Illinois’ Energy Economy: Coal exports can lead the way

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Illinois’ Energy Economy: Coal exports can lead the way

By David A. Kelm

President Barack Obama recently announced a new initiative to reduce the amount of carbon produced by coal-fired power plants. The president hopes to craft regulations, implemented by the United States Environmental Protection Agency, that will attempt to double the number of U.S. homes that draw power from renewable sources like wind and solar.

The president also announced his intention to increase renewable power sources on military bases and federal offices. What captured the attention of those in the energy sector, however, was the comment made by White House advisor and Harvard professor Daniel P. Schrag that the president was not launching a war on coal but “a war on coal is exactly what’s needed.”

Illinois is a “Big Coal” state. At times it is difficult to place such a label on Illinois given the high sulfur content of Illinois coal; the fact that Illinois has the largest number of nuclear reactors; and, a political climate in Illinois that follows the path set by the president. Simply put, Illinois does not fully exploit the abundant natural resources that reside in Central and Southern Illinois.

Domestically, coal is the backbone of power consumption. Coal provides Illinois and the United States with 40-43 percent of power needs on an annual basis. According to the Energy Information Administration’s most recent statistics (2011), Illinois mined 37,770 tons of coal producing 90,013 megawatts of power at an average rate of $.0897 per kilowatt hour.

Illinois hosts approximately 4,200 mine employees with 9,200 direct coal industry jobs and 39,000 indirect employees linked to the Illinois coal industry. The Illinois coal economy generated $771 million in direct labor income and $2.7 billion of indirect labor income in 2011 for Illinois families and communities.

While those numbers seem impressive, Illinois’ coal fields are virtually untapped and the contribution to Illinois’ economy should be exponentially expanded. Currently, Illinois only contributes 3 percent to total U.S. Coal production. Of that production, 15 percent is used domestically and 85 percent is exported. It is important to note, however, that the Energy Information Administration estimates there are 37.9 billion tons of recoverable coal reserves in Illinois. Much of this coal is in Central and South Central Illinois where jobs that pay an average of $78,000 per year are in high demand.

As the Obama Administration and Illinois politics continue to seek ways to stifle the domestic coal economy, Illinois and U.S. coal companies are looking to the export market with increasing success. Hal Quinn, the president and CEO of the National Mining Association, notes that increasing demand overseas is providing Illinois coal companies with reason to increase production, hire more employees and boost the Illinois economy. Importantly, Quinn said, in a recent Springfield Business Journal interview, that the new clean air changes proposed by the president will not impact coal exports.

The demand for coal in overseas markets has driven a doubling of U.S. coal exports and a five-fold increase of exports of Illinois coal since 2007. While the headlines have been filled with demand for coal from China and India, European countries are the leading market for Illinois coal and coal from other states east of the Mississippi. Approximately 70 percent of the coal from the Illinois basin heads to Europe for coal power plants with the difference heading to South America and North Africa.

The National Mining Association anticipates worldwide coal demand to grow by one billion tons by 2018. With Illinois’ unemployment rate lagging dramatically behind much of the rest of the country, it is important to note that for every million tons of coal exported 1,300 jobs are created. Springfield, Sangamon County and Central Illinois could see thousands of new jobs in direct mining positions and indirect positions in areas such as logistics and railroads with an increasing export demand for Illinois coal.

Illinois has the resources, the skilled labor market and the infrastructure to greatly increase the export of coal overseas. A small hurdle, according to Quinn is the modernization of the Panama Canal. Once the canal is widened, it will be able to handle the large coal carriers that will permit Illinois coal companies to sell to the growing Asian markets. With nearly 40 billion tons of recoverable coal, Illinois should be playing a major role in one of the only positive areas in U.S. overseas trade.

Illinois is a Big Coal state. With growing international demand for Illinois coal and with more rules and greater restrictions put in place by federal and state regulations, Illinois producers and Illinois workers must turn to export coal in order to make Illinois a Huge Coal state. Illinois’ coal exports have continued to far outpace that of other states and yet, Illinois’ coal production is hamstrung by stringent government regulations and the need for modernized infrastructure.

Illinois must continue to look overseas to grow much needed, high paying jobs here in Illinois that will lead to an improved economy and increase revenues to state and local government coffers.

kelm

 

David A. Kelm is an attorney from Chatham with experience in environmental law.

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