Are we running out of coal?

One could ask several questions related to coal.

First, why ask the question? Don't we want to reduce or eliminate coal because of climate change?
Yes, we do. For better or worse, however, it's important to be realistic about the availability of coal. If we're not running out of it, we have to make a conscious decision to eliminate it, not rely on geological limits. Also, it's good to know whether or not we'll face energy shortages due to coal scarcity. If not, we have more options - if we face an emergency, we will have the option of using coal. Of course, that may be expensive and difficult to do without excessive CO2, but options are usually good to have. In that vein, we should note that if we have coal to spare it's actually easier to sequester CO2 - sequestration consumes a fair amount of energy, and if things are tight it will be much harder to pay for something whose necessity isn't obvious to all .

So, do we face limits on our coal production, as a practical matter?
No. Coal is unlike oil - we have enormous reserves, we know where they are, and in many cases there is no significant increasing marginal cost to their extraction, except for temporary costs of expansion.

Do higher energy prices raise the costs of extracting fossil fuels?

It depends on the individual case. Coal has a high E-ROI. For instance from a recent survey by Heinberg ( from http://www.theoildrum.com/node/4061 ): "Consider the case of Massey Energy Company, the nation’s fourth-largest coal company, which annually produces 40 million tons of coal using about 40 million gallons of diesel fuel—about a gallon per ton" .

That's a very high E-ROI: a gallon of diesel is about 140K BTU's, and a ton of coal is very roughly 20M (see http://www.uwsp.edu/CNR/wcee/keep/Mod1/Whatis/energyresourcetables.htm ), so that's an E-ROI about 140:1! Now, diesel costs very roughly 10x as much per BTU (reflecting it's scarcity premium), so the cost ratio isn't quite as favorable, but it's still well above 10:1. So, the price of diesel rises by $1 (roughly 25%), and the cost of coal rises by $1, or very, very roughly 2% - not a big deal. Also, we should note that coal mining (and transportation) is often electric even now (especially underground), and that it's pretty amenable to further electrification - in other words, coal mining can power itself using a small fraction of it's production.

Will higher coal prices make a substantially larger fraction of the coal available for extraction?

Yes, but only slightly higher prices are needed. Here's what Heinberg has to say: "if Montana and Illinois can resolve their production blockages, or the nation becomes so desperate for energy supplies that environmental concerns are simply swept away, then the peak will come somewhat later, while the decline will be longer, slower, and probably far dirtier.". The Montana "production blockages" he talks about are relatively trivial, and Illinois doesn't really have them. The pollution he refers to is CO2 and sulfur - the sulfur costs about 2 cents/KWH to scrub, and the CO2 might cost out at $80/ton of CO2, which IIRC would add about $30/ton of coal, should we choose to internalize this cost.

Illinois coal simply couldn't compete with Powder River coal with a 2 cent premium for sulfur scrubbing - it's as simple as that. UK and German coal became a bit more expensive, and they couldn't compete with cheap oil.

The same general rule applies to US, UK and European coal: only under Business As Usual is coal declining - people who say otherwise are misinterpreting the data. I discussed this at length with one the often-quoted authors on this subject, David Rutledge, and we came reasonably close to some kind of agreement on this. If there are serious energy shortages, the old reserve numbers will apply, for better or worse.

So, would a doubling in coal prices substantially increase recoverable coal reserves?

Yes. Now, "recoverable" is tricky: the normal distinction used by the USGS is "economically recoverable" - that includes economic assumptions, and Illinois coal (and much other coal in the world), at a slightly higher cost as discussed above, is currently uneconomic. But, that's under Business As Usual - if we have a true energy scarcity, Illinois coal will very, very quickly become economic.

What about the "Law of Receding Horizons"?
That applies only to low E-ROI sources of energy. Coal is high E-ROI, unlike Canadian bitumen (tar sands) or Colorado kerogen (oil shale). I would note that the importance of this "law" has been enormously exaggerated, as it's confused with temporary capex issues and scarcity premia, which are allocating temporarily scarce capital resources.

More coal gets extracted from the ground each year as measured in tons, but hasn't the quality declined so much that net energy content is lower now than 10 years ago?

Powder River coal is lower energy density (sub-bituminous), but it's sufficiently cheaper to mine that the difference doesn't matter. Again, this is a purely economic shift from Illinois coal, which is higher energy density (bituminous). This shift has caused endless confusion to analysts unfamiliar with the coal industry (OTOH, people inside the industry understand this).

Aren't coal prices rising?

In many cases, this is due to the temporary costs of expansion. Oil & gas are much more expensive per BTU due to a scarcity premium, and so demand has increased for coal. Most coal is on long-term contract, not on the higher spot market (unlike oil). But it's important to be clear that in many places, like the US, the long-term marginal cost of extraction isn't really increasing, as it is for oil.

Should we build new coal electrical generation plants?

Yes. I used to think that we should only build new plants if they included sequestration. Lately, I've started to think that that's unrealistic, given the glacial pace of development for sequestration. At the moment, much of our marginal generation comes from the very dirtiest, least efficient coal plants. It's unlikely that we'll be able to build enough wind and solar generation to replace all coal and natural gas plants for at least 25 years. New wind production will largely eliminate natural gas consumption before it affects coal. The marginal cost of NG KWH's is much greater than for coal, plus it's much easier to finetune NG production around wind's variations. Even at night, long-distance transmission will allow heavy NG users to preferentially buy wind-power (whose marginal cost will always be lower). In other words, an area with excess wind production which has zeroed out it's NG will sell the excess before turning down coal production.

Consideration should probably be given to building new, efficient coal plants to replace the least efficient coal plants - that would substantially reduce emissions, because coal will be around for a while. Now, that wouldn't make sense if we can get behind Al Gore's challenge to eliminate all CO2 emitting generation in 10 years. Gore's proposal gets it just right, but will require a lot of education and selling to the public.

Consideration should probably be given to building new, efficient coal plants to replace the least efficient coal plants - that would substantially reduce emissions. These might include underground coal gasification , which would also expand usable coal resources. Now, that wouldn't make sense if we can get behind Al Gore's latest challenge to eliminate all CO2 emitting generation in 10 years. Gore's proposal gets it just right, but will require a lot of education and selling to the public.

Is Coal-to-Liquids (CTL) feasible?

Yes, but projects tend to be large and expensive, and would be CO2 intensive. That means that investors would like federal loan guarantees, but that such guarantees are unlikely. Nevertheless, CTL is cost-effective even with fairly high carbon taxes, with oil prices at anything like the current level , and projects are slowly moving ahead . The best path would be CTL with CO2 sequestration - this would deserve guarantees.

Is oil-shale feasible?

With oil over $100/barrel, the answer is almost certainly yes. There's something like a $50T incentive there for exploitation, and somebody could make something work. In that way its similar to the Bakken basin, which may have 400B barrels of true oil, though much, much less is economically recoverable right now.

Kerogen has the advantage of not needing hydrogenation (which is needed for both tar-sands and CTL), which requires expensive natural gas or a combination of added energy and water (also a significant cost).

On the other hand Green River kerogen (mis-named oil shale) is low density, and a pain to dispose of after burning (it expands). That's why even low-value coal is more attractive for burning (which is what the Estonians do with it). That's also why retort conversion to oil (the conventional method) is unattractive, and why Shell is considering in-situ conversion instead.

Further, kerogen requires a lot of energy to upgrade - the Shell process looks very much like a very slow, inconvenient method of converting electricity to oil (kind've like ethanol, except ethanol mostly uses natural gas). All in all, it's not going to happen cheaply or at large volumes any time soon.

I wouldn't reject it, as it is extremely valuable to have diversity in energy supply, but it would be much better to concentrate on electrifying our vehicles ASAP. In other words, we can't let it distract us from the main and best solutions available to us, which are, unfortunately, inconvenient for oil & gas and car companies.