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Vol. 19, No. 8 Week of February 23, 2014
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Coal tops minerals commission wish list

Advisory group says coal provides a ready solution to high energy costs in Interior Alaska, asks lawmakers to help inform public

Shane Lasley

Mining News

Coal is an abundant and readily available solution to the high cost of energy, the bane of operating mines, minerals development projects and residents in Interior Alaska, according to the Alaska Minerals Commission.

“We always hear about (natural) gas and we always hear about oil, but one of the things that has been taking the back seat is coal,” Alaska Minerals Commission Chairman Bill Jeffries informed Alaska legislators during a Feb. 5 presentation.

The minerals commission is mandated to make recommendations to Alaska’s governor and legislature on ways to mitigate restraints on the development of the state’s minerals and coal.

“State support for the coal industry as an integral part of the state’s overall energy strategy and for coal’s value as an export asset” topped the commission’s 2014 wish list.

Coal-generated electricity runs about one-sixth the cost of diesel and less than half the cost of natural gas-fired power in Interior Alaska, according to figures provided by Golden Valley Electric Association, the electrical utility for Interior Alaska. Despite the price differential, less than a third of the power in the region is fueled by coal.

This discrepancy is not due to a lack of good quality coal.

The United States Geological Survey estimates that Alaska hosts more than 6 trillion short tons of coal resources, enough to last the United States some 5,400 years at today’s consumption levels. While much of this coal may never be economically viable to mine, Usibelli Coal Mine has an estimated 700 million tons of coal reserves located along the railway about 100 miles south of Fairbanks.

These reserves of low-sulfur sub-bituminous coal could fuel Interior Alaska’s current electrical needs for roughly 200 years.

Jefferies told lawmakers that coal as a low-cost and abundant fuel source “is something we really need to take advantage of and start exploiting.”

While an undeniably inexpensive and abundant fuel source in Alaska, coal has become a dirty word to many worried about the effects of coal-fired power generation on the climate.

The Alaska Minerals Commission says this perception does not reflect the reality of modern coal-fired power plants.

According to figures compiled by the minerals commission, while coal use has tripled, emissions of dangerous pollutants from coal-based electricity generation have decreased by nearly 40 percent since the 1970s.

The Alaska Minerals Commission has asked for the state’s help in informing the public about the environmental strides that have been made in utilizing the abundant and low-cost fuel source.

“I think everybody is aware that there is a perceived war on coal, but what we are not hearing is the strides the coal industry has made in cleaning up emissions from coal-fired plants,” Jefferies told the lawmakers.

Getting off of oil

At US17 cents per kilowatt-hour, naphtha, a gasoline-like petroleum product produced at Flint Hills Resources Alaska’s refinery in North Pole, accounts for 30 percent of power generation in the Interior. Diesel, another product of the refinery, fuels another 13 percent of the electricity at around US30 cents per kw/h.

On Feb. 3, Flint Hills announced that it will close the refinery by June 1, cutting off the local fuel supply for the 180 megawatts of power generation at GVEA’s North Pole power plants.

Golden Valley is seeking other sources of fuel for its naphtha- and diesel-fired generators. The cost of this alternative source of fuel will determine to what extent the refinery’s closing will affect the price of electricity delivered to GVEA’s Interior Alaska customers.

“The cost of power is directly based on our cost of fuel, and we will be working diligently to obtain another long-term source of fuel for our North Pole units at the lowest cost possible,” the utility assured its customers in a Feb. 4 statement.

Golden Valley informed customers that it is actively pursuing the development of a natural gas trucking operation from the North Slope. Once enough of the cleaner burning fuel is available, the Interior Alaska utility could convert its diesel and naphtha generation facilities in North Pole, with a combined 180 MW of electrical generation capacity, to natural gas.

“We have been working our way off oil for a long time,” said GVEA Chairman Bill Nordmark. “This just gives us more motivation to complete the projects we’ve started.”

Roughly 18 percent of Golden Valley electricity in 2012 was generated at natural gas-fired power plants in Southcentral Alaska. At US11 cents per kWh, natural gas-generated power costs about twice that derived from coal but substantially less than the cost of power from naphtha and nearly a third that of diesel.

Healy Clean Coal

In addition to natural gas, GVEA has been endeavoring to add more coal to the mix, a move the Interior Alaska utility expects to help stabilize electricity rates, which have fluctuated with the oil market over the past several years.

Currently, the Usibelli Mine near Healy provides fuel for six coal-fired plants with the capacity to deliver 136 MW of electricity to Interior Alaska. At around US5 cents per kilowatt-hour, these coal-fired generators provided Golden Valley customers with by far the cheapest electricity in 2012, but it only accounted for roughly 30 percent of the region’s power needs.

In December, Golden Valley finalized the purchase of the Healy Clean Coal Power Plant from the Alaska Industrial Development and Export Authority for about US$44 million. The low emissions facility is fully built and sitting idle at the mouth of Usibelli’s Healy mine,

The Interior Alaska utility has renamed the clean coal plant Healy Unit 2, due to its proximity to the 25 MW coal-burning plant known as Healy Unit 1.

By burning low-grade Usibelli coal in stages and adding limestone, Healy Unit 2 was engineered to significantly reduce nitrogen and sulfur oxide emissions. The original construction of the clean coal facility was completed in 1997 and testing ran through 1999, but the facility has sat idle ever since.

In a trade-off agreement with the U.S. Environmental Protection Agency, GVEA has agreed invest up to US$88 million to retrofit the plant with state-of-the-art emission controls.

The electrical cooperative expects to have the low-emissions coal-fired power plant ready to provide 50 megawatts of power to the Alaska Railbelt electrical grid early in 2015.

Usibelli Coal Mines has floated the idea of a much larger mouth-of-mine coal-fired power plant, known as the Emma Creek Energy Project.

According to a plan presented to Alaska officials, the proposed 200-megawatt Emma Creek power plant would be built just north of Jumbo Dome, an 83-million-ton coal reserve recently put into operation by Usibelli.

If built, the Emma Creek power plant would burn some 1.5 million tons of coal per year from the adjacent mine and provide Alaska’s railbelt customers with an additional 1.6 million megawatt-hours per year of relatively inexpensive coal-fired electricity.

Carbon dioxide limits proposed by EPA for new fossil fuel-fired power plants though, could derail the Emma Creek project while it is still in the conceptual stage.

The Alaska Minerals Commission’s 2014 report recommends that Alaska lawmakers establish environmental policies that strike a balance between the need for affordable energy and sensible environmental protection requirements.

In addition to supporting the coal industry, the commission urged lawmakers to continue state support for development of energy and transportation infrastructure; resource education in the classroom; and litigation against federal intervention regarding the management of Alaska’s land, water and mineral resources.



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