34 Responses to January 24 News: 2012 Outlook for American Coal is “Grim”
Other stories below: John Podesta on why we need to continue leadership in clean energy; Obama to tout natural gas in State of the Union
This year’s outlook is grim for the U.S coal industry, which after two years of rising profits has begun closing mines, signaling a new wave of production cutbacks and, possibly, another round of industry consolidation.
The country’s biggest coal producers, which begin reporting fourth-quarter results on Tuesday with St. Louis-based Peabody Energy Corp., should provide insight into how bad this year could be. Most should meet Wall Street’s earnings expectations for the last quarter of 2011 on export gains over a year ago, while tempering investor expectations for 2012, say analysts.
The two biggest threats facing U.S. coal companies are the low price of domestic natural gas, which is making thermal coal a less-attractive fuel for their utility-customers, and the shaky economic picture in Europe, which is damping exports of metallurgical coal.
Demand among European steelmakers has fallen off, pushing down the benchmark price for the highest grades of coal by nearly 30% over the past year. Also damping prices is tougher federal emissions rules for U.S. utilities, resulting in more planned closures of coal-fired generating plants and eroding the market for thermal coal.
In the hubbub around the president’s decision not to approve the proposed Keystone XL pipeline between Canada and the United States, Americans missed the big picture. While conservatives have been fighting to build a pipeline to import more foreign oil and deepen U.S. dependence, the U.S. is poised to transform its energy portfolio by developing domestic resources—renewable and mineral—that will let it become a net exporter of clean energy and energy technology in this decade.
Under President Obama’s leadership, we appear to be at the beginning of a domestic gas and oil boom. After a four-decade decline in oil production, the U.S. is now producing more than half of our oil domestically. This can free us from our addiction to foreign-sourced barrels, particularly if we utilize our dramatically larger and cheaper natural gas reserves. Natural gas now costs the equivalent of less than $15 per barrel, versus the $100-plus barrels we import from the Middle East.
There are critical environmental questions associated with developing these resources, particularly concerning methane leakage and water pollution. Yet as long as we ensure high regulatory standards and stay away from the riskiest and most polluting of these activities, we can safely assemble a collection of lower-carbon, affordable and abundant domestic-energy assets that will dramatically improve our economy and our environment. Under President Obama’s watch, increased domestic production from developing these reserves has already created 75,000 new gas and oil-production jobs since 2009. And we have much further to go.
President Barack Obama will encourage the country’s booming natural gas output in his State of the Union address on Tuesday, while defending his administration’s energy record, according to sources familiar with the matter.
Obama was expected to devote a significant portion of his speech slated for 9 p.m. EST Tuesday calling for a “new era for American energy,” which will include promoting domestic natural gas production, according to documents provided to Democratic party sources.
U.S. natural gas output has grown sharply in recent years thanks to advances in drilling techniques that have unlocked massive shale reserves.
Obama has repeatedly stressed the importance of domestic natural gas output, pointing to natural gas as a possible area of compromise for Democrats and Republicans.
Chesapeake Energy, the nation’s second biggest natural gas producer, announced Monday that it would cut production of gas in response to plummeting prices.
The announcement was not unexpected, and it followed a trend that has been under way for several months: oil and gas companies have been transferring drilling rigs to oil fields from natural gas fields. But given that Chesapeake has been the industry’s most public champion of natural gas, its announcement of an 8 percent cut in daily production led to a substantial rally in gas prices that had fallen last week to their lowest level in a decade.
Natural gas prices have been steadily falling over the last two years because of a glut stemming from mushrooming production in shale fields like the Haynesville in Louisiana, the Barnett in Texas and the Marcellus in Pennsylvania. Warm weather so far this winter has also cut normal seasonal demand significantly.
Aubrey K. McClendon, Chesapeake’s chief executive, said in a statement, “We have committed to cut our dry gas drilling to bare minimum levels.”
The U.S. Energy Information Administration just released its Annual Energy Outlook 2012 report, and three things stick out: The United States is dramatically curbing its oil imports, carbon emissions are flatlining and we have less shale gas than once thought. Here’s a rundown:
1) The United States is reducing its dependence on foreign oil. According to EIA forecasts (which, do note, are far from perfect), Americans will likely continue restraining their gasoline consumption, thanks, in part, to the Obama administration’s new fuel-economy standards for cars and lights trucks. Meanwhile, oil and gas production in places such as North Dakota has been booming, thanks to higher prices and new drilling technology. Put those together, the EIA calculates, and the United States is set to import just 36 percent of its petroleum by 2035, down from 60 percent in 2005.
After a week that saw President Obama and a conservative group backed by the Koch brothers trade multimillion-dollar jabs over energy jobs on the airwaves of six states, one thing is clear: The 2012 election’s environmental narrative is taking shape fast.
Less certain is the kind of conservationist cavalry that Obama’s re-election campaign can count on as it sells his record to voters in the face of a likely onslaught from business groups irate at his rejection of the Keystone XL oil pipeline. As the XL project and bankrupt solar firm Solyndra migrate from Capitol hearing rooms to TVs across the nation, greens are counting on their grass-roots to fill the fundraising gap.
“We can’t compete with Big Oil in terms of campaign cash — we don’t have tens of millions of dollars to throw into TV ads — but we can outcompete Big Oil in terms of people,” Sierra Club chief Michael Brune said in an interview.
But Brune acknowledged that “of course we’re worried” about the financial muscle that the U.S. Chamber of Commerce, the American Petroleum Institute (API) and other groups can bring to the table this year to pitch the benefits of Keystone XL to the public.
Seaweed often brings to mind thoughts of surf and sushi, not fuel. But that could change if a biotechnology start-up called Bio Architecture Lab succeeds in building a new kind of energy company from designer bacteria and a low-cost process for harvesting seaweed.
The key is a genetically modified strain of Escherichia coli bacterium, which can break down the sugars in brown seaweed, or macro-algae, to produce ethanol, according to new research published in the peer-reviewed journal Science.
As one of the 14 study authors, BAL’s co-founder and chief science officer, Yasuo Yoshikuni, explained in an interview by phone, “Sugar is the next-generation crude oil — it can go to fuels and chemicals.” BAL’s breakthrough, he says, is about finding a way to “unlock the sugars in seaweed.”
A reduction in the Sun’s activity is expected this century, but is unlikely to do much to slow global warming due to greenhouse gases, scientists said on Monday.
Research by the Met Office and the University of Reading looked at the most likely changes in the Sun’s activity and found that its output was likely to decrease up to 2100, from the “grand maximum” seen in the 20th century.
But this would only cause a reduction in global temperatures of about 0.08C over that time, in comparison to projected rises of 2.5C by 2100 as a result of rising greenhouse gases in the atmosphere.
Even if solar activity fell to levels seen in the so-called Maunder minimum, between 1645 and 1715, when the Sun’s output was at its lowest recorded level, the reduction in temperature would only be 0.13C.
The study looked at a range of possible projections of solar activity over the coming century and then applied them to one climate model, taken from the middle of the range of models, to see how it might affect temperatures.