Society of Petroleum Engineers 6200 North Central Expressway Dallas, Texas 75206

THIS PAPER IS SUBJECT TO CORRECTION

American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc.

Abstract

To meet marginal energy requirements of the next 15 or 20 years, the US has only three viable alternatives . . . imported oil, nuclear energy, and coal. Imports are vulnerable to supply interruptions at the hands of foreign governments, and they present balance of payments problems. present balance of payments problems. Nuclear energy continues to face delays from financing, siting, and environmental problems. While increased coal usage also problems. While increased coal usage also faces specific problems, the US has about half the free world's reserves, and it is believed coal will increase its share of total US energy supply from 18% now to 25% in 1990, while oil and gas decline from 74% to 58%. To meet this demand, coal production must more than double by 1990, production must more than double by 1990, even with a three-fold increase in nuclear capacity. Much of the increased coal must come from the West because it is generally lower in sulfur content and less expensive to mine. In this 15-year time frame, western coal production is expected to increase almost six-fold.

Western coal faces all of the usual complexities of large-scale development in a frontier environment. . . limited infrastructure, severe sociological impacts, unfamiliar and uncertain marketing prospects. But in the West, all of the "usual" frontier uncertainties are surpassed by the uncertainties of government . . . legislation, regulation, and litigation. Eighty percent of western coal is directly affected by federal policy. Can leases be secured under federal leasing regulations? Can coal be mined under the various environmental laws? Can coal be used under the Clean Air Act? Can the consumer afford to buy the coal after it has traversed this expensive maze? These are but a few of the uncertainties facing the investor in western coal.

Higher energy prices have made coal more competitive among the viable alternatives for the marginal fuel market, and the economic foundation for significant growth in coal is being formed. Moreover, the added economic stimulus will promote new technology. It is our view that western coal is too important a national resource not to get on with its development during a period when our nation is experiencing a growing shortfall in meeting its energy needs. By the same token, now is not the time to legislate out of the business those investors whose skilled manpower, financial resources, and management capability are ideally suited to the development of coal for direct use as well as the technology for its conversion to synthetic fuels.

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