1

The Official Launch of Gasification 3.0The Official Launch of Gasification 3.0

2006 Gasification Technologies Conference2006 Gasification Technologies ConferenceOctober 2, 2006

Gregory H. BoycePresident andChief Executive Officer Peabody EnergyNYSE: BTU

2

The Official Launch of Gasification 3.0

TOWN GAS

1.0

NICHE USE

2.0

WIDESPREADAPPLICATIONS

3.0

1880s - 1920s - 2010 -

3

The Official Launch of Gasification 3.0

●How do we enhance energy security?

●How do we increase electricity supply?

●How do we manage CO2?

Gasification is an Answer to Three Key QuestionsGasification is an Answer to Three Key Questions

Peabody a LongPeabody a Long--Standing Supporter of Gasification Standing Supporter of Gasification

4

The Resource: 27% of the World’s Coal is in the United StatesThe Resource: 27% of the World’s Coal is in the United States

U.S. is Home to 27%of World’s Coal Reserves

5

CTL and CTG Technologies Expand Markets for Coal

STEELELECTRICITY

INDUSTRIAL GAS

PIPELINE SYNGAS

SPECIALTYCHEMICALS

ETHANOL

DIESEL

JET FUELHYDROGEN

6

U.S. Long-Term Coal Demand Enhanced by CTL and CTG

Coal Demand Coal-to-Liquids

2005 U.S. Coal Demand

2030 Coal Demand (EIA)

2030 Coal Demand (NCC)

2030 Coal Demand (EIA / SSEB)

1.1 billion

1.8 billion

2.4 billion2.5 billion

U.S. Coal Demand U.S. Coal Demand

Source: U.S. Energy Information Agency 2030 projections include 190 million tons per year for coal to liquids; Southern States Energy Board July 2006 Report calls for 1.0 billion tons of coal-to-liquids; National Coal Council April 2006 Report calls for 2.4 billion tons per year of coal used for multiple uses including clean electricity, coal to gas and coal to liquids. (Peabody was a participant in the NCC and SSEB Reports.)

Opportunities

Tons

7

● SSEB calls for 5.6 million barrels per day of oil from U.S. coal

● Bipartisan council includes governors and select legislators from 16 states and two territories

● Would require an additional 1 billion tons per year of production

Southern States Energy Board Sees Coal Converted to Transportation Fuels

8

NCC Sees Coal Converted toNatural Gas, Other Energy Sources

● Study: Technologies available to turn abundant U.S. coal into electricity, natural gas, transportation fuels, hydrogen and other energy forms

● By 2025, new capital investments of $515 billion 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

9

NCC Study: Greater Coal Use Translates into Enormous Benefits

● Huge Benefits from Btu Conversion – Energy prices would be reduced by nearly

33% from business-as-usual case– GDP more than $600 billion higher – NPV of $3 trillion ($4 trillion with EOR)– Employment increased by 1.4 million

● Major upside to energy security

10

“Our abundant coal reserves could do even more to meet our nation’s energy needs. One of the most exciting areas is the technology for turning coal into diesel and jet fuel.”Samuel Bodman

Secretary ofEnergy

"Why wouldn’t we create an economic engine that will take us into the next century, and let those sheiks and dictators and rats and crooks from all over the world boil in their own oil?"

Brian Schweitzer Governor of

Montana

“Instead of becoming more dependent on the Middle East for our fuels, we can increase our dependency on Middle America, and that makes sense to me. I call for an American Energy Harvest.”

Ed Rendell Governor of

Pennsylvania

"We can't drill our way out of this crisis, and the situation can only be solved by turning to alternative energy sources, like gas made from coal. Within a decade, if America puts its mind to it, we could be independent of foreign oil."

Sen. Bill Nelson Florida

Coal Use and Gasification Increasingly Earning Bipartisan Support

11

Power Systems Development Facility Begun

Peabody a Long-Standing Supporter of Clean Coal Technologies

Power Systems Development Facility

Thoroughbred Energy Campus

Prairie State Energy Campus

FutureGen Founding Partner

EPIC Industrial Syngas Plants

Coal-Pipeline Quality Gas Plant

Coal-to-Liquid Sites with Rentech

February 1997

February 2001

October 2001

December 2005

October 2005

November 2005

July 2006

12

FutureGen: Advancing Gasification, Clean Coal and New Markets

● Peabody Energy● American Electric

Power● Anglo American● BHP Billiton● China Huaneng

Group● CONSOL Energy● Foundation Coal● Kennecott

Energy● PPL Corporation● Southern

Company

FutureGen Alliance

Investments of $250 Million from Industry andInvestments of $250 Million from Industry and$700 Million from U.S. and India Governments $700 Million from U.S. and India Governments

13

0 100 200

Continental U.S. Proven Oil Reserves

121.5

184.9Peabody’s Proven and Probable Coal Reserves

Continental U.S. Natural Gas Reserves

Largest U.S. Oil Company

160.2

108.3

Energy Value in Quadrillion BtusEnergy Value in Quadrillion Btus

BTU Has 30 100+ MillionBTU Has 30 100+ Million--Ton Sites to Fuel Generation / Btu ConversionTon Sites to Fuel Generation / Btu Conversion

Largest U.S. Natural Gas Company 14.6

Source: 2004 annual reports for selected energy companies, Energy Information Administration’s U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves.

Peabody’s Energy Reserves Are Unmatched

14

Peabody Poised for HighShare of Btu Conversion Success

● Largest reserve base in key basins

● Mega-sites for gasification projects

● Permitting and development expertise

● Capable partner for technology leaders

● Global expansion & joint venture potential

Leading Partner for Large ProjectsLeading Partner for Large Projects

15

GasificationInformation Campaign:

Coal CanDo That

16

The Official Launch of Gasification 3.0The Official Launch of Gasification 3.0

2006 Gasification Technologies Conference2006 Gasification Technologies ConferenceOctober 2, 2006

Gregory H. BoycePresident andChief Executive Officer Peabody EnergyNYSE: BTU