U.S. Geological Survey


THE USE OF HISTORICAL PRODUCTION DATA TO PREDICT FUTURE COAL PRODUCTION RATES

In mature mining areas, especially those that are a decade or more past their years of peak production, both production decline rates and reserve decline rates coupled with coal reserve estimates can be used to construct predictive production rate models. In general, to extrapolate projections from declining production rates, historical production data are entered into spread sheets and are used to calculate year-to-year growth rates (this year's production/last years production). If there is an annual increase, the value is greater than 1; if there is a decrease, the value is less than 1. Mean production decline rates (mean negative growth rates) are calculated from the data and are, in turn, used to calculate the projection. Short-term production decline rates that are calculated during a period of economic downturn are likely to be misleading, however, and their use would result in a long-term projection that declined too steeply.

For reserve decline projections, historical data are entered into a spread sheet together with a hypothetical remaining reserve estimate for the current year. The remaining reserve for each preceding year is calculated by adding the annual production, year by year, back into the reserve estimate. Reserve decline rates are then calculated by dividing each year's remaining reserve by last year's remaining reserve. The value is always less than one. A mean annual reserve decline rate is calculated for the approximately 10-year period prior to the year from which the projection is to be made. Because the decline rates generally are not linear, a rate of change is calculated and applied to the reserve decline rate; this continuously changing decline rate is used to project remaining reserves into the future. Projected annual production rates are obtained by subtracting projected annual remaining reserves, year by year, and are used to construct the graphic projection.

Pennsylvania Anthracite

The historical production curve for Pennsylvania anthracite (figs. 3A, 3B) is a classic example of a nearly normal discovery-to-depletion life cycle. The coal resource was developed in the middle of the last century and went through a 70-year long period of rapid growth until 1917, when annual production reached 99.7 million tons during World War I. Following the War, production at first declined rapidly into the years of the Depression, then rose a little to a relatively small second-cycle peak of 63.7 million tons in 1944 during World War II. Production has declined ever since to the 5 million tons or less that are currently produced annually. Even though the anthracite resource remaining in the ground is substantial, the complex geologic structure, steep terrain, and early mining of the thicker and more accessible blocks of coal preclude the use of modern mechanized equipment underground. Large-scale surface mining of shallow old works is conducted in the few places where the anthracite may be extracted profitably (Edmunds, 1995), and only 5 million tons or less are produced annually.

The historical production curve for anthracite is used herein to illustrate the use of both production decline rates and reserve decline rates to forecast future production (figs. 3A, 3B). Anthracite production declined from 99.67 million tons in 1917 to 73.8 million tons in 1929 at an annual rate of 3.56 percent (excluding data for 1922 and 1923, when declines were excessive, perhaps because of strikes). In 1917, the year of peak production, cumulative production of Pennsylvania anthracite was about 2.8 billion tons. Seventy-eight years later, cumulative production was about 5.5 billion tons, almost twice the cumulative production at the year of peak production, reflecting the near-normal distribution of the historical production curve for anthracite. Although the extrapolation cannot predict the economically driven episodes of high and low production, such as occurred during the World Wars and the Depression, the calculated production decline is generally close to the observed production decline from 1929 to the present (figs. 3A, 3B).

Reserve decline rates can also be used to construct predictive models for future coal production, even before the year of maximum production is attained (fig. 3B). The use of a reserve decline rate, by its very nature, requires a reserve estimate and is not a simple extrapolation of historical trends into the future. Reserve decline rate models, therefore, may be improved as reserve estimates are improved and are a flexible tool in iterating production rate projections.

Graph showing production decline 
projection

Figure 3A.Production decline projection: Observed (solid line) and calculated (dashed line) historical production data for Pennsylvania anthracite. The long-term production decline rate was projected from the 3.56 percent decline rate estimated from 1917 to 1929 production data. Although the calculated decline rate missed production perturbations caused by the depression (1929-1932) and World War II (1942-1945), it generally follows the observed decline curve closely.


Graph showing reserve decline 
projection

Figure 3B.- Reserve decline projection: Observed (dashed line) and calculated (solid line) historical production data for Pennsylvania anthracite. The calculation is based on a reserve estimate of 4 billion tons of anthracite in 1905 (cumulative production plus 5 mt/yr current production times 30 yr = 150 mt remaining reserves, as of 1/1/95). The initial annual reserve decline rate, from 1905 to 1906, was estimated as 1.9 percent. A rate of increase in the reserve decline rate was calculated from the geometric mean for the rate of increase for the preceding eight years as 0.082 percent per annum. Although the curve produced by using this decline rate fell short of the peak production in 1917 and missed production perturbations caused by the depression (1929-1932) and World War II (1942-1945), it generally follows the observed decline curve closely for the next 75 years.




Virginia's Bituminous Coal

Virginia has three historical mining districts of significance: the Richmond basin of Early Mesozoic age, the Valley coal fields of Mississippian age, and the southwestern coal fields of Pennsylvanian age. Only the latter, which is an extension of the great Pennsylvanian coal fields of the Appalachian Plateaus into the southwestern corner of Virginia, is of any current economic significance to the State. Because of the remoteness of the southwestern Virginia coal fields from the industrial markets of the northeast, full-scale development did not begin there until 1882 (Hibbard, 1990), much later than the first production of Pennsylvania anthracite (fig 4).


Graph showing comparison of historical 
production data for Pennsylvania anthracite and Virginia bituminous coal

Figure 4. Comparison of historical production data for Pennsylvania anthracite and Virginia bituminous coal. Production commenced much later in Virginia than in Pennsylvania and peaked at a little less than half of the maximum production for anthracite.

Declining production from major beds.--Recent trends in coal production from the major producing coal beds in Virginia are indicative of an imminent production decline for the State. Coal is currently produced from more than 50 coal beds in southwestern Virginia. Of these, 18 beds have produced about 84 percent of Virginia's coal since 1951 (table 5). Ten of these coal beds reached their year of maximum production more than 10 years ago, and the remainder attained their peak production year (thus far) 5 years or more ago. It is apparent that half or more of these coal beds will never again attain past production rates, and production from the remainder may exceed current levels only if current mine closures are offset by the opening of several additional large mines.


Table 5. Production from major coal beds in southwestern Virginia since 1972 (millions of tons).
[The six top coal beds have produced more than 90 million tons of coal each, and each of these beds is more than 6 years past peak production.]

Coal Bed Cumulative production 1951-1995 Peak Year Production 1995 production
Tiller 141.32 1972 3.65 0.33
Pocahontas #3 140.04 1990 9.86 7.31
Raven 99.63 1988 2.30 0.47
Clintwood 95.62 1985 3.79 1.51
Jawbone 93.75 1991 4.82 2.78
Upper Banner 92.75 1984 3.16 1.82
Dorchester 78.66 1987 5.10 2.31
Taggart 72.63 1973 2.73 0.96
Kennedy 68.41 1978 2.51 0.66
Blair 68.05 1980 4.19 0.70
Campbell Creek 61.29 1972 2.59 0.67
Splashdam 57.25 1987 3.51 1.99
Lower Banner 52.62 1988 1.85 0.76
Hagy 50.79 1974 1.73 0.50
Kelly 40.37 1992 1.80 1.08
Eagle 37.14 1979 2.33 0.34
Pardee 23.99 1984 1.41 0.00
Upper Standifer 23.94 1992 1.70 1.23
Total major beds: 1,298
Virginia cumulative production 1951-1995: 1,546
Percent In major beds: 84



Declining reserves at Virginia's mines.--Production decline rates are very likely to be preceded by an overall decline in the amount of coal that occurs as a proved reserve. "Recoverable coal reserves at reporting mines," as reported to EIA, (EIA, 1996) are the amounts of coal reported by industry to be economic and are likely to be proved by detailed feasibility studies. Early in the life cycle of a coal resource, during the period of rapidly increasing demand, reserves at active mines should increase because new mines are developed faster than old ones are abandoned. Later in the life cycle, reserves may be proved only as necessary to replace coal that is currently being mined. Once past peak production, however, reserves at active mines decrease because mining blocks are exhausted faster than new blocks are drilled, and old mines are closed faster than new mines are brought into production. The dramatic decline in "proved" reserves to about one-fourth of their amount within 15 years at active mines in Virginia is an additional indicator that Virginia's southwestern coal fields are well past their most productive years (fig. 5, table 6).


Table 6. Declining reserves at Virginia's coal mines (millions of tons) (EIA, 1996)
Year 77 78 79 80 81 82 83 84 85 86 87 88> 89 90 91 92 93 94 95
Reserves 789 780 788 742 815 732 537 612 575 499 508 411 420 424 412 366 >336 237 203



Graph showing declining 
coal reserves at Virginia's mines

Figure 5.- Declining coal reserves at Virginia's mines




Changing mine size distributions.--The number of mines producing more than 300,000 tons of coal annually in Virginia ranged from 10 in 1995 to 16 in 1990, 1992, and 1994. In the past several years, these few mines have produced from about one-quarter to almost one-third of the annual coal production of the State. Although overall production is currently down in Virginia, coal production from mines producing more than one million tons per year has increased significantly from 1993 to 1995 (table 7, fig. 6) as several mines in the Pocahontas #3 coal bed were brought back into production. This trend toward increased production from larger mines reflects the current long-term national trend in coal-mine size, from many small mines to fewer, larger mines that can produce greater amounts of coal more efficiently and at lower cost (EIA, 1993).


Table 7. Virginia coal production (milllions of tons) from mines producing more than 300,000 tons of coal annually, 1990-1995
Year >1,000K 500K-1,000K 300K-500K Total production from large mines Virginia annual production Percentage of large mines
1990 9.025 2.211 0.989 12.23 46.92 26.1
1991 7.337 1.659< 1.116 10.11 41.95 24.1
1992 6.766 4.985 1.395> 13.15 43.02 30.6
1993 2.847 7.167 2.846 12.86 39.32 32.7
1994 4.435 6.591 1.106 12.13 38.81 31.3
1995 7.697 1.203 1.004 9.90 34.10 29.0



Graph showing coal production from mines 
producing more than 300,000 tons of coal annually

Figure 6. Coal production from mines producing more than 300,000 tons of coal annually.




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For more information, please contact Robert C. Milici
Last revised 9-16-97 (Kathie Watson)