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Peabody Energy Corp
The world’s most abundant fossil fuel could be tapped without moving mountains, delivered without trucks or trains and burned without greenhouse-gas emissions.
The technology to make this possible has been around for decades. Underground coal gasification was pioneered by Sir William Siemens in the 1860s to light London’s streets. Vladimir Lenin hailed the method in a 1913 article in Pravda for its potential to rescue Russians from hazards of underground mines.
Despite its early boosters, the technology never caught on in the U.S., mostly for cost reasons. Now the improvements in seismic mapping and drilling that lit a fire under the U.S. fracking boom may also spur development of a domestic coal gas industry, proponents said.
“The shale gas revolution is opening doors for the coal gas revolution,” said Richard Morse, director of coal and carbon research at Stanford University in Palo Alto, California. “We knew it was there but couldn’t get it out in a cost- effective way.”
The technology works like this: beds, or seams, of underground coal are ignited, and the resulting combustible gas is piped out for use in electricity generation or as a raw material in chemical production.
The burn can be controlled by regulating the flow of oxygen, so there’s slim chance of giving rise to another Centralia, the abandoned Pennsylvania town where a coal seam near the surface has been burning since 1962.
The method also leaves underground the worst parts of coal -- the mercury, arsenic and lead. And it allows for a much simpler capture of greenhouse gases, which can be piped back into the seam and stored there or sold to oil producers who inject it into wells to boost recovery rates.
Development of coal gas is proceeding faster in places where natural gas is expensive and coal seams are deep, including Canada, South Africa, New Zealand, China and Uzbekistan. Both of those preconditions are lacking in the U.S., at least right now.
Hydraulic fracturing depressed gas prices to a 10-year low of less than $2 a million British thermal units. That’s well below the $6 that can be attained through a typical gasification project, according to estimates from Julio Friedmann, chief energy technologist at the Lawrence Livermore National Laboratory in California.
Gas futures in New York are trading at about $2.60 a million Btus, down 13 percent this year.
“Cheap gas is the mortal enemy,” Friedmann said.
And while researchers at Stanford University and Lawrence Livermore estimate that underground coal gasification would boost the levels of exploitable coal reserves in the U.S fivefold, the country isn’t suffering from a shortage of the mineral.
Tom Welch, a spokesman for the U.S. Energy Department said underground gasification “has limited applicability across the U.S. because we have ample supplies of high quality, readily available coal.”
That hasn’t stopped mining companies in the U.S. from picking up reserves that would otherwise be worthless. Peabody Energy Corp. (BTU), the largest U.S. coal producer, last year paid $6.5 million for 29 coal leases in Wyoming containing what it said are “billions of tons” of the fuel. The seams are too deep to mine conventionally but may be ideal for underground gasification.
Outside of the U.S., coal gas is seeing a wave of new investment thanks to advances in drilling and computer modeling that are bringing down costs, said Stanford’s Morse.
Canada’s Swan Hills Synfuels LP is building a C$1.5 billion ($1.52 billion) plant coal-gas plant attached to a 300-megawatt power generator near Whitecourt, Alberta. The company will drill down 4,700 feet (1,400 kilometers) to a coal seam that otherwise wouldn’t be practical to reach.
“Our costs are very competitive with new coal plants,” Swan Hills President David Shaigec said.
Australia’s Linc Energy Ltd. (LNC) is operating a demonstration plant in Chinchilla, Queensland, and formed a joint venture with a Chinese company in April to develop projects on the mainland.
Environmental groups are cautiously supportive of the technology.
“It’s a much smaller environmental footprint than conventional mining and consumes much less water,” said George Peridas, a scientist at the Natural Resources Defense Council who advocates more study and testing before projects are commercialized.
Coal gas does have its downsides. As with fracking, which has been blamed for polluting groundwater with the chemicals needed to break up shale rock, some early underground gasification projects caused toxic metals to leak into the water table.
“Groundwater contamination is a concern that needs to be addressed,” said Julie Lauder, chief executive officer of the London-based Underground Coal Gasification Association, whose membership has grown by a third in the past year. The industry’s solution is to go deeper than the water table and to choose sites carefully.
Lauder, not surprisingly, is bullish about future prospects. “Conventional mining will soon be a thing of the past,” she said. Lenin would applaud.
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