As Natural Gas Surges

As Natural Gas Surges, Illinois Utilities Turn to Coal to Fuel Power Plants

By Melita Marie Garza, Chicago Tribune - Mar. 28

Illinois is at the forefront of a coal comeback in the U.S., fueled by volatile natural gas prices that have utilities scrambling for sources of cheaper electricity.

Nationwide, more than 105 coal-fired electric power plants are planned that would produce enough electricity to serve 72.2 million homes, according to Platts NEWGen database, which tracks new power-plant projects.

No state has more coal-fired plants in the works than Illinois, which has 10 projects on the drawing board. If all were completed, the Illinois plants would produce a combined 10,000 megawatts of electricity, enough to power 10 million homes. Kentucky and Wyoming also each have 10 proposed plants, though they would generate about half as much power as those planned in Illinois.

"The resurgence of coal is a good thing if you don't want to pay high electricity prices," said Tom Woods, a senior analyst with Platts Research & Consulting. "What's really happened is the high price of natural gas."

Typically, to be economically competitive, gas prices can't be more than $3 above coal prices per million British thermal units, Woods said. In a volatile gas market, the price spread shouldn't exceed $2.50 per million Btu, he said.

In Illinois, the average price of coal for a power plant is $1.14 per million Btu, and the average price of gas for a power plant is $5.87 per million Btu, according to the Energy Information Administration.

"With more than a $4 difference between the cost of coal and natural gas in Illinois, coal-fired plants are an attractive option," Woods said. "At some point in the future, if this price differential continues, even new nuclear plants could be an option."

In Illinois, the surge in power-plant projects has pitted environmentalists and health advocates against the Illinois coal industry and Gov. Rod Blagojevich, who campaigned on boosting one of the state's most abundant natural resources.

Mandates in the federal Clean Air Act amendments of 1990 triggered fuel switching from Illinois' high-sulfur coal to low-sulfur western coal. One third of Illinois' 1990 coal production sales have been lost as a result, according the coal industry.

Environmentalists say the plants would contribute to hundreds of deaths from asthma, lung disease and other ailments, while the industry says the plants would create hundreds of Illinois coal mining jobs and increase the country's energy security by easing reliance on imported oil and natural gas.

"It's an unconscionable step that the state would add more dirty coal plants that would cause more human suffering," said Bruce Nilles, the Sierra Club's senior Midwest representative. "Chicago is ground zero for asthma: both people suffering from asthma, and people dying from asthma.

"And Gov. Rod Blagojevich's plan to build up to 10 more coal plants without cleaning up the old ones is going to further exacerbate the problems caused by dirty coal plants."

Some coal plant proponents are aware of the concerns. Ground is expected to be broken this summer for a plant described by the federal government as a demonstration project for clean coal technology.

Corn Belt Energy Corp. has environmental permits to build a 91-megawatt, $147 million coal-fired plant in Logan County, about150 miles southwest of Chicago. Corn Belt's new plant would be partly financed with $51 million in grants from the U.S. Department of Energy. The plant would create 200 temporary construction jobs and 24 permanent plant jobs.

Nilles, however, said the technology planned for the plant doesn't go far enough.

"Anything that is not an old coal plant, the government calls clean," he said. "There is modern, off-the-shelf technology that would result in significantly less pollution."

Many of the proposed power plants are part of the "Illinois Coal Revival Program," a state-sponsored effort intended to reinvigorate Illinois' ailing coal mining industry and tap more of the state's vast coal reserves.

Fossil fuel underlies 37,000 square miles of Illinois, or about 65 percent of the state. Illinois coal reserves, which amount to 30 billion tons, contain more energy than the combined oil reserves of Saudi Arabia and Kuwait, according to the Illinois coal industry.

The coal rush is significant, not only because Illinois hasn't built a coal plant since the early 1970s, but also because the plants would serve consumers' daily energy needs.

Analysts project a need for additional base-load plants as existing coal plants age, and some are closed rather than upgraded to meet future environmental regulations.

Until recently in the Midwest, "most utility plans for construction of base-load coal-fired plants have been shelved in favor of natural-gas-fired peaking facilities called 'peaker plants,'" said Jeff Reeves, president and chief executive of Corn Belt Energy of Bloomington.

"These plants only address the short-term peak load requirements created by high air-conditioning demands during the summer," Reeves said.

Among the Illinois Coal Revival projects is a proposal by Indeck Energy Services Inc. of Buffalo Grove. Indeck plans a $966 million, 660-megawatt coal-burning power plant on the site of the former Joliet Arsenal, 55 miles west of the Chicago Loop.

Nilles of the Sierra Club contends the new plant would spew pollution over Chicago during the summer months and then north along Lake Michigan.

"In Illinois it's the Wild West as far as plant construction goes," Nilles said. "You can build a coal plant just by getting an air permit and a water permit. You don't have to demonstrate need, or that it's a good deal for ratepayers. You don't even need an environmental impact statement or a site permit."

The Sierra Club, the American Lung Association of Metropolitan Chicago and three other environmental groups have filed an appeal with the federal Environmental Protection Agency challenging Indeck's state environmental permit, which was issued in October.

A decision may not come until the fall; until then, the project is on hold.

"Ultimately, we will win the argument," said Jim Thompson, Indeck's vice president for business development. "Right as we are speaking, the U.S. is operating coal plants that are very, very dirty. When our plant comes on online, we will be more efficient, and our emissions will be a fifth or a tenth of theirs.

"All you'll do by stopping our new plant is to ensure that industry will relocate somewhere else, probably to a country where the emissions standards are not as high as ours," Thompson said.

The environmental groups argue that Indeck should use a state-of-the-art clean-burning technology called coal gasification, which is being used at two plants: one in Indiana and one in Florida. But Thompson said such technology is considered experimental and is subsidized by the federal government.

"Those plants were built by utilities that can roll the costs to their customers," Thompson said. "The technology isn't advanced enough for those projects to be financed by the private [financial] markets."

Indeck must secure long-term power contracts from utilities before it can obtain financing and proceed with the project, Thompson said.

If the plant proceeds as planned this fall, it would employ 1,200 construction workers for 3 1/2 years. The plant, which would have a $100 million annual operating budget, would create 80 full-time jobs and provide another 200 jobs to Illinois coal miners.

Bigger yet is the $1.4 billion, 1,500-megawatt plant that Peabody Energy Corp., the world's largest coal company, plans to build in Washington County near St. Louis.

The proposed Prairie State plant, which received its draft air permit last month from the Illinois EPA, would create 1,500 construction jobs and 500 permanent jobs.

Vic Svec, a spokesman for St. Louis-based Peabody Energy, said the plant would use "advanced emission-control technologies enabling it to operate cleaner than the existing averages for U.S. coal-fueled plants, Illinois coal plants and proposed future emission limits."

But Nilles argues that the measures are inadequate.

"Peabody is going to add thousands of tons of fine particles to the air in the greater St. Louis area and force businesses there to add more pollution-control equipment as a result," he said.

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