Fredrick D.

Palmer
Senior Vice President Government Relations
Peabody Energy

Wisconsin Public
Utilities Institute
Gas Symposium
Coal as Wisconsins Future Fuel
(Including Substitute Natural Gas)
2
The World is Turning to Coal
We believe the world is increasingly energy-short, led by
unprecedented demand from population centers and economic
hubs in Asia, the Middle East and South America
This occurs as:
Traditional energy sources are clearly constrained, requiring coal-
based alternatives
Energy-rich nations leverage political gain from their assets, and
nations urgently look to improve energy security
In this environment:
Oil, coal and gas face a greater long-term convergence,
Coals traditional regionalized nature becomes global, and
Coals compact energy form becomes an attractive source
for liquids and substitute natural gas
The world is blessed with an abundance of coal to help meet all
human energy needs
Peabodys View
3
154
129
88
46
34
0
25
50
75
100
125
150
175
1990 2000 2010 2020 2030
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G
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In 20 years, world
GDP will double
Economic Growth Requires Energy, and
Future Growth Estimates Require Coal
World GDP in Trillion 2000 Dollars
4
78
85
99
107
110
131
205
262
301
404
489
570
0
100
200
300
400
500
600
1980 1990 2000 2010 2020 2030
U.S Rest of the World
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In 20 years, world energy
consumption will increase 80%
The Rising Tide of Energy Demand
Swamps Existing Supply
1.6 Billion People Worldwide Lack Access to Electricity
5
U.N.: Access to Abundant Energy is Key to
Quality of Life and a Fundamental Right
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0 5 000 10 000 15 000 20 000
Electricity Use
H
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a
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D
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p
m
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t

I
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x

Canada
Qatar
Sweden
Finland
United
States
UAE
Mozambique
Zambia
Zimbabwe
Bangladesh
Ethiopia
South Africa
Malaysia
Argentina
Italy
India
Morocco
China
Brazil
Indonesia
Electricity Use Per Capita and the U.N. Human Development Index
Source: International Energy Agency, World Energy Outlook 2005.
Life expectancy, educational attainment
and income all correlate
with per capita energy usage
6
0
2
4
6
8
10
12
14
16
0 10 20 30 40 50
Electricity Usage per Capita

Passenger Vehicles per Capita

Source: United Nations Human Development Report; Dargay, Gately & Sumner, 2007.
Most Nations Still in Early Stages of
Modernization and Energy Use
Projections Assume Chinese Consumption Remains
Below Current Levels of Mexico for Next 25 Years
GDP Per Capita (thousand US $)
M
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P
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India
China
Brazil
Malaysia
Mexico
South Korea
Italy
UK
Australia
USA
0
10
20
30
40
50
60
70
80
90
0 5 10 15 20 25 30 35 40
UK
China
India
China
Brazil
Malaysia
Mexico
South Korea
Italy
UK
Australia
USA
V
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s

P
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1
0
0

P
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GDP Per Capita (thousand US $)
7
8.2
7.6
6.8
6.1
5.3
4.4
4
4.5
5
5.5
6
6.5
7
7.5
8
8.5
1980 1990 2000 2010 2020 2030
W
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Current U.S. population: ~ 300M
U.S. population in 2040: ~ 400M
We Need to Meet All Human Energy Needs to
Achieve World Banks Poverty-Free Dream
Population Growth Ensures Future Energy Demand
8
Reserve
Additions
Consumption
The World is Consuming More Oil Than it is
Finding; New Finds Less Prolific Than First Finds
Source: ASPO Ireland, Newsletter, August 2007; U.S. Energy Information Administration, World Petroleum Consumption, 2008; and Management
Information Services, Inc., 2008.
0
10
20
30
40
50
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2007
B
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0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Reserve
Additions
Consumption
Annual Depletion in Existing Major Oilfields is
Relentless and is At Least 3 Million Barrels a Day
9
4% Production
Fluctuation
Band
87
86
85
84
83
82
81
80
79
78
77
76
75
74
2002 2003 2004 2005 2006 2007
W
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Plateau
If they [Saudi Arabia] don't have a lot of additional oil to put on the market,
it is hard to ask somebody to do something they may not be able to do.
President George W. Bush
World Liquid Fuel Production Has Apparently
Plateaued, Saudis Notwithstanding
Source: U.S. Energy Information Administration, 2008.
10 Source: BP Statistical Review of World Energy, June 2008
More Signs of Peak: Production Drops From 2006
Levels, Including Reclassified NGL Production
World Annual Oil Production, 2002 - 2007
74.5
77.0
80.3
81.5
81.7
81.3
68
72
76
80
84
2002 2003 2004 2005 2006 2007
M
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11
Prices Say Were at Peak; Speculation Doesnt
Drive Increase, the U.S. Congress Not Withstanding
Weekly Price of West Texas Crude, 1986 - 2008
Source: U.S. Energy Information Administration, Petroleum Navigator, Spot Prices, June 2008.
0
20
40
60
80
100
120
140
J
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-
8
6

J
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8
8

J
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0

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2

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9
4

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6

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9
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12 Source: Matt Simmons, Peak Oils Investment Implications, March 7, 2008.
Matt Simmons: Supply May Fall Rapidly;
World will be Totally Different if He is Correct
By 2012, World Oil Production
May Decrease Between 7% and 31%
0
10
20
30
40
50
60
70
80
90
M
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2007 Actual
Simmons 2012
"Best Case"
Simmons 2012
"Worst Case"
13
9.2
7.8
6.7
5.7
10.8
12.7
0
2
4
6
8
10
12
14
Potential Natural Gas Demand for
Electricity Exceeds Supply
At Current Growth Rate,
Gas for U.S. Electricity
Generation Would Raise
U.S. Natural Gas
Demand by 6 tcf / Year
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2002 2007 2012 2017 2022 2027
Natural Gas for U.S. Generation
Source: Energy Information Administration Natural Gas Consumption by End Use, 2008.
14
0
2
4
6
8
10
12
14
16
18
20
22
2007 2008 2009 2010 2011 2012 2013 2014 2015
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EIA Projected Production Depletion at 32%
New
NG
Needed
Source: Energy Information Administration; EOG; CIBC World Markets.
Source: Energy Information Administration, March 2007.
Unconventional Gas Plays Will Struggle to Fill
Gap of 6 TCF/Year the Size of Texas Production
Natural Gas Depletion, Like Oil Depletion,
is a Constant
15
U.S. Natural Gas Production:
Where We Stand
From J une 30
th
Wall Street J ournal Article
16
784
1,760
1,550
1,111
934
200
400
600
800
1000
1200
1400
1600
1800
2005 2006 2007 2008 (Jan) 2008 (Feb)
B
C
F

/

Y
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a
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EIAs LNG Forecasts Falling Toward Reality
17
LNG Becomes Default Fuel for Generation
if Coal Use is Limited for Any Reason
U.S. will voluntarily cede
control of its energy future to
a foreign energy cartel
Project Energy Independence
led to a reduction of oil used
for electricity generation
LNG is global and priced off
of oil benchmarks
LNG risks:
Political
Risky regions
Physical
Security of terminals
Financial
Balance of payments
U.S. Actions in the 1970s Reduced
Use of Oil for Generation
18
Most Gas Reserves Are in the Middle East and Asia
Iran, Russia, Qatar, Algeria & Indonesia
Have Announced an LNG Cartel
LNG is a Global Commodity, Priced Off of Oil Benchmarks
It is No Different than Importing Foreign Oil
19
Expensive Natural Gas Now Limits
Usefulness of Most Gas Generating Plants
Generation Could Drain Natural Gas Storage
20
The Long Run Price of NG/LNG
in a Peak Oil World
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$70 $90 $110 $130 $150 $170 $190 $210
$9.70
$12.08
$14.76
$17.45
$20.13
$22.82
$25.50
$28.19
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H
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N
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(
$
/
M
C
F
)

Source: Adapted from "The Relationship Between Crude Oil and Natural Gas Prices," Hartley et. al, Rice University, 2007.
Price of W TI Oil in Dollars per Barrel
Oil prices are not going to come down to gas
prices but gas prices will get closer to oil
Dr. R. Bertani,
Former President of Petrobas America
21
Percentage of Wisconsins Electricity Which Comes from NG
Wisconsins Growing Dependence on
Natural Gas for Electricity
0
2
4
6
8
10
12
2002 2003 2004 2005 2006 2007
3.5
4.1 3.9
10.3
9.0
10.2
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22
Natural Gas Use for Power Generation is
Raising Prices for Wisconsin Manufacturers
$6.00
$6.50
$7.00
$7.50
$8.00
$8.50
$9.00
$9.50
$10.00
$10.50
$11.00
20
25
30
35
40
45
50
55
60
2003 2004 2005 2006 2007 2008
P
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f
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(
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Consumption of NG for Power Plants Price of NG for Industrial Firms
23
What the Continuing Dash to Gas
Means for Wisconsin Electricity Rates
2000
2500
3000
3500
4000
4500
5000
5500
6000
6500
6
6.25
6.5
6.75
7
7.25
7.5
7.75
8
8.25
8.5
8.75
2002 2003 2004 2005 2006 2007
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Price of Electricity Electric Generation from NG
Since 2002, the price of
NG in Wisconsin has
increased 70% for
families and 100% for
industry*
Since 2002, NG prices
in Wisconsin have increased
70% for families
and 100% for industry

Source: Energy Information Administration, through April 2008.
24
By 2015 Wisconsin Will Pay Substantially
More for NG to Produce Electricity
0
200
400
600
800
1000
1200
1400
1600
2002 2007 $100 $125 $150 $175 $200
76
392
793
976
1,200
1,400
1,600
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Price of Oil/Barrel; (Price of NG)
(Actual Cost) *(13) *(16) *(20) *(23) *(27)
*Amount paid by Wisconsin to generate electricity as NG approaches oil parity
25
Wisconsins Coal Prices for Electricity
are Lower, More Stable than NG Prices
2.91
4.44
4.73
3.54
5.82
6.39
8.62
7.26
7.41
8.88
1.02 1.02 1.05
1.12
1.28
1.36*
1.54* 1.69* 1.77* 1.73
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
NG Coal
Source: Energy Information Administration, U.S. Price 2008.
26
Coal Continues as
Worlds Fastest Growing Fuel
Five-Year Change in Global Energy Consumption
Source: BP Statistical Review of World Energy, June 2007.
0 5 10 15 20 25 30
30%
2
0
0
1

-

2
0
0
6

C
h
a
n
g
e

16%
9%
15%
4%
Coal
Natural Gas
Oil
Hydro
Nuclear

Compound Annual
Growth Rate
0.8%

1.7%

2.9%

3.1%

5.3%
Seaborne Coal Demand Growing 7% Annually
27
+456
+3,114
+137
+22
+763
Growth through 2030. Amounts in million short tons.
Source: U.S. Department of Energy, Energy Information Administration, International Energy Outlook 2006. International Energy Agency.
Projected Australia export flow for 2004-2030.
EIA/IEA Expected Coal Demand Increase
of 4.5 Billion TPY in 2030 to 11 Billion TPY
Platts: 660,000 MW of New Coal Plants in 75 Countries
with Coal Use of 2.3 Billion TPY within 10 Years
Power Demand Driving Global Coal Growth
28
The Resource: 27% of the Worlds Coal is in the United States
250 Billion Tons of Recoverable Coal
Coal: Homegrown Energy Abundance
in a World of Energy Shortfalls
29
NCC Sees Coal Converted to
Natural Gas, Other Energy Sources
Study determined that clean coal technologies are
available to turn abundant U.S. coal into multiple
energy forms including electricity, natural gas,
transportation fuels and hydrogen
By 2025, new capital investments of $515 billion
(present value of $350 billion) in Btu Conversion
technologies would create:
100 GW in new generation capacity
4 TCF of coal-to-natural-gas facilities
2.6 million barrels per day of coal-to-liquids
U.S. coal production would more than double to
2.4 billion tons of coal per year
Millions of high-paying jobs created nationwide in
a new energy manufacturing industry
March 2006 conclusions reaffirmed in latest study
The Urgency of Sustainable Coal
30
Peabody Partnering with ConocoPhillips on
New Coal-to-Natural Gas Facility
Feasibility study for mine-mouth facility under way
$250 million in incentives available from Kentucky
Annual production of 50 to 70 billion cubic feet of pipeline-
quality synthetic natural gas
~1.5 tcf in the first 30 years of production
3.5 million tons annually of Peabody coal and petcoke
Carbon capture ready


Major Commitment from Leading Global Oil & Gas Company
31
Latest Example of Clean Energy
Investments: GreatPoint Energy
BTU has investment in
GreatPoint Energy that
markets proprietary
bluegas
TM
technology
Process converts coal into
clean natural gas with
carbon storage
Technology being advanced
to commercial scale;
Massachusetts pilot demo
under way

GreatPoint Bluegas Demonstration Facility
32
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.
33
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 CTLs 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 much
better footprint than LNG.

Coal-to-Electricity New supercritical clean
coal plants emit 15% less CO
2
. FutureGen and
GreenGen would have near-zero emissions.
34
Peabody is the Global Leader
in Clean Coal Solutions
BTU is the only
non-Chinese equity
partner in GreenGen,
Chinas centerpiece
commercial climate
initiative
BTU is a long-
standing supporter
of the Vision 21
and FutureGen
clean coal projects
BTU is a member of
Australias COAL21
Fund to advance
near-zero emissions
through technologies
such as oxyfuel
Advancing Signature Climate Projects in U.S., China and Australia
Fredrick D. Palmer
Senior Vice President Government Relations
Peabody Energy

Wisconsin Public
Utilities Institute
Gas Symposium
Coal as Wisconsins Future Fuel
(Including Substitute Natural Gas)