Coal production in the United States is expected to increase slightly in both 2017 and 2018, reversing recent declines, primarily because of rising natural gas prices, according to a new report by the U.S. Energy Information Administration (EIA).
The federal agency’s short-term energy outlook, issued in early February, said coal output in the nation totaled 739 million tons in 2016, an 18% decline from 2015 and the lowest level of coal production since 1978. Nowhere was this decrease more pronounced than in Kentucky, once the leading coal producer in the U.S. Kentucky’s coalfields are located in both the high-sulfur Illinois Basin (ILB) in western Kentucky and Central Appalachia in eastern Kentucky. The 42.6 million tons of coal mined in the commonwealth last year was its lowest yearly total since 1939.
As the EIA noted, the vast majority of coal produced in the U.S. is used to generate electricity, with smaller amounts of metallurgical coal marketed domestically and overseas for steel production. As a result, coal production and coal-fired electricity generation are closely connected. In recent years, coal production has been hurt by utilities switching from coal to gas to take advantage of historically low natural gas prices. But with average gas prices forecast to climb well past $3/MMBtu over the next two years, “coal is expected to regain some of the electricity generation mix, and coal production is expected to increase slightly,” said the EIA.