El Paso CEO Says Coal to Play Bigger Role

Even though natural gas is and will remain the company's backbone, El Paso Corp. CEO William Wise told energy executives last week that coal will play an increasingly "preferable" role as the Houston-based company works to sustain its leadership position into the future.

Wise, speaking at the natural gas plenary session of Cambridge Energy Research Associates' CERAWeek 2001 in Houston, shared a panel with J. Larry Nichols, CEO of Devon Energy, Linda Z. Cook, CEO of Shell Gas & Power, and Bernard de Combret, director general of TotalFinaElf. Wise, however, was not the only CEO to mention coal as a viable option, however. Several generators at the CERA meeting also mentioned the possibility of considering more coal plants in the future (see related story).

Even though El Paso's production is growing, Wise said that overall, the company's production, like other producers, has been flat the past few years. Because of the flat production level, the company wants to remain flexible about its options to serve the marketplace, and coal would be just more thing to put into the energy mix.

"We are up and that's the exception," Wise said. "We are seeing an infrastructure response because of the tight supplies, but we have not yet seen the production up. We went up '99 to '00, but we're not sure about '01."

Just last week, El Paso announced it would spend $1.5 billion in the next five years to build six liquefied natural gas terminals for North American markets (see NGI, Feb. 12). Building up the LNG base and diversifying its energy products are all part of a larger plan for El Paso, and because of the "pressure on the incremental supply" of natural gas and the uncertainty of adequate natural gas supplies in the future, Wise said looking at coal as an option only made sense.

"If you take clean coal technology and apply it to waste coal you will have an environmentally efficient energy that is economically sound," Wise said. He listed coal's disadvantages: more capital intensive, more labor intensive and not as "clean and neat" as natural gas. But coal has tax advantages and can be a "very attractively priced power product," that actually costs less to produce overall than natural gas, he said.

Of course, El Paso would not have to go far to increase its coal production. When it merged with The Coastal Corp., it picked up coal mines, processing plants and coal loadout facilities from holdings in Central Appalachia. The resources are located on major rail lines with access to the large eastern utility market, industrial customers and cogeneration facilities. Coastal had been marketing steam and metallurgical coal from the operations and was leasing coal reserves for development by independent producers.

"Coal would provide a significant solution to some short-term supply," said Wise.

Carolyn Davis, Houston

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