Q1 2016 coal output in the U.S. falls to lowest level since 1981

The U.S. Energy Information Administration reported in the May 10 edition of its “Today in Energy” feature that coal production in the first three months of 2016 was 173 million short tons (MMst), the lowest quarterly level in the United States since a major coal strike in the second quarter of 1981.

Production in the second quarter of 1981 was 126 MMst.

Among the supply regions, coal production from the Powder River Basin in Montana and Wyoming declined the most in tonnage and percentage since the previous quarter. Wyoming, based mostly on PRB production, is the leading coal-producing state in the U.S.

Coal production has declined because of increasingly “challenging market conditions” for coal producers, EIA noted. Electricity generation accounts for more than 90% of domestic coal use. In addition to complying with environmental regulations and adapting to slower growth in electricity demand, coal-fired generators also are competing with renewables and with natural gas-fired generation during a time of historically low natural gas prices, the agency explained.

A 17% decrease in coal production from the previous quarter marked the largest quarter-over-quarter decline since the fourth quarter of 1984. Above-normal temperatures during the winter of 2015–16 were a key reason for the large decrease in coal production during the first three months of 2016. Throughout the fourth quarter of 2015, electric power plants received more coal than they consumed, leading to a net increase of 34 MMst in coal stockpiles, the highest fourth-quarter net increase on record.

High coal inventories encouraged electric power plants to consume coal from their own stockpiles in the beginning of 2016, resulting in lower new coal orders. Decreases in coal purchases have reduced overall coal rail traffic because most producers ship coal by rail. Based on data from the American Association of Railroads, coal carloads in the first three months of 2016 were about 20% lower than in the final three months of 2015.

Regionally, production from the PRB decreased the most between the fourth quarter of 2015 and the first quarter of 2016. First-quarter coal production of 69 MMst from the PRB was the lowest level since the second quarter of 1995.

The decline in coal demand is not limited to any geographic region. Texas, Michigan, Illinois, and Oklahoma accounted for an average quarterly demand of 37 MMst of PRB coal in 2015, or about 40% of the total PRB coal market. Demand for PRB coal in these four states fell to 19 MMst in the first quarter of 2016.

To illustrate the point about the PRB production fall, here is U.S. Mine Safety and Health Administration data about the basin’s two largest mines, the North Antelope Rochelle operation of Peabody Energy and Black Thunder mine of Arch Coal. Incidentally, both of these companies are in Chapter 11 bankruptcy protection. These two mines are located basically next to each other and produce a premium low-sulfur, 8,800 Btu/lb+ coal. Both have dual access to the BNSF Railway and the Union Pacific.

  • North Antelope Rochelle – Production of 20 MMst in the first quarter of this year and 30.2 MMst in the year-ago quarter. Full year production for the mine in 2015 was 109 MMst, down from 118 MMst in 2014.
  • Black Thunder – Production of 15.2 MMst in the first quarter of this year and 26.3 MMst in the year-ago quarter. The mine produced 99 MMst in all of 2015, down from 101 MMst in 2014.
About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.