Texas' outsize role in the decline of the Powder River Basin coal industry
Download Full Report
View Press Release
Key Findings
Overall coal consumption in the U.S. fell by 26 percent from 2010 to 2015, from 1 billion tons to 740 million tons.
The decline of coal-fired power in Texas is hurting PRB coal producers, and more problems loom. The shift in Texas is of special note because Texas is the country’s largest electricity market and because Texas is a national leader in energy policy and development.
Executive Summary
Texas burns more coal for electricity generation than any state in the nation, and much of that coal comes from the Powder River Basin.
Texas historically has been the single largest customer of PRB coal. As coal-fired plants in the Lone Star State continue to close, Powder River Basin mines will lose their biggest customers.
PRB coal sales to Texas declined by 14 percent from 2010 to 2015 and have dropped even more precipitously this year: in the first five months of 2016, Texas coal purchases from the PRB declined by 48 percent compared to the first five months of 2015.
Although Texas maintained a fairly steady average of 102 million tons of thermal coal consumed annually from 2010 through 2014, its consumption dropped to 87 million tons in 2015, a 13.5 percent year-over-year drop. Texas consumption will probably continue to decline in 2016.
This decline is part of a larger national trend in which coal-fired power has lost a significant share of the U.S. electricity-generation market over the past decade, going from 51 percent in 2007 to 33 percent today. This pattern is likely to persist over the next decade, with coalfired generation falling to 20 percent.
The sharp drop in PRB sales to Texas—which is likely to continue as more coal-fired power plants experience financial distress—has major implications for several of the largest U.S. coal companies, including Peabody Energy, Alpha Natural Resources, Arch Coal, and Cloud Peak Energy, all of which operate mines on federal leases in the Powder River Basin.
Three of these companies—Peabody Energy, Alpha Natural Resources, and Arch—are currently in Chapter 11 bankruptcy. The fourth, Cloud Peak, has not declared bankruptcy but is exhibiting signs of financial distress. As these companies develop reorganization plans and seek new investors in the face of deteriorating coal markets, questions will arise as to whether there are customers for their coal.
Please view full report PDF for references and sources.
Press release: As Texas Coal-Fired Power Plants Close, Powder River Basin Mines Are Losing Their Largest Customers
