Clean Coal: Limitless

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1 Clean Coal: Limitless Global Energy for our Future 2 ND ANNUAL INTERNATIONAL SYMPOSIUM ON ENERGY & ENVIRONMENT DECEMBER 8, 2008 Fredrick D. Palmer Senior Vice President Government Relations Peabody Energy 1

2 Clean Coal: Limitless Global Energy for our Future Key Themes The world s current energy capacity is insufficient to support sustained economic growth Global coal reserves are ubiquitous and understated Coal reserves around the globe are sufficient to provide for centuries of expanded clean coal use to allow more people to live longer and live better Carbon capture and storage is the key to unlocking the full value of coal 2

3 Peabody is the Largest Private-Sector Coal Company 250 Annual Sa ales (Tons in Millions) Rio Tinto Arch 100 Anglo-American 50 0 Foundation Xstrata Alpha Natural Massey Resources Patriot International Coal BHP Consol Reserves (Tons in Billions) Source: Most recent company reports and websites, SEC filings and Peabody analysis. Values are on a short-ton basis. Peabody sales and reserves based on 2007 data. 3

4 New Demand from Emerging Nations Clash With Realities of Tight Supply 3 Billion People Awaken to Modern Energy Use China Daily, May 28, energy supply shocks illustrate the need to more fully deploy clean coal technologies 4

5 A Rising Tide as the World Awakens to Modern Energy Electricity Usage per Capita Passenger Vehicles per Capita USA 80 USA Megaw watt Hours Per Capita Malaysia Brazil China India South Korea Mexico Australia Veh hicles Per 100 Peo ople Italy UK Malaysia India China Mexico Brazil Italy South Korea UK Australia GDP Per Capita (thousand US $) GDP Per Capita (thousand US $) Per Capita Electricity Use Just 1/8th (China) and 1/25th (India) the U.S. Level Source: United Nations Human Development Report; Dargay, Gately & Sumner,

6 Global Population Growth Trends Require Enormous New Energy Supply World Popula ation in Billio ons Current U.S. population p ~ 300 million U.S. population in 2040 ~ 400 million

7 Energy Use Improves U.N. Human Development Index Electricity Use Per Capita Argentina Italy United States Finland Sweden Canada Human Dev velopment Inde ex Brazil Indonesia Morocco India Bangladesh Zimbabwe China Zambia Mozambique Ethiopiai Malaysia South Africa UAE Qatar Life expectancy, educational attainment and income all correlate with per capita energy use ,000 10,000 15,000 20,000 Electricity Use Source: International Energy Agency, World Energy Outlook

8 Societies With Greater Access to Electricity Live Longer and Better Out of Poverty Study: Energy & Social Progress Closely Linked Survive Childhood Live Longer Drink Cleaner Water Eat Are Better Better Educated % 70% 90% Under Five Death Rate/ % 70% 90% Life Expectancy (years) 0 25% 70% 90% Access to Improved Sources (%) 0 25% 70% 90% Under- Nourished (%) 0 25% 70% 90% Literacy Rate (%) 25%, 70% and 90% average percent of population with access to electricity. 8

9 Coal s Contribution to China is Model for Developing World Electrification in China Remarkable Success Story International Energy Agency Access to electricity increased 76% GDP increased 300% Irrigated land increased 9% U.N. Human Development Index increased 22% Coal accounted for Food production index increased 88% 65% of the Strengthening the increase in energy Backbone production from Food production index increased 88% Steel production increased over 300% Concrete production increased 250% Poverty decreased 45% Undernourished population decreased 25% No access to improved sanitation decreased 27% Infant mortality declined 39% 9

10 The World is Consuming More Oil Than it is Finding New Finds Less Prolific Than First Finds Reserve Additions 40.0 Billion Barrels Per Ye ear Discovered Consumption Billion Barrels Per Year Consumed Source: ASPO Ireland, Newsletter, August 2007; U.S. Energy Information Administration, World Petroleum Consumption, 2008; and Management Information Services, Inc.,

11 Iran, Russia, Qatar, Algeria and Indonesia Have Announced an LNG Cartel Most Gas Reserves are in the Middle East and Asia LNG is a Global Commodity, Priced Off of Oil Benchmarks 11

12 The Long Run Price of NG/LNG in a Peak Oil World Oil prices are not going to come down to gas prices, but gas prices will get closer to oil. Dr. R. Bertani Former President Petrobas America Price of W TI Oil in Dollars per Barrel Source: Adapted from "The Relationship Between Crude Oil and Natural Gas Prices," Hartley et al, Rice University,

13 The World is Increasingly Turning to Clean Coal al- Based Ca apacity GW of New Co It took the United States half a century to build its coal-fueled plant fleet China will build half of U.S. capacity in just two years Anadark ko BP ConocoP Phillips Chevron Apache Shell China India Other Europe USA ROW Asia 65 ExxonMo obil Source: Data derived from Platt s Proprietary Database,

14 Coal Comprises 60% of Global Energy Resources And 85% of And 50% of U.S. Fuel Resources U.S. Electricity 50% 50 Gas 10% Oil 5% Coal 85% Pe ercent of Elect tricity Generat tion % 19% 6% 2% 2% 0 Co oal Ga as Nuclea ar Hydr ro Othe er Oil Ultimately recoverable demonstrated reserves on Btu basis. Source: USGS, National Assessment of United States Oil and Gas Resources, U.S. Coal Reserves; Energy Information Administration Monthly Energy Review, March 2008 Table 7.2b, 2007 data. 14

15 Coal Has Been the World s Fastest-Growing Fuel for Each of the Past Five Years Global Coal Demand Grows 1.5+ Billion Tons in 6 Years Nuclear 4% Compound Annual Growth Rate 0.6% Change Oil 11% 1.7% 19% Hydro 29% 2.9% Natural Gas 19% 2.9% Coal 35% 5.1% How Does the World Add 250 Million Tons of Supply Per Year? Source: BP Statistical Review of World Energy, June

16 Future World Coal Demand Growth Likely to be Greater Than the Past 12 72% Growth in World Coal Consumption (Versus 48% ) 10 Total Coal Use Billion Short Tons Emerging Economies Mature Market Economies 2 Transitional Economies Source: EIA International Energy Outlook

17 Coal Gasification, Coal-to-Liquids and Power Demand Drive Global Coal Growth EIA/IEA Expected Coal Demand Increase of 4.5 Billion TPY in 2030 to 11 Billion TPY +3,114, Platts: , MW of New Coal Plants in 75 Countries with Coal Use of 2.3 Billion TPY within 10 Years Growth through Amounts in million short tons. Source: U.S. Department of Energy, Energy Information Administration, International Energy Outlook International Energy Agency. Projected Australia export flow for

18 Clean Coal Technologies Provide the Path for Affordable & Adequate Energy Supplies Coal-to-Liquids CTL with CCS can produce better fuels at the same rate of CO 2 emissions as imported oil. Adding biomass increases cost but improves CTL s carbon footprint. Coal-to-Gas Coal can be gasified to create NG for power plants and the CO 2 can be captured and stored. SNG from coal with CCS has better footprint than LNG. Coal-to-Electricity New supercritical clean coal plants emit 15% less CO 2. FutureGen-type plants would have near-zero emissions. 18

19 The Technology Path to Near-Zero Emissions from Coal New Supercritical Plants and CCS Demonstration Essential Advanced Supercritical Combustion Plants Demonstrating ti Carbon Capture/Storage Commercial CTG/CTL with CCS Commercial IGCC with CCS Retrofitting PC Plants with CCS

20 The Enabling Technology: Carbon Storage Source: U.S. Department of Energy, Office of Fossil Energy, National Energy Technology Laboratory, Carbon Sequestration Atlas of the United States and Canada. 20

21 Dozens of Carbon Capture and Storage Projects Planned Around the World Sites which are currently injecting CO 2 Planned CCS sites. Generally plan on injecting at least 700,000 tonnes CO 2 per year Sites which have been delayed, cancelled or have completed injection Source: Scottish Centre for Carbon Storage, School of Geosciences, University of Edinburgh. 21

22 GreenGen Recognized on the World Stage for Advancing Clean Coal With CCS Partner group led by China Huaneng Group, one of the world s top 10 power companies Multi-phase commercial project includes IGCC plant with carbon capture for EOR Project quickly progressing g and leads the world advancing clean coal solutions 22

23 We ll Invest in Technology That Will Allow Us to Use More Coal President-Elect Barack Obama Administration Pledges $150 Billion Over 10 Years for Clean Energy Image Courtesy: Transplanted Mountaineer 72% of Americans support using coal to fuel electricity change we can believe in New Administration targets $15 billion in annual clean energy investments Five first-of-a-kind commercial coal plants with carbon capture and storage targeted with US U.S. Department tof fenergy Greater use of coal has tremendous U.S. support: Nearly 70% of Americans believe coal is a fuel of the future 23

24 Peabody is the Global Leader in Clean Coal Solutions Advancing Signature Climate Projects in U.S., China and Australia BTU is the only non-chinese equity partner in GreenGen, China s centerpiece commercial climate initiative BTU is a longstanding supporter of the Vision 21 BTU is a member of and FutureGen Australia s COAL21 clean coal projects Fund to advance near-zero emissions through technologies such as oxyfuel 24

25 Clean Coal: Limitless Global Energy for our Future 2 ND ANNUAL INTERNATIONAL SYMPOSIUM ON ENERGY & ENVIRONMENT DECEMBER 8, 2008 Fredrick D. Palmer Senior Vice President Government Relations Peabody Energy 25