Colorado coal industry faces changing climate

Mike Moran
Business Times

Vince Matthews

It’s a commodity near the center of any discussion about a move to more renewable energy sources. And it’s currently at the center of controversy surrounding a movement in Colorado to shift power plants to the use of natural gas.

Coal is the engine that’s driven the energy machine for most of the history of the United States. And it continues to be a major source of energy — and income — in the Rocky Mountains.

“We don’t consume anywhere near what we produce (in Colorado),” said Vince Matthews, state geologist and director of the Colorado Geological Survey. Matthews discussed coal as well as efforts to capture carbon emissions  during an energy briefing hosted by the Grand Junction Area Chamber of Commerce.

A geological survey estimates that 63 percent of Colorado coal is shipped out of state. Simple economics likely won’t change that scenario any time soon.

But the focus on renewables and other forms of alternative energy has the coal industry joining in the trend to capture carbon emissions — the so-called greenhouse gases some scientists blame for global warming.

In addition to competition from the push for renewables, the coal industry faces a regulatory reality: If it doesn’t work to curb carbon emissions itself, it risks the possibility the Environmental Protection Agency will force it to follow new rules. Colorado legislators enacted a measure calling for Xcel Energy to study ways to reduce emissions, including retiring coal-fired power plants or converting them to natural gas.

Enter a national carbon sequestration experiment in Western Colorado near a coal mine and power plant near Craig.

Much as reserves of natural gas are stored underground in the U.S., carbon gases can be stored under the earth’s surface as well. In fact, carbon dioxide is non-toxic and non-combustible, making it safer to store than natural gas, Matthews said.

The experiment is in the first year of what is expected to be three years of federal funding to assess whether or not the project is practical. Geologists this year are mapping the surface, purchasing seismic equipment for testing underground conditions and building a database. In 2011, they plan to drill a well and test core samples of shale, sandstone and water. In 2012, they plan to assess the potential storage volume underground.

The long-term costs and benefits of underground carbon gas storage will take years to assess partly because federal and state governments have yet to determine how to regulate such operations. Such regulations could add to the cost of operations. “We don’t have any regulatory framework for carbon dioxide sequestration,” Matthews said.

But one potential economic benefit for Colorado is that companies seeking to store carbon dioxide underground might be enticed to locate near the Western Colorado storage area or somewhere in the Rocky Mountain region. That’s because pipelines might be built in the region to transport gas to the storage area.

While the underground experiment continues, production and sale of coal is anything but experimental. It’s the most-used fuel source in the United States, both plentiful and inexpensive. In 2005, the average price of coal vacillated between $17 and $37 a ton. The average price weighed in at $24.40, Matthews said. The average price in 2009 rose above $28 a ton.

But coal can fetch higher prices in countries that are using it at ever-escalating rates. China, for example, continues to increase its coal use, with coal-fired power plants opening at the rate of about one a week. The country is hauling coal out of the U.S. for use in China and elsewhere. “They’re buying it not to use here, but overseas,” Matthews said.

Such demand has at times pushed the price of coal in China to as much as $240 a ton on the spot market for metallurgical grade coal. Such coal is used to make coke, which in turn is used to make steel.

The appetite for coal from overseas bodes well for coal operations, regardless of how much coal might be used domestically. Colorado has 27 coal fields and the fields with the most coal are located in Western Colorado, Matthews said. Colorado ships coal to 27 other states and Mexico.

Yet another coal mine could open northwest of Fruita, where Rhino Energy hopes to open the proposed Red Cliff Mine by 2014. The company says the mine could employ 250 people earning annual wages of more than $80,000. The McLane Mine is already producing coal in the same vicinity.

Colorado coal benefits from nationwide efforts to reduce pollution. The local coal has a relatively low sulfur content, low nitrogen-oxide content and emits a high degree of heat when burned. The state ranked eighth among all U.S. states in coal production in 2008, but production has declined since its most recent peak in 2005.

Advances in technology have affected employment in the industry, as modern machinery requires fewer workers to extract coal.

As the industry moves toward a more environmentally friendly image, many experts say there’s too much government subsidy for alternative energy sources and not enough evidence to support the premise global warming is caused by people or can be curtailed by energy use habits.

“We are extremely concerned that there could be an artificial crisis due to climate change,” Stuart Sanderson, president of the Colorado Mining Association, said during an energy briefing last year.

“Ninety-seven percent of carbon emissions are from natural sources and Colorado accounts for 1.7 percent of the world’s carbon footprint,” he said.

Regardless of such opposition, the underground storage experiment near Craig is scheduled to continue for at least another 28 months as the industry scrambles to keep up with a climate of changing regulation and green energy.