Coal-to-gas plant may land in Wyo.
By PETER GARTRELL, News-Record Writer
Published: Sunday, January 27, 2008 12:00 AM MST
gillettenewsrecord.com
As natural gas prices continue hovering around $8 per million Btu — more than triple what they were in the ’90s — a well-backed Massachusetts firm is showing interest in building a commercial-scale coal-to-gas conversion plant in the Powder River Basin.
GreatPoint Energy on Friday announced it had struck a deal with Peabody Energy, making the mining giant its “preferred provider” of coal as it considers the development of “coal-to-natural gas manufacturing facilities at or near Peabody mines, with a focus on the Powder River Basin area.”
On Saturday, an official for a company that uses a chemical catalyst to help it turn coal into natural gas told The News-Record that early stages of planning for such plants have Wyoming in mind.
“In terms of looking at locations just in the Powder River Basin, we’ve done mapping studies and we have other studies ongoing to see where would make the most sense,” said John Niland, director of business development.
He underscored such a project is no sure thing for Wyoming and, in any case, is unlikely to be built before 2012. That’s the earliest the Cambridge, Mass., firm would build a commercial-scale plant using up to 18,000 tons of coal daily.
But should a gasification plant be built, it could mean hundreds of jobs. Hanna’s DKRW coal-to-gas plant being developed by Arch Coal and Medicine Bow Fuel & Power is expected to employ up to 450 people, according to published reports.
GreatPoint announced a corporate partner of its own — Peabody, which is Wyoming’s largest coal producer and the owner of North Antelope-Rochelle, Caballo and Rawhide mines. Peabody has invested an unspecified amount of money in GreatPoint and will take on an observer role on its board. The cash will help the company meet what Niland said is a goal of building 10 plants within the next 10 years.
The move also fuels analyst speculation that Peabody is continuing an attempt to evolve coal markets.
“It looks to me like they’re trying to cover their bases and try to develop markets for their reserves,” said Bob Burnham, a senior analyst for Hill & Assoc., in Arvada, Colo. “That kind of says ‘we’re looking for a place to put (our) coal.’”
New Orleans’ stock analyst William Burns believes developing gasification is high on the list goals for Peabody CEO Greg Boyce.
“One of his priorities is to push the coal-to-gas field because it is such a viable option for coal,” Burns said. Nearly 95 percent of coal is now used for steam in coal-fired power plants and much of the remaining is used in steel production, he said.
Gasifying coal would not only open opportunities for selling a different, cleaner product to power plants, but could also lead to producing jet fuel. Peabody, which has signed agreements with other gasification companies in recent years, was unsuccessful in convincing Congress last year to approve a long-term supply deal for such fuel with the Air Force.
“We see it as an opportunity to advance clean coal technology and energy security, especially in light of the fact that our country’s use of natural gas is outpacing supply, and we depend on supply from risky sources,” Peabody spokesman Derrell Carter wrote in an e-mail Friday.
Niland, who is scheduled to present GreatPoint’s business plan to the Wyoming Infrastructure Authority next week in Jackson, said the company believes it can produce natural gas from coal for $4 per million British thermal units.
Such production costs, combined with an increasingly tight energy supply, have changed the economic landscape for the gasification industry, said Reina Calderon, vice president and general counsel for Calderon Energy, an Ohio firm that once considered building plants in Wyoming.
“When I started in the ’90s there was no private money — you had to go through government,” she said.
Now private investment is readily available, as demonstrated by GreatPoint’s list of backers. In addition to the Peabody deal, it counts among its backers corporate titans like Dow Chemicals, Suncor Energy, electric utility AES and CitiBank.
“There is certainly enough room for processes that can offer some cost advantages,” Calderon said, a point on which Burns agrees.
“Given a $7 or $8 (gas price) that’s a nice spread,” Burns said. “The issue they’re going to face now is two years ago it was all about energy, now everything is about the environment.”
He points out gasification produces twice the carbon dioxide as a conventional coal-fired power plant — an issue as political fervor builds around climate change. But GreatPoint says it can capture enough of the gas to actually emit 40 percent less carbon dioxide than power plants.
“The beauty of our process is that we can capture the (carbon dioxide) in a pure form and sequester it (underground),” said Dan Goldman, the company’s vice president and CFO. “It’s our intention to build that in as part of our plan.”
Steve Waddington, executive director of the Wyoming Infrastructure Authority, just hopes this project will go forward.
“This is an exciting announcement, I hope it’s for real,” he said, reflecting on past projects in the Powder River Basin. “It’s a lot of really cool announcements but nothing seems to go all the way through the pipeline for real.”
Calderon said such failures or short-comings are part of developing a new industry.
“With any of these projects it takes hundreds of millions of dollars to do and there’s a kind of patience that you need to have,” she said. “It’s not a short-term game. As frustrating as it is to see companies come, see companies go, that’s what it is.”
THREE ISSUES TO CONSIDER
- So who is GreatPoint? The Cambridge, Mass., company is a coal-to-gas technology firm that aims to build commercial-scale plants with the ability to produce natural gas and sequester carbon dioxide.
Founded in 2004 by several entrepreneurs, the company has tested in Illinois a process that turns coal into natural gas using a chemical catalyst.
It plans to have a pilot test plant built in Massachusetts by the fall and a larger demonstration plant could be announced this year. A full commercial-scale plant could be built by 2012.
- What about water? One issue that has plagued coal-improvement projects in the West in the past is wate. The GreatPoint’s project would be no exception:
“Water is certainly a key concern to us and it is a challenge to us — I’ve been out to Wyoming and I understand that water is in short supply in some areas,” said John Niland, director of business development for GreatPoint Energy
While engineers for GreatPoint have been working to reduce water use at the plants, Niland acknowledged projects are still projected to use “more than a couple of thousand (gallons) per minute.”
- Where could it be? Among the states Niland said have been considered as sites for a demonstration plants are Indiana, Illinois, Montana, Wyoming, Arizona, Mississippi, Texas and Alberta, Canada.
He said sites in the Powder River Basin are being considered but believes they would be built during the company’s commercial development phase — the first of which is planned for completion in 2012.
Bob Burnham, a senior analyst for Hill & Assoc., speculated that one potential site is southeast of Gillette near Peabody’s Caballo mine.
“There seems to be a geologic split around the Caballo mine where the coal deteriorates and you’ll notice there’s a split between the Caballo and the Wyodak mine where the coal is not particularly good,” he said.
At least some of that coal in that area north of Bishop Road is owned by Peabody Energy.
— The Associated Press contibuted to this report |
