Posts Tagged ‘Arch Resources’

Biden Plan Would Accelerate Coal Decline

April 5, 2021

The Biden administration’s proposals to fight climate change would accelerate what has already been a downward decline of the use of coal for generating electricity.

That would further depress railroad coal traffic, industry observers say.

Rob Godby, an economics professor who is deputy director of the University of Wyoming’s Center for Energy Regulation and Policy, said the Biden proposals would accelerate the decline of coal that has been under way for a decade.

During the past 10 years, railroads have seen their coal traffic fall but “black diamonds” still remained a substantial source of revenue.

In 2020, coal was 12 percent of rail freight volume in the United States, figures from the Association of American Railroads show.

Coal was the single largest commodity that Class 1 railroads carried in 2020 and provided $7 billion in revenue.

Yet the use of coal to generate electricy has fallen from 48 percent of the nation’s power supply in 2008 to less than 20 percent last year.

Most coal mined in the United States is used to generate electricity but is also used in steel making and exported to other nations.

Biden has proposed using tax incentives for renewable energy for another decade while making power grid investments to support greater use of wind and solar power.

Godby said those changes, if implemented, will make it difficult for coal to compete on an economic basis with natural gas and renewable sources of energy.

“The bottom line is if this were to happen, you could say the Powder River Basin would almost entirely be shut down,” Godby said referencing a region in Wyoming and Montana served by BNSF and Union Pacific that produces nearly half of U.S. coal.

Godby said some renewable energy projects provide electricity more cheaply than coal, even without subsidies.

Transportation costs can take up three quarters of the delivered cost of coal to a power plant.

Even if Congress were to reject the Biden plan, Godby said coal is living on borrowed time and he expects demand for it to be a shadow of itself by 2035 when very little of the nation’s power will be generated by burning coal.

Already, coal producers are seeking to sell or shut down mines in the Powder River Basin. Arch Resources plans to close the Coal Creek mine in Wyoming in 2022 and reduce production at Black Thunder Mine, the second-largest U.S. coal mine.

The Biden infrastructure plan has proposed establishing as many as 10 power plant carbon capture demonstration projects.

But Godby said for those to be commercially viable, carbon capture would require technology and cost breakthroughs as well as the development of markets for carbon dioxide use.

Fewer Mines Seen as Needed to Boost Coal Industry

October 30, 2020

A common theme in recent investor calls discussing Class 1 railroad quarterly financial results and the weekly and monthly freight data provided by the Association of American Railroads has been the steady downward trajectory of coal traffic by rail.

Class 1 railroad executives and many industry observers have adopted a pessimistic attitude toward coal, saying that it will continue to lag due to low prices of natural gas used to generate electricity and the closing and planned closing of power plants using coal.

The coal industry itself is undergoing a transformation with some saying there are too many mines for the size of the market.

“There are too many mines and too few customers,” said Rob Godby, an economics professor who is deputy director of the University of Wyoming’s Center for Energy Regulation and Policy, in an interview with Trains magazine.

He said the best thing that could happen to improve the financial health of the coal industry would be a permanent closure of a mine in the Powder River Basin, where there has been little consolidation of operations.

That has resulted in less profitability for the owners of those mines. Some have sought bankruptcy in the past few years.

That included St. Louis-based Arch Resources, which emerged from bankruptcy protection in 2016 and is one of the major players in the Powder River Basin.

Arch said this week it is seeking a buyer for its mines and if can’t sell them it will wind down production in the Power River Basin.

The company said during a third quarter earnings call that it is transitioning away from thermal coal used to generate electricity and instead focusing on metallurgical coal used in steel making.

Coal was used to generate 48 percent of U.S. electricity as recently as 2008.

But the U.S. Energy Information Administration said that has fallen to 20 percent this year.

Last year Arch’s mines in the Powder River Basin produced 75 million tons of coal. It expects to produce 55 million tons this year.

A month ago Arch and one of its chief competitors, Peabody Energy, called off plans to combined operations in the Powder River Basin and elsewhere.

The Federal Trade Commission had opposed the due based on competitive concerns.