US coal use falling fast; utilities switch to gas

Jonathan Fahey, Associated Press, New York | Wed, 06/13/2012
America is shoveling coal to the sidelines.

The fuel that powered the U.S. from the industrial revolution into the iPhone era is being pushed aside as utilities switch to cleaner and cheaper alternatives.

The share of U.S. electricity that comes from coal is forecast to fall below 40 percent for the year — the lowest level since the government began collecting this data in 1949. Four years ago, it was 50 percent. By the end of this decade, it is likely to be near 30 percent.

"The peak has passed," says Jone-Lin Wang, head of Global Power for the energy research firm IHS CERA.

Utilities are aggressively ditching coal in favor of natural gas, which has become cheaper as supplies grow. Natural gas has other advantages over coal: It produces far fewer emissions of toxic chemicals and gases that contribute to climate change, key attributes as tougher environmental rules go into effect.

Natural gas will be used to produce 29 percent of the country's electricity this year, up from 20 percent in 2008. Nuclear accounts for 20 percent. Hydroelectric, wind, solar and other renewables make up the rest.

The shift from coal is reverberating across Appalachia, where mining companies are laying off workers and cutting production. Utilities across the country are grappling with how to store growing piles of unused coal. And legal disputes are breaking out as they try to cancel contracts and defer deliveries:

— Mining company Alpha Natural Resources of Bristol, Virginia, plans to produce 11.5 million fewer tons of coal this year, a decline of 11 percent, because so many customers have requested deferrals. The company has announced that 12 mining operations in Kentucky and West Virginia will be idled or slowed, and 353 jobs cut.

— Patriot Coal, a mining company based in St. Louis, closed a mine in Kentucky, idled several others in Kentucky and West Virginia, and has cut 1,000 jobs. The company's stock has fallen below $2, down from nearly $25 a year ago, and the company's CEO, Richard Whiting, was replaced at the end of May.

— GenOn, a wholesale power producer based in Houston, has invoked a legal clause typically used after natural disasters to try to stop suppliers from delivering more coal to already overloaded plants. "We just can't physically take it right now," says GenOn CEO Edward Muller.

Coal has dominated the U.S. power industry for so long because it's a cheap and abundant domestic resource. The U.S. is the world's second-largest coal producer after China, and it has the world's biggest reserves — enough to last more than 200 years.