Climate

Are we approaching peak coal? Part 1

The imminent reality of peak oil production should be clear to all by now (see “Normally staid IEA says oil will peak in 2020“).

Now some very serious people are suggesting that there is a lot less accessible coal out there than most folks believe. If we are nearing peak coal (and peak oil), then we would need to embrace the rapid transition to a clean energy economy almost as urgently as we need to embrace it to avoid destroying the climate.

Let’s start with the U.S. Geological Survey’s stunning 131-page analysis from December, “Assessment of Coal Geology, Resources, and Reserves in the Gillette Coalfield, Powder River Basin, Wyoming” [big PDF]:

The Gillette coalfield, within the Powder River Basin in east-central Wyoming, is the most prolific coalfield in the United States. In 2006, production from the coalfield totaled over 431 million short tons of coal, which represented over 37 percent of the Nation’s total yearly production.

The “total original coal resource in the Gillette coalfield” without applying any restrictions, “was calculated to be 201 billion short tons.” Then USGS subtracts out the inaccessible coal, and then mining and processing losses, which leaves 77 billion tons, and finally:

Coal reserves are the portion of the recoverable coal that can be mined, processed, and marketed at a profit at the time of the economic evaluation. With a discounted cash flow at 8 percent rate of return, the coal reserves estimate for the Gillette coalfield is 10.1 billion short tons of coal (6 percent of the original resource total) for the 6 coal beds evaluated.

Ouch! And this analysis was done at a time of soaring coal prices.

The National Research Council’s Committee on Coal Research, Technology, and Resource Assessments to Inform Energy Policy wrote in a 2007 report:

Present estimates of coal reserves are based upon methods that have not been reviewed or revised since their inception in 1974, and many of the input data were compiled in the early 1970s. Recent programs to assess reserves in limited areas using updated methods indicate that only a small fraction of previously estimated reserves are economically recoverable.

The NRC, however, decided not to seriously downgrade the very optimistic estimates still out there, certainly not by as much as the 2008 USGS report suggests may be warranted. Its press release states:

It is clear that there is enough coal at current rates of production to meet anticipated needs through 2030, and probably enough for 100 years, the committee said. However, it is not possible to confirm the often-quoted assertion that there is a sufficient supply for the next 250 years.

The “probably enough” claim does not appear to be based on any rigorous analysis, and the Committee itself called for a major 10-year assessment effort.

The group Clean Energy Action will be coming out soon with a mine-by-mine assessment that has been reported to conclude we have far less than a 100-year supply, perhaps as little as 10 to 20 years. I will blog on that when it hits the streets.

The Energy Watch Group, an independent group of scientist who investigate energy issues initiated by a German member of parliament, published a 2007 study that found the data on coal reserves around the country are very poor, but estimates appear to dropping, in some cases sharply:

The timeline analyses of data performed here suggest that on a global level the statistics overestimate the reserves and the resources. In the global sum both reserves and resources have been downgraded over the past two decades, in some cases drastically.

The most dramatic example of unexplained changes in data is the downgrading of the proven German hard coal reserves by 99 percent (!) from 23 billion tons to 0.183 billion tons in 2004. The responsible German administration1 did not publish any explanation, and thus the downgrading went unnoticed in spite of the intensive public debate of the future of coal production in Germany. The World Energy Council briefly notes in its “2004 Survey of Energy Resources”: “Earlier assessments of German coal reserves (e.g. end-1996 and end-1999) contained large amounts of speculative resources which are no longer taken into account”. Thus, large reserves formerly seen as proven have been reassessed as being speculative.

Also the German lignite reserves have been downgraded drastically, which is noteworthy because Germany is the largest lignite producer world-wide.

Poland has downgraded its hard coal reserves by 50 percent compared to 1997 and has downgraded its lignite and subbituminous coal reserves in two steps since 1997 to zero.

The Group has equally pessimistic conclusions about American coal reserves:

The USA, being the second largest producer, have already passed peak production of high quality coal in 1990 in the Appalachian and the Illinois basin. Production of subbituminous coal in Wyoming more than compensated for this decline in terms of volume and — according to its stated reserves — this trend can continue for another 10 to 15 years. However, due to the lower energy content of subbituminous coal, US coal production in terms of energy has already peaked 5 years ago — it is unclear whether this trend can be reversed. Also specific productivity per miner is declining since about 2000.

Right now, I’m not certain there is enough hard data to draw a firm conclusion on this issue. Also, the amount of economically recoverable coal in this country and around the world clearly depends on the price of coal, which, until recently, had been soaring.

If the nations of the world get serious about avoiding catastrophic global warming, then we will either need to start reducing global coal use pretty sharply starting around 2020 (if your target is 450 ppm, see Hadley Center: “Catastrophic” 5-7°C warming by 2100 on current emissions path) or immediately (if your target is 350 ppm, see Hansen et al: We must phase-out coal emissions by 2030 and stabilize at or below 350 ppm). Such sharp reductions, which must begin before coal with carbon capture and storage (CCS) is likely to be practical and affordable on a large scale (see here), would inevitably lead to sharp declines in the price of coal.

Of course, if coal and oil are near peak production levels, then we urgently need to jumpstart the transition to a clean energy economy to replace those fossil fuels — almost as fast as that urgent transition is needed to avoid catastrophic climate impacts. And if coal is near peak production levels, then CCS is obviously a much less useful and scalable climate solution.

Part 2 looks at U.S. reserves more closely based on the forthcoming Clean Energy Action report.

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15 Responses to Are we approaching peak coal? Part 1

  1. GFW says:

    What does “a discounted cash flow at 8 percent rate of return” have to do with the estimate of recoverable reserves? Granted that some economic/financial factors affect the definition of economically recoverable resources, I don’t think inflation is really one of those factors (and there’s definitely inflation baked into that 8% number).

  2. GFW says:

    Ok, I re-read that section and I know what they mean … but the economic discounting doesn’t affect the real tonnage that would be consumed. So it’s a useful economic analysis, but would significantly underestimate the CO2 released from fully exploiting the reserve.

  3. Bob Wright says:

    Maybe the “easy” coal is largely gone. Part of the Sago mine disasters in 2006-07 was Wilbur Ross and company taking over old, even abandoned, mines with the best seams already taken, using non-union workers or even contractors to keep costs down while they glean what’s left. Safety? Didn’t Duya’s buds do away with that?

    BTW: Does Gasprom know what its doing? Sounds like the Russkies are gonna get all of Europe feeding off them just in time to run out of gas.

  4. At $10.47 per ton mining costs the Gillette reserves are 25 years as our host concludes, as does the report cited. (Fig 66)

    One coal company, ARCH Coal is delighted to mine it at this cost and sell it for only $12.50 per ton. The margin is about $2 per ton. If the cost of mining is allowed to go to $20 per ton then the reserves go from about 10 billion tons to about 35 billion tons.

    This would suggest that the reserves would last 87 years.

    The only reason Arch Coal has been selling coal for $12.50 per ton is that they sell on contracts. The spot price has been around $20 per ton for about the last year. It seems that there is every reason to think that new contracts are now being written for closer to $22 per ton and at this price the reserves extend to 85 years, as I previously stated.

    Then I looked at the actual core sample data. The problem is far worse since if you scrape off more dirt the basic resource looks to be good for a thousand years. And they say China has more coal than we do.

    No wonder GM is planning to shift to electricity to power cars.

    It seems clear that there has to be a combination of legal measures to restrict coal along with ways for people to live the way they want to without extreme cost burdens.

  5. Tim Auld says:

    Depletion of conventional energy supplies will preclude massive build out of high-tech renewable infrastructure. You need surplus energy and other resources (extracted by that energy) to make the transition. Once net energy is declining, hard questions about what is sacrificed must be asked – fast. There’s no indication or guarantee that this will happen. The most likely outcome is a disorderly collapse. I believe the modern Western lifestyle is unsustainable even using renewable power. There are just too many fundamental flaws built into the system (e.g. viewing everything as linear systems). For a really positive and pragmatic approach to the problem, look at Permaculture (www.permacultureprinciples.com).

  6. Brian Rookard says:

    Well, I agree with James Hansen on this one at least – we need more nuclear:

    “The three points that I raise concern: (1) coal, (2) carbon tax, and (3) nuclear power.
    * * *
    (3) Nuclear power: it would be great if energy efficiency, renewable energies, and an improved (“smart”) electric grid could satisfy all energy needs. However, the future of our children should not rest on that gamble. The danger is that the minority of vehement antinuclear “environmentalists” could cause development of advanced safe nuclear power to be slowed such that utilities are forced to continue coal-burning in order to keep the lights on. That is a prescription for disaster.”

    http://www.columbia.edu/~jeh1/mailings/20081229_DearMichelleAndBarack.pdf

  7. Wes Rolley says:

    I have two questions. The first is for all. Why do we take resources that we all know are limited at some point and insist that the best policy is to use them up as fast as we can. It just does not make sense whether it is coal, or oil, or water.

    The second is for Brian… and for Jim Hansen. Nuclear is the most expensive of the options. That is without taking externalized costs such as the impact on health care. We have been unwilling or incapable of tracking custody of nuclear material from ground to ground. So why is this different. So again, a question. Why are we advocating so strongly for the most expensive solution to our problem?

    This is not about technology. It is about having the political will to do what is right.

    Wes Rolley CoChair EcoAction Committee Green Party US.

  8. mitchell porter says:

    Two contributors at The Oil Drum simulated future climate change using the standard MAGICC model, under the assumption that coal peaks soon, and derived very low estimates for the likely temperature increase by 2100. Their conclusion was that energy scarcity is the real issue.

    As I recall they are essentially assuming global coal reserves of 1 trillion tonnes, and this is consistent with the IEA’s figures (World Energy Outlook 2008), *but* the IEA also refers (p.128 of WEO 2008) to the “lack of incentives to prove up reserves… Exploration activity is typically carried out by mining companies with short planning horizons, rather than by state-funded geologic surveys.” I.e. there is probably much more coal than has been discovered, because prospecting has been ad-hoc in much of the world, because the economic demand hasn’t been there for anything more.

  9. Russ says:

    Wes:
    I have two questions. The first is for all. Why do we take resources that we all know are limited at some point and insist that the best policy is to use them up as fast as we can. It just does not make sense whether it is coal, or oil, or water.

    The answer is simple – there’s no such thing as “we”. Words like “we”, the “economy”, the “country”, “America”, are nothing more than that: words.

    What really exists is a free-fire zone of ususally mutually exclusive interests, and regarding any question, e.g. the best use of resources, the only real question is, cui bono?, Who benefits?

    That’s why a concept like having a rational long-term resource triage plan can never be seriously considered – it benefits no vested interest, and those are the only interests which any longer exist (the “people” having abdicated long ago).

  10. Chris Vernon says:

    Also see The Oil Drum’s summary article on coal from 2007:
    http://europe.theoildrum.com/node/2726/

  11. msn nickleri says:

    That’s why a concept like having a rational long-term resource triage plan can never be seriously considered – it benefits no vested interest, and those are the only interests which any longer exist (the “people” having abdicated long ago).

  12. Bob Wallace says:

    Wrong Mike.

    Your interests can’t be purely in the science.

    You aren’t aware of the science.

    Perhaps you’re looking forward to a future introduction to the science?

  13. Mike says:

    Interesting. Bob Wallace replies to “Mike”, yet Mike’s comment is not there. I assume it was mine.

    Bob Wallace – my interests are purely in the science. I am extremely well aware of the science, having spent a very large amount of time on it, read a large number of scientific papers, and communicated directly with prominent researchers in three countries. I have been involved in organising presentations by researchers from both sides of the argument, and still am. Any views that I have have been formed over a period of time, and are based solely on scientific research and facts (normal meaning of “facts”).

    Whoever removed “Mike”‘s comment – it’s a bit late now, but if you restored it then people could see what Bob Wallace was replying to.

  14. David Lewis says:

    According to Dr. Stephen Chu, “”coal is so plentiful there’s no serious exploration for it…” And the fact that no serious exploration has been done can cut both ways: there may be way more than anyone thinks.

    But I think it would make sense for the IPCC to commission or do a serious evaluation of the global resource. It would be interesting to find out that everyone has been wrong all these years about how much carbon there is that can be expected to end up in the atmosphere under business as usual scenarios.

    If it is true that there is actually far less coal than most thought, this is good news. Peak coal is unlikely to be found to looming quite as near as peak oil, and in that case the transition even under business as usual energy scenarios could be predicted to be orderly. I take it people don’t see peak oil as great news because they fear disruption.

    I may personally fear large economic and social disruption, but I hope they run out of oil and coal tomorrow. As in WWII, when it took invasion of US territory before people woke up to the obvious, running right out of fossil fuels would cause the kind of effort we need to replace them, and if we ran out tomorrow, it would be that much easier to achieve a 325 – 350 ppm target level in the atmosphere.

  15. Mike says:

    David Lewis : This may sound absurd to you, but no-one has yet eliminated the possibility that the planet will achieve 325 – 350 ppm all on its own, without anyone reducing the use of fossil fuels. Figures from UAH (and other global temperature sources) and from Mauna Loa show that the CO2 level is affected by temperature with a time-lag of 3-9 months (warmer oceans release more CO2, cooler oceans absorb more CO2). The figures suggest that somewhere below a LT temperature of around -0.2 to -0.25 deg C the atmospheric CO2 level might start to decrease. There is a lot of speculation by serious scientists that we are entering a cooling phase of maybe around 20 years and maybe much longer – we have definitely been cooling for a couple of years, as shown by verified ocean cooling. Coincident with that cooling, the Earth’s albedo, which had been decreasing, has been increasing again (increasing albedo means less sunshine reaches the oceans). Put that all together and there clearly is a chance that you will get your 325-350 ppm wish.

    I make no comment on anything like peak oil, peak coal, pollution, the desirability of using or not using fossil fuels, etc, etc. My comment relates purely to climate science.