T h e N a t i o n a l C o a l C o u n c i l C O A L : A M E R I C A ’ S E N E R G Y F U T U R E COAL: AMERICA’S ENERGY FUTURE V O L VOLUME I U The National Coal Council M E 1730 M Street, NW I Suite 907 Washington, DC 20036 The National Coal Council www.NationalCoalCouncil.org March 2006 2 0 0 6 Coal will enable the United States to meet the substantial increase in demand for energy; ensure our continued economic preeminence in the world arena; reduce our dependence on foreign oil and natural gas; and improve the quality of life for all Americans. Coal: America’s Energy Future Chair Thomas G. Kraemer Burlington Northern Santa Fe Railway Co. Vice Chair Georgia Nelson PTI Resources, Inc. Study Chair Gregory H. Boyce Peabody Energy Technical Work Group Chair Fredrick D. Palmer Peabody Energy Library of Congress Catalog # 2006924747 The National Coal Council Thomas G. Kraemer Chairman Robert A. Beck Executive Director U.S. Department of Energy Samuel W. Bodman Secretary of Energy The National Coal Council is a Federal Advisory Committee to the Secretary of Energy. The sole purpose of The National Coal Council is to advise, inform, and make recommendations to the Secretary of Energy on any matter requested by the Secretary relating to coal or to the coal industry. Preface The National Coal Council is a private, nonprofit advisory body chartered under the Federal Advisory Committee Act. The mission of the Council is purely advisory: to provide guidance and recommendations as requested by the U.S. Secretary of Energy on general policy matters relating to coal. The National Coal Council is forbidden by law from engaging in lobbying or other such activities. The National Coal Council receives no funds or financial assistance from the federal government. It relies solely on the voluntary contributions of members to support its activities. The members of The National Coal Council are appointed by the Secretary of Energy for their knowledge, expertise, and stature in their respective fields of endeavor. They reflect a wide geographic area of the United States and a broad spectrum of diverse interests from business, industry and other groups, such as: • Large and small coal producers • Coal users such as electric utilities and industrial users • Rail, waterways, and trucking industries, as well as port authorities • Academia • Research organizations • Industrial equipment manufacturers • State government, including governors, lieutenant governors, legislators, and public utility commissioners • Consumer groups, including special women’s organizations • Consultants from scientific, technical, general business, and financial specialty areas • Attorneys • State and regional special interest groups • Native American tribes The National Coal Council provides advice to the Secretary of Energy in the form of reports on subjects requested by the Secretary at no cost to the federal government. Coal: America’s Energy Future VOLUME I Table of Contents Executive Summary . 1 Chapter One: Coal-to-Liquids to Produce 2.6 MMbbl/d . 15 Chapter Two: Coal-to-Natural Gas to Produce 4.0 Tcf Per Year . 33 Chapter Three: Coal-to-Clean Electricity . 45 Chapter Four: Coal to Produce Ethanol . 63 Chapter Five: Coal-to-Hydrogen. 73 Chapter Six: Enhanced Oil and Gas (Coalbed Methane) Recovery as Carbon Management Strategies . 83 Chapter Seven: Delineate U.S. Coal Reserves and Transportation Constraints as Part of an Effort to Maximize U.S. Coal Production . 95 Chapter Eight: Penn State Study, “Economic Benefits of Coal Conversion Investments”*. 113 Appendix Abbreviations. 123 * Economic analysis conducted at Penn State University, 2006; see Volume II for analysis detail. The Resource: 27% of the World’s Coal is in the United States Executive Summary The National Coal Council thanks Secretary of “… a 22-percent increase in clean-energy Energy Samuel W. Bodman for his April 7, 2005 research at the Department of Energy, request for a “report identifying the challenges and to push for breakthroughs in two vital areas. opportunities of more fully exploring our domestic To change how we power our homes and coal resources to meet the Nation’s future energy offices, we will invest more in zero-emission needs.” coal-fired plants, revolutionary solar and wind technologies, and clean, safe The Secretary’s request is timely, as recent nuclear energy.” geopolitical events and hurricane devastation in the Gulf of Mexico have demonstrated that the This report addresses the Secretary’s request in the precarious balance between energy supply and context of the President’s focus, with eight findings demand leaves our nation’s economy vulnerable to and recommendations that would use technology supply disruption and volatility in energy prices. to leverage our country’s extensive coal assets and reduce dependence on imported energy. Volume I President George W. Bush made a number of points outlines these findings and recommendations. in his 2006 State of the Union address that make this Volume II provides technical data and case histories study’s timing even more compelling: to support the findings and recommendations. “Keeping America competitive requires This National Coal Council report is based on the affordable energy. And here we have a following fundamental premises regarding the serious problem.” evolving energy situation in the United States: He went on to describe America’s addiction to oil • Energy demand will increase significantly and the need to break dependence on the Middle East over the next 25 years. The Energy Information for energy and later emphasized the Advanced Administration (EIA) has projected that Energy Initiative: consumption will grow from 100 quadrillion British thermal units (Btu) in 2004 to 1 EXECUTIVE SUMMARY 127 quadrillion Btu in 2030, a rise of 27%. This • The emerging economies of the world, led by 27 quadrillion increase is equivalent to the nation’s China, are moving rapidly to develop their coal total energy consumption increase from 1972 to resources (see Figure ES.1). China will increase 2004. But during those years, oil imports were coal production from 1.7 billion tons per year (tpy) available to meet two-thirds of new demand. Such today to over 3.2 billion tpy by 2020. This an international supply cushion no longer exists. additional coal will be used for electric generation, Thus, the great bulk of new energy supply for the which will approach 1,000 gigawatts (GW) in total next generation of Americans will come from coal capacity, for coal liquefaction and for coal-to- in its many varied applications. syngas. Syngas production is already well under way in China, and liquefaction will follow shortly. • Coal is the only domestic fuel that has the Both are regarded as strategic imperatives by the flexibility and reserve base to meet this Chinese government. burgeoning demand. Coal’s annual production of over 1.1 billion tons can be more than doubled to • By maximizing the use of coal, we free the next 2.4 billion tons. This increase of 1.3 billion tons is generation from continued and increased possible because our coal reserves are vast. U.S. oil dependence on foreign energy suppliers. The and natural gas (NG) production both peaked in the EIA forecasts that from 2004 to 2030, petroleum 1970s, but we have enough coal to last more than imports will increase from 58% to 62% of supply, 100 years even at elevated levels of consumption. and NG imports will grow from 15% to 21%. In In 2004, the EIA estimated that the demonstrated terms of domestic oil production, for example, the reserve base (DRB) of the United States exceeded United States experienced a decline from 5.8 496 billion short tons distributed across more than million barrels per day (MMbbl/d) in 2001 to 5.1 in 25 states that have significant recoverable 2005—an 11% decrease. During the same time resources. period, NG production declined over 7%. Unless Global Coal Use Soars 22%, or 1.1 Billion Tons, in 3 Years Three-Year Percent Change in Global Energy Consumption Nuclear 3.9% e g Oil 5.9% n a h C 4 Hydro 7.6% 0 0 2 – 1 0 0 Natural Gas 9.1% 2 Coal 25.3% 0 5 10 15 20 25 Figure ES.1 Source: BP Statistical Review of World Energy, 2003, 2004 & 2005 2 steps are taken to utilize more of our domestic energy resources, the United States will be forced to increasingly rely on the Middle East and other regions for both oil and NG. • Imported energy comes with a staggering cost. At today’s prices, oil and NG imports would reach as much as $2.5 trillion over the 2010–2019 decade alone. Further, many of these imports would come from unstable and volatile regions of the world. • Clean coal technologies are commercially available to produce exceptionally clean, reliable and low-cost electricity; to convert coal technologies is captured and used to enhance to NG and liquid fuels; to produce hydrogen; to domestic oil production, these benefits would exceed increase enhanced oil recovery; to enhance coalbed $4 trillion. methane recovery; and to fuel the production of ethanol in an environmentally acceptable manner. Overall, the recommendations presented here Government support of a portfolio of clean coal regarding the expanded role of coal will enable the technology and environmental systems United States to: development will ensure that we continue to protect the environment while greatly expanding • meet the substantial increase in demand for energy coal’s long-time role as the cornerstone of low- over the next several decades for the benefit of the cost, reliable energy in the United States. American people; • Implementation of these technologies would • ensure continued economic preeminence of the generate unprecedented socioeconomic benefits United States in the world arena; for the American people for decades to come.