Forget Oil, Coal Remains King

In an interview at Peabody's St. Louis headquarters, in his corner office facing the gleaming Gateway Arch, Chairman and CEO Gregory Boyce shrugs off any worries. He says coal is just too plentiful to be cast aside, especially with power demand soaring. He notes Peabody's coal has 50% more energy value than Exxon's oil reserves, and the USA has 27% of the world's coal, a 200-year supply.

"It's a good time to be Peabody," says Boyce, an affable man who speaks in a confident baritone. "There's not enough natural gas. There's not enough renewables (such as wind and solar energy) to go around. So I'm not concerned that coal is going to disappear. For us not to use that resource, we are just shooting ourselves in the foot."

Boyce dismisses the Sierra Club's criticism. He says Peabody backs climate-change regulation, but only after carbon-storage technology is developed; it could take at least 10 years. Otherwise, he says, consumers will be socked with added costs without any benefits.

"The U.S. economy is not healthy," he says. "The cost of electricity has only just begun to rise. Therefore, we ought to be prudent in how we go about regulation."

David Hawkins, climate-center director of the Natural Resources Defense Council, calls that "a self-defeating position" aimed at squashing regulation. Utilities, he says, won't deploy costly carbon-capture technology unless they face high fees to emit CO2.

Boyce laments that the Bush administration recently scuttled a big demonstration project to sequester CO2 called FutureGen because of its $2 billion cost. Peabody is one of 12 companies that had agreed to chip in $30 million each to FutureGen. Although Nilles says Peabody could have funded the entire project if it wished, Peabody's position is that developing such costly new technology is too risky for any one company to take on alone.

Far from phasing out coal, Boyce wants to expand use of "clean coal" to solve the energy crisis. "Clean coal" would be scrubbed free of CO2 thanks to carbon-capture technology. Peabody kicked in about $9 million this year to an ad campaign touting "clean coal." Boyce is leading a push for coal that's turned into a liquid — with part of its CO2 captured in the process — to replace gasoline for vehicles and gasified coal to supplant natural gas, though environmentalists criticize the initiatives.

"We wonder why we pay $4-plus for gasoline," says Boyce, moments before holding up a half-inch-long bottle filled with colorless liquid coal. "Coal has to be a big centerpiece of our energy strategy because it's our major reserve base.

"There's a perception out there that coal is dirty, and we have to change that," he adds, noting that coal plants already have cut emissions of some pollutants and boosted efficiency to slash CO2 discharges. "Black is the new green."

Thinking globally

The company was plodding along when Boyce joined as president and chief operating officer in 2003. U.S. coal demand was rising 1.3% a year, and Peabody stock was mired at about $7, adjusting for splits.

Boyce, 53, a lifelong mining executive who previously headed international coal giant Rio Tinto in London, decided to tap a ravenous appetite for coal in developing economies such as China and India. At Peabody, he led mine acquisitions in Australia, a major supplier to Asia, and opened trading offices in London and Beijing. Today, Peabody is the only U.S. coal company with overseas mines.

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