And ironically it is US President Barack Obama’s home state, Illinois, that has the second biggest reserves of coal in the US – 104 billion tonnes – which the Energy Information Administration says is enough to power the US for 163 years at this year’s consumption levels.
A number Environmental Protection Agency rules and federal laws forcing utilities to install scrubbers in their power plants mean they are hot for Illinois Basin coal, which has greater sulphur content than other coals, costs less and has a higher heat content.
Subsequently, demand from the basin has climbed to its highest level last year since 1990.
The irony was best summed up last week by Foresight Energy LP CEO Mike Beyer at his company’s Viking mine in Macedonia, Illinois: “Here we are growing while the industry is shrinking. The market is not going away. It’s not going to zero.”
That it is surging as opposed to 1990 is no surprise, given the Clean Air Act has expanded since then, placing limits on sulphur dioxide emissions that cause acid rain. These contaminants have to be removed with scrubbers.
The market is responding to this unexpected boost for Illinois coal, with St Louis-based Foresight stunning the market by raising $US350 million ($A324 million) on the New York Stock Exchange by issuing 17.5 million shares, valuing the company at about $2.6 billion in June.
This came just two weeks after the EPA’s proposal to cut emissions at existing power plants by 30% by 2030 from 2005 levels; and amid the perceived threat by the booming US shale industry.
Early signs are that the company was right to bet it could evade other miners’ fate, courtesy of its large, thick seams of coal in Illinois that can be mined for a third of what it costs to dig up the rock Appalachia, which has suffered a spate of mine closures in recent years, including by Arch Coal and Alpha Natural Resources this year alone.
