://www.eia.gov/naturalgas/weekly/archive/2015/07_16/index.cfm#tabs‐prices‐1

0

5

10

15

20

25

30

35

40

45

Jan‐00

Jul‐00

Jan‐01

Jul‐01

Jan‐02

Jul‐02

Jan‐03

Jul‐03

Jan‐04

Jul‐04

Jan‐05

Jul‐05

Jan‐06

Jul‐06

Jan‐07

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Jan‐08

Jul‐08

Jan‐09

Jul‐09

Jan‐10

Jul‐10

Jan‐11

Jul‐11

Jan‐12

Jul‐12

Jan‐13

Jul‐13

Jan‐14

Jul‐14

Jan‐15

Antrim (MI, IN, & OH) Bakken (ND) Woodford (OK)

Barnett (TX) Fayetteville (AR) Eagle Ford (TX)

Haynesville (LA & TX) Marcellus (PA & WV) Utica (OH, PA & WV)

Rest of US 'shale'


Coal Plant Retirements are in Central Appalachia Core Markets


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Summary

• Central Appalachia production has been declining for a long time– This is not a short‐term phenomenon

• The decline in Central Appalachia will continue– Competition from other regions for limited markets will be intense

• Natural gas is taking market share– Short‐term declines have been dramatic

• Environmental regulations are taking away domestic markets– Closing power plants

– Forcing scrubbing that reduces demand for lower sulfur coal

• Mining regulations are increasing production costs• Export markets are declining

Appalachia Coal Mining-to Marketing Training Library/Research/Coal...Appalachia Coal Mining-to Marketing Training September 24, 2015 NETL Pittsburgh, PA 10/15/2015 1 National Energy

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