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Meet the king of coal

You may not love coal, but you use a lot of it. Peabody Energy's Greg Boyce says the company will even participate in cleaning the stuff up.

Talking to Greg Boyce at a clean-tech conference is sort of like hanging out with George Steinbrenner at a Red Sox fans convention.

Boyce is the top exec at Peabody Energy, the world's largest coal mining company. How un-clean-tech can you get?

But coal won't be disappearing anytime soon. The U.S. derives 49 percent of its electricity from coal. China has been erecting 2 gigawatts worth of power plants a week, according to an oft-heard stat, and most of them run on coal. In 2007, Peabody garnered $4.6 billion in revenue and $421.3 million in net income. And prices for coal are rising.

Boyce, CEO of Peabody, also clearly wants you to know that his company and the coal industry understand the implications of carbon dioxide emissions. Peabody even invested in clean coal expert GreatPoint Energy.

Peabody sat down with CNET at the Clean Tech Investor Summit earlier this month to discuss clean coal technologies, capturing carbon dioxide, and where the market is going.

Q: Why don't you give us a quick overview of Peabody's business at the moment.
Greg Boyce: Peabody is the world's largest publicly held coal company. We're the largest producer of coal in the U.S., as well as a major operating presence in Australia, the Pacific Rim, China, and India. We have a limited operating base in South America. We're also one of the world's largest traders of coal. We've got a trading office in Australia, in Beijing, in London, and then in St. Louis. So we participate in every coal market there is.

What clean coal technologies have you mostly concentrated on?
Boyce: The integrated gasification process is what we've focused most of our time on, and the reason we have is that once you gasify coal you can produce electricity, you can produce hydrogen, you can produce industrial synthetic gas. You can produce aviation fuel, diesel fuel, transportation fuels from that gasified coal, and that gasification process is efficient enough to allow you to capture CO2 and then ultimately sequestrate it.

Does gasification scale well?
Boyce: It does. China gasifies a huge amount of coal and they use it for all of their industrial gas because they don't have a lot of natural gas over there. There are some medium-size coal gasifiers in this country--in Florida, Indiana--that are producing electricity. One of the questions is, what does a gasifier look like if you try and build a 1,000-megawatt power plant? That's the next generation of plants that needs to be built, and there are folks that are talking about doing that.

We've got a third of the world's coal reserves in this country, and we need to figure out how to use them and use them cleanly going forward.

And then ultimately it's the scalability of large-scale carbon sequestration. Carbon capture and sequestration has been done for 10 or more years in different places, in Norway or up in the Great Plains, but to do it at scale, it hasn't been done and that's the next level of deployment.

Can companies make the case now that coal gasification is economical?
Boyce: Well, if you try and compare it to everybody's electricity cost today it doesn't compare. It's more expensive, but then everything is getting more expensive. So when you look at coal gasification or carbon capture and sequestration, it looks like it will compete with natural gas, the cost of natural gas. It'll compete with new nuclear. It'll compete with all of these other technologies for electricity generation and so that's why everybody wants to very quickly get to a point where we can demonstrate it on a large scale.

One of the things we find very interesting is using gasification to turn it (CO2) into a pipeline quality natural gas and at that point you may be talking about something that's very competitive with today's natural gas prices. And it allows all the existing gas plants to continue to earn when we begin to run out of natural gas in this country, which is going to happen.

You know, we've got a third of the world's coal reserves in this country, and we need to figure out how to use them and use them cleanly going forward. It's the only way we're going to get energy security and I would say energy price stability because we're going to have huge swings on energy costs if we don't get it right.

You often hear the U.S. described as the Saudi Arabia of coal and how it can help energy security. But there is also a lot of opposition out there. Is the opposition to mining or using coal changing?
Boyce: Right now the big issue around coal is obviously CO2 and the climate effect, and so that's the technology that we're focusing on. I mean, when you look at how much additional coal we've used over the last 30 years, and look at our emissions of SO2, particulates, and all the other criteria pollutants, they have gone down over 40 percent over that period of time. So we've got that right. So now the question is how do we replicate that with reducing carbon emissions from the use of coal going forward?

It's a very well-controlled, scientific problem and so it's just a matter of making sure that the technology got developed, growing that technology so that there isn't huge price spikes in the marketplace for electricity and then getting those reductions over time. If everybody says we've got to have immediate reductions next year, I mean, it's just not going to happen. It's how we deploy those new generation technologies over time to get that profile that we've already achieved with the use of coal on SO2 and other criteria emissions over the last 30 years.

When it comes to sequestration, BP and some of the oil companies favor putting it underground or while some others are talking about turning it into a solid like baking soda. What do you think is viable?
Boyce: Well, I agree with the BP folks in that. You take CO2 and you liquefy it because you can transport it under pressure. Then you put it under the ground and the same formations that held oil and gas for millions of years can hold CO2 for another million years. I mean, geologically that works, and the demonstration projects that have been going on for a number of years show that.

The other opportunity is . When a petroleum council looks at this, they see maybe another 2 (million) to 3 million barrels of oil a day in this country from enhanced oil recovery. You take that CO2, liquid CO2, you reinject it back into the oil field and it pushes the oil that's trapped in the pores of the earth out to the surface. It (enhanced oil recovery) has been going on in West Texas for 25 years. We know how to transport CO2. We know how to pump it back in the ground and we know how to monitor it when it's in the ground.

But if you add it up for all of the power generation, it's a large amount of CO2, and that's where people say, "OK, we need to get the large-scale projects and then see what happens."

The other thing we need to do in this country is we need to develop the regulatory and the legal framework for CO2 storage. If we're going to store it in the ground we've got to come up with that whole framework and a program that'll allow that to happen, and that doesn't exist right now.

What are some of the ideas for that?
Boyce: People are just discussing that. Who owns the pore space under the ground? Is that owned by the federal government like some minerals are and coal reserves are? Is it privately owned? All of that has to be sorted out.

Coal has been the fastest-growing fuel of any fuel every year for the last five years and people...don't see that or recognize it.

The European Union is also moving very quickly down the path of trying to approve some large facilities. In fact, they're also in the process of developing the legislative framework for the storage, the monitoring, and the permitting. They're actually farther along than we are. People think that the European Union is trying to do away with coal. The fact is they are farther down the path of bringing coal back into their energy mix because they have recognized that...gas is not a good thing to be exposed to in terms of the sole source of electricity.

Why did FutureGen collapse? (FutureGen was a billion-dollar-plus project to build a clean power plan in the U.S. Funding was shifted to other projects last month.)
Boyce: Well, you know, it hasn't collapsed. I mean, we are still in discussions with the Department of Energy. We are still in discussions with Congress and will have to see where all of those go. What we all agree on is we can't lose any more time to get large-scale demonstration projects in place. What the DOE has said is that they want to do multiple projects rather than just doing one project at one site. We are still under active discussions. Where it's all going to turn out I don't know, but it certainly has thrown a major delay into it, which is a disappointment.

We're also a participant in the Australian Coal 21 project for clean coal and electricity and a participant in the Midwest Carbon Sequestration programs in Missouri area. And we were the only non-Chinese company that was invited to participate in GreenGen, which is the Chinese government and utilities' new power plant of the future for electricity generation with near-zero emissions. We think our credentials both in terms of the coal that we produce as well as continuing to push the envelope for cleaner coal use are really unequaled.

By the way, a few companies have said they are looking at the Fischer-Tropsch process for making liquid fuel from coal. Could that be economically viable?
Boyce: China is building a number of these plants today because they are not arguing about it. They are just doing it because they've got an energy need they are trying to fill. The break-even-barrel-of-oil kind of numbers that we were hearing from the industry was in that $50 to $60 a barrel range. So, you know, I think it's only a matter of time.

The U.S. Air Force is a very strong component of that because they are looking at where they are going to get their liquid fuel for the next 30 years. They are saying we want to an initiative to get half of our liquid fuels from a U.S. synthetic source over that timeframe. So they are talking about participating and potentially supporting a coal-to-liquid facility in Montana.

The concept is still alive. It's just the capital costs for everything have gone up and then I think we do need to have a little more clarity in terms of our carbon management program going forward. Even the military would like it, if they build these plants, to see them supported with carbon capture and sequestration.

Lastly, how is demand?
Boyce: Coal demand has just been extremely strong. The globe is short of energy. In all coal markets, the demand is far outstripping supply. Prices have gone up over the last year in most major markets and it looks like it's going to be here for a while. China is a major consumer.

Coal has been the fastest-growing fuel of any fuel every year for the last five years and people...don't see that or recognize it. A lot of it's been outside the U.S. because of China, India, the Soviet Union, and Brazil. All of those places have coal reserves and they are using those coal reserves to feed their energy complex.