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Alberta Turns to Coal Gasification to Pick Up Production Slack

A new contender has stepped forward to help complement the ever dwindling conventional natural gas supplies in the main Canadian producing province of Alberta -- coal gasification, on a large scale.

Up to four synthetic gas plants, each making 270 MMcf/d, are included in a project that targets rich coal seams 50 miles southeast of the Alberta capital of Edmonton. For an initial outlay of C$1.5 billion (US$1.3 billion) the scheme aims to open a strip mine and a first plant by the fall of 2011. The project schedule anticipates making a start on the second plant soon afterwards, followed by the third and fourth units in the 2015-20 period.

Prospective customers include an array of petrochemical complexes east of Edmonton, and especially oil sands projects which are seeking to replace natural gas as a mainstay of their thermal bitumen extraction and hydrogen-addition upgrading operations.

Known as the Dodds-Roundhill Coal Gasification Project after two communities in the path of the proposed strip mine, the project has big sponsors with deep pockets. The owner, Carbon Development Partnership, is an alliance of Canadian mining heavyweight Sherritt International Corp. and the Ontario Teachers' Pension Plan.

For the first two gasification plants, Carbon Development proposes to strip mine 120 square miles of coal seams straddling two Alberta municipal jurisdictions, Beaver and Camrose counties. The area contains an estimated 320 million tons of coal in thick, shallow seams. The mine would be expanded for the final two gasification plants, spreading across coal seams that carpet the district.

The project is in a preliminary stage known in Canada as "preliminary disclosure," when sponsors unveil plans for consultations required before formal development and construction applications are filed.

A decision will be made in May or June on whether to go any farther on the proposal after collecting community, environmental and market reactions, Sherritt spokesman Michael Minnes said. "Sherritt is absolutely sensitive to the history of that area," he added. "We want to consult all stakeholders to ensure we address the issues before we move ahead with any type of project."

The cautious approach is required in the region. Resistance to strip-mining in the area dates back to the mid-1970s, when protests by irate farmers stopped a mammoth coal-fired power project proposed by a corporate ancestor TransAlta Corp. for the site.

Sherritt and the pension fund acquired mineral rights in the area by collaborating on a 2001 takeover of Luscar Ltd., a mining company that bought the coal deposits from TransAlta. Miners have rated the Dodds-Roundhill property as the best undeveloped coal deposit in Alberta.

The project may draw a better welcome than its failed 1970s predecessor. No battle lines are drawn yet. "Everybody in the area has definitely got their eyes open and is trying to get information," Beaver County Reeve Ron Yarham said. "Nobody's really made up their mind." Environmental standards have improved, the project has changed and the economics of farming have deteriorated since the 1970s, he added.

The project may be welcomed by many rural families as a chance to sell farms squeezed by chronic weak prices for agricultural commodities and perennially rising costs of machinery, fertilizer and fuel, Yarham said. One critical difference is that the gasification proposal does not have the short-circuited power plant's permanent, lake-sized cooling ponds that would have flooded out agriculture forever, said Yarham, whose family fought the 1970s project.

Carbon Development Partnership bills its proposal as "clean coal technology." The design includes continuous land reclamation over a 40-year mine lifespan and underground disposal or commercial sale of byproduct carbon dioxide without venting the greenhouse gas into the atmosphere. "Using increasing volumes of natural gas to process relatively low energy-high carbon resources such as bitumen is costly and is not sustainable," the project sponsors say. "Unlocking the full energy potential of coal, in an environmentally responsible manner, is a key next step in the ongoing and sustainable development of Alberta's oil sands."

Barring technical breakthroughs or a severe slowing of development, gas consumption by oil sands operations is forecast to triple into a range of 1.8 Bcf/d to 2 Bcf/d over the next 10 to 15 years. Carbon Development's proposal, if built up to four gasification plants, would potentially cover half the anticipated oil sands demand.

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