Apr 18 - Knight Ridder/Tribune Business News - Patty Henetz The Salt Lake Tribune

If energy producers in Utah and other western states don't pay more attention to advances in coal-fired electricity technology, they risk losing hundreds of millions of dollars annually in coal and power sales outside the region.

That's according to a report from Western Resource Advocates, a conservation organization with offices in Boulder, Colo., and Salt Lake City. The report, funded by a grant from the Pew Charitable Trusts, says demand for electric generation in the West could increase 50 percent by 2020.

But as concern about greenhouse gases and global warming grows, traditional ways of burning coal for electricity will become increasingly unacceptable. And that, the report says, could cost Utah as much as $107.4 million per year in coal sales and $19 million in tax revenue annually.

Here's why: Power producers in the East and Midwest more and more are turning to a technology called integrated gasification combined cycle, or IGCC, a more efficient and less-polluting alternative to conventional plants that burn pulverized coal to create electricity.

IGCC plants can be tooled to capture carbon dioxide, which comprises more than 80 percent of greenhouse gases. West Coast states, primarily California, have declared they won't buy electricity from plants that can't or won't control greenhouse gas emissions that contribute to global warming.

IGCC power plants strip pollutants from coal to create synthetic natural gas that drives turbines. Utilities have discovered that such plants work better with eastern coal than that mined in Utah and the West, which has a higher moisture content and lower heating value than eastern coal.

However, laboratory research has shown that western coal combined with petroleum coke, a refining byproduct, actually works better than eastern coal because of coke's high heating value. But until someone demonstrates that finding in a commercial-scale IGCC power plant at the higher elevations found in the West, plant operators are likely to shun western coal, the report says.

In 2004, the western coal industry shipped 525 million tons of coal to utilities nationwide. Those shipments accounted for about half the total coal used in the country. Western producers garnered about $4.5 billion in sales; coal-producing states received an estimated $868.5 million in related revenues, the report calculates.

Coal is used to generate 70 percent of the West's electricity, and at this time, there is no indication of declining coal sales in the interior West, the report says. Virtually all of Utah's electricity is coal-fired, and two-thirds of coal sales in Utah feed in-state power plants.

But Utah and other states could lose sales of "coal-by-wire," that is, electricity plants built in the interior West for transmission to the West Coast, said John Nielsen, report co-author and director of the Western Resource Advocates energy program. About one-third of Utah's coal-fired electricity now goes to California under existing contracts.

Utilities and private companies are planning to build 27 coal-fired power plants that would produce 18,000 megawatts of power throughout the West, mostly for West Coast customers. California's policy changes, however, have made the new plants' futures look shaky, the report says.

One Utah plant already has banged into California's determination to find cleaner power. In 2004, the Los Angeles Department of Water and Power withdrew its participation in the 900 megawatt expansion of the Intermountain Power Project near Delta when then-Los Angeles Mayor James Hahn decided instead to invest the city's $400 million to develop renewable energy resources.

It's not just California. Other states -- including Oregon, Washington, Arizona and New Mexico -- are looking at alternatives to conventional coal-fired energy. Plans to build a conventional coal-fired plant in Nevada were abandoned in March due to California's greenhouse gas policies and local opposition. About the same time, Idaho imposed a two-year moratorium on building conventional coal-fired plants.

Utah sold just $4.5 million in coal to states in the Midwest and East in 2004, but those revenues probably will decline as IGCC gains converts, Nielsen said. Other western states, particularly Wyoming, face the same dilemma: in 2004, Wyoming producers sold coal worth $1.1 billion to states to the east and more than $14 million to conventional plants powering the West Coast.

To prepare for Western coal's uncertain future, Western Resource Advocates recommends development of a large-scale IGCC plant using western coal and petroleum coke. The report also advocates further investigation of a greenhouse-gas capture method called carbon sequestration, a technology not yet used in the field. Researchers say captured carbon dioxide could be injected into depleted oil and gas fields, unusable coal seams, saline aquifers or basalt formations.

Energy Northwest, a Washington public-power electricity wholesaler, aims to be the first utility in the West willing to use Wyoming coal and petroleum coke to create electricity. The company, which also operates the Columbia Generating Station nuclear power plant, expects its IGCC plant to be running by 2012, company spokesman Brad Peck said.

But because the $1 billion, 600-megawatt plant will be built at or near sea level at the Columbia River port of Kalama, IGCC's efficiency at higher elevations remains in question, Nielsen said.

The Wyoming Natural Gas Pipeline Authority has asked the governor's office to pursue federal funds to build a commercial-scale IGCC demonstration project in that state. Other western energy producers, including PacifiCorp, Utah Power's parent company, are evaluating IGCC for future projects.

PacifiCorp wants to add 500 to 600 megawatts of production to its system, possibly through an addition to the Hunter plant near Castledale or the Jim Bridger plant near Rock Springs, Wyo. The plants could be IGCC rather than conventional, said Utah Power spokesman Dave Eskelsen.

"Technologically, it is a very interesting proposal," he said. However, to adopt IGCC could cost the utility 20 percent more than bringing on-line a conventional plant, and ratepayers would have to pick up the tab, he said.