According to an SNL Energy analysis of data submitted to the U.S. Energy Information Administration on Form EIA-923, deliveries of subbituminous coal to U.S. power plants totaled 699,781 billion Btu during March, compared to bituminous coal deliveries of 690,338 billion Btu. The gap between subbituminous and bituminous coal use had narrowed significantly in recent years, but subbituminous deliveries had been higher than bituminous shipments only once before on a monthly basis. That occurred in November 2007, ahead of a huge run-up in prices for bituminous coal.

Domestic subbituminous coal, which is sourced almost entirely out of the Powder River Basin in Wyoming and Montana, generally has a significantly lower heating content than bituminous coal—8,000-9,000 Btu/lb vs. 12,000-14,000 Btu/lb—but has the advantage of having a lower sulfur content, thus generating fewer emissions when it is burned. Bituminous coal, which is sourced from producing regions across the country but primarily from mines in Central and Northern Appalachia in the eastern U.S., has historically fueled the lion’s share of the nation’s electricity due to its high heating content and the proximity of bituminous coalfields to power stations in the eastern U.S. However, as federal clean air regulations have tightened, subbituminous coal has become increasingly attractive to generators looking to rein in power plant emissions. According to EIA data, of the total bituminous and subbituminous coal delivered to U.S. power plants in 2010, bituminous coal accounted for 52.5% and subbituminous coal accounted for 47.5%. Those figures are significantly different than in 2002, when bituminous coal comprised 58.5% of deliveries and subbituminous coal 41.5%.Also playing a role in the continued growth of subbituminous coal use is the continued affordability of the fuel. Since 2002, the spread between the delivered price of bituminous and subbituminous coal has gradually widened, according to SNL Energy data. In January 2002, for example, the average price of delivered bituminous coal was approximately $1.39/MMBtu, compared to $1.06/MMBtu for subbituminous coal, a gap of 33 cents/MMBtu. The gap has more than tripled since that time, as March 2011 deliveries of bituminous coal averaged $2.89/MMBtu, compared to $1.83/MMBtu, a spread of $1.06/MMBtu.

PRB coal prices have generally remained low because the massive surface mines operated in the region enable producers to keep mining costs low. The same cannot be said of bituminous coal regions, particularly Appalachia, which has struggled to keep operating expenses down due to a host of challenges, including increased regulatory costs, continued depletion of high-quality reserves and rising labor costs. These challenges have led to more volatility and higher pricing for most bituminous coals, according to SNL Energy data.

Looking at the trend on an individual company basis, numerous large bituminous coal burners have seen significant increases recently in the role subbituminous coal plays in their coal consumption mix. For example, the coal supply used by Wisconsin utility Dairyland Power Cooperative consisted of 96.4% subbituminous coal in 2010, up from 61.2% in 2007, according to EIA data. The Tennessee Valley Authority has also become increasingly reliant on PRB coal, with subbituminous deliveries accounting for 22.5% of its 2010 coal supply, compared to only 7.6% in 2007. Other generators that typically burn large amounts of bituminous coal but increased their reliance on PRB coal between 2007 and 2010 included NiSource Inc., up 13.6%; CMS Energy Corp., up 5.8%; American Electric Power Co. Inc., up 5.7%; and Constellation Energy Group Inc., up 5.4%.

Looking ahead, U.S. power companies are expected to feel even more heat on the clean-air regulatory front, which is likely to push the generating load carried by subbituminous coal even higher. The U.S. EPA recently unveiled its final Cross-State Air Pollution Rule and is drafting a rule to address mercury and other toxins—initiatives that are widely expected to force generators to rely more heavily on PRB coal. Officials with Peabody Energy, the largest coal producer in the U.S., said July 19 that if the EPA clean air rules go forward as planned, power companies are “going to require significant rebalancing of burn towards low-sulfur coal,” such as ultra-low-sulfur PRB coal products.

This article was provided courtesy of SNL Energy (; (434) 977-1600). SNL provides news, data and research on the coal industry through Web- and Excel-based platforms. Coverage includes: CME/NYMEX forward coal prices, fuel procurement analysis, transportation costs, mine production and company financial reports.