HECA in talks with Peabody for El Segundo coal at power project

Hydrogen Energy California LLC is in talks with Peabody Energy (NYSE: BTU) for coal supply out of the El Segundo mine in New Mexico for its planned coal- and petroleum coke-gasification power project in California, the company said in a Jan. 16 filing with the California Energy Commission (CEC).

The commission is considering a revamped version of the project. The company has in the past said the coal feedstock would be a sub-bituminous coal out of New Mexico, but hadn’t provided details. But it did provide some in the Jan. 16 filing, which consisted of answers to various commission questions about the project.

In September 2011, SCS Energy California acquired 100% ownership of HECA from BP Alternative Energy North America Inc. and Rio Tinto Hydrogen Energy LLC. The project, which was revamped under the new ownership, will gasify a blend of 75% coal and 25% petcoke to produce synthesis gas (syngas). The syngas will be purified to hydrogen-rich fuel, and used to generate a nominal 300 MW of baseload electricity, with CO2 to be used for enhanced oil recovery in the nearby Elk Hills oilfield.

The company said in the Jan. 16 filing that it assessed domestic mines in the Western U.S. capable of providing the quantity and quality of required solid feedstocks. Coals sourced from New Mexico, Utah, and Colorado were among the analyzed alternatives.

“Based on this alternatives analysis and as detailed below, the Project currently plans to use Western sub-bituminous coal from New Mexico,” said the filing. “As reported in the Applicant’s Response to Sierra Club Data Request 17, the Project is in the process of discussing contractual terms with Peabody Energy to supply coal from their portfolio of mines, including, but not limited to, Lee Ranch and, more likely, El Segundo. In contrast, an alternative coal supply proposed for the Project and presented in the 2008 AFC was to be Western bituminous, sourced from the Uinta Basin in Utah and Colorado.”

The 2008 AFC (application for certification) covered a scrapped version of this project. Lee Ranch and El Segundo are the only Peabody mines in New Mexico, with the state only having a handful of coal mines. Lee Ranch is the older of the two Peabody mines and has more limited coal reserves to serve the long-term needs of the HECA project.

Peabody is, by the way, the top producer of sub-bituminous coal out of the Powder River Basin in Wyoming and Montana, but those states aren’t mentioned as possible sources for the HECA coal.

Mitsubishi tests showed that New Mexico coal worked well

The coal supply identified in the current Amended AFC has several advantages over alternative sources, the Jan. 16 filing noted. Sub-bituminous coal from New Mexico was selected for the current project due to the quality of the feedstock, the proximity of the mine to the project site, the availability of a direct rail corridor and lower transportation costs.

During pre-front end engineering design work, sub-bituminous New Mexico coal was tested and approved by Mitsubishi Heavy Industries (MHI), the project gasifier technology supplier. Sub-bituminous New Mexico coal was deemed preferable by MHI in terms of ash composition and other characteristics that enhance reliability and efficiency, resulting in more favorable project economics.

Coal and petcoke deliveries to the project site will be unloaded and stored at the site in a coal/petcoke barn designed to contain feedstock sufficient for 30 days of operation (about 172,000 tons of coal and petcoke). Storage of feedstocks in a covered barn eliminates the need for an uncovered, onsite storage pile, thereby reducing the risk of precipitation coming into contact with solid feedstocks and the generation of contaminated stormwater.

All rail the top alternative, but rail-truck routing an option

For the current project, the sub-bituminous New Mexico coal can be railed along a continuous route on the BNSF Railway. Selection of a continuous rail route eliminates the need for multiple transloading facilities en route, minimizing emissions and transportation costs.

In the current amended AFC, two alternative coal transport methods are proposed, and the applicant is seeking approval of both alternatives:

  • Alternative 1 (Rail). An approximately five-mile new industrial railroad spur that would connect the project site to the existing SJVRR Buttonwillow railroad line, north of the project site.
  • Alternative 2 (Truck). Truck transport of coal that originated on rail would be via existing roads from an existing coal transloading facility northeast of the project site. The truck route distance is about 27 miles. This alternative was presented in the 2009 revised AFC.

Since this is a DOE-backed clean coal project, gas not an option

In another series of answers, HECA noted that the U.S. Department of Energy is providing financial assistance to HECA under the Clean Coal Power Initiative (CCPI) Round 3, along with private capital cost sharing, to demonstrate an advanced coal-based generating plant that co-produces electricity and low-carbon nitrogen-based products.

The overall objective of the HECA project, as reflected by the award of funding under the CCPI, is to demonstrate the commercial viability of carbon capture technologies using coal as a fuel. Under these circumstances, analysis of a natural gas fuel alternative would be meaningless for this project, because such an alternative would be antithetical to the overall objective of the project and the basis of the federal funding, HECA noted. Under applicable California case law, analysis of an alternative so contrary to the overall objective of the project is not required, because it would not contribute to the decisionmaking process in any meaningful way, the company added.

The proposed Pacific Gas and Electric (PG&E) switching station that would connect this project, located in Kern County, to the grid will be located approximately two miles east of the HECA site at the intersection of an unimproved farm road and Elk Valley Road. Transmission network upgrades due to the HECA project may also include re-conductoring of the existing 230-kV Midway-Wheeler Ridge transmission line between the new switching station and the existing PG&E Midway Substation (approximately eight miles).

The CEC’s direct jurisdiction extends to the first point of interconnection with the electrical transmission system at the PG&E switching station. The transmission network upgrade program will be permitted under the jurisdiction of the California Public Utilities Commission.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.