Mar 14 - Journal Record - Oklahoma City

Alliance Resource Partners will invest $600 million over the next three to four years to bring three new coal mines online, bringing its inventory to 11.

That move reflects anticipated long-term growth for both U.S. and world demand for coal, driven by increased electrical generation needs, President and Chief Executive Joseph W. Craft III told a sold- out University of Tulsa Friends of Finance audience Tuesday.

But investments such as Alliance plans come with increasing risk, as scientists and politicians debate potential carbon emission regulations, said Craft.

The head of the nation's fourth largest coal production operation warned that those environmental steps, if taken without regard for existing technological capabilities and increased research, could have drastic impact on U.S. and world economic growth by reducing usage of the key component to cheap power.

"The cost of electricity is driven by a large part on the percent of coal used to generate it," said Craft, defending his industry's performance and interests while linking future gross domestic product growth to a continued abundance of inexpensive electricity. "Coal remains the low-cost alternative."

Craft said electrical power generation by coal-fueled plants rose 50 percent last year to 3.9 billion kilowatts per hour.

Federal government projections estimate that will grow to 4.9 billion kilowatts by 2030, with improved sulfur removal technologies allowing the coal-fired market share to hit 57 percent.

Coal usage is projected to rise 48 percent over that period, he said, comprising the majority of power generation. Renewable sources would increase 60 percent, he said, while nuclear power generation would climb 19 percent and petroleum sources 9 percent.

Natural gas projections call for a 24-percent drop due to insufficient production and forced imports of liquid natural gas.

But Craft warned carbon emission regulations could skew those projections.

Craft did not urge regulators to turn away from alternative power sources. He said he embraced increase usage of renewable, nuclear, natural gas and other electrical power generators.

"The question's going to be, 'How are we going to generate that electricity?'" he said, with the answer helping determine not just future U.S. economic performance but its place in a competitive world environment.

Renewable sources, he said, can not be developed in a scale necessary to replace the electricity generated by coal-fired plants. The sources also remain plagued by intermittent availability and continued storage problems.

Craft said the nation now has 104 nuclear power plants, the last ones built in the 1980s.

Only five are now under construction for an industry that needs to build 40 just to maintain its market share. As for natural gas, Craft said the inability for domestic production to meet rising demand has not only driven natural gas prices higher but forced importation of LNG.

As a result, Craft said states paying the highest electrical rates are those that draw the smallest percent of their power from coal-fired plants.

While natural gas prices rose, Craft said coal prices remained relatively stable until recent times, when rising international demand spurred a spike not just in the U.S., but with export leader Australia and other sources. But he suggested that could aid the U.S., since it retains an abundance of coal despite a century of mining. Even with rising consumption, Craft presented data suggesting the U.S. retains more than a 200-year coal supply, comprising 95 percent of the nation's energy reserves.

Only the current low value of the U.S. dollar cast a shadow on rising coal exports, which he said have tripled since 2005.

Craft warned that the environmental debate has slowed more than the construction of nuclear power plants. He said utilities have not moved fast enough to refurbish or replace many coal-fired plants built in the 1980s.

Across the nation, Craft said utilities have 28 coal-fired electrical plants under construction, six starting construction and 13 permitted. Those 47 plants promise to generate 42.39 megawatts. Another 67 plants are in the early planning stages, promising 65.56 megawatts capacity.

That compares to plant construction promising 96 gigawatts underway in China.

With electrical capacity playing a key role in GDP growth and standards of living, Craft worried that U.S. electrical capacity may soon not be able to keep pace with peak usage demands. He urged leaders to increase spending on research to solve these environmental and electrical generation issues while providing another technology for the U.S. to export.

"I hope we just think it through so that if we do have a cost, we do have a benefit," Craft said of new environmental regulations. "We should try not to create one crisis by trying to solve another crisis.

"I'm going to do my best to try to educate them," he said of politicians. "Whether they listen or not is not my decision, because more often than not all they want is more money."

Originally published by Kirby Lee Davis.

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