Alberta's expanding coal business, fuelled by record-high prices for thermal and metallurgical coal, shows no signs of running out of steam, say industry players and analysts.
Even if world coal prices slump slightly as expected within a couple of years, they say, the province's long-range energy strategy will ensure the fossil fuel is used to generate electricity and make steel well into this century.
"Coal is here to stay," says Jim Dinning, chair of Calgary-based Western Financial Group Ltd. and former executive vice-president at TransAlta Corp.
"The commodity demand that we're facing now shows no signs of abating."
|Courtesy Epcor Inc.|
|State-of-the-art Genesee 3, left, joins Genesee 1 and 2 this year in a generating complex at Wabamun, west of Edmonton.|
Coal will still be a key energy source in Alberta 30 years from now, when the province "will be known as the world's clean- energy powerhouse," Dinning predicts.
Alberta generates about half its total 12,400 megawatts of electricity from coal-fired power plants, and still has at least 800 years of coal left in the ground at current production rates.
That makes coal an abundant and price-stable energy source compared with natural gas, whose price has skyrocketed and is subject to volatile swings on the world market, says David Lewin, senior vice-president, environment and sustainable development, at Epcor Inc.
"We really don't have many alternatives for power generation in Alberta, providing we want to remain economic," Lewin says.
Alberta will also be exporting thermal coal for decades to come, says Allen Wright, executive director of the Calgary-based Coal Association of Canada.
Coal makes up 60 per cent of Canada's remaining fossil fuel reserves, he notes, compared with the oilsands at 24 per cent and the remaining sources being conventional oil and gas.
Dozens of new coal-fired power plants are on the drawing board in the United States, which still generates more than half its electricity from coal. China and other fast-industrializing countries also plan to start building new and cleaner coal-fired generators, Wright adds.
Advances in pollution-control technology have significantly reduced air pollutants, such as sulphur dioxide (SO2), nitrogen oxides (NOx) and harmful particulate matter, from coal-fired power plants, Wright says.
But Tom Marr-Laing, policy director at the Pembina Institute, says the electricity industry is dragging its feet on reducing coal plants' toxic mercury emissions, which air currents deposit around the world in ever-accumulating amounts. There has also been negligible progress on cutting emissions of carbon dioxide, which is blamed for global warming.
"If industry is actually thinking that coal will have a serious role to play in the energy mix for North America, let alone worldwide, they have to move a heck of a lot faster on dealing with the environmental and human health impacts," Marr-Laing says.
Dinning, who is also chair of the Canadian Clean Power Coalition, says the industry group continues working to develop clean-coal technology that would emit few or no air pollutants or greenhouse gases.
"Within the next five to seven years, we will have nailed down a clean-burning coal technology that will allow us to build a coal-gasification facility in Alberta," he says.
Such a technology is a key part of Alberta's long-range energy strategy, notes Dinning, a former provincial treasurer whom many observers believe has the inside track - if he wants the job - to replace Premier Ralph Klein.
Marr-Laing, however, is skeptical of the clean-coal promise.
"Industry has been saying it's only five years away for probably around the last 10 years," he says.
"In the meantime, we're continuing to build the coal plants that are not clean coal or zero-emission coal."
Alberta cleanest-ever coal-fired generator is now undergoing field trials and is due to be fully operational by this spring.
Epcor and TransAlta teamed up to build the $695-million Genesee 3 plant at Wabamun, about 70 kilometres west of Edmonton.
The facility is the first in Alberta to use "supercritical" technology, essentially a high-efficiency boiler that burns less coal more efficiently than any other electricity generator in the province while producing 495 megawatts of power.
Genesee 3 is also the province's first coal-fired generator to incorporate advanced environmental technologies, including a sulphur emissions scrubber, high-efficiency burners and a bag filter system.
The equipment significantly reduces SO2 and NOx emissions and particulate matter, Epcor's Lewin says.
The new plant is also increasing demand at home for thermal coal.
Luscar Ltd. expects to add 1.8 million tonnes of production to the 3.5 million tonnes it currently mines at its Genesee site when Genesee 3 comes online.
Buoyed by high prices for thermal coal, Luscar is also looking at a $75-million project that would double exports to offshore customers from its Coal Valley mine near Edson to four million tonnes per year from the current two million.
Last month, TransAlta applied to build another new coal-fired plant, the $750-million, 450-megawatt Centennial facility at Wabamun. Like Genesee 3, Centennial would use advanced supercritical technology, incorporate environmental add-ons and further boost demand for thermal coal.
"My forecast is that coal will remain a viable and also an economic source of fuel for electricity generation for many years into the future," Lewin says. Alberta is also ramping up production of metallurgical or coking coal, a hard, high-quality coal used in making steel.
Record-high world prices for coking coal - due to a global shortage of the product and a seemingly insatiable demand for steel - is spurring new and expanded coal mine projects in Alberta.
Patricia Mohr, vice-president and commodities specialist at Scotia Economics, says she expects this year's price for western Canadian metallurgical coal exports to soar to unprecedented heights of more than $100 US per tonne, and she wouldn't be surprised if the price hits $125 US per tonne.
"The price is going to double" from last year's price, Mohr predicts. "It will be the highest that we've ever seen."
Just four years ago, she adds, prices for steelmaking coal plunged to a low of about $39 US per tonne in 2000.
The Coal Association of Canada's Wright says wryly that many in the investment community "probably couldn't spell the word 'coal' " just a few years ago.
"Now the demand is astronomical," he says.
"I'm not saying its going to last forever and a day. On the other hand, it would surprise me greatly to see it slowing down dramatically."
Grande Cache Coal Corp., which started production last year, will ship 1.3 million tonnes of coking coal starting April 1 to steel producers in South Korea and Japan for $125 US per tonne - the highest contract term price ever received for Canadian metallurgical coal.
Elk Valley Coal Corp. continues to develop its $50-million, 7,455-hectare open-pit Cheviot coking coal mine near Jasper National Park, despite calls by a coalition of environmental groups for a judicial review of the already-approved project.
Global supply of the commodity is so tight that Calgary-based Fording Canadian Coal Trust and Vancouver-based Teck Cominco Ltd. last month announced their first-ever 10-year contracts to supply two Asian steelmakers, Japan's Nippon Steel Corp. and South Korea's Posco, with coking coal from the Elk Valley mines.
Fording and Teck, through their Elk Valley Coal Partnership, operate five coal mines in B.C. and one in Alberta.
Scotia Economics' Mohr expects that Australia, Canada's main competitor in coking coal, will build more infrastructure and ramp up production as fast as it can, as long as prices stay high.
However, she says that China's demand for steel has been expanding at double digits for several years while the demand for coal in India, Taiwan and other developing countries is also growing.
"I think there'll be good markets for both thermal and metallurgical coal for many years to come," Mohr says.
(Mark Lowey can be reached at email@example.com)