Legislature(2009 - 2010)Anch LIO Conf Rm
10/09/2009 09:00 AM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Overview Cook Inlet Regional Inc. - New Energy Project | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE RESOURCES STANDING COMMITTEE
SENATE SPECIAL COMMITTEE ON ENERGY
HOUSE RESOURCES STANDING COMMITTEE
Anchorage, AK
October 9, 2009
9:05 a.m.
MEMBERS PRESENT
SENATE RESOURCES
Senator Lesil McGuire, Co-Chair
Senator Bill Wielechowski, Co-Chair
Senator Charlie Huggins, Vice Chair
Senator Hollis French
Senator Thomas Wagoner
SENATE SPECIAL COMMITTEE ON ENERGY
Senator Lesil McGuire, Chair
Senator Bill Wielechowski
HOUSE RESOURCES
Representative Craig Johnson, Co-Chair
Representative Mark Neuman, Co-Chair
Representative Paul Seaton
Representative David Guttenberg
Representative Chris Tuck
MEMBERS ABSENT
SENATE RESOURCES
Senator Bert Stedman
Senator Gary Stevens
SENATE SPECIAL COMMITTEE ON ENERGY
Senator Lyman Hoffman
Senator Albert Kookesh
Senator Bert Stedman
HOUSE RESOURCES
Representative Bryce Edgmon
Representative Kurt Olson
Representative Peggy Wilson
Representative Scott Kawasaki
OTHER LEGISLATORS PRESENT
Senator Johnny Ellis
Senator Fred Dyson
Representative Jay Ramras
Representative Bill Stoltze
Representative John Harris
Representative Mike Chenault
Representative Mike Kelly
Representative Les Gara
COMMITTEE CALENDAR
OVERVIEW COOK INLET REGIONAL INC. - NEW ENERGY PROJECT
HEARD
PREVIOUS COMMITTEE ACTION
No Previous Action to Report
WITNESS REGISTER
MARGIE BROWN, President and CEO
Cook Inlet Regional Incorporation (CIRI)
POSITION STATEMENT: Delivered introductory welcome remarks.
ETHAN SHUTT, Sr. Vice President
Land and Energy Development
Cook Inlet Regional Incorporation (CIRI)
POSITION STATEMENT: Gave the presentation on Underground Coal
Gasification (UCG) and answered questions.
ACTION NARRATIVE
9:05:05 AM
CO-CHAIR LESIL MCGUIRE called the joint meeting of the Senate
Resources Standing Committee, the Senate Special Committee on
Energy and the House Resources Standing Committee to order at
9:05 a.m. Present at the call to order were Senators
Wielechowski, Huggins, French, Wagoner and McGuire;
Representatives Neuman, Seaton, Guttenberg, Tuck and Johnson.
^Overview Cook Inlet Regional Inc. - New Energy Project
Overview Cook Inlet Regional Inc. (CIRI) - New Energy Project
CO-CHAIR MCGUIRE said that CIRI has an exciting announcement
today about a new project here in Alaska that will move the
state forward in the next 100 years.
MARGIE BROWN, President and CEO, CIRI, delivered introductory
welcome remarks. She feels that there is a greater awareness now
of a possible gas shortage in their region and they are all
looking for a shared view on how to handle the energy situation,
particularly in the Railbelt. Their project is very exciting;
they have been quietly investigating this technology for one
year. They traveled to South Africa to look at a pilot project
with some skepticism, but they became convinced that this is an
understood and safe technology that can do something for the
energy situation in Alaska. It can harness the energy in a coal
seam and produce electric power and perhaps other value-added
products without the negative effects of mining. It is not the
energy solution for every energy need in the Cook Inlet, but it
adds a diverse supply of energy to the Railbelt so they are not
so dependent on one fuel source, natural gas. She mentioned that
their Fire Island wind project is another solution.
9:11:56 AM
ETHAN SHUTT, Sr. Vice President, Land and Energy Development,
CIRI, gave the presentation and answered questions. The first
phase of the project is a Underground Coal Gasification (UCG)
facility and a 100 mgW combined cycle power plant. It will be
located on CIRI land in the Beluga area. UCG produces a product
stream called syngas that has also been referred to as "town
gas" or "coal gas."
9:12:57 AM
It can be used in its simplest form without refinement to
generate electricity by burning it through a control modified
natural gas turbine or it can be upgraded through known and
commercially available processes to synthetic natural gas or
clean liquid fuels. This project is committed to doing carbon
capture and sequestration (CCS) for environmental and economic
reasons. The primary target for the CCS is to do enhanced oil
recovery in the legacy oil fields in Cook Inlet, an additional
benefit for the project.
While four other projects have been announced in Alberta and
Wyoming, CIRI has a good chance of being the first commercially
operational project in North America. But because they are
proposing to have an integrated CCS piece, it is almost certain
they will be a world first project of this kind.
CIRI has a lot of landholdings in the Cook Inlet area, and the
Beluga field is a world class coal resource that hasn't been
developed commercially yet for a variety of reasons. UCG
addresses both economic and environmental concerns of such a
development. The site is near the Beluga area and close to
natural gas fields and has access to gas and electrical
generation infrastructure put in by Force Energy about 10 years
ago when they drilled a dry hole. The specific project area is
remote and not near any populated areas. The nearest community
is Tyonek, about 25 miles south.
9:16:47 AM
He said the that UCG technology has been around for more than
100 years and has been operational on a commercial scale for 50
years internationally. It harnesses the energy in a very deeply
buried coal seam and does it without mining. Roughly, you have
coal, water, oxygen, and heat. That starts a set of chemical
reactions that yields syngas composed of hydrogen and carbon
monoxide. It creates a substantial amount of carbon dioxide
(CO), methane and other trace gas elements. Coal seams have
2
methane in them and gasification creates more methane, but this
is not coal bed methane technology.
9:18:18 AM
MR. SHUTT emphasized that syngas is an energy-rich gas product;
it can be handled and used like natural gas, but it is not
natural gas. It's most simple use is to fuel a gas turbine that
has been modified to generate electricity. It is a very valuable
gas product for a number of value-added upgrades. It can be
converted through a process called methanation to make natural
gas. If you manufacture it instead of producing it out of a well
in the ground, it is called synthetic or substitute natural gas;
but it is chemically the same product. An upgrade like that
would make it available to put directly into the Enstar
transmission system on the west side of the Inlet.
9:19:43 AM
Alternatively, another target in the longer run is to do a
value-added upgrade process to make liquid fuels. A number of
well known processes exist for that; one is called the Fischer-
Tropes process, which upgrades syngas as a feed stock into
synthetic crude oil which can be refined through a basic
refinery process into synthetic fuels like gasoline, diesel and
aviation fuels. An alternative liquid fuels route makes methanol
first as the feed stock; methanol has value in the Pacific Rim
where it is used in China as a fuel additive in their liquid
fuels for transport fuels and automobiles. Methanol is a two-
stage process, and Exxon has a patented liquid fuels refinery
process that runs off of methanol and produces synthetic
gasoline.
9:20:19 AM
MR. SHUTT said it's important to note that UCG-produced syngas
has environmental attributes, and they have promised to do a CCS
regime integrated with their UCG project. Natural gas is the
gold standard for environmental purposes when people talk about
fuel-fired generation.
If you have CCS, you can have equivalent or lower CO emissions
2
out the back end of the combined cycle natural gas power plant.
Other tracked emissions - sulphur and nitrogen compounds,
mercury and a few other things that come out of the flu gas from
a power plant - will be comparable to or favorable with natural
gas as well. CIRI plans to install a modern and highly efficient
combined cycle power plant. Most of power generation in the
Railbelt is old, and therefore the proposed power plant will
compare very favorably to the existing infrastructure.
Slide 12 depicted the drilling process from the ground level to
the underlying rock. They used a two-well design for
illustration purposes, but in fact it is not simply two wells.
Basically, two wells are drilled into a deeply buried coal seam
and a connection is created between them so that they can
communicate (flow gas from one well to the other). At one well
an oxidant is injected; for power generation (in this case) you
simply compress air and inject that. This starts a combustion
reaction that creates heat and pressure that starts to expand
the cavity into a reaction chamber. A series of chemical
reactions gasifies the coal through. It's not as simple as
burning a portion of the coal underground and having an exhaust
stream. You are burning a portion of the coal and the heat and
pressure that creates gasifies the rest by driving certain
chemical reactions. The process consumes about 20 percent of the
energy content in the coal and the other 80 percent is produced
and comes out the production well through the gasification
process.
MR. SHUTT explained:
Because you're gasifying the coal in the coal seam,
itself, you leave a lot of the ash and slag and
particulate and other toxic by-products of the coal in
the ground where it started. One of the reasons people
don't like coal, and it's referred to as a four-letter
word in the environmental community, is because -
while coal is very energy-rich - it is about what
people say is two-thirds junk and one third energy.
The two thirds junk is not all just solids that you
have to deal with; the solids are also laden with
heavy metals, and volatile organic compounds and other
carcinogens. So, the beauty of this process is that
those things that are incumbent in coal are less at
the end in the coal seam where they started, not
produced up to the surface where you have to handle
them and store them for long periods of time.
9:24:54 AM
MR. SHUTT further explained:
Slide 13: The gas has to be cleaned up and this facility has a
relatively small footprint, about half the size of this room.
Some of the product stream will also be steam, which will
condense into water as the temperature goes down at the surface,
but not large volumes like coal bed methane. When the stream has
been cleaned it is ready for carbon sequestration.
9:26:04 AM
Slide 14: Site characteristics for a UCG development: Department
of Energy has rule of thumb best practices. One of those is that
the coal is at least 200 meters down, more than 650 feet deep
and below the fresh water aquifer. The most important
characteristic is that the fresh water aquifer is isolated from
the coal seam. It will be and remain below the fresh water
aquifer if you find strong and impermeable overlying rock
layers. Cook Inlet has shales and mud stones, which are both
structurally strong and impermeable.
Another beneficial layer to find is clay which Cook Inlet has.
It has very high impermeability, but it needs other impermeable
rocks as well. Before any development, extensive testing is done
to validate the site; and the process is monitored.
9:27:59 AM
Slide 15: Mitigating Hazards: The two principal environmental
hazards are linked - surface subsidence and ground water
contamination. Surface subsidence means that you've caused a
vertical column above the steeply buried coal seams to collapse
from 900 ft. deep all the way up to the surface. This will
create a set of vertical fractures through which water can move.
Surface subsidence is managed through very careful site
selection and site characterization, through extensive drilling
at the site and core sampling. Then in certain cases 3-D seismic
is used. Gathering that data set allows one to do careful
project design and set operational parameters; and always
following through with subsequent monitoring.
MR. SHUTT said it is important for risk mitigation to manage the
process pressure in the gasification chamber, which is operated
at a pressure that is slightly less than the hydrostatic
pressure in the coal seam. High pressure flows to low pressure,
so the water in the coal seam flows into the process. The
process needs some water and the water coming in supports the
process, itself; that is why water is not injected at the
surface. Another important environmental reason that is helpful
is that means that the water and the contaminants are flowing
into the process chamber itself. The ones that are liberated or
created by the process remain in the chamber. When they are in
the chamber they can be predicted and controlled.
In a reverse scenario and an over-pressurized process chamber,
carries gas products with contaminates out into the coal seam;
and there is then the possibility of losing control and not
being able to predict where they would go. So, it's important to
operate the process at a pressure slightly less than the
pressure of the water in the coal seam. Operators control or
halt the process of combustion by managing oxygen supply from
the surface. There is very little risk of uncontrolled coal seam
fires, because the chamber is 800-900 feet deep in a wet coal
seam with strong impermeable rock layers above.
9:32:05 AM
The final two bullets on mitigating hazards are important, but
are soft people elements: First, to pick the right technology
provider; theirs' has a proven track record for UCG development.
They were the technology provider of probably the most prominent
commercial pilot scale project in Australia called Chinchilla,
where they developed and operated for three years. It was shut
down and monitored by independent environmental audits. It was
found to not cause any ground water contamination and no
noticeable subsidence at the surface.
9:33:36 AM
He said that UCG is a simple concept, but it requires a
technical expertise. Lawrence Livermore National Laboratory is
CIRI's independent technology consultant (not a consultant to
the project). This company is the scientific body of the DOE
that ran the U.S. government's UCG program in the late 70s and
early 80s.
9:36:00 AM
Slides 16 & 17: Why UCG? It is a proven energy technology to
access an abundant local resource. It is new to Alaska, but it
has been deployed at commercial scales in China and India as
well as private projects starting up in Australia. It produces
syngas which is a flexible feed stock for generating electricity
or upgrades to synthetic natural gas or liquid fuels. Because of
Cook Inlet's positioning at tidewater on the Pacific Rim, it
would provide local manufacturing jobs, a secure domestic energy
supply and a bridge fuel for the future. It is a very efficient
process.
9:37:53 AM
Slide 18: It is a safe and proven technology. The reaction is
controlled and can be stopped at any time. Risks are mitigated
by careful site selection and characterization, project design
and operation, and ongoing monitoring. More than 50 commercial
UCG projects have already been completed around the world. It's
cutting edge technology that harnesses a world class resource
that is here now.
9:42:03 AM
Slides 19 & 20: UCG is low-impact energy production because it
requires minimal surface infrastructure; it eliminates
risks/problems associated with coal mining handling, transport
or waste. It is not coal mining; it leaves most tradition
negative coal byproducts safely contained deep underground. In
the process it enables carbon capture and sequestration (CCS).
9:43:48 AM
Slide 21: The UCG process produces syngas at temperatures and
pressures with CO concentrations that allow relatively easy,
2
low-cost carbon removal at the surface prior to burning. Carbon
capture is usually discussed in the context of retrofitting
traditional pulverized coal plants and scrubbing carbon dioxide
out of the flu gas; people don't like it because it is very
expensive in that context. The reason it is expensive in the
retrofitting context is because the parameters are all inverted
and backwards. A flu gas stream has very high temperatures, very
low pressures, and very low concentrations of CO; so you have to
2
handle massive quantities of hot gas at low pressure to try to
get the CO scrubbed out. Carbon capture equipment is enormously
2
energy parasitic; it can consume 40-45 percent of the energy
going into the plant.
The UCG process produces syngas in a composition that has almost
the ideal circumstances for carbon capture in an energy
efficient manner - moderate temperatures, high pressures and
relatively high concentrations of CO. UCG with CCS leaves a very
2
manageable carbon footprint that is far smaller than any
traditional coal technology and is similar to natural gas. CO in
2
this form is easily separated by existing commercially available
technologies that several manufacturers are working on
improving. The ones that are commercially available are for
scrubbing CO out of a syngas stream are an absorbent type
2
technology that requires absorbing and then an energy consuming
process to desorb the CO out of the absorbent. A much more
2
efficient technology would be a membrane-based separation, and
several companies are working to commercialize this technology.
An example of such a facility is in North Dakota that has a
surface gasification facility that ultimately methanates the
syngas stream and makes synthetic natural gas for local
distribution. This method sends its CO stream by a 250-mile
2
pipeline north across the border into Canada for enhanced oil
recovery at Weyburn in Canada.
The other place with carbon scrubbing technology applied to a
syngas stream is an integrated gasification project at the
surface In West Virginia where they gasify and then produce
electric power. They are doing a deep saline sequestration
experiment with the CO stream with federal funding.
2
9:47:49 AM
Slide 22: Their primary target for carbon management is through
enhanced oil recovery (EOR) in the depleted oil fields of Cook
Inlet. There are a number of sequestration options, but enhanced
oil recovery is the only that has been proven and is well
understood. The oil industry in Louisiana and Texas has been
doing EOR for 25-30 years. They understand how to put CO back
2
into the ground and get more oil and keep the CO in the ground
2
when they put it there. Other methods, like deep saline, are
science experiments and the impacts are not totally understood.
EOR is the one proven method of sequestration, and it is the
economically preferred method. It extends the productive life of
existing oil fields.
9:49:40 AM
Slide 23: EOR maximizes use of existing oil field infrastructure
by maximizing production out of an area that has already borne
the environmental impact of development. This, in turn, reduces
the pressure to develop additional resources. So, environmental
impacts of EOR are largely positive, not negative.
CIRI met with a number of national and local environmental
groups leading up to today, and with one exception that wasn't
necessarily negative, the response has been positive. Most
believe EOR is a preferred first step toward carbon management
on a commercial scale for the very reasons CIRI believes CCS
should be the primary target.
9:50:57 AM
Slide 24: UCG is not coal mining. There are no open pits,
mountaintop removal or tailing piles, no surface water pollution
or impact. It reduces or eliminates most of the traditional
pollutants that accompany coal mining; there is no surface ash
and slag waste handling. The project site is small and easily
restored upon project completion. It is not coal bed methane
extraction.
9:53:33 AM
CIRI's commitment: They will only begin building a UCG facility
after a deliberate thoughtful process and performing all
necessary due diligence, completing an EIS, securing all
necessary permits, and after reaching agreements with world-
class technology partners and evaluating input from local and
national stakeholders.
9:55:30 AM
Slide 28 Preliminary Timeline:
December 2009: Resource assessment drilling begins
February 2010: Preliminary resource assessment results;
preliminary site selection
March 2010: Pre-feasibility drilling begins
August 2010: Site characterization drilling begins
November 2012: Project permits received
January 2013: Above-ground project construction begins
January 2014: Commercial operations begin
9:58:34 AM
CO-CHAIR MCGUIRE thanked them for presenting to the Legislature
first rather than holding a press conference or any of the other
ways they could have done it. She asked if CIRI has been in
touch with the Department of Defense that is looking at a pilot
project in Alaska. They need synfuel to fulfill a contract by
2014.
MR. SHUTT replied no; that could be a potential logical second
phase; but they are intent on getting the first phase off the
ground.
10:00:42 AM
CO-CHAIR MCGUIRE asked if the project would change if Exxon
decided to further develop natural gas.
MR. SHUTT replied probably it wouldn't affect their project
because energy prices for UCG are competitive now.
10:03:54 AM
CO-CHAIR WIELECHOWSKI asked if they would build a completely new
power plant or retrofit the existing one.
MR. SHUTT answered build a completely new 100 mgW combined cycle
power plant. Beluga turbines are so old that it doesn't make
sense to feed a highly efficient fuel source into an inefficient
old facility. It's also very expensive to retrofit an existing
facility compared to new construction.
SENATOR WIELECHOWSKI asked who would operate the plant.
MR. SHUTT answered they hadn't talked to other utilities about
that, so CIRI would operate it; but they might take on
additional investors moving forward.
SENATOR WIELECHOWSKI asked the impact of this project on a
bullet line in Cook Inlet.
MR. SHUTT answered that is not the intent of this project, but
phase one of this technology will offset 9 bcf/yr. quickly,
which substantially defers the energy shortfall. And, more
importantly, he said, they can supply energy at prices
competitive with today's prices without asking the state for
money.
10:07:16 AM
SENATOR WIELECHOWSKI asked if he anticipates expanding this
project to extract gas for Enstar, Agrium or for possible export
to Fairbanks and other communities.
MR. SHUTT replied yes; but the first phase is to do something
for the Railbelt.
10:09:06 AM
SENATOR WIELECHOWSKI asked if this project would affect other
proposed projects like the Chuitna strip mine.
MR. SHUTT answered no.
CO-CHAIR MCGUIRE asked if he considered applying this technology
to North Slope oil.
MR. SHUTT answered yes.
10:10:06 AM
SENATOR FRENCH said being first carries prestige, but also first
problems. What causes him worry?
MR. SHUTT answered the single biggest worry is permitting. This
is the first project of its kind in the U.S., and neither state
nor federal regimes apply to this technology. They apply to coal
as the resource, and certain oil and gas types of regulations
loosely fit. Underground injection permitting looks at things
like oil and gas fields or waste disposal wells, but those don't
apply very well for UCG development where the first phase would
be only injecting compressed air. If the project is successful,
the state and federal government will have to develop statutes
and permitting regimes that are tailored to address development
and environmental concerns of the process and the technology.
SENATOR FRENCH asked him where the crossover point for price is
for their project versus natural gas for Armstrong/Enstar, for
instance.
MR. SHUTT replied as long as natural gas prices don't fall below
$5/bcf. There is a lot of risk being the first UCG project here
and he didn't want to go below that figure.
10:13:48 AM
SENATOR FRENCH asked if this technology could be taken to the YK
Delta, one of the most energy starved regions in the state.
MR. SHUTT replied that he didn't know for sure.
10:14:14 AM
REPRESENTATIVE JOHNSON said he liked the concept of no public
money. He asked if they had figured out what their cost is per
kilowatt hour.
MR. SHUTT replied that they hadn't directly modeled what the
cost of power would be, but the fuel is the single largest
component, the capital recovery is the second, and operating
costs are the third. They believe their fuel price is very
competitive with today's natural gas price in Cook Inlet;
capital equipment is capital equipment. They estimate it will
take $30 million to build the UCG aspect of the development; and
$150 million for the power plant aspect.
REPRESENTATIVE JOHNSON asked what they can do as a legislative
body to help.
10:16:57 AM
MR. SHUTT answered that they thought a lot about permitting
issues, but he didn't know if changing the regulatory scheme
this session actually advances the process, because it would
take a regulatory development process to follow a statutory
change. They have had a meeting with the commissioner of the
Department of Environmental Conservation, and flagged their
concern about the application of regulations to make sure the
state and public interests are protected, while making sure the
project is advanced. They will meet with state and federal
regulatory agencies to figure how to proceed early next month.
If it can't be permitted through existing regulations, they will
ask the legislature for help.
REPRESENTATIVE JOHNSON said he appreciated no public money
especially for such an ambitious project.
10:20:09 AM
REPRESENTATIVE RAMRAS said the project sounds practical and
doable and asked at what point his leadership would sanction the
actual commencement of the project.
MR. SHUTT replied that there are a couple of phases to go
through before committing. They will need an actual budget with
real analysis behind the numbers; their drilling program will
commence this winter that will be followed by two subsequent
rounds of drilling that validate the geology and make sure a UCG
development can be responsibly done. There is no single
benchmark point. They spend more and more as they get further
down the trail.
10:22:53 AM
REPRESENTATIVE RAMRAS asked if the scope of the project is $100
million, how much they will have spent on all pre construction
pursuits.
MR. SHUTT answered they don't have a budget worked out, but they
will have spent less than $10 million before permits are
obtained.
REPRESENTATIVE RAMRAS asked after their first commercial
success, is it expensive to create other products. How much
would syngas production cost and what would the timeline be?
10:26:19 AM
MR. SHUTT answered they have a sense of some of the capital
required for the build out for second phase operations, but they
are focused on the first. The second phase is more capital
significant than the first phase even in the cheapest option.
The most expensive option would be synthetic fuel plants at
commercial scale; those would be multiple billions for just the
capital process for setting up a refining process.
Another very important factor is that this is not a project that
can be financed with commercial financing. Banks are unwilling
to take technology risks. Proving the technology will require
successful operation of the project for probably a year. The
step-out development for additional UCG production, for syngas,
is not expensive. Most of the UCG development expense is in the
initial site development and some of the control systems and
other infrastructure that support the project as a whole.
REPRESENTATIVE RAMRAS said other projects have problems because
they are hard to scale down for state use. Does CIRI's UCG
process seem to be scalable to smaller communities?
MR. SHUTT said there are a couple of answers. It can be scaled
to a pretty small level, but the economics don't scale down,
because of the technical expertise that is needed. He said the
South Africa project is an example of this that he saw.
10:32:26 AM
SENATOR WAGONER asked how much methane is produced per ton of
coal burned.
MR. SHUTT replied that he didn't know the answer, but one factor
that increases methane production is the chemical reaction that
takes place in the gasification chamber that produces the
methane, which is pressure dependent; so going deeper in the
coals, the more pressure you would have in the gasification
chamber, and that would produce more methane as a component of
the gas stream.
SENATOR WAGONER asked if he had talked with oil companies about
tertiary EOR.
MR. SHUTT answered not yet, but Chevron is the producer in the
Inlet.
10:34:22 AM
SENATOR WAGONER asked how long after the first project was done
would it take to get another 100 mgW project going.
MR. SHUTT replied that it wouldn't take long to start up a new
module. With the large coal resource, additional UCG development
is not a big step. From there it is just a matter of additional
development for the end use.
10:35:12 AM
SENATOR WAGONER asked what maximum depth is being produced now.
MR. SHUTT answered he didn't know; but some projects in various
parts of the world are proposing depths in the range of 3,000
ft.
SENATOR WAGONER asked how long it would take to extinguish a
problem if it comes up in this process.
MR. SHUTT answered that is a question they asked in South
Africa. It is a slow process to change; so they had technicians
monitoring - similar to an oil and gas operation. A more
complicated response might require getting a UCG expert. In
South Africa these UCG technical experts don't stay on a project
24/7; they basically do office hours. The changes take place in
timeframes of hours and days, not minutes and seconds. So if a
technician on site notices a trend in the middle of the night,
he can call an expert who might typically respond that he would
look at it in the morning.
10:37:23 AM
SENATOR WAGONER asked how they plan to get infrastructure
materials - barge them down to Tyonek and truck them up? The
state may need to build a bridge across the Susitna River. What
about winter transport?
MR. SHUTT replied they hadn't looked at construction logistics
yet, but those are a couple of the options.
10:38:33 AM
SENATOR HUGGINS said he was heartened by Mr. Shutt using the
term "diversity of our resource development." His question was
about infrastructure, and he wanted him to facture in that the
Susitna ferry will arrive in that neck of the woods next spring.
He asked if there is some place for the Railroad in this
project.
MR. SHUTT replied he didn't see much role for the Railroad since
the project is at tide water.
SENATOR HUGGINS asked how far out the phases extend.
MR. SHUTT replied today's target is to execute a plan to get
into production within a couple of years. The value-added piece
is their objective down the line.
10:42:26 AM
SENATOR HUGGINS said an extensive road network already exists
and he hoped that would reduce the environmental impact for
accessibility.
MR. SHUTT replied that most of basic road access is already in
place. They are optimistic that their site will be close to the
existing road.
10:44:16 AM
SENATOR HUGGINS asked where they will hook into the grid.
MR. SHUTT answered at the transmission infrastructure at Beluga.
SENATOR HUGGINS asked if the present power transmission lines
are adequate for the additional load.
MR. SHUTT replied that he didn't know.
SENATOR HUGGINS asked for an estimate of the life span potential
of the coal resource.
MR. SHUTT answered thousands of years.
10:45:12 AM
SENATOR DYSON remarked on how valuable CO is for the oil lift in
2
EOR and asked the business and tax advantages of CCS done
through reinjection.
MR. SHUTT answered that is an important aspect of the project,
but they have done only the preliminary steps of looking at it.
If they produce large quantities of CO at relatively low costs
2
in Cook Inlet, EOR is an obvious target there. So that has been
identified as a key project component. A number of technical
steps are behind that that will require the participation and
cooperation of the oil producers and the people who run the
fields. Most of the fields in Cook Inlet are operated by
Chevron; so they need to have some "robust sessions" with them.
The economics of the commodity pricing play a big role. CIRI
believes they have the core elements for producing CO at low
2
cost in large volumes.
SENATOR DYSON asked what the government does to reward
sequestration of carbon presently.
MR. SHUTT replied that the federal government has tax credits
for CO use for EOR, but he wasn't familiar with how that works.
2
CO-CHAIR MCGUIRE mentioned that SB 31 has a production tax
incentive for renewable energy capital investment; CCS is in it.
10:49:13 AM
REPRESENTATIVE STOLTZE asked if CIRI's business partners are
public.
MR. SHUTT said Laurus Energy is their developing partner; it is
an affiliate of the technology company called Ergo Exergy based
in Montreal. They provided the technology to do UCG development
around the world. Negotiations on deal terms are being finalized
now and that is why they are a little sensitive about how that
is presented.
10:50:47 AM
REPRESENTATIVE STOLTZE said he knows that Mat-Su has
transmission line and power plant ordinances.
MR. SHUTT said that is a consideration of where infrastructure
ultimately gets sited. The Kenai Peninsula Borough is just a
little south of the project area and they are aware of Mat-Su's
power plant ordinance.
REPRESENTATIVE STOLTZE asked how many set net sites are along
that corridor. Is this compatible?
MR. SHUTT answered yes; he said this project won't use surface
water or be in riparian areas.
10:53:02 AM
REPRESENTATIVE HARRIS asked if CIRI will be able to get the
necessary permits to achieve their timeframe of December
09/February 10.
MR. SHUTT replied yes. They will prefile for permits while
completing the preceding stage.
REPRESENTATIVE HARRIS stated that this is not a renewable energy
project even though it will possibly provide power for the Mat-
Su Valley, and the administration has asked for 50 percent of
our energy produced by 2025 to be renewable. If their project
comes to fruition, he asked where renewables would fit in.
MR. SHUTT replied that the project, particularly at the scale
they are looking at now is consistent with the objective of
getting more renewables. CIRI is working to get more renewables
into the mix with their wind project on Fire Island, for one, as
well as others. He believes that truly renewable generation is
beneficial, in part, because it delinks the state from commodity
prices around the world. The 100 mgW scale is significant by
Alaskan standards; it represents around 10 percent of Railbelt
generation in the winter and up to 25 percent in the summer. But
it is not so large that it will become the only generation
source.
REPRESENTATIVE HARRIS asked what other renewable energy projects
they are interested in.
MR. SHUTT replied that they looked at low-impact hydro on the
Kenai, but those sites aren't commercially viable, and they are
winding down serious involvement in that. He said the projects
have to be locally acceptable as well as commercially viable,
and these projects don't appear to be either.
They have also identified a significant potential geothermal
resource on CIRI land on the west side of Cook Inlet that would
have to be very significant to reach commercial development.
It's in an isolated area pretty far away from infrastructure.
He said they have explored for wind resources in a number of
Railbelt locations - two on the Kenai Peninsula, Hatcher Pass
(not commercially viable) and one north of Healy (that does look
commercially viable).
REPRESENTATIVE HARRIS asked if they were interested in
Chakachamna.
MR. SHUTT answered no.
11:01:03 AM
REPRESENTATIVE SEATON asked what number of wells he anticipates
for a 100 mgW project.
MR. SHUTT replied about two or three injections wells for the
initial development of the UCG module, and six to eight
production wells. Over time additional production wells would be
drilled as the coal resource is gasified. It becomes a long
rectangular development pattern. Another 100 mgW plant would
require all new injection and production wells, but it could go
in an opposite direction; and it would all come back and feed
into the same surface infrastructure.
11:03:21 AM
REPRESENTATIVE SEATON asked if they are also going to recover CO
2
from the surface generation plant for sequestration.
MR. SHUTT answered no; they are not planning on "scrubbing" the
CO closed combustion out of the turbine. The reason the pre
2
combustion sequestration is so attractive is because the cost to
operate the scrubbing is manageable and relatively low compared
to post combustion carbon scrubbing technology that is
"enormously parasitic." It would require large physical pieces
of equipment handling large volumes of very hot gas to scrub a
minor a 1-2 percent of the overall gas stream.
REPRESENTATIVE SEATON asked if the coal seam is at 950 ft.
MR. SHUTT replied that their initial thought was to look at coal
in the 900 ft. depth. In discussions with their perspective
partner, they have started looking at doing something around
2,500 ft. - more of a scientific technical experimental aspect.
An unknown option you see on the web is the proposal to use
closed out gasification chambers already developed by the UCG
process as a sequestration source for the carbon created by
latter development in the same project. But it is simply a
theory at this point, and it might get federal funding at some
point.
REPRESENTATIVE SEATON asked if their project was in the range of
$200 million.
MR. SHUTT replied no; their place holder is $30 million for the
UCG development including the pre-permitting expense of $10
million and $150 million for the power plant. They need to do
further analysis for the carbon handling necessary to do EOR,
something probably north of $100 million - largely depending on
which field and how far away it is.
11:08:15 AM
CO-CHAIR MCGUIRE invited them to the Energy Council this spring
and to the PNWR meeting in Calgary next July. She also hoped
that this project could "value-add" onto the University of
Alaska in terms of becoming a leader in UCG.
11:09:51 AM
REPRESENTATIVE NEUMAN said he understands "town gas" describes a
lower btu type of gas and asked the value of coal gas per btu
per cubic foot compared to that of natural gas.
MR. SHUTT answered that syngas is lower calorie gas on a cubic
foot basis than natural gas. Depending on the coal resource and
the depth and injectant used to make it, it will be in the
nature of 10-25 percent of the calorie value of natural gas.
That is why you have to go through the "methanation process" to
get to pipeline quality gas. This does not impact the usefulness
of the syngas product to make electricity through a turbine.
REPRESENTATIVE NEUMAN asked for a direct comparison of the CO
2
produced between coal gas and natural gas. And how much would
CCS cost per ton?
MR. SHUTT didn't have numbers for how much CO is created per ton
2
of gasified coal, but it is not proportional to that of natural
gas. The calorie isn't the right factor to apply in trying to
rough those numbers out. They haven't begun modeling the price
per ton for CCS.
REPRESENTATIVE NEUMAN said he looked forward to working on
moving any type of energy programs out there forward.
11:14:51 AM
REPRESENTATIVE KELLY asked if CIRI intended to be regulated by
the RCA.
MR. SHUTT replied that the proposed structure would be regulated
by the RCA that would try to figure out what their cost of
operation is to produce an mmbt. It would then give them some
utility type mark up, which could completely undercut their
economics and risks they are taking in trying to do something
that has not been done before. While they respect the RCA's
role, its structure doesn't work well for them.
REPRESENTATIVE KELLY asked if they are unable to get customers
for the CO flange for EOR, what would they do.
2
11:16:47 AM
MR. SHUTT answered that CO is not a regulated substance, so it
2
could be emitted. But they have made the commitment to not do
that and will find another solution. Other carbon sinks are
available, as well as depleted and abandoned reservoirs in the
area. The federal government would have to figure out a way to
reward it or it would become a federally funded science
experiment.
REPRESENTATIVE KELLY asked how much CO would be released into
2
the atmosphere without sequestration as compared to what a
combined cycle turbine is doing in Chugach now.
MR. SHUTT answered that without scrubbing the CO out of the
2
syngas stream and putting it through the turbine you'll have a
significant carbon footprint over a natural gas combined cycle
turbine. It would be better than coal-fired generation and worse
than natural gas. Eskom in South Africa isn't doing anything
with its CO, but they believe they will get a 16-25 percent
2
reduction in their emissions on an energy equivalent basis just
because the process is so much cleaner and efficient.
REPRESENTATIVE KELLY said if he were on CIRI's board, he might
question the wisdom of committing to not letting it go into the
airstream given some of the problems with the national economy
and cap and trade.
11:21:35 AM
CHAIR MCGUIRE asked about their plans for waste heat recovery.
MR. SHUTT said that is the second part of a combined cycle
plant. You burn gas through a primary gas turbine and do a heat
recovery steam generator at the back end. "In another stroke of
dumb luck, the 100 mgW they have been using as a placeholder
meshes up well with a Seamons turbine that is being developed
for Eskom's first commercial application, a 40 mgW single cycle
gas turbine. Two of those driving a heat recovery steam
generator will get close to the 100 mgW of power.
CO-CHAIR MCGUIRE asked what that translates to in terms of
electrification.
MR. SHUTT replied that the Railbelt is somewhere in the 400 mgW
in the summer and up to 1,000 mgW in the winter. It's a
meaningful piece of new generation with a new fuel.
CHAIR MCGUIRE said the first phase of Susitna is 250-300 mgW and
it has the potential of getting to 1,000. They are all
significant.
11:23:39 AM
REPRESENTATIVE RAMRAS said $100 million for a 100 mgW project.
What is the difference if a conventional power plant were built?
MR. SHUTT replied that a ballpark figure is $1 million per mgW
for gas turbines. The fuel source is a capital and operating
expense, so it isn't part of the equation.
REPRESENTATIVE RAMRAS asked how much of the coal source under
the impermeable overburden is "just good luck" or good
leadership. Is it typical across the state or are those
characteristics unique to that site?
MR. SHUTT said it is both. It's not unusual to find UCG
development potential; five other potential sites were found in
the Lower 48. Finding the right type of overlying rock in the
geology for deeply buried coal seams is not that unusual. Their
technology developer can make a lot of different site
characteristics work well. The one they just worked on in South
Africa with Eskom was a difficult site. The giant traditional
pulverized coal plant was across the street from the UCG plant,
which was supposed to be an underground mine. The mine failed
almost immediately because they had not found or accounted for
the fact that the coal seam was interrupted by dolomite
intrusions that cut the coal seam. Now they have to truck coal
from seven miles away to feed the 420 mgW power plant. Site
characteristics for UCG development were a little tricky because
the same things that cut off the traditional mine cut off the
module development for UCG. Impermeable rocks over the coal are
necessary, but that is not hard to find.
REPRESENTATIVE RAMRAS stated the permitting concern and the
recent trend of the state being the applicant. Would CIRI be
interested in a state sponsor, not as a participant in the
program, to help expedite the permitting process? This might be
better than legislative hearings about delays.
MR. SHUTT said that the DNR has been helpful, but CIRI's first
preference is to work with the system as it is. If there are
unreasonable permitting delays, they would like help. He thought
the existing framework would work for now.
11:31:09 AM
CHAIR MCGUIRE asked if wholesale generation - from Fire Island
or the UCG plant - were not regulated by the RCA, would that
eliminate a lot of red tape, and would they come to the
Legislature for that.
MR. SHUTT answered that part of the RCA function is to protect
the rate payer. If you are an independent power producer, you
have to negotiate with the utility that has the same charge over
their customers. So layering another time consuming process over
the top to second-guess that commercial negotiation doesn't seem
to serve anybody.
11:32:41 AM
CHAIR MCGUIRE observed that the RCA is already burdened with
their dockets. There being nothing further to come before the
committee, she adjourned the joint meeting at 11:32 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| CIRI Energy Presentation.pptx |
SRES 10/9/2009 9:00:00 AM |