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July 9, 2013

IER Senior Fellows Testifies on Benefits of U.S. Coal Production

July 9, 2013
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WASHINGTON D.C. — IER Distinguished Senior Fellow Mary Hutzler will testify today at 2:00 PM ET before the House Natural Resources Subcommittee on Energy and Mineral Resources. Hutzler will discuss the benefits of America’s vast coal reserves and how federal policies are restricting the production of these resources. The text  of her introductory remarks, as prepared for delivery, follows:

Coal is the world’s most abundant fossil fuel, and America’s known coal reserves – 261 billion tons – constitute 27 percent of the entire world’s coal reserves. We are the Saudi Arabia of coal with more than 1½ times the reserves of our nearest competitor, Russia, and more than twice the reserves of China. If you include our “in-place” resources, the United States has enough coal to last 9000 years at today’s consumption rate.

The prospect for utilizing this vast domestic resource should be great. From providing low-cost electricity to nearly 40 percent of American homes and businesses to innovative coal-to-liquid fuels technology that can provide gasoline, diesel and jet fuel, we have yet to experience the full benefit of America’s coal reserves.

Some have speculated that coal’s decline in the United States reflects a global trend away from this energy-dense fuel source.

The facts, however, do not bear this out.

While U.S. coal production and consumption have gone down in recent years, coal’s share of world energy consumption has increased to 29.9 percent in 2012, the highest since 1970. China’s coal use alone has grown by over 40 percent in the last decade and presently constitutes almost 70 percent of China’s energy consumption.

Similarly, Western European countries like Germany – which have implemented policies in the past to restrict the use of coal – are now realizing that such policies have handicapped economic development and failed to achieve the purported environmental benefits.  The Germans are building coal-fired power plants to replace retiring nuclear plants and to back-up intermittent renewable technologies.

To fuel these plants, countries are looking to the United States, where coal exports were 17 percent higher in 2012 than in 2011. The Energy Information Administration projects that coal exports will continue at recent levels as the U.S. supplies our trade partners in China, the United Kingdom, South Korea, and Brazil. The greatest portion of that supply will come from places like the Powder River Basin, which accounts for more than two-fifths of all coal mined in the United States.

Yet unlike other coal-rich areas of the United States, the Powder River Basin is almost entirely under federal control.  Only 1.5 percent of federal unleased lands have been determined to be available for coal production under standard government lease terms.

As a result, the American taxpayer is losing an immense benefit to the federal treasury and our overall economy. If we evaluated the entire amount of federally-owned coal that could be leased in the lower 48 at an average price of $15 per ton for the subbituminous coal and $35 per ton for the remainder of the federal lower 48 coal, the worth of that resource would be approximately $22.5 trillion to the economy.

These figures do not take into account the vast coal resources in Alaska, which has more coal in place than the entire lower 48 states.

Many see coal’s problems as environmental. Yet, coal has made significant strides environmentally.

According to the EPA, since 1970, the total emissions of the six criteria pollutants have declined by 68 percent, even though our coal consumption has nearly doubled. Due to technological advances, coal-fired power plants are becoming even cleaner and air quality is continuing to improve.

Despite these advances and the opportunity to lead the world in advanced coal technologies, the White House announced last month a new agenda to impose even further restrictions on the use of coal in the United States. Those restrictions would require technology that is not currently commercially available. Some have labeled this plan the Industrial Counterrevolution. In the end, jobs will suffer in nearly every sector – from mining to transportation to our utilities.

Finally, some believe that low cost natural gas has priced coal out of the market. However, production costs for coal-fired electricity in 2012 at 3.27 cents per kilowatt hour were slightly lower than that for natural gas.

It should be noted, of course, that while natural gas prices are currently low, gas-directed rig activity is also very low. This could impact future supplies, resulting in higher costs. Also, natural gas production on federal lands – much like coal – is also on a downturn.

Coal production on federal and Indian lands is down 9 percent from its peak level in 2008. Fewer coal lease sales have taken place on federal lands on average during the Obama administration than during the prior two administrations.

Yet, coal revenues were the largest ever in FY2012. Taking Asian and European markets as an example, U.S. policymakers should consider the vast benefits our domestic coal resources can provide to our own economy and adopt more sensible policies to harness this resource both responsibly and efficiently.

A true “all of the above” energy strategy cannot dismiss the tremendous benefit that U.S. coal offers to both our own nation and the world.

Thank you for the opportunity to testify today.

 

To read the full testimony, click here (PDF).

To watch the hearing live, click here.

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