U.S. Foresees a Thinner Cushion of Coal

Every year, federal employee George Warholic calculates America's vast coal reserves the same way his predecessors have for decades: He looks up the prior year's coal-reserve estimate, subtracts the year's nationwide production and arrives at a new official tally.

Coal provides nearly one-quarter of the total energy consumed in the U.S., and by Mr. Warholic's estimate, the country has enough in the ground to last about 240 years. A belief in this nearly boundless supply has led officials to dub the U.S. the "Saudi Arabia of Coal."

But the estimate, recent findings show, may be wildly overconfident.

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The agency began with the Powder River's rich Gillette coal field, an 80-mile-long strip in northeastern Wyoming that contains the nation's 10 top-producing mines. About one-third of all coal in the country is produced there. Some 1.2 million short tons leave the field daily, a river of coal filling more than 75 trains of 125 to 150 cars each.

For the Gillette study, USGS engineers, geologists and economists spent three years analyzing data from 10,200 drill holes, the most comprehensive study ever attempted of the region. The team concluded there are 201 billion short tons of coal in the Gillette field. Environmental rules and physical challenges put much of that out of reach, leaving what they figured were 77 billion short tons of recoverable coal.

Little is presently worth mining. Analyzing coal beds that contained 82% of the Gillette deposits, the team determined that with coal selling for $10.50 a ton, the prevailing price two years ago, less than 6% of the coal could be extracted profitably enough to leave mining companies an 8% rate of return.

If Powder River prices were to hit $60 a ton in current dollars, as much as 47% could be extracted. But at that price, coal would have a tough time competing with other fuels and technologies.