British Columbia is moving quickly to take advantage of current record-high prices for metallurgical coal used in steelmaking, say industry players, government officials and analysts.

Even if world coal prices slump slightly as expected within a couple of years, they say the province is taking steps to ensure it will be able to continue to produce the fossil fuel well into this century.

Spurred by a global shortage of metallurgical coal estimated to be about 30 million tonnes per year, production of this so-called coking coal is white-hot in the province.

Premier Gordon Campbell's Liberals also have a long-range energy strategy that calls for building coal-fired power plants, something the province hasn't seen for generations.

"We don't see coal as a negative industry," says Pat Bell, minister of state for mining. "We see it as a positive industry and one that we actually want to embrace and encourage."

The government has implemented several measures, including reducing royalty rates on new coal mines, eliminating the provincial sales tax on mining production equipment and machinery, and streamlining the permitting process, to re-energize a sector many observers wrote off just four years ago as "a sunset industry."

Expected provincial revenues from coal mining will exceed $110 million for the current fiscal year, compared with the government's original prediction of $55 million, Bell says.

Dale Marshall, climate change policy analyst with the David Suzuki Foundation, says what worries the environmental group most about the big push on coal is the government's explicit commitment in its long-range energy strategy to build new coal-fired power plants.

Such plants will only increase local air pollution and cause health problems while also raising carbon dioxide emissions blamed for global warming, Marshall says. "There are all kinds of energy sources that we should be investing in other than coal."

Marshall wrote a report released last summer, entitled Running on Empty: Shifting to a Sustainable Energy Plan for B.C., that he says uses BC Hydro figures on future energy demand to show the province can meet its power needs for at least the next two decades, solely through clean renewable energy sources such as wind power and energy conservation. "We don't need any new coal plants," he adds.

When it comes to metallurgical coal, B.C.'s industry is quickly expanding existing mines, building new projects and even reconsidering opening previously mothballed mines such as Quintette in the northeast, which was shut down in 2000 due to low coal prices.

Bell credits the government's new dual-track regulatory scheme for a lot of the activity. It allows a company with a proposed new mine to proceed through both the environmental impact assessment process while at the same time applying for all the permits needed to build and operate the mine.

"We're not bypassing any of the activities that have to occur in order to ensure that the environmental values are maintained," Bell insists.

The government approved Western Canadian Coal Corp.'s new Dillon Mine on its Burnt River property in northeast B.C. in a lightning-fast 83 days, he notes. "The faster I can get these guys up and running, the longer they have at the top of the market to return their cost of capital."

This will help keep companies operating even when cyclical world commodity prices take the inevitable dip, he adds.

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.

Allen Wright, executive director of the Coal Association of Canada, 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 it's going to last forever and a day.

"On the other hand, it would surprise me greatly to see it slowing down dramatically."

Gary Livingstone, president and CEO of Vancouver-based Western Canadian Coal, says his company expects to get provincial approval to build the firm's second metallurgical coal mine, called Wolverine, within the next few weeks.

Western Canadian Coal hopes to have Wolverine up and running by early 2007, he says. It would initially produce about 2.4 million tonnes per year and be expandable to three million tonnes annually.

The firm's new Dillon Mine, located between Chetwynd and Tumbler Ridge, last week shipped its first-ever load of high-quality coking coal to a South Korean customer from the Ridley coal terminal in Prince Rupert.

The open-pit Dillon mine should produce more than 600,000 tonnes this year, which will increase to nearly one million tonnes in 2007, Livingstone says.

Even if coal prices drop to about $70 US per tonne by then, Western Canadian Coal's plan is to keep costs down so it can keep on producing, he says. "If we can pay off our capital and then we have minimal debt, then we can sustain lower prices."

Other companies active in northeast B.C. include Pine Valley Mining Corp. of Vancouver, which last year began production from its Willow Creek coal project near Chetwynd - the first new metallurgical coal mine in B.C. in 20 years.

Northern Energy & Mining Inc. expects to begin production this year at its Trend property near Tumbler Ridge, starting with about 240,000 tonnes per year and ramping up to three million tonnes annually.

Mining Minister Bell says B.C. currently supplies about 26 million tonnes per year of coking coal to offshore customers from the Elk Valley coalfields in southeast B.C. through the Roberts Bank port in Vancouver.

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 mines in B.C. and one in Alberta.

Bell says B.C. has the infrastructure in place, including a rail line and the Ridley terminal at Prince Rupert, to handle the surge of production from northeast coalfields in the Tumbler Ridge-Chetwynd area.

Hillsborough Resources of Vancouver became the newest player in the area last week, announcing it will buy 11 coking and thermal coal-mining properties from Aurora Coals & Minerals Inc.

B.C. is looking to produce an additional 15 million tonnes annually of coking coal from the northeast coalfields - enough to fill half of the 30-million-tonne global shortage - within the next few years, Bell says.

Scotia's 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 and Taiwan 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 mark@businessedge.ca)