Don’t count coal out yet

‘Dirty’ fuel used in the past may be key to clean, bright future on peninsula

Posted: Friday, February 17, 2006


  Alaska Railroad locomotives pull empty coal cars north after delivering product to a ship in Seward several years ago. Agrium's Nikiski fertilizer plant is looking at coal as a possible replacement for some of its dwindling natural gas supplies. Photo by M. Scott Moon

Alaska Railroad locomotives pull empty coal cars north after delivering product to a ship in Seward several years ago. Agrium's Nikiski fertilizer plant is looking at coal as a possible replacement for some of its dwindling natural gas supplies.

Photo by M. Scott Moon

With natural gas prices increasing, many on the Kenai Peninsula are looking toward the past for future energy needs.

Much as coal reasserted itself as a possible fuel source during the energy crisis of the 1970s, the dirty black rock is becoming more and more enticing to Cook Inlet developers and energy merchants as natural gas reserves are depleted.

Anticipating natural gas shortages, Enstar is pushing for a spur line connecting Southcentral to North Slope and Nenana Basin gas. Even so, the price of gas is expected to keep increasing.

When speaking of this year’s increase in cost per kilowatt hour for Homer Electric Association customers in January, HEA spokesman Joe Gallagher said steep natural gas price increases were the main culprit. HEA buys the lion’s share of its power from Chugach Electric, which relies on natural gas-generated power for its own supplies. HEA wants to look into coal-generated power in the future, Gallagher said.

“We’re looking at the possibility of putting (the Healy Clean Coal Plant) into operation,” he said. “It would diversify our power options.”

Dave Carey, who serves as the president of the HEA Board of Directors, said putting the Healy Clean Coal plant into operation using coal from the Usibelli mine would put HEA in a position to expand those options because the utility could operate the plant and sell the power to other groups for resale to HEA, like Chugach Electric.

“It’s not like we’re going to bring Healy power down here,” Carey said.

Coal could be an attractive alternative for the peninsula in particular due to the close proximity of the Beluga coal fields. The fields are just across the Cook Inlet and contain hundreds of years worth of proven reserves of low-sulfur coal, making it one of the world’s largest known sources.

The Chuitna Coal Project, an undertaking by Texas-based PacRim Coal, aims to open the fields and start sending coal to Asia by 2009, if the required infrastructure can start coming together in 2007.

Infrastructure, in this case, means building a surface mining operation capable of extracting between 3 million and 12 million tons of coal annually. Usibelli currently produces 1.1 million metric tons per year. If Healy opens and Usibelli ups its production, the plant still will produce less coal than a Beluga mine would be capable of.

Opening a coal mine is difficult because of the sensitive environmental, health and safety issues involved. As recent tragedies in West Virginia demonstrate, coal mining can put lives at risk. Pumping soot into the atmosphere is not a popular idea, either. Regulations are complex. The application process is long, and rigorous studies come with every step closer to breaking ground.

Oddly enough, then, one of the reasons the “dirty” fuel is gaining notoriety as a possible fuel source for Alaska is how clean it can be if best-laid plans are properly executed.

The future of Agrium’s North Kenai fertilizer plant was in jeopardy for most of 2005. The specter of ending all operations loomed large as Agrium scrambled to secure enough natural gas at an acceptable price. Agrium secured a deal providing enough to keep running through October, but there is a need for something more permanent if operations are to continue.

What to do? Turn to coal. More specifically, turn coal into gas.

Agrium began a feasibility study on the possibility of building a coal gasification plant in November, a project called “Blue Sky” — in reference to the environmentally friendly nature of the technology. The plant would use clean coal gasification technologies like those used in the Lower 48 and Europe to turn coal into usable fuel for the plant and then some. To this end, Agrium is in talks with Shell to obtain proprietary gasification technology.

According to Bill Boycott, Agrium operations manager, the 335 megawatts of electricity the plant could produce would be enough to sustain Agrium’s expected operations — which would be shuffled a bit if the project goes through — with 225 megawatts left over for sale into the Railbelt power grid.

Beyond that, the carbon dioxide generated by the plant could be used to recover additional oil from fields thought to be dead. In this process, as it has been done in Texas and Norway’s North Sea, the stored carbon dioxide is pumped into oil fields and pushes out oil that could not be extracted previously.

Agrium is expected to announce the results of its study by April. If the results are favorable, the plant could be up and running by 2011.

Bill Popp, the Kenai Peninsula Borough’s oil and gas liaison, points out that there are no guarantees, however. The borough is a firm supporter of Blue Sky and Chuitna, he said, and with good reason. Additional power generation for the borough, tax revenue boosts, job creation and the possibility of increasing oil recovery in Cook Inlet would all be great news for the borough as a whole, but opening an above-ground strip mine, which is what Beluga would be, is a proposition requiring the utmost care to be taken every step of the way.

“They face some significant hurdles,” Popp said. “They will face some pretty tough scrutiny in terms of the environmental issues that are incumbent with projects like this. We have to wait. We have to let these companies do their homework.”

Speaking specifically to the Blue Sky Project, Popp noted that the enormity of the undertaking makes early predictions on its success a foolish gambit.

“It’s a world-class project,” he said. “A project of that scope and that cost, you are talking about a lot of opportunities for it to not go forward. You wouldn’t be running out and making financial or business decisions yet on either one of these.”

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