Editorial: Industrial Perspectives

Is the U.S. supply of coal sufficient to meet the increased demand for coal-fired generation?

With the increasing demand for coal to generate electricity, the big question is, How reliable is the supply and transportation of the fuel? Currently, Industrial Info Resources (IIR) is tracking 185 new coal-fired power projects, and if all were to be completed, they would add over 100,000 MW of additional coal-fired capacity. Regions expected to have the greatest potential for growth in coal-fired power plants are the Great Lakes, Midwest, Rocky Mountains, and Southwest.

"Can Coal Deliver? America’s Coal Potential and Limits," by Global Energy Decisions (Global Energy) and Global Energy Consultants LLC., concludes that meeting the future U.S. demand for coal will require substantial new investment in the coal supply chain and a fresh assessment of U.S. coal reserves.

The U.S. Energy Information Administration (EIA) has projected that the U.S. coal supply will increase by 10.5% over the next five years. To meet the country’s fuel diversity objectives will require a 4% annual increase in the supply of coal for the next 20 years. "What is not well understood today is that meeting that growing coal demand will require substantial investment in coal infrastructure and technology to overcome the constraints on coal supply, productive capacity, and deliverability," says Larry Metzroth, vice president coal advisory services at Global Energy Decisions. "At the same time as the demand for coal is growing to meet America’s fuel diversity and supply needs, we are also focused on expanding our use of clean coal technology to address emissions and global warming concerns. This will trigger a new era of coal supply chain investment."

PRB Coal Delivery is a Concern

In the past few years, the focus of coal consumers and coal producers has been the cost of coal. Although the cost for Powder River Basin Coal (PRB) is a concern, a more serious problem is insufficient rail capacity to deliver that coal. The capacity of mines to supply sufficient PRB coal is not a problem. On the other hand, there is some concern in the East about the capacity of Central Appalachia to supply compliance and low-sulfur coal. The lack of sufficient transportation for coal is also a concern in the eastern U.S.

Currently, production of PRB coal is limited by the lack of sufficient rail transport capacity to haul PRB coal out of the region. According to the EIA, the lack of rail transportation is affecting eight mines. These mines are served by the joint rail line operated by the Union Pacific (UP) and BNSF railroads. In 2005, the UP and BNSF rail links had an estimated capacity to transport 347 million tons of coal. The railroads have promised greater capacity for the delivery of PRB coal. Unfortunately, their performance in 2006 to date indicates that they will not be able to match the supply of PRB coal from the mines.

However, the railroad companies say they are upgrading their lines and equipment to keep up with the increased demand for coal transportation. According to Tom Kraemer’s article, "Increasing the Capacity of PRB Coal Delivered to Power Plants Is a Priority," in the Spring issue of Coal Power, UP and BNSF transported 269 million tons in 1995 and by 2005 had increased it to 415 million tons. In 2006, Kraemer states, coal transportation will receive nearly 35% of the $2.4 billion capital commitments. The majority of the money will go into upgrading the PRB rail line to increase coal transportation. Money will also be spent to purchase new locomotives.

With passage of the Staggers Rail Act in 1980, many regulatory restraints on the railroad industry were removed. Since then, the railroad companies have spent $349 billion on capital improvements and maintenance of their tracks and equipment.

There are differences of opinion on how well the railroad companies are doing to increase capacity for transporting coal. Criticism by electric power companies and railroad companies will not help the problem. Ensuring sufficient coal transportation capacity for the future will require all parties — coal-fired electric utilities, the railroads, and government — to work together.