Coal Sector Developments in the United States Scott M. Smouse

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Office of Fossil Energy

Coal Sector Developmentsin the United States

Clean Coal Day 2017 in Japan International Symposium

5 September 2017

Scott M. SmouseSenior AdvisorActing Director, International &

External Partnerships Division Office of Clean Coal and Carbon

Management

energy.gov/fe2 | Office of Fossil Energy

Price of Natural Gas is Key Factor in Projecting Future U.S. Energy Mix

Source: EIA Annual Energy Outlook 2017

High NG prices

Low NG prices


U.S. Domestic Coal Market

• Coal industry is simultaneously in period of decline and restructuring M&A activity continues and several initial public offerings

loom.• Producers becoming better capitalized, but market continues to

face challenges but some bright spots: Higher natural gas prices have helped increase coal consumption

and draw down coal inventories so far in 2017, but longer-term domestic coal demand remains uncertain.

On track to higher annual production this year compared to 2016 National labor shortage persists and equipment typically under

maintained. 2 new coking coal mines this year

*After Key Coal Messages from CERAWeek 2017 by IHS Markit, 12 April 2017


U.S. Coal Exports

• As a swing supplier in international markets, U.S. coal has been losing market share since 2012, in face of global oversupply and strengthening of U.S. dollar.

• U.S. coal exports recovered in the first half of 2017 along with the recovery of international coal prices.

Increased U.S. coal exports following severe Cyclone Debbie impacted Australian coal exports to Asia

• International coal prices, driven primarily by Asian demand, will remain key source of uncertainty for U.S. coal exports in long run.

• Without dedicated export infrastructure on the U.S. west coast the gateway for lower-cost Powder River Basin coal to Asia opportunity for higher U.S. coal exports is limited.


U.S. coal exports in 2017 on track to reverse steady decline since 2012 peak

-

20

40

60

80

100

120

140

160

0%

2%

4%

6%

8%

10%

12%

14%

16%

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Steam

Coking

U.S. exports by coal type

million short tonsU.S. share in annual

global total coal exports

Jan-May'16 Jan-May'17

U.S. exports by coal type

million short tons


Top importers of U.S. coal bought less U.S. coalin recent years, except India

U.S. coal exports, 2016 U.S. coal exports, 2010-2016


Alaskan Coal Exports

Usibelli

Coal

mine

Seward coal terminal

0

0.2

0.4

0.6

0.8

1

1.2

2008 2010 2012 2014 2016

Chile Japan Korea

Alaskan coal exports by destinationMillion short tons


Advanced Fossil Technology Systems R&D

Cross Cutting ResearchMaterials, sensors, and advanced computer systems for future power plants and energy systems

Carbon StorageSafe, cost-effective, and permanent geologic storage of CO2 in depleted oil and gas fields and other formations

Carbon CaptureR&D and scale-up technologies to capture CO2 from new and existing industrial and power-producing plants

Advanced Energy SystemsTechnologies that greatly improve plant efficiencies, reduce costs, increase plant availability, and maintain highest environmental standards

Existing Major DemonstrationsFirst Generation fossil energy technology systems built to validate first-of-a-kind fully integrated projects at full scale for power and industrial sectors


• Existing Market Mechanisms: Enhanced Oil Recovery (EOR) 65M tons/yr of CO2 nearly 300,000

barrels/d of oil

• Regulatory Framework• Financing (Tax Credits and Loan

Guarantees)

• R&D focused on cost (capture) and

confidence (storage)

• Demos (integration and learning)

• International Cooperation Access to world-class R&D researchers

and facilities

Better, faster, cheaper

Domestic Oil Supplies and CO2 Demand (Storage) Volumes

from “Next Generation” CO2-EOR Technology

Technology Push Market Pull

CCS Activities in the United States Historically Focused on Technology Development and Market Mechanisms


USEPA Regulations for storage in place since 2010


• Current U.S. Tax Code § 45Q - Credit for CO2 sequestration1) $20 per metric ton of qualified CO2 which is—

a) captured by taxpayer at qualified facility, andb) disposed by taxpayer in secure geological storage and not used by taxpayer as

described in paragraph (2)(B)

2) $10 per metric ton of qualified CO2 which is—a) captured by taxpayer at qualified facility,b) used by taxpayer as tertiary injectant in qualified enhanced oil or natural gas

recovery project, andc) disposed of by taxpayer in secure geological storage

• Additional tax and financial incentives to support CCS deployment being considered Incentives for CO2 storage-EOR, including expanding existing 45Q provisions CO2 price stabilization Master Limited Partnerships (MLPs) Private Activity Bonds (PABs) Investment tax credits (ITCs)

• Diverse stakeholder support for proposed CCS legislation

Current and Proposed U.S. CCUS Policy Incentives


Proposed CCUS IncentivesS.15387 (Heitkamp, July 2017)

• For facilities placed in service on or after date of enactment: Credit available for 12 years, beginning when equipment is placed in

service $50 for secure geologic storage, with credit increasing annually until full

value is reached in 2026 $35 for EOR, EGR or utilized in another qualified manner, with credit

increasing annually until full value is reached in 2026

• Qualified facilities are defined as: construction begins by January 1, 2024 original planning and design includes installation of carbon capture

equipment For facilities that emit less than 500,000 tons of CO2, capture must be not

less than 25,000 tons of CO2 should be utilized per year For EGUs, capture should be not less than 500,000 tons per year Direct air-capture facilities should be not less than 100,000 tons per year


State Policies for CCS

H. Javedan, Massachusetts Institute of Technology

https://sequestration.mit.edu/pdf/US_State_Regulations_Underground_CO2_Storage.pdf

CO2 Owner: Post-Injection owner of CO2

Unitization: Minimum % of landowners which must agree to project

Primacy: CCS rights granted to mineral rights holders


U.S. DOE CCUS Major Demonstration Projects

CCPI

ICCS

Southern CompanyKemper County IGCC Project

Transport Gasifier w/Carbon Capture~$7 B – Total; $407M – DOE

EOR: ~3.0 MM TPY Suspended: June 2017

Petra NovaW.A. Parish Generating StationPost-Combustion CO2 Capture

$1B – Total; $190M – DOEEOR – ~1.4 MM TPY

Started Operations: January 10, 2017

Air Products and Chemicals, Inc.CO2 Capture from Steam Methane Reformers

EOR in Eastern TX Oilfields$431M – Total; $284M – DOE

Over 3.5 MMT stored as of March 2017!Started Operations: March 2013

Archer Daniels MidlandCO2 Capture from Ethanol PlantCO2 Stored in Saline Reservoir$208M – Total; $141M – DOE

SALINE – ~0.9 MM TPY Started Operations: April 7, 2017


Petra Nova – NRG Energy’s W.A. Parish CCPI-3 Advanced Post-Combustion CO2 Capture

• Project at NRG’s W.A. Parish power plant near Houston, Texas

• Post-Combustion CO2 capture retrofit of existing coal Plant at NRG’s W.A. Parish Unit 8

• World’s largest post-combustion CO2 capture system • Project completed on-budget and on-schedule • Delivering and permanently storing around 1.4 M tons

of CO2 per year for EOR• 240 MWe slipstream – scaled up to improve project

economics• Fuel: PRB sub-bituminous coal• 90% CO2 capture (KM CDR Process®) • EOR at Hilcorp’s West Ranch oil field• Total Project Cost: ~$1 B (DOE Cost Share: $190 M)

– NRG Equity - $300 million– JX Nippon Equity – $300 million– JBIC Project Financing - $250 million– MHI – Technology Provider

Key Dates:• Project awarded: May 2010

• Air permit: December 2012

• NEPA Record of Decision: May 2013

• Financial close: July 2014

• Complete construction: December 2016

• Construction completed on-budget and on-schedule

• Started operations: January 10, 2017

• Project Ribbon Cutting Ceremony: April 13, 2017


Southern Company Services, Inc. CCPI-2Kemper County Advanced IGCC with CO2 Capture

Key Dates:

Project awarded: Jan. 30, 2006

Project moved to MS: Dec. 5, 2008

NEPA Record of Decision: Aug. 19, 2010

Initiate excavation work: Sept. 27, 2010

CC operation on Natural Gas: August 2014

First syngas production: July 14, 2016

Lignite gasification portion of project

suspended on June 28, 2017 (facility will

continue to operate on natural gas)

• New Coal Plant built by Mississippi Power in Kemper County, MS

• First Baseload Unit Built in 30 years

• Built away from Gulf coast after Hurricane Katrina

• Mississippi Power is PSC Regulated Utility

• Part of Kemper costs subject to PSC rate recovery

• Generation: 582 MWe (net) with duct firing

• 2 TRIGTM gasifiers developed by Southern Co. and KBR

• Fuel: Local Mississippi Lignite

• 67+% CO2 capture (Selexol® process)

• ~3,000,000 metric tons CO2/year

• EOR: Denbury Onshore LLC

• Total estimated project cost: ~$7B

• DOE Cost Share: $407MM


Archer Daniels Midland Company ICCS Area 1CO2 Capture from Biofuel Plant

• CCS project built and operated by Archer Daniels Midland (ADM) at existing biofuel plant in Decatur, IL

• CO2 is by-product from production of fuel-grade ethanol via anaerobic fermentation

• Up to 90% CO2 capture (with >99% CO2 purity), dehydration (via tri-ethylene glycol) &compression

• ~900,000 tonnes CO2/year captured and stored

• CO2 Sequestration in Mt. Simon Sandstone deep-saline formation

• First new EPA UIC Class VI well permit for CO2

saline storage

• Total Project Cost: $208 M

• DOE Cost Share: $141 M (68%)

Key Dates:

FEED study completed: April 2011

Construction started: May 2011

Two monitoring wells drilled: Nov. 2012

UIC Class VI Injection Well Permit: Sept.

2014

Injection well drilled and completed:

Sept. 2015

Construction complete: Apr. 2016

Commercial operations: April 7, 2017

Ribbon cutting: September 22, 2017


Air Products & Chemicals, Inc. ICCS Area 1Steam Methane Reforming with CO2 Capture

• Built and operated by Air Products and Chemicals Inc. at Valero Oil Refinery in Port Arthur, TX

• CO2 capture added to 2 existing Steam-Methane Reformers (SMRs) for hydrogen production

• Project achieves 90+% CO2 capture Vacuum Swing Adsorption (VSA) for CO2 separation

• Capturing ~925,000 tonnes CO2/year

• ~30-MWe cogeneration unit makeup steam to SMRs and power to VSA and compressors

• CO2 to Denbury “Green” pipeline for EOR in Texas at West Hastings oil field

• Total Project cost: $431 M

• DOE Share: $284 M (66%)

• Project on time and under budget

• Operated >100% of design when needed

Key Dates:

Phase 2 awarded: June 15, 2010

Construction started: Aug. 2011

Started operations: March 2013

1 M tons of CO2 delivered Apr 2014

2 M tons of CO2 delivered May 2015

3 M tons of CO2 delivered May 2016

3.5 M tons of CO2 delivered March 2017


Carbon Capture Small-Pilot Projects – up to 1.5 MWe

Decrease capital and energy costs

2nd Generation Technologies

• 10 post-combustion systems

• Low degradation rates

• High permeance/reaction/flux

• ~$40/tonne

Transformational Systems

• Membrane systems for post-combustion

• Solvent and sorbent systems for pre-combustion

• ~$30/tonne

Technologies ready for large scale testing

• 10 to 25MWe

• $60M for greenfield units

• 5000+ hours of testing for commercial viability


Post-Combustion CaptureNational Carbon Capture Center - Benefits to Program

• Operated by Southern Company Services, at Plant Gaston, AL

• DOE funds 80% of operations

• Over 91,000 test hours

• Technologies from U.S. and 6 other countries since 2008 founding of NCCC

• More than 40 carbon capture technologies tested • 20+ Post combustion

• 20+ Pre-combustion

• Dedicated staff of plant engineers

• Standard design guidelines

• Small and large solvent test units

• 90+% of U.S. developers opt for testing at NCCC

energy.gov/fe21 | Office of Fossil Energy21

Example of CO2 Capture Development TimelineMembrane Technology Research, Inc. (MTR)


Accelerating the Rate of RD&D - Transformational

• Partnership between national labs, academia, and industry

• Accelerate deployment by 50% in TRL 2-5 range

• Parallel paths for materials discovery –synthesis – process design

• Leverage advanced computing

• Robotics for rapid synthesis and analytical capabilities

“Transformational Technology Development”


The Problem

New high-temperature structural alloy development and commercialization is time consuming and expensive: >10 years and multi-million dollars for single alloy

The Vision

• Reduce cycle time, cost and failure rate of advanced FE materials development by at least factor of 2X by:

o Integrated High-Performance Computational materials design and long-term predictive behavior tools coupled with smarter, more efficient experimental techniques

o Data analytics to leverage existing data and knowledge to maximum possible extent

Developing Advanced Materials

Friction stir welding of ¼”-thick dispersion strengthened Sandvik APMT plate

Advanced FE systems - Extreme environments- Long-service life (>100,000 h)- Large components

Opportunity- New Phase-Stable Alloys - Manufacturing of Alloys, Materials

Systems & Components- Build upon successes with Integrated

Computational Materials Engineering (ICME) environments


Transformative R&D: Supercritical Carbon Dioxide (sCO2)

Supercritical CO2:

A highly efficient working fluid

Cleaner, more

affordable electricity

Diverse fuel/

heat sources

Higher thermal efficiencies,

smaller physical footprint, and

lower capital costs(than conventional steam-based

power generation)

COAL

SOLAR

NUCLEAR

NATURAL

GAS

WASTE

MFG.

HEAT


Industrial sources could be early movers for CCS

Chemical and refinery

Metals and mineral

Other (including ag and waste management)


Industrial CO2 Capture OpportunitiesMaintaining U.S. jobs


Storage InfrastructureSmall Scale to Large Scale

Completed 18 injection

projects (1.35 M tonnes

injected)

RCSP Development Phase Large-Scale

Field Projects

RCSP Validation

Phase Field Projects

Over 10 million metric tonnes stored


Storage Infrastructure – Addressing Large-Scale Challenges

Brine Extraction Storage Tests (BEST)

Regional Carbon Sequestration Partnerships

Offshore Storage Carbon SAFE

Unconventional EOR


Advanced Storage R&DRisk Assessment, MVAA, Well Integrity & Mitigation, Predicting Plume & Pressure Impacts

• Advanced simulation tools for coupled processes – Flow, mechanical deformation/failure, geochemistry in complex, fractured reservoirs and caprock

• Measurement tools to ensure reservoir conformance

• Measuring and modeling geo-mechanical properties and coupled processes in reservoir, caprock, and faults

• Reduce risk of induced seismic events monitoring and forecasting capabilities

• Monitoring and mitigating wellbore leakage: bio-mineralization, pH-triggered polymers, nanocomposites, mesoporous nanoparticles


Existing U.S. CO2 Pipeline Network

• 50 individual pipelines with combined length over 4,500 miles (~7250 km)

• Roughly 80% of CO2 transported through pipelines from natural sources

• Vast majority of pipeline system dedicated to CO2-EOR producing >4% of

U.S. crude oil

• Pipeline regulation is joint responsibility of federal and state governments


CO2 Infrastructure Opportunities

A regional CO2 pipeline network will require collaboration between private companies,

investment community, State agencies, Federal regulators, and other interested stakeholders.

CO2 pipeline network showing oil and gas fields. Pipeline data

from Energy Velocity, saline reservoir and oil and gas field data

from NATCARB.

Source: NETL

• CCUS is capital intensive, faces policy and market uncertainties, and requires long-term commitment, all of which present financial burden and risk for CCUS project developers

Regulatory, policy, and financial certainty essential for industry

• U.S. EOR operations represent commercially demonstrated and Federally recognized form of geologic storage that could provide market pull for the CCUS deployment

Need to expand existing CO2 pipeline network to realize full potential for domestic oil production using CO2 -EOR


Integrated System Approach

33

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Coal Sector Developments in the United States Scott M. Smouse

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