Studies find no U.S. market for Otter Creek coal

May 3, 2013

Categories: Coal, Northern Plains Resource Council

View Declining Markets for Montana Coal, the Synapse Energy Economics (pdf)>>

View Changes in the Market for Montana Powder River Basin Coal between 1986 and 2012 (pdf), by Power Consulting>>

By Northern Plains Resource Council

Two recent studies commissioned by Northern Plains Resource Council confirm the lack of domestic markets for Otter Creek coal. A detailed report by Boston-based Synapse Energy Economics and another report by Montana economist Tom Power delve into a variety of reasons why Arch Coal’s proposed Otter Creek mine would be an overseas export mine.

U.S.  demand for coal has declined by 14 percent since 2007, and according to the Synapse report, “The future of coal for U.S. power generation is uncertain at best.” Only five new coal plants were built in 2012, versus 50 plants that were retired, with many more retirements announced.

Lower natural gas prices, new environmental regulations, and higher mining and transportation costs, have hurt coal’s short- and long-term cost competitiveness. New energy efficiency is curbing increased energy demand, while renewable energy’s market share is growing as wind and solar power become cheaper. America’s coal fleet is aging, leaving decades-old power plants struggling to meet emission standards that are aimed at protecting public health.

Beyond the general economic case against coal, Otter Creek coal has an additional unique disadvantage – it is up to seven times higher in sodium than coal from the southern Powder River Basin in Wyoming. Because sodium causes slagging problems at power plants, demand is weak for high-sodium coal, and the few power plants that would take high-sodium coal are particularly on the chopping block. Already, seven of 10 prospective buyers of Otter Creek coal have announced plant retirements or conversion to natural gas or biomass.

The Power report also documents that the market for Tongue River Valley coal has changed dramatically between 1986 and 2012.

The case is clear – Otter Creek coal would be bound for Asian markets.

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