Coal regains regal status as energy prices rise

"There's no doubt that coal will be playing a much bigger role in power generation," said Stuart Sanderson, president of the Colorado Mining Association. "That bodes well not only for Colorado coal but for Western coal in general."

The move toward coal is an abrupt departure from the past 20 years when most new power plants built in the U.S. have been fueled by natural gas. Before the big price run-up over the past five years, natural gas was viewed as a cheap fuel, with the added benefit of burning cleanly.

But with natural gas prices jumping from $2 per 1,000 cubic feet in 2001 to as high as $15 last December, gas-fired power has led to record increases in consumer electric bills. On Friday, natural gas was trading at $5.62 per 1,000 cubic feet.

Based on long-term averages, power from natural gas costs three to five times more to generate than power from coal, according to industry analysts.

As a result, there are proposals for 153 new coal generators nationwide that would supply enough electricity for 93 million homes.

Xcel Energy and Tri-State Generation and Transmission, Colorado's two largest utilities, have proposed $7 billion in new plants, which represents 5 percent of the $136 billion in potential new projects tracked by the Department of Energy. Those utilities and their ratepayers make up some of the nation's biggest spenders for coal-plant development.

The five new plants in Colorado will run the gamut from conventional units to a leading edge facility with ultra-low emissions.

The development surge also could benefit Colorado's coal-extraction industry, the nation's seventh-largest, with production last year of 38 million tons.

Xcel has proposed building the nation's first power plant that converts coal to clean-burning gas and also captures carbon emissions - viewed as an environmental breakthrough that will change coal's image from a belching polluter to an abundant, clean and relatively affordable resource.

The plant could cost from $500 million to $1 billion or more, with a possible construction start in 2009.

Westminster, Colo.-based Tri-State is launching an aggressive $5 billion campaign to build three conventional coal power plants - two in western Kansas by 2013 and one in southeast Colorado by 2020 - primarily to serve growing demand for electricity from Colorado customers.

The prospect of a nationwide surge in new coal-burning plants is alarming environmental advocates. The Department of Energy projects that new coal-fired generation will increase carbon dioxide emissions 52 percent by 2030. Many scientists believe that carbon emissions are a contributor to global warming.

"There are enormous adverse environmental consequences," said John Nielsen, energy program director of Boulder, Colo.-based Western Resource Advocates, an environmental research group. Nielsen said utility companies and their customers also face financial risk from coal-burning plants if the federal government taxes carbon emissions.

California Gov. Arnold Schwarzenegger has signed into law a sweeping global warming initiative that imposes the nation's first cap on greenhouse gas emissions.

But advocates from mining and power organizations say that utility owners and customers will benefit from increased reliance on abundant and relatively inexpensive coal.

Coal isn't immune to price increases. Coal from Wyoming's Powder River Basin, the nation's most prolific producer, has moved in price during the past five years from a low of $3.60 a ton in 2001 to a high of $17.50 earlier this year when rail problems caused a short-term shortage. It since has dropped to about $8.

But analysts say the vast reserves of coal in the U.S. - an estimated 250-year supply - make it typically less volatile in price than oil or natural gas and a more dependable source of energy.

Renewable energy from wind and sun are expected to shoulder a bigger share of power needs in coming years, but their intermittent nature make them less dependable than coal plants that produce power 24 hours a day, coal boosters say.

"There's only so much you can do with renewables, conservation and efficiency," said Tri-State spokesman Jim Van Someren. "To keep up with the demand that's going on, we are in dire need of more (coal-fired) generation."

Tri-State has explored the ultra-clean coal gasification technology that Xcel proposes to use, but Tri-State opted not to use the process for its three proposed plants. "We considered that, but timing-wise, we need to get our (conventional coal) facilities up and running in a timely manner," Van Someren said. "Coal generation takes a beating from various entities, but all our facilities operate well within state and federal emissions regulations."

Nielsen said Tri-State's three plants will produce an estimated 15 million tons of carbon dioxide per year. He said the utility should give more consideration to renewable energy and conservation.

"You've got a company putting all of its eggs in one basket, and that's very risky," he said. "Coal is perhaps helping them mitigate their financial risks, but they are completely ignoring the environmental regulatory risks."