Eight-step plan would increase coal production

Eight-step plan would increase coal production

New York (Platts)--13Apr2006

The National Coal Council's eight-point plan exploring how domestic coal
resources can meet the nation's future energy needs could increase coal demand
1.3 billion short tons.

The US has 27% of the world's coal reserve and it can be used to ensure US
energy security, Gregory Boyce, Peabody Energy President and CEO and study
chair, told members of the Industrial Energy Consumers of America in
Washington on Wednesday. "The US has more energy in coal than any nation in
the world and we know where the coal is, it is within our shores."

The report found that clean-coal technologies are available to turn US coal
into multiple energy forms including electricity, natural gas, transportation
fuels and hydrogen, Boyce said.

"Our nation must develop energy supplies right now here in the United States,"
said Paul Cicio, ICEA president. "The economic damage from high natural gas
and oil prices has been devastating to industry and families. Implementing
this plan will lower energy costs, reinvigorate our industrial base and
provide energy security for Americans."

By 2025, new capital investments of $515 billion ? a present value of $350
billion ? in Btu conversion technologies would create 100 GW of new
electricity generation capacity, 4 Tcf of coal-to-natural-gas facilities and
2.6 million barrels/day of coal-to-liquids. To meet that demand, coal
production would have to more than double to 2.4 billion st/year.

Energy prices would be reduced by nearly 33% with greater coal use, the gross
domestic product would be more than $600 billion higher in 2025 and the net
present value of the benefit is $3 trillion, increasing to $4 trillion with
enhanced oil recovery.

The eight points are:

Using coal-to-liquids to produce 2.6 million b/d. Using CTL will relieve cost
and supply pressures on transportation fuels by producing ultra-clean
coal-derived diesel fuel using 475 million st/year of coal and will enhance US
oil supply by 10%.

Turning coal into natural gas to produce 4.0 Tcf/year will ease supply
pressure by providing an alternative to at least 15% of US annual consumption
and would use 340 million st/year of coal. Liquified natural gas is
insufficient to relieve the US' growing demand for natural gas, Boyce said.
"It has the same cost and security [problems] as foreign oil because it comes
from the same places."

Converting coal into clean electricity by building 100 GW of coal-to-clean
energy plants to satisfy more than 60% of the expected increase in electricity
generating capacity using an additional 375 million st/year of coal. It would
also relieve price pressures on natural gas.

Increasing the use of coal for heat and electricity to produce ethanol would
reduce costs and displace oil and natural gas significantly and increase coal
demand 40 million st/year.

Developing a fleet of coal-to-hydrogen plants to satisfy at least 10% of the
nation's transportation needs with Freedom Car efficiencies from an additional
70 million st/year of coal.

Capturing carbon for enhanced oil recovery could eventually lead to production
of an additional 2 million to 3 million b/d of oil. Captured carbon dioxide
can also be used to produce methane from coalbeds.

Maximizing US coal production by delineating coal reserves and transportation
constraints. The NCC said data it analyzed showed the mining industry and the
US transportation infrastructure can be expanded to accommodate growth in coal
production by over 1.3 billion st/year by 2025.

Stimulating economic growth and enhancing national security through the
development of US coal reserves. Developing an additional 1.3 billion st/year
for Btu conversion would add $623.1 billion to the GDP and add 1.4 million new
jobs.

"This is an aggressive plan and its benefit to America is enormous," Boyce
said. "Coal is the only domestic fuel with the flexibility to meet burgeoning
demand."

-- Mark E. Heckathorn, mark_heckathorn@platts.com

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