Wholesale (spot) coal prices across all basins fell during the first half of 2012 before stabilizing in the latter half of the year, according to an Energy Information Agency (EIA) report. Competition between natural gas and coal for electric power generation drove price declines in the Appalachian and Powder River Basins (PRB), two key sources for thermal coal, through the summer, according to the report. Also, mild temperatures in the winter and high stockpiles at electric power plants limited demand for more purchases of coal in the second half of 2012, the report added. While spot prices fell across the country, the Appalachian and Powder River Basins were affected the most, the report said. “With new competition from Illinois Basin and ongoing natural gas displacement, annual average Central and Northern Appalachia prices reflected their most significant declines since 2009, falling 18 percent and 14 percent, respectively, from 2011,” the report stated. “Average annual PRB spot prices for 2012 fell almost 30 percent compared to 2011. Illinois Basin coal prices declined just 5 percent, partially offset by a 9 percent increase in production because of robust demand for the low-cost, high-sulfur coal from the region.” The report went on to say that U.S. coal production, down almost 7 percent, fell almost everywhere. “Central Appalachia production decreased significantly, down 16 percent, followed by a 9 percent production decline in PRB,” it stated. “By contrast, coal production volumes in the Illinois Basin rose above its five-year range, up 9 percent from 2011.” Electric utility scrubber additions to meet proposed U.S. EPA regulations limiting sulfur dioxide (SO2) emissions underpinned much of the increasing demand for Illinois Basin's low-cost, but high-sulfur coal, according to the report. “With a scrubber in place, a plant using high-sulfur coal can reduce its need to buy and surrender SO2 emissions permits by 90 percent or more compared to a plant using the same fuel without a scrubber, making Illinois Basin coal much more competitive, especially against Central Appalachia which previously could rely on its low sulfur content as a competitive advantage,” the report stated. “In addition to its relative low cost, Illinois Basin coal is more likely to be used in larger, more efficient plants with modern pollution control equipment, helping it compete against low natural gas prices. Record exports of both thermal and metallurgical coal partially offset declines in consumption in the power sector.”