NTEC CEO Clark Moseley delivers the keynote address at the forum.

Forum focuses on maximizing lessons learned from the past, while moving the industry forward

by jennifer jensen, associate editor

Nearly 70 leaders in the coal industry came together back in March for the American Coal Council’s (ACC) Spring Coal Forum in Fort Lauderdale, Florida. The start of a new decade brings new beginnings and sometimes new challenges as well. The focus of the forum was to acknowledge the highs and lows of the previous years, the “mixed bag” of regulatory support for the coal industry, and to focus on a path to move forward.

ACC Chief Executive Officer Betsy Monseu noted the forum’s theme was “Leveraging the past and building the future.” This may prove to be helpful during what has already been a tumultuous year. At the time of the conference, the extent of the coronavirus (COVID-19) was yet to be known. There was some discussion about its ramifications and how it would affect the industry.

Jim Truman, research director of global metallurgical coal markets, Wood Mackenzie, called it the “black swan,” and said it would put “so much at risk.”

At the time, the coronavirus caused a temporary boost for seaborne import coal and lowered demand, he said.

Fast-forward and its impacts can truly be seen. America’s Power, a national trade organization that advocates on behalf of coal-fueled electricity and the coal fleet, compared data from March 2020 to March 2017-2019. Electricity demand dropped a combined 7% in both the PJM (Pennsylvania-New Jersey-Maryland Interconnection) and MISO (Mid-continent Independent System Operator) markets. Coal-fired electricity generation fell by a combined 42%. This is not news with the announcements of mines decreasing production or shuttering operations altogether during the outbreak.

According to B. Riley FBR analysts, declining demand has pushed many major coal basins into oversupply and utility stockpiles to multiyear highs. “While year-to-date U.S. coal production is at its lowest level in decades, demand declines have been even sharper,” B. Riley analysts Lucas Pipes, Daniel Day and Matthew Key said in a report. The combined impact of increased coal stockpiles and conservative U.S. electricity demand from the economic shutdown “has led to little-to-no activity in the spot market” and led some producers to expect to sell less than their contracted 2020 volumes, they said.

The analysts also said during the outbreak and shutdown of most industrial production in the U.S., the power load on weekdays closely resembled a typical weekend, emphasizing the decline in overall power demand during this time.

“This, in combination with the fact that March-May comprise the spring ‘shoulder season’ where mild weather results in very little electricity demand for heating or air conditioning, has been bad news for thermal coal demand,” the analysts said.

Low natural gas prices have also affected coal-fired power generation. Gas prices fell almost 37% nationally, according to America’s Power. This allowed natural gas to displace coal, seeing a 31% increase in generation in PJM and 24% in MISO regional transmission organizations.

There has also been a decline in coal shipments by nearly 15% in March 2020 compared to March 2019.

Global coal production in 2020 is expected to rise only by 0.5% due to the disruption caused by COVID-19. With that, thermal coal production is expected to grow by 0.5% to 7.05 billion tons, while metallurgical coal production is forecast to be flat at 1.1 billion tons.

The forum didn’t focus solely on the coronavirus and the potential havoc it could bring.

The keynote address was given by Navajo Transitional Energy Co. (NTEC) CEO Clark Moseley who provided a backstory and update on America’s largest Native American-owned coal producer. The company is owned by the nation, but is overseen by an independent board of directors whose members cannot be members of the Navajo government.

Moseley came on board in 2014 and he said his job was to “acquire more money.”

The company’s main asset is the Navajo mine. Since it acquired the mine, NTEC has made numerous equipment improvements.

In July 2018, NTEC finalized the acquisition of a 7% ownership of Four Corners Power Plant, a 1,550-megawatt (MW) power plant. This makes NTEC the only tribal company in the United States to have partial ownership of a coal-fired power plant.

Moseley also discussed the Navajo mine coal supply agreement that runs through May 2031. The mine has a “finite life.” The agreement includes a base price that is escalated according to changes with certain industrial and other CPI-related indices; and a take-or-pay type contract with minimum quantities, which is currently 4.7 million tons per year.

“We probably have the best coal supply agreement in the country,” Moseley said.

The company is not only a coal supplier, it is also a power producer and marketer, Moseley said. The board needed to learn about plant operations as well as utility speak.

NTEC has also worked to increase the quality of coal. The calorific value improved from 8,767 Btu/lb to 8,984 Btu/lb in 2019, Moseley said.

The company also sought to diversify in August 2019 when it acquired an interest in Texas Minerals Corp. rare earth minerals project near El Paso, Texas.

“You can’t get a better project,” he said.

In October 2019, NTEC closed on its purchase of three Powder River Basin coal mines owned by Cloud Peak Energy (CPE). NTEC is now the third-largest producer of coal in the United States.

“We want to be a long-term supplier,” Moseley said. The company saw an opportunity to supplement and be able to go beyond 2031, he added.

He added that CPE is now supplying to companies that it hadn’t in three to four years.

Even more long term, Moseley said the company will focus on the export market and continue to support the southern Powder River Basin.

In just six years, NTEC has received several awards, Moseley said. In November 2019, NTEC and Bisti Fuels were awarded the Good Neighbor Award from the Office of Surface Mining and Reclamation (OSM) for efforts to create opportunities for students interested in Science, Technology, Engineering and Mathematics (STEM). They were also awarded the Sentinels of Safety award for recording the most hours in a calendar year without a lost-time injury.

“This is pretty good for a little company that just started three years before that,” he added.

Moseley said NTEC wants to be the safest operation and best neighbor to the communities in which they reside.

Karen Bennett, partner with Lewis Brisbois, discusses the EPA’s removal of regulatory burdens that have affected the industry.

Coal Remains a Vital Industry

One session during the forum focused on coal’s contributions to society, something Dan Byers, vice president, policy, U.S. Chamber of Commerce Global Energy Institute, said people tend to overlook.

Worldwide, 1.2 billion people have gained access to electricity since 2000 and 70% came from fossil fuels, 45% coming from coal, Byers said.

“In other words, coal provided energy access to 540 million people from 2000-2017,” he added.

He referenced a quote from the International Energy Agency that said, “Energy access is the golden thread that weaves together economic growth, human development and environmental sustainability.” Basically, electricity access leads to human development.

“Electricity correlates most strongly” to child mortality, life expectancy, maternal mortality, infant mortality, youth literacy, female school enrollment, immunizations, etc., Byers said. 

The DOE continues to discover and develop clean coal technologies, says Program Manager Raj Gaikwad.

“Coal is driving this,” Byers added.

There were also a lot of discussions regarding the need for innovation for coal-fired power plants instead of regulation. And also, the misnomer that coal technologies haven’t become cleaner and haven’t addressed environmental challenges.

“The need for innovation is extremely obvious,” Byers said. Coal can be a part of this through carbon capture and storage, he added.

Clear Path Managing Director of External Affairs Luke Bolar said the attack on fossil fuels is misguided. On the global scale, the U.S. accounts for 14.6% in emissions.

“It’s such a minute thing in the global picture,” Bolar said.

By sector, electricity and heat production accounts for 24% of the pie.

If the coal industry continues to focus on carbon capture research development and deployment, 17-plus gigawatts of fossil power plants with carbon capture is forecast for carbon dioxide-enhanced oil recovery by 2040, Bolar said.

On this same topic, the forum welcomed Raj Gaikwad, senior program manager of Transformative Power for the Department of Energy (DOE).

He discussed DOE’s Office of Fossil Energy’s Clean Coal’s Research and Development program that will advance the goals of the President Trump administration’s America First Energy Plan. The goal is to discover and develop advanced coal technologies that ensure America’s access to and use of secure, affordable, and reliable fossil energy resources.

One of these programs includes Coal FIRST, with a goal to reach zero or near-zero emissions, Gaikwad said.

The Coal First initiative started in 2018 and 13 conceptual front-end engineering and design (FEED) study designs were completed. This was to be narrowed down to seven in April 2020. Following that, two FEED study awards will be given in September 2020, as well as critical components awards to advance other Coal FIRST designs. In September 2023, FEED study designs and critical components study will be completed. Detailed engineering and construction will be completed in 2027-2028, Gaikwad said.

During her session, CEO of America’s Power Michelle Bloodworth discussed ways her organization is advocating for America’s coal fleet. The mission is to get coal on a level playing field, Bloodworth said.

There is a continued need for a coal fleet to provide fuel security, affordable electricity and help maintain grid reliability, she added.

She discussed PJM’s fuel assurance initiative that could help the coal fleet.

“It allows them to live another day,” Bloodworth said. It will help prevent further coal retirements and capacity prices may go up slightly, she added.

DOE’s Coal FIRST program’s goal is to reach zero or near-zero emissions.

In December, FERC expanded PJM’s Minimum Offer Price Rule (MOPR) to mitigate the effects of state-subsidized resources in its 13-state footprint. It was intended to protect the fuel capacity market, Bloodworth said.

MOPR covers all new and existing resources that receive state subsidies unless an exemption applies. They must bid in at true cost, so subsidies are removed, Bloodworth said.

Bloodworth said America’s Power will continue to educate state utility commissioners on the importance of creating a level playing field in all markets and the need to value fuel security.

Several presenters spoke about current Environmental Protection Agency (EPA) regulations. These regulations deal with Coal Combustion Residuals, Effluent Limitations Guidelines, Clean Water Act Section 401, and CERCLA 108(b) Financial Assurance.

Partner with Lewis Brisbois Karen Bennett said most of these updates have been is response to the previous administration’s strong rulemaking.

“At one point, you are advocating and on the offense and I feel like that’s where we’ve been for the last four years,” Bennett said.

The current administration is removing regulatory burdens that have hindered the industry in the past. Depending on the November election, this could prevent more plant closures in the future.