Coal: Yesterday, Today

1
Coal Yesterday, Today TomorrowEnvironmental
Markets Association November 2006 Marina del
ReyJanet Gellici - Executive Director - American
Coal Council
2
American Coal Council

• Vision
• To serve as the pre-eminent business voice of the
  American coal industry
• Mission
• Dedicated to advancing the development and
  utilization of American coal as an economic,
  abundant and environmentally sound fuel source

3
ACC Members

• 155 U.S. Canadian member companies
• Coal Suppliers
• Coal Consumers (utility, industrial,
  transportation)
• Transportation (rail, barge, trucking,
  ports/terminals)
• Energy Traders
• Coal Support Services

4
Coal Basics
5
Coal Energy Security

• Coal is
• Abundant/Secure
• Economic
• Environmentally Sound

6
Abundant Reserves

• US Coal Reserves
• Western 235 470
• Interior 158 316
• Appalachian 103 206
• Total US 496 992
• Middle East Oil
• Saudi Arabia 262
• Iraq 113
• UAE 98
• Kuwait 96
• Iran 90
• Other 27
• Total 686

Billion Tons
Billion Barrels
Billion Barrels
Coal demonstrated reserve base January 1,
2004 Based on production of 2 barrels of CTL
fuel per ton of coal
7
Secure

• 85 of
• U.S. energy
• resources
• are coal
• More than
• 250 years
• of supply
• at current
• usage rates

8
Economic
Coal costs historically lower than other fossil
fuels Coal costs historically less volatile than
other fossil fuels
Source EIA Annual Energy Outlook 2006
9
Coal EconomicsCost per kWh of Coal Generation
10
Americas Increasingly Clean ResourceAnnual U.S.
Air Emissions and Coal Use
Coal Use
Coal Use, NOx and SO2 Emissions (Index 1970 1)
NOx
Mercury Emissions (tons)
Mercury
SO2
Historical data (19702000) Coal consumption and
electricity generation per DOE EIA, AER 2003 NOx
and SO2 per EPA Air Trends Report
http//www.epa.gov/air/airtrenda/econ-emissions.ht
ml Projected data (20032020) Coal consumption
and electricity generation per DOE EIA, AEO
2005 NOx and SO2 per EPA projections under CAIR
http//www.epa.gov/interstateairquality/charts.htm
l Mercury per EPA Clean Air Mercury Rule
11
Yesterday, Today Tomorrow
12
Yesterday, Today Tomorrow

• Three Days that I dread to see arrive
• Three Days that I hate to be alive
• Three Days filled with tears sorrow
• Yesterday, Today Tomorrow

13
Yesterday, Today Tomorrow

• Brunfelsias
• Yesterday-Today-Tomorrow, Kiss Me Quick
• Latin sweet-smelling
• Evergreen shrub from tropical America

14
Yesterday, Today Tomorrow

• Ieri, Oggi, Domani
• 1963 film
• Sophia Loren
• Marcello Mastroianni
• Oscar Best Foreign Language 1964

15
Coal Electricity
16
Electric Power Generation by Fuel Type (2005)
Source EIA
17
(No Transcript)
18
Coal Dominates Forecast for Power Generation
Billion kWh
Annual Energy Outlook 2006, electricity
generation by fuel, 1980-2030 (billion kilowatt
hours)
19
(No Transcript)
20
www.netl.doe.gov/coal/refshelf/ncp.pdf
21
(No Transcript)
22
Coal Energy
23
(No Transcript)
24
Transportation FuelsSource EIA Annual Energy
Outlook 2006
25
Maximizing the Value of CoalSource National
Mining Association
26
Direct Coal Conversion to Liquid Fuels Source
National Energy Technology Lab, DOE
H2S, NH3, COx
Methane Ethane
Gas Recovery Treatment
Make-up H2
Recycled H2
LPG
Refining
Hydro- treating Unit
Gasoline
Coal Catalyst
Coal conversion
Diesel Fuel
H-Donor
Slurry
Fractionation
Slurry
Heavy Vacuum Gas Oil
Solvent Deashing
Gasifier
Ash Reject
Deashed Oil
Unconverted Coal
27
Indirect Coal ConversionSource National Energy
Technology Lab, DOE
Coal Petcoke Biomass etc
Oxygen/ Steam
Catalyst
Gasification Gas Cleaning
Fischer-Tropsch Synthesis
FT Product Separation Upgrading
CxHy Liquids Wax
H2 CO Syngas
Steam
Tail Gas
Sulfur, CO2 and Ash
Water Oxygenates
Ultra-Clean Liquid Fuels Chemical Feedstocks
Electric Power Generation
Steam
Electricity
28
Impact of Plant Size Crude Oil Price on IRR
29
CTL Environmental Acceptability

• CTL production process emissions much lower than
  traditional pulverized coal power plants
• Indirect coal liquefaction inherently carbon
  capture ready
• Ultra Low Sulfur Diesel product derived from coal
  exceeds pending requirements in existing engines
• 100 less aromatics
• 47 less carbon monoxide
• 46 less hydrocarbon
• 32 less particulate matter
• 9 less nitrogen oxides
• Biodegradability
• Naphtha derived from coal better than oil-derived
• Greater solvent capacity
• Extremely low sulfur blending stock for low
  sulfur gasoline

30
Maximizing the Value of Coal
A choice to make
Electricity Production Products
Value 3 MWh electricity 120 Total
120
Combustion
Fuel and Power Production Products
Value 0.083 MWh electricity 3 0.28 bbls
naphtha 13 2.13 bbls diesel fuel
166 Total 182
1 ton Coal
Indirect Coal Liquefaction
Fuel, Power Fertilizer Production Products
Value 0.31 MWh electricity
12 0.30 bbls naphtha 14 1.58
bbls diesel fuel 123 0.30 t ammonium
nitrate 105 Total 254
Polygeneration
31
Coal Challenges
32
Coal SupplyOperations

• Geology/Reserves
• Safety Productivity
• Labor
• Stuff
• Tires, Steel, Diesel, Safety

33
Coal Transportation

• Capacity Constraints
• Labor
• Fuel
• Longer Hauls/New Haul Routes
• ROI
• Reregulation

34
Coal Consumption - UtilitiesEnvironmental
Management/Compliance

• Fuel Sourcing
• Equipment
• Allowance Markets
• Stakeholder Directives
• Permitting
• Technology Commercialization

35
Evolution of APC Equipment on PC BoilersSource
Institute of Clean Air Companies (ICAC)
36
The Carbon Wild Card

• Greenhouse gas emissions regulations emerging in
  states and regions
• Most companies expect federal regulation related
  to global warming in next decade
• Carbon sequestration technologies currently being
  tested for deployment

37
Coal Industry Divisiveness

• Repercussions
• FERC
• Congress
• Wall Street
• NGOs

38
Coal Conversion

• So if this stuff is so good How come no one is
  building plants in the U.S.?
• Capital Intensiveness
• Typical ethanol production facility capex equals
  100 million. CTL facility capex 1 billion to
  5 billion
• Private Capital Market Issues
• Technology Risks
• First to build the third plant syndrome
• Market Risks
• But will oil still be 76 a barrel in five
  years?
• Market Inertia
• Transportation fuels companies with sufficient
  balance sheets not incentivized to disrupt their
  own businesses

39
Industry Needs DOD Leadership
Technology Development
Technology Deployment
The Valley of Death
Certification and Demonstration
Issue Long Term Contracts
DOD
Invest in Plants Title 3
Price Incentives
Congressional
Tax Incentives
DoD Catalyze the Construction of the First Three
Plants
Loan Guarantees
Secured Loans
DOE
Lines of Credit
Direct Investment
Siting and Permitting
State
Incentives/Long term off takes
Direct Investment
40
National Public Policy Support Needed

• National Mining Association (www.nma.org)
• Coal Conversion Task Force
• Comprised of coal companies, CTL technology
  providers and allied associations
• Identified policy objectives to bridge
  commercialization gap and mitigate risks
  perceived by private capital markets
• Loan guarantees
• Investment tax credits
• 100 expensing
• Funding support for FEED activities
• Excise tax credit extension
• Department of Defense fuels purchasing

41
National Coal Councilwww.nationalcoalcouncil.org
National Coal Council Annual Spring Full Council
Meeting Washington, D.C. March 22, 2006
42
Southern States Energy Boardwww.americanenergysec
urity.org
43

• Janet Gellici, Executive Director
• American Coal Council
• 2980 E Northern Ave., Ste. B5
• Phoenix, AZ 85028
• www.americancoalcouncil.org