Bloomberg News

Buffett Says Coal’s Decline in U.S. to Be Gradual Yet Permanent

July 25, 2013

Coal use in the U.S. will continue to fall though the slide will be gradual as electric utilities switch to cleaner alternatives over “years and years,” billionaire Warren Buffett said at an event in Indiana this week.

“Coal will gradually decline in importance, and of course when natural gas prices get low enough you have a big switch over,” Buffett said July 22, according to a recording posted online by WFYI, a public radio station in Indianapolis.

“Coal plants are producing about 38 percent of all the electricity in the United States now,” Buffett said. “You can’t scrap that. That takes years and years and years to replace. It will be happening gradually.”

Buffett was in Indiana to open a Geico Corp. call center in Carmel, north of Indianapolis. The insurance company is owned by Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc. (B:US), as is the utility MidAmerican Energy Co. Berkshire also owns companies that use and transport coal.

Buffett didn’t immediately respond to a message left with an assistant.

Hydraulic fracturing for natural gas in shale formations has increased supplies and lowered prices for the fuel, and decreased coal’s share of electricity generation. In 2007, coal accounted for 49 percent of U.S. power production. Natural gas futures have rebounded from record lows in 2012 and are up more than 9 percent this year.

MidAmerican Energy, based in Des Moines, Iowa, generated about 45 percent of it electricity from coal at the end of 2012.

Burning Halted

The utility has since announced plans to stop burning coal at five Iowa electric generating plants in an agreement with the Sierra Club, a San Francisco-based environmental group that had threatened to sue over the plants’ emissions.

In May, the company said it would invest $1.9 billion to build more wind farms in the state.

Berkshire also owns the rail line Burlington Northern Santa Fe Corp., which ships coal from the Powder River Basin in Wyoming.

“If there was no coal moving we would not find a lot of use for some of the tracks we have,” Buffett said at Berkshire’s annual meeting in May. Should natural gas prices increase, coal use will probably go back up, he said.

Meanwhile, BNSF will continue to benefit from the rising production of oil in North Dakota, Buffett said. About 75 percent of the crude is transported by rail lines, according to the state.

“I think there will be a lot of rail usage for a lot longer,” Buffett said.

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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