In the past two years, more than half of U.S. coal production was attributable to the top four coal producers, the result of changes in regional production as well as decades-long trends towards the concentration of coal production around the top few companies, said the U.S. Energy Information Administration.
EIA, in the Oct. 2 version of its Today in Energy feature, said that Peabody Energy (NYSE: BTU), Arch Coal (NYSE: ACI), Alpha Natural Resources (NYSE: ANR) and Cloud Peak Energy (NYSE: CLD) together supplied 575 million tons, or 52% of total U.S. coal production, in 2011, while more than 500 other companies supplied the remaining 48%.
By comparison, the fifth largest coal producer in 2012, CONSOL Energy (NYSE: CNX), contributed 34 million tons, or 35% less than fourth-place Cloud Peak Energy, EIA reported. Notable is that CONSOL’s website shows its actual 2012 production as 56.5 million tons, which is still well behind Cloud Peak for fourth place.
The top four are that big because they control Powder River Basin mines in Wyoming (Cloud Peak also has the Spring Creek mine in the Montana end of the PRB, which has smaller mines than in Wyoming). The PRB mines are massive, with Peabody’s North Antelope Rochelle and Arch Coal’s Black Thunder strip jobs for several years being by far the largest coal mines in the country. CONSOL, which actually sold its undeveloped PRB reserves in recent years, gets to be number five on the strength of several big longwall-equipped deep mines in northern West Virginia and southwest Pennsylvania.
Although the four companies that comprise the top four have changed from year to year, the rising share of production held by the top four producers continues a longer term trend that began in the 1990s with the continued expansion of mines in the PRB and with the divestment of coal properties by oil and gas companies, EIA noted. In 1990 and 1995, the top four accounted for 22% and 35%, respectively. By 2002, when total coal production levels were nearly identical to production in 2011, the top four coal producers accounted for 40% of the total U.S. production and increased to over 50% in 2011 and 2012, based on preliminary 2012 data.
In 2011, the coal production from the top four companies combined represented 27% of Appalachian production, 18% of interior production, and 77% of western production (where the PRB is located).
If measuring by the heat content of the coal produced, the top four coal producers’ share of production was about 49% (compared to the 52% share on a tonnage basis) in 2011 because of the lower Btu content of western coal. Even so, the top four producers on a Btu basis still are Peabody, Arch, Alpha, and Cloud Peak. These companies also maintain a high share of national production because of the decline in higher-Btu Appalachian coal’s share of production; in 2011, its share of total production (measured in tons) was 31%, compared to 39% in 2000.
Peabody has been the number one U.S. coal producer for decades. It expanded its production at existing mines by 56%, or 62 million tons, between 2000 and 2011, EIA said. Although most of this growth comes from the large, highly productive surface mines of the PRB, Peabody also owns mines in Arizona, New Mexico, Colorado, and it is the largest coal producer in the Illinois Basin. It spun off Patriot Coal in 2007, but that didn’t knock Peabody out of its long-held spot as the nation’s largest coal producer.
Several key mergers and acquisitions in the coal industry have occurred during the past few years. In 2009, Foundation Coal Holdings (fourth-largest producer in 2008) merged with Alpha. This jumped Alpha from being the 14th-largest producer to the fourth-largest but with 16% more production in that slot than its predecessor, Foundation Coal. Alpha then acquired Massey Energy in 2011 and its production rose by 35 million tons, or 44%, year-over-year, EIA noted. Alpha owns the Eagle Butte and Belle Ayr mines in the Wyoming PRB in addition to Appalachian mines, including the big Cumberland and Emerald longwall mines in southwest Pennsylvania.
In 2009, Rio Tinto Energy of America (RTEA)—the second-largest producer in 2008—reshuffled some production by divesting itself of the Jacobs Ranch mine in Wyoming, selling it to Arch Coal, which then merged the mine into its neighboring Black Thunder operation, creating a mega-mine. This move allowed Arch Coal, an eastern and western coal producer, to solidify its second-place position in 2009, although it had been in the top four since 1998 when it first acquired PRB mines, EIA noted. Arch in 2011 also acquired International Coal Group, which really didn’t change its position in these national rankings. On the other hand, Arch recently sold its Utah coal mines.
Cloud Peak Energy—unlike the others exclusively a PRB coal company—was also spun off from RTEA in 2009 and entered the top four, where it has remained with its three PRB mines.