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Why coal’s environmental baggage could keep it grounded forever

Alberta has the potential to become a significant player in the coal-exporting business...but will it?

Dec 10, 2013

by Andrew Livingstone

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In Alberta, oil is king, but coal, a long-resilient resource in high demand worldwide, has industry in the province chomping at the bit. With an estimated 33 billion tonnes of untapped coal reserves buried beneath the rock and soil in Alberta, this province has the potential to become a significant player in the coal-exporting business.

And a major project underway two hours west of Edmonton is setting the province on that path. Coalspur Mines has plans to turn its Vista project, southeast of Hinton, into one of the largest export-driven thermal coal mines on the continent, ultimately employing 1,000 people and reaching output of 12 million tonnes per year. The coal is destined for power-generation plants in Asia.

But is there really a future for Alberta’s coal? Coal-generated power is on the decline across Canada (although it still makes up nearly 17 per cent of generation) and there’s a public appetite for a shift toward cleaner energy sources like hydro, natural gas, wind and solar power. Recent reports by the United Nations Intergovernmental Panel on Climate Change show coal to be a major cause of rising world temperatures and climate change. Together with new federal regulations on emission standards that will limit the lifespan of coal-fired plants to 45 years (unless they can reduce emission levels to match natural gas plants), the industry is at risk domestically. As investors sense the changing winds, they will take their money elsewhere.

“Frankly I think there is no future for [thermal] coal,” says Andrew Weaver, one of the authors of the two United Nations reports on climate change that implicate coal as a contributing factor. “While Alberta and Canada might think they’re immune to what’s going on in the rest of the world, the rest of the world is seeing climate change. There may be use for coal for the steel industry and to do some other things in the future, but thermal coal use, its days are numbered.”

“There may be a use for coal for the steel industry and to do some other things in the future, but thermal coal use, its days are numbered.” – Andrew Weaver, author, UN report on climate change

But the anticipated demand for thermal coal may suggest otherwise, particularly the numbers coming out of China, India and the U.S. Those three countries make up 70 per cent of coal use globally – by 2025 it is predicted to be 80 per cent. By 2040, China’s coal consumption for its electric power sector will increase 10 per cent from 2010. Overall, international demand for coal is expected to increase by nearly 30 per cent by 2030. And as far as metallurgical coal is concerned, India, the world’s fourth-largest steel producer, has plans to increase steel production from 78 million tonnes in 2011 to 304 million tonnes by 2020. “We may never build another coal plant in Canada,” says Peter Howard, president of the Canadian Energy Research Institute, with a tinge of regret in his voice, “[but coal] has a money future.”

Ann Marie Hann, president of the Coal Association of Canada, agrees, and says there is a middle ground. “The discussion isn’t use coal at all costs,” she says. “It’s about using it in a way that protects the environment better.” She says all power sources are going to be in demand in the coming decades and the coal industry “should reflect the best technologies moving forward, but it’s going to take time.”

She says industry is working to find better ways to make coal more environmentally friendly. “We want the best technology applied. It’s going to be a phase-in process and significant investment.”

Howard says there’s a role for the Alberta government to play in coal development, and that it should look to the past for inspiration. “A forward-looking government would see coal as the next oil sands,” he says, pointing to years of investment in the 1970s and 1980s in northern Alberta before the province – and country – reaped the economic benefits of the oil sands. He says proper investment in clean technologies will reduce the carbon footprint of coal-fired power plants, and the sooner they can be put in place, the better.

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For its part, Alberta Energy spokesperson Bart Johnson says the provincial government plans to continue its support for coal, predominantly that which is low in sulphur and therefore burns cleaner. For Alberta coal to make its way into the international market, “We have to show that our resource development is sustainable,” he says.

Alberta’s coal plants also fall under the provincial greenhouse gas regulatory system, “which has seen companies take significant action to reduce emissions,” or pay into the province’s technology fund. “This funding will allow the province to continue to pursue innovations to help us use coal in a cleaner way.”

Another tough challenge for Alberta’s coal industry will be breaking into the market. American and other foreign producers are already well-established. “There’s a lot of competition in the market right now that compete against Alberta,” Howard says. “Coal in the United States has started to make its way overseas, especially from the Dakota states.”
Production on the first phase of Coalspur’s Vista project was initially scheduled for late 2014, but opposition from some area residents convinced Alberta’s energy regulator to hold additional public hearings in December and January. Tourmaline Oil is concerned about overlapping mineral rights, and three First Nations groups are concerned about long-term environmental damage.

Despite the delay, it appears that Vista is well on its way to receiving regulatory approval. Once that happens, Vista will become the money future Howard predicts.

Supply and Demand

Canada isn’t a large player in the coal market, but the opportunity is there

08_Fossilfuel_story2aIn 2012, Canada produced 67 million tonnes of coal, compared to China’s staggering 3,549 million tonnes. But Canada does rank third worldwide in the exportation of the more valuable metallurgical coal used in steelmaking (as opposed to thermal coal, which is used in power generation). In 2012, Canada exported 31 million tonnes of metallurgical coal.Alberta produces more than half the nation’s coal (36.9 Mt), much of it going to generate electricity in the province. 08_Fossilfuel_story2aThe demand for coal worldwide – an estimated 10,900 million tonnes a year by 2020 – is setting the stage for Alberta to become a player in the export business.Domestically, demand is falling. Coal-fired generators produced 54 per cent of Alberta’s electricity last year, but that figure has been dropping, and the Alberta Resources Conservation Board says natural gas is set to become the biggest supplier of electricity in the province in the next decade.
Past Production

Every year, about 30 million tonnes of coal is mined in Alberta. Most of the subbituminous coal is used for electricity generation in the province, and most of the bituminous coal is exported for thermal and metallurgical uses.

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