August 11, 2008

DOE Seeks Applications for Third Round of Clean Coal Power Initiative
Funding Opportunity Announcement Solicits Applications for Carbon Capture and Sequestration

WASHINGTON, DC –The U.S. Department of Energy (DOE) today issued the final Funding Opportunity Announcement (FOA) for Round 3 of the Clean Coal Power Initiative (CCPI) which seeks to accelerate the commercial deployment of advanced coal technologies to help supply the United States with clean, abundant, and affordable energy. DOE anticipates making multiple awards under this FOA and, depending on fiscal year 2009 appropriations, may be able to provide up to $340 million to be distributed among selected recipients. The projects will be cost-shared, with the award recipient(s) providing at least 50 percent of funds for the project. The solicitation contemplates cooperative agreements between the Government and industry to demonstrate, at commercial scale, new technologies that capture carbon dioxide (CO2) emissions from coal-fired power plants and either sequester the CO2 or put it to beneficial use.

“The Department of Energy is committed to increasing the Nation’s energy security and addressing global climate change by developing the technologies that will ensure coal can be used to meet our growing energy demand in an environmentally responsible way,” Acting Assistant Secretary for Fossil Energy Jim Slutz said. “This announcement brings clean, coal-derived energy, with no greenhouse gas emissions, one step closer to the commercial market and to the consumer.”

The FOA, which is available at Grants.gov and the DOE e-Center, provides instructions for the preparation and submission of an application and outlines the mission need and background, project description, and the primary technical goals and functional performance requirements. The announcement also outlines the criteria by which applications will be evaluated, the terms and conditions of a model cooperative agreement, and the cost-sharing required for government-industry cooperation.

For Round 3, a draft FOA detailing the goals and requirements was released in October 2007 for comment. To garner input, a public workshop was held November 1, 2007, with 105 attendees representing utilities, technology vendors, and project developers. Changes to the final FOA include:

• Carbon capture technologies must operate at 90 percent carbon capture efficiency.
• At least 300,000 tons per year of CO2 must be captured and sequestered or put to beneficial use.
• Projects must show significant progress toward carbon capture and sequestration with less than 10 percent increase in electricity costs.
• Projects must use domestic mined coal or coal refuse for at least 75 percent of energy input.
• Projects must produce electricity as at least 50 percent of the gross energy output.
• Repayment of the Government’s share of project costs is not required.

Applications are due to DOE on January 15, 2009, and selection announcements are anticipated for July 2009.

Initiated in 2002, the CCPI is a multi-year program that demonstrates advanced coal-based power generation technology at commercial scale. Eight projects are currently active from two previous rounds of competition. The goal of the initiative, which is being executed through a series of competitive solicitations, is to accelerate the readiness of advanced coal technologies for commercial deployment, ensuring that the United States has clean, reliable, and affordable electricity and power.

Coal is the Nation’s most abundant energy resource, supplying more than 50 percent of domestic electricity. Technologies that use coal with minimal environmental impact are a vital component of the Bush Administration’s vision for a cleaner, more secure energy future.

The State of Montana announced on August 8, 2008 the signing of an agreement between the Crow Nation and Australian-American Energy Company for development of a Coal to Liquids project in southeastern Montana.

August 8 , 2008

CROW AGENCY, MONTANA – Governor Brian Schweitzer along with the Crow Tribe of Indians (Apsáalooke Nation) and Australian-American Energy Company LLC (AAEC) today announced agreements to develop a $7 billion coal-to-liquids project on the Crow Reservation in southeastern Montana.
The Many Stars Project is initially targeted to convert 38,000 tons per day of coal into
50,000 barrels per day of ultra-clean diesel, jet fuel and naphtha. The project would provide up to 4,000 jobs during construction and 900 permanent jobs on the reservation after start up,
which is expected in 2016.
Governor Schweitzer, who has long been an advocate of coal-to-liquid fuels
technology, praised the project. He was introduced to AAEC at an international coal-to-liquids
conference in New York during the summer of 2007 and invited the company to more closely
assess Montana’s abundant resources. His administration has worked closely with both the
Crow Nation and the company in helping make this project a reality.
“Montana is on the move,” said the Governor. “This will be one of the first clean-coal
technology projects in the state and meets one of my goals of bringing new economic
development to Montana. The Many Stars Project will also be a significant contributor to our
nation’s need for energy security and has the potential for providing superior military fuels to
near-by bases.”
Crow Chairman Carl Venne praised the project’s positive impacts. “The Crow Nation
has over 10 billion tons of coal resources,” he said. “We made a decision to pursue this type of
clean-coal project because it provides long-term economic and social benefits for our people
for many generations to come. The Many Stars Project will help us become self-sufficient.”
Venne noted that future plans with AAEC include expanding the CTL plant to
125,000 barrels per day. As part of the agreement, AAEC also will be assisting Little Big
Horn College in creating needed training and educational programs to meet the human
resource needs of the project. Additionally, discussions are underway with Montana State
University and Idaho State University for education and training of the energy workforce that
will be necessary for the project, Venne said.
Allan Blood, chairman of AAEC, said the agreements between the company and the
Crow Nation are the result of many months of open discussions, collaborative planning and
tough negotiations.
“We are pleased to be bringing our Australian experience in clean coal projects to
Montana,” Blood said. “The Many Stars project is important on so many levels. It provides
good jobs in a part of Montana that needs them, it helps address U.S. dependence on foreign
fuels and it will demonstrate this is a technology that can be used in a way that addresses
environmental concerns.”
Blood noted that the project design calls for capturing CO2 for geo-sequestration and
supply to enhanced-oil recovery projects to both provide an environmentally responsible
project and further create additional energy opportunities in otherwise declining regional oil
fields.
“With over 100 billion tons of coal resources in the state, Montana is the `Saudi
Arabia of Coal’ and we are doing our part to help make energy security with clean fuels a
reality,” the governor added. “We anticipate this project being a model for clean-coal energy
projects in Montana and the United States. We know we have a lot of work ahead of us, but
this agreement today is an important first step.”
Under terms of the agreement announced today, the Crow Nation has committed coal
and water resources for the project while AAEC will provide the development capital and
project management. Both the Crow Nation, through its company Apsáalooke Energy
Company LLC, and AAEC will participate in the board of directors of the project company.
“AAEC has assembled a remarkable team here in the U.S. with their key executives
bringing an average of 30 years of experience managing energy projects world-wide,” Venne
said.
Added Blood: “AAEC is committed to working closely with the Crow Nation, the
State of Montana and the federal government to bring this important project to fruition.”
Venne said the Interior Department has been involved in the project since talks first
began last year. Members of the Crow Nation also have met with representatives of the U.S.
Department of Energy regarding the project, Venne said.
The documents the Crow Nation and AAEC signed today include an exploration
agreement under which AAEC will spend 12 to 18 months to further evaluate the coal
resources and select a final site for the mine and plant. AAEC has already completed its initial
feasibility study for the coal-to-liquid fuels project and will begin the environmental
permitting process later this year. Construction is expected to begin in 2012.
“The economic impact of this project cannot be overstated,” Venne added. “At the
same time, it fits with our desire to use Crow resources efficiently and responsibly for our
people.”
Apsáalooke Energy is a wholly owned company of the Crow Nation, which has
12,000 enrolled citizens and spans more than 2.2 million acres in southeastern Montana.
Australian-American Energy Company, LLC is a subsidiary of Australian Energy
Company Limited (AEC), headquartered near Perth, Australia. AEC was the original
developer of the APEL (now Monash) CTL Project in Victoria, Australia and is currently
developing a $2 billion clean-coal conversion project, the Latrobe Valley Urea Project, also in
Victoria.

A subsidiary of a Chinese state-owned oil giant has thrown its weight behind an ambitious, $3 billion coal-to-liquids (CTL) project planned for South Australia.

Australia-focused energy company Altona Resources Plc, which is listed on London’s Alternative Investment Market, has signed an in-principle agreement with CNOOC (Beijing) Energy Investment Co Ltd to cooperate in the development of Altona’s Arckaringa project in SA.

The project includes a 10 million barrel per year open cut mine and a 560 megawatt power plant.

Interest in CTL, which involves converting coal into liquid hydrocarbons, is growing amid concerns about “peak oil”.

“We have always recognized that Altona would need a partner of major stature, given the size of the Arckaringa project,” Altona chairman Chris Lambert said.

“With their immense resources and capabilities, CNOOC Energy is an ideal partner for Altona to work closely with in evaluating technology, off-take, financing and construction opportunities.”

He said the project would provide a major new source of base load power and diesel to SA, “which has a significant looming power deficiency and currently imports all of its distillate requirements”.

CNOOC Limited incorporated in Hong Kong in August 1999, was listed on the New York Stock Exchange (code: CEO) and The Stock Exchange of Hong Kong Limited (code: 0883) on 27 and 28 February 2001, respectively. The Company was admitted as a constituent stock of the Hang Seng Index in July 2001.

The Group is China’s largest producer of offshore crude oil and natural gas and one of the largest independent oil and gas exploration and production companies in the world. The Group mainly engages in oil and natural gas exploration, development, production and sales.

CONSOL Energy and Synthesis Energy Systems Announce Funding of Front-End Engineering Design Package for West Virginia Coal Gasification Project

               Plant Expected to Produce Gasoline and Methanol

PITTSBURGH and HOUSTON, July 28 /PRNewswire-FirstCall/ — CONSOL Energy Inc. (”CONSOL”) (NYSE: CNX), the nation’s largest producer of bituminous coal, and Synthesis Energy Systems Inc. (”SES”) (Nasdaq: SYMX), a global industrial gasification company, intend to develop through a joint venture their first U.S. coal gasification and liquefaction plant to be located in West Virginia. CONSOL (through its subsidiary Terra Firma Company) and SES have formed Northern Appalachia Fuel LLC (”NAF”), as the company through which the development will occur.

The Board of Directors of CONSOL and SES have authorized funds for development activities, including the front-end engineering design (”FEED”) package. Each member company will contribute equally to this phase of the project. NAF is finalizing agreements with Aker Solutions US Inc., a subsidiary of Aker Solutions ASA (OSL: AKSO), to perform the FEED. The FEED will include a carbon management strategy that will focus on carbon sequestration in a deep saline aquifer. At a later date, NAF will file for environmental and other permits necessary for the construction of the plant.

CONSOL and SES propose to site the plant near Benwood, West Virginia, south of Wheeling. It is expected that the plant will be a ‘mine mouth’ facility with feedstock supplied directly from CONSOL’s nearby Shoemaker complex. The feedstock will be a blend of run of mine coal and coal otherwise not recovered in the normal preparation process. Coal will be converted to syngas utilizing SES’s proprietary U-GAS(R) technology. It is expected that the syngas will be used to produce approximately 720,000 metric tons per year of methanol that can be used as a feedstock for the chemical industry. It is also expected that the project will be capable of converting methanol production to approximately 100 million gallons/year of 87 octane gasoline. NAF is currently negotiating with ExxonMobil Research and Engineering to license their proprietary methanol-to-gasoline technology. As envisioned, the project will include a river terminal facility, where products will be stored in tanks for off-loading into barges for ultimate delivery.

CONSOL and SES also have signed a memorandum of understanding (”MOU”) with the State of West Virginia and its partner, the Regional Economic Development Partnership (”RED”), a private West Virginia non-profit development corporation focused on generating business opportunities through job creation and economic stimulus in the Ohio, Marshall and Wetzel counties of West Virginia. Under the provisions of the MOU, the State and RED will provide financing and tax incentives to the project over a 10-year period.

“This project has the potential to transform West Virginia from a major coal producing state to a national energy center as well,” said J. Brett Harvey, CONSOL Energy President and Chief Executive Officer. “By converting some of our region’s abundant, high-Btu coal into gases and liquids, not only will we create economic value for the state, but we will help West Virginia become the linchpin of American energy security.”

Harvey thanked both the State of West Virginia and the RED for their assistance and support of the project. “In every conversation I have had with Governor Manchin in recent years, we have talked about ways to leverage West Virginia’s coal position into a national energy leadership position — a position in which jobs, economic growth, and the enhancement of American energy security flow from the harnessing of West Virginia’s resources and the ‘can-do’ attitude of its people,” Harvey said. “His vision is sound. With West Virginia’s help, our success with this plant will make the vision a reality.”

“We are proud of the progress we have made to-date toward the development of the first industrial size U-GAS(R) gasification plant in the United States and we appreciate the support that the State of West Virginia and the RED have demonstrated for this initiative,” said Tim Vail, President and Chief Executive Officer of SES. “Together with our partner, CONSOL Energy, SES will be taking a first step toward securing energy independence in the U.S. as we convert raw and residual coal from CONSOL’s Shoemaker mine and plant into gasoline in an environmentally responsible and cost efficient manner,” Vail added.

“It’s clearer than ever that one of the biggest issues our state and country faces is meeting our energy needs,” said West Virginia Gov. Joe Manchin. “Technological solutions like this plant at Benwood will lead to more environmentally friendly ways to use our coal and hold the key to America’s energy security. I am committed to making West Virginia the leader in clean coal technology and the construction of clean coal power and fuel liquefaction plants. We have the resources and expertise to realize our goal.”

Both of West Virginia’s United States Senators voiced their support as well. “America cannot meet its energy needs,” said Senator Robert C. Byrd. “West Virginia has the coal, the brains, and the determination to meet that challenge and demonstrate to the world that we intend to be part of the solution.”

Senator Jay Rockefeller also added his support. “We are in the midst of a serious energy crisis in America. Today, with this project and others in the works, West Virginia is announcing to the world that we’re not waiting around anymore,” Rockefeller said. “We’re getting started with a CTL plant that will create jobs, meet modern environmental standards, and develop our most abundant domestic resource — coal. This plant will help put our state on the path to energy security and greater economic growth.”

About CONSOL Energy:

CONSOL Energy Inc., a high-Btu bituminous coal and coal bed methane company, is a member of the Standard & Poor’s 500 equity index and has annual revenues of $3.8 billion. It has 17 bituminous coal mining complexes in six states and reports proven and probable coal reserves of 4.5 billion tons. In addition, the company is a majority shareholder in one of the largest U.S. producers of coalbed methane gas, CNX Gas Corporation. CONSOL Energy was named one of America’s most admired companies in 2005 by Fortune magazine. It received the U.S. Department of the Interior’s Office of Surface Mining National Award for Excellence in Surface Mining for the company’s innovative reclamation practices in 2002, 2003 and 2004. In 2002, the company received a U.S. Environmental Protection Agency Climate Protection Award.

About Synthesis Energy Systems, Inc.:

SES is an energy and technology company that builds, owns and operates coal gasification plants that utilize its proprietary U-GAS(R) fluidized bed gasification technology to convert low rank coal and coal wastes into higher value energy products, such as transportation fuel and ammonia. The U-GAS(R) technology, which SES licenses from the Gas Technology Institute, gasifies coal without many of the harmful emissions normally associated with coal combustion plants. The primary advantages of U-GAS(R) relative to other gasification technologies are (a) greater fuel flexibility provided by our ability to use all ranks of coal (including low rank, high ash and high moisture coals, which are significantly cheaper than higher grade coals), many coal waste products and biomass feed stocks; and (b) our ability to operate efficiently on a smaller scale, which enables us to construct plants more quickly, at a lower capital cost, and, in many cases, in closer proximity to coal sources. SES currently has offices in Houston, Texas and Shanghai, China. For more information on SES, visit http://www.synthesisenergy.com or call (713) 579-0600.

Monday, August 18 2008

The Virginia Center for Coal and Energy Research (VCCER), Congressman Rick Boucher, CNX Gas and the Russell County Board of Supervisors hosted a form groundbreaking ceremony today at the site of what will be the first test of carbon storage in Central Appalachian coal seams.

The VCCER leads the research team for this project, which is funded by the National Energy Technology Laboratory of the US Department of Energy, through the Southern States Energy Board, and is part of the Southeast Carbon Sequestration Partnership (SECARB). A similar test is planned for the Black Warrior Basin in Alabama.

SECARB is one of seven regional carbon sequestration partnerships funded by the National Energy Technology Laboratory.

For more information, please visit the SECARB Coal Group web site, the SECARB partnership web site, and the NETL Carbon Sequestration web site.

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Tuesday, August 19 2008

BOUCHER INTRODUCES LEGISLATION TO ACCELERATE THE AVAILABILITY OF CARBON CAPTURE AND STORAGE TECHNOLOGY

Bill Creates $1 Billion Annual Fund to Bring Cutting Edge Clean Coal Technologies to Market

(WASHINGTON, D.C.) - U.S. Representative Rick Boucher (D-VA), Chairman of the House Energy and Air Quality Subcommittee, today introduced bipartisan federal legislation to advance the development and deployment of carbon capture and storage (CCS) technologies. CCS is a method of reducing greenhouse gas emissions by capturing and injecting underground the carbon dioxide emitted from electricity generation plants that use fossil fuels. Boucher is joined in the sponsorship of the bill by Rep. Fred Upton (R-MI), Rep. John Murtha (D-PA), Rep. Joe Barton (R-TX), Rep. Nick Rahall (D-WV), Rep. Ed Whitfield (R-KY), Rep. Jerry Costello (D-IL), Rep. John Shimkus (R-IL), Rep. Jim Matheson (D-UT), Rep. Mike Doyle (D-PA), Rep. Tim Holden (D-PA), Rep. Brad Ellsworth (D-IN), Rep. Baron Hill (D-IN), Rep. Charlie Wilson (D-OH), and Rep. Deborah Pryce (R-OH).

The legislation would establish a $1 billion annual fund, derived from fees on the generation of electricity from coal, oil and natural gas. Grants from the fund will be awarded to large-scale projects advancing the commercial availability of CCS technology.

“Coal is America’s most abundant domestic fuel, and today, coal accounts for more than one-half of the fuel used for electricity generation. Given our large coal reserves, its lower cost in comparison with other fuels, and the inadequate availability of fuel alternatives, preservation of the ability of electric utilities to continue coal use is essential. The legislation introduced today addresses this clear need by enabling electric utilities that use coal to have the continued ability to do so when a mandatory program is implemented to control greenhouse gas emissions,” Boucher said.

According to Boucher, if severe emissions reduction requirements are imposed before the carbon capture and storage technologies are available, the result would be a rapid switch from coal to other fuels. Such fuel switching would significantly increase electricity prices to the detriment of both residential and industrial electricity consumers. Fuel switching from coal would most likely result in far greater uses of natural gas for electricity generation, severely stressing an already constrained natural gas supply and dramatically increasing natural gas prices.

“Today 58% of U.S. homes are heated with natural gas, and numerous industries are heavily reliant on it. If large scale switching by utilities from coal to natural gas occurs, tens of millions of Americans would experience deep economic pain, and many domestic industries would be dislocated. The early arrival of CCS is essential to prevent this economic disruption in a carbon constrained economy,” Boucher said.

“Some think power from coal is the dreary past and our energy future is all sun, wind, geysers, trash and tides,” Barton said. “Maybe, but not yet. When working families are paying electricity bills so high they look like house payments, we in Washington can’t afford to put our country’s least expensive and most available energy off limits.”

“Carbon-capture technology is reaching maturity, and it offers the promise right now of affordable power. This bill can make a real difference in the daily lives of people who work for their living and strain to pay their bills, and I’m going to help get it passed,” Barton said.

While some commercial CCS projects are in operation, they are small in scale and have the purpose of enhancing oil recovery. Further research, development and demonstration is necessary for the permanent storage underground of large quantities of CO2 in a variety of storage media in widely dispersed locations around the nation. Carbon conversion technology also exhibits promise with the ability to convert CO2 into an environmentally harmless form. The new fund will finance research on various methods of capturing CO2 from the combustion process and establish the reliability of conversion or storage in multiple storage sites.

“Coal is a valuable resource,” commented Murtha. “With this technology and legislation, we can enhance existing coal power plants by providing the resources they need to meet the federal requirements and reduce greenhouse gases.”

“This bill will further strengthen America’s coal industry, promote new ‘green’ jobs, and protect our environment,” said Murtha. “It’s the responsible thing to do.”

“Energy prices drive our economy-as the price of gasoline has skyrocketed due, in part, to policies that limit access to American energy resources, it is critical that electricity rates do not follow suit. We must take advantage of our nation’s vast coal reserves that have the promise to produce clean and affordable power for generations. In our quest to reduce greenhouse gas emissions and protect the environment, we must promote exciting new clean coal technologies that will not only keep costs down for consumers, but also foster new jobs and a strong economy. These technologies exhibit great promise, and in encouraging advancements in carbon capture, we’ll be able to responsibly fortify our nation’s energy supply with American-made energy and protect the pocketbooks of our nation’s consumers as well,” Upton said.

“Carbon capture and sequestration is critically needed in order to continue providing sufficient supplies of affordable energy to American families in an era of increased climate change awareness. But we need to get this technology moving now. The small-scale work that we’re currently doing is not going to cut it in time. This bill is essential to getting carbon capture and sequestration moving in the near-term, by starting up the large scale projects that so much of the electric power industry is waiting for,” Chairman of the House Committee on Natural Resources Nick Rahall said.

“We need to be realistic and recognize that coal will remain a key fuel in our nation’s energy portfolio. The United States has enough coal to power our country for the next 250 years and it provides fuel for over 50 percent of all electricity in the country. Coal is a resource we simply cannot afford to waste. This legislation will advance Carbon Capture and Storage technology and deployment, ensuring an environmentally responsible role for coal in our energy future,” said Whitfield.

“The full development of CCS technologies is a national priority, and this legislation will allow us to maximize our domestic coal resources while keeping energy bills affordable for consumers,” said Costello. “Coal will continue to play a significant role in our national energy plans and CCS will let us use it cleanly while creating jobs.”

“It is critical that the abundant coal resources we have in the United States be used in any national energy plans,” Shimkus said. “This technology can allow us to use coal to provide American jobs and spur the economy while capturing and storing carbon.”

The legislation would authorize the nation’s fossil-based electricity distribution utilities to hold a referendum on the establishment of a Carbon Storage Research Corporation. If approved by entities representing 2/3 of the nation’s fossil fuel-based delivered electricity, the Corporation would be established and would be authorized to collect assessments from retail customers of fossil based electricity. The Corporation will be operated as a division of the Electric Power Research Institute and would assess fees totaling approximately $1 billion annually. These monies would then be used by the Corporation to fund the large scale demonstration of CCS technologies in order to accelerate the commercial availability of the technologies. The fee to be collected would represent an increase of approximately $10-12 annually for the average residential consumer of fossil fuel based electricity.

“This legislation is by no means in lieu of a cap and trade measure, which I believe to be urgently needed. It simply begins the necessary work to accelerate the deployment of CCS technologies in order to ensure that they are commercially available at the earliest possible time,” Boucher added.

The legislation enjoys wide industry support:

“We wholeheartedly support this legislation because it will allow our nation to responsibly address climate change by developing the technology needed to stabilize greenhouse gas emissions both here in the U.S. and around the world. America must be a leader in developing and implementing CCS technology and this legislation will enable us to do that. Passage of this bill is critical for all Americans, including those who mine the coal that produces the energy needed to meet our nation’s current and ever-increasing demands,” said Cecil Roberts, President of the United Mine Workers of America.

“Funding for the continued development and commercial deployment of carbon capture and storage technology is vitally important for the nation’s economy and energy security,” said Michael G. Morris, Chairman, President, and CEO of American Electric Power. “Representative Boucher’s bill provides funding for the technology for the next 15 years, filling what we considered to be a significant void in other climate legislation. Coal is this nation’s primary fuel used to generate electricity. Taking steps today to address greenhouse gas emissions from coal will lead to more cost-effective options for complying with future mandatory climate rules.”

“The legislation introduced today by Chairman Boucher, Mr. Upton, Mr. Murtha, Mar. Barton, Mr. Rahall, Mr. Whitfield, Mr. Costello and Mr. Shimkus squarely acknowledges the critical role that technological innovation must play in any meaningful effort to address global climate change concerns,” said Kraig Naasz, National Mining Association President and CEO.

“The National Mining Association is pleased to support this important legislation that is designed to continue the nation’s use of affordable domestic coal with near zero emissions. This bill truly deserves the support of all those seeking environmental solutions that enhance our energy and economic security,” Naasz added.

“As the saying goes, a vision without resources is a hallucination-and we simply cannot address climate change without new and creative ways to fund advanced technology that can capture carbon dioxide from coal power plants and sequester it safely underground,” said Duke Energy CEO Jim Rogers. “I congratulate Chairman Boucher for his proposal and encourage all members of Congress who want to go to work on climate change to support this legislation.”

“The Carbon Capture and Storage Early Deployment Act is an essential step forward to advance new technologies to address global climate change by reducing carbon emissions, promoting domestic energy sources and protecting consumers. Dominion strongly supports this legislation,” said Thomas F. Farrell, II, Chairman of Dominion.

“New technology that is both commercially available and widely deployable is essential to meeting future demands to reduce greenhouse gas emissions,” said David Ratcliffe, Chairman, President and CEO of Southern Company. “I applaud Congressman Boucher for taking a leadership role by introducing this legislation, which will provide a practical mechanism to fund the development of this technology.”

“The overarching issue in the power industry today is how to address global climate change and the growing demand for energy while maintaining a secure electricity supply, reliable service and affordable rates. Breakthrough technology is critical to our ability to achieve significant reductions in greenhouse gas emissions. This legislation recognizes the importance of aligning reduction targets with technological advancements, and we are pleased to support it,” said Bill Johnson, Chairman, President and CEO of Progress Energy. “I commend Chairman Boucher for his leadership as we continue to work with Congress and our states to address the new energy realities of growing energy demand and global climate change.”

“SRP supports the intent of legislation introduced by Congressman Rick Boucher to accelerate development of commercial scale technology to control greenhouse gas emissions. We believe the best interest of our customers can be best served by the proposed public-private partnership and funding formula,” said Dick Silverman, CEO of Salt River Project.

Read Chairman Boucher’s Floor Statement

Janet Gellici, CAE - Chief Executive Officer, American Coal Council

jgellici@americancoalcouncil.org
Published June 6^th, 2008 – Power Engineering Magazine

Douglas Adams’ science fiction classic, The Hitchhiker’s Guide to the Galaxy, features the fictional intergalactic travel guide of the book title as a manual for planet-hoppers interested in seeing the Universe on less than $30 a day. The words “DON’T PANIC” are printed in capital letters on the cover of the Guide “in large friendly letters.”

We might use this same advice – DON’T PANIC – and apply it to our thinking about the recent spate of coal-fueled plant deferrals and cancellations. Then again … while intergalactic travelers reportedly favored the Hitchhiker’s Guide to the Galaxy over the alternative Encyclopedia Galactica because it included the reassuring words DON’T PANIC on the cover, it turns out the Guide had many glaring and occasionally fatal inaccuracies.

There are many potentially fatal inaccuracies, as well, in the “logic” and revelry with which many are greeting announcements of coal plant cancellations. What appears to some as a quick-fix victory for managing global climate change challenges may, in fact, have significant repercussions in the future. Coal is an abundant, economic resource that we in the U.S. and those in developing nations will rely on for years to come to meet our ever-growing energy needs. We may not experience the negative impacts of coal plant cancellations in the short term, but we would be wise to amend the Hitchhiker’s Guide cover text to read - DON’T PANIC … YET.

____________________________

The Energy Information Administration (EIA) projects strong growth for worldwide energy demand from 2004 to 2030. Total world consumption of energy is projected to increase from 447 quadrillion Btu in 2004 to 559 quadrillion Btu in 2015 and then to 702 quadrillion Btu in 2030 – a 57% increase over the projection period. Global demand for energy continues to grow. In the U.S., EIA projects annual electricity demand will increase 1.1-1.5% through 2030, increasing overall by upwards of 40%.

While our demand for energy continues to increase, however, our ability to meet that demand is a growing concern. In a recent poll of utility CEOs, only 53% of respondents indicated they were confident they will be able to provide the needed electric power supply in their region in the next 5 years. In its annual Long-Term Reliability Assessment, the North American Electric Reliability Corporation (NERC) projects inadequate peak summer capacity margins in several regions of the U.S. as early as 2009.

The U.S. has 27% of the world’s coal reserves – an estimated recoverable coal reserve base of 275 billion short tons. EIA projects total resources of nearly 4 trillion short tons. We have a lot of coal. As with other energy resources, prices for coal have been rising, fueled, in large part, by increasing world market demand for U.S. coal as a result of global supply disruptions. Between 1999 and November 2007, the cost of coal increased 45%, versus a 175% increase for natural gas and a staggering 270% for oil. In spite of recent price increases, our nation’s most affordable energy resource is still coal.

So if we have plenty of affordable coal resources here in the U.S., why are we seeing an increase in the number of coal power plant cancellations and deferrals? The primary reasons are:

Uncertainty associated with the cost and requirements of pending CO2 emissions regulations.

Escalating EPC costs.

Increasing emphasis on energy efficiency, demand response and the use of renewables.

Should we be concerned or panicked about the increasing number of coal plant cancellations and deferrals? In responding to that question, it’s important to understand the difference between “announced” projects and “progressing” projects. In fact, it’s not unusual for “announced” projects to be cancelled before or during the permitting phase; announced projects are not necessarily strong indicators of capacity additions. Progressing projects – those under construction, near construction or permitted – reflect a developer’s financial commitment to completion and offer a better perspective of the new generation capacity that may be forthcoming.

Actual plant capacity commissioned since 2000, for example, has been far less than new capacity announced. In the year 2002, 36,000 MW of new coal plants were announced to be installed by 2007. In actuality, only 4,500 MW or 12% of those announced plants were actually built.

In the past few years, there has been a significant amount of new coal plants announced in response to utilities’ efforts to meet growing demand for baseload generation at reasonable costs for their customers. A greater number of coal plants have been announced, therefore more are likely to be delayed or cancelled. Additionally, because of the primary reasons noted above, many announced project developments have been shifted out in time. The combination of new announcements and delayed projects has increased the backlog of plants. We’ll likely continue to see more and more projects cancelled as prospects for completing all projects in the “deferred” queue become impractical.

A significant amount of coal generation is still scheduled to come on line in the near term (2009-2011). As of the end of 2007, 47 plants with a capacity of 23,000 MW are progressing; an additional 67 plants (43,000 MW) had been announced as of that date. While not everyone agrees with EIA’s projected electric power demand, coal generation development activity presently exceeds EIA’s estimate of need. In this more immediate period, it’s projected that new gas, renewable capacity and energy efficiency initiatives will help bridge the shortfall in near-term demand.

What about longer term (2012-2017? This is where the caution – DON’T PANIC … YET – applies.

We should be concerned with the significant disparity between electric demand forecasts, a history of growth exceeding projections and the unknowns associated with how much and when we can count on savings from energy efficiency and conservation. Low demand electricity growth forecasts enhance demand uncertainty. Larger houses with flat screens TVs and computerized technology in every room, coupled with the pending advent of Plug-in Hybrid Electric Vehicles (PHEVs) suggest we’ll be using more and more electricity in the years to come.

We should also be concerned that the capability to install and commission plants is already being constrained by limited skilled resources. By 2015, demand for utility industry workers is expected to increase 25%; 40% of senior electrical engineers and shift supervisors will be eligible for retirement in 2009.

We should be concerned with the ability of non-coal resources to meet our electric generation needs and what it will cost our economy and consumers. Projections for 2030 for additional capacity from new renewables ranges from 16 GW to 176 GW and for new nuclear capacity from 3.5 GW to 117 GW. Which projections are right? Wind and solar are increasingly attractive resource options but will be expensive and require new transmission and special operating considerations. Large nuclear units require transmission grid expansion and integration.

We should be concerned that continued coal plant permit denials and increased demand for natural gas will put pressure on gas/LNG supplies and prices. Energy analysts forecast that the deferral of coal and nuclear plants will result in too little generation and too much reliance on Natural Gas Combined Cycles (NGCC). We can expect increased competition for gas and decreased imports from our largest supplier, Canada. LNG may be an option, but has its own challenges with siting and construction. Some are projecting we will not have sufficient gas at any price to satisfy residential, industrial and electricity generation needs in 2014.

Above all, we should be concerned with the increasingly anti-coal environment in which our electric power planners and providers are forced to operate. Efforts to remove coal as a viable generation option hamper our ability to develop clean coal technologies and to provide our citizens with an affordable, secure power source. Over the past 30 years, the coal industry has invested more than $50 billion in technologies to reduce emissions. As a result, today’s coal-based generation is 70% cleaner. The industry is committed to advancing this record in terms of reducing CO2 emissions.

We have a good foundation on which to build an increasingly clean coal energy industry. Let’s figure it out now so we won’t need to panic later.