Price of natural gas makes coal king as energy source

Price of natural gas makes coal king as energy source

Coal is experiencing a mini-boom as an energy source for generating electricity, thanks to soaring energy demand, abundant supplies and volatile natural-gas prices.

Utilities companies have concentrated on building cleaner-burning natural-gas power plants for the past two decades. Now, 153 new coalburning power plants are under way or being proposed nationwide, according to the National Energy Technology Lab, 24 of which would convert coal to clean-burning synthetic gas and capture carbon dioxide emissions.

Although there are proposals for 30 new nuclear reactors, a spokesman from the Nuclear Regulatory Commission said, it’s questionable whether they will materialize. The last nuclear power plant built in the U.S. was ordered in 1978, the year before the Three Mile Island accident stopped the growth of the industry in its tracks. Still, nuclear power is second to coal in generating electricity.

One of three coal-fired plants proposed for Colorado is under construction close to home ”” Xcel Energy is building its first new coalfired unit in Colorado since 1981 in Pueblo at the Comanche Generating Station. When the unit opens in 2009, about 10 trains a week will pass through Colorado Springs en route to Pueblo. Four trains carrying Xcel coal currently travel through the Springs.

More than half the nation’s electricity is supplied by coal, but in Colorado it’s 71 percent, according to the Colorado Mining Association.

Colorado is a big player in coal mining, ranking as the nation’s seventh-largest producer, with 38 million tons excavated last year, according to the Colorado Geological Survey. That’s down from a record 40 million tons in 2004, when the state was the nation’s fastest growing coal producer, because several mines temporarily shut down. But higher prices led last year’s overall sales value of coal to increase by $100 million to $850 million, the association reports.

This year’s production estimation from the Colorado Geological Survey is 35 million tons, with a more robust haul expected for 2007 because the
mines that halted production are back online.

Colorado coal producers boast that their coal is cleaner burning and burns more efficiently than coal from the East.

In response to the increased demand for coal, Twentymile, the state’s top coal producer and the main supplier for Colorado Springs Utilities, stepped up production. When Peabody Energy bought the mine in 2004, annual production was 7 million to 8 million tons. This year’s output should reach 10 million tons, according to Jerry Nettleton, environmental manager, with 12 million by 2008.

The local utilities company’s long-term contracts with Peabody expire at the end of 2009, and it’s possible the price of coal will be as much as double the local utilities’ current contract average of $13 a ton, said Michele Fujimoto, fuels and materials management supervisor for the city-owned utilities.

”It depends on what the market does, but I think that coal will still be cheaper than natural gas,” she said. ”We expect coal to be the lowestcost fossil fuel for electric generation.”

Colorado coal prices are as much as $36 a ton for the highest quality coal and $25 to $33 a ton for lower-grade coal, according to Coal Daily. The price averaged $21.63 a ton in 2005, according to the Energy Department, up from recent years by $5 to $10 a ton.

But the coal industry, Fujimoto said, can be as volatile in supply as the natural gas industry is in price. At times, Colorado Springs Utilities has had problems receiving full shipments of coal from Twentymile, she said. Mechanical repairs were part of the problem, a Peabody Energy spokeswoman said, as well as the need to remove coal dust after a Mine Safety and Health Administration inspection.

Fujimoto said coal prices could go higher if the federal government imposes stricter regulations on carbon dioxide emissions from power plants. Carbon dioxide is not currently limited, although environmentalists are pushing for regulation because they say it contributes to global warming.

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