Maxim to end coal use in 2019 at Milner Unit 1 in Alberta

Maxim Power Corp. (TSX: MXG) said in a Nov. 6 earnings statement that it plans to end the life of HR Milner Unit 1 (M1) in Alberta as a coal facility in 2019, with the unit then undergoing a life-extension project good for 40 years as a gas-fired facility.

M1 is a 150-MW (nameplate capacity) coal-fired facility located near the town of Grande Cache, Alberta, and has been in continuous operation since 1972.

Maxim noted that M1’s current coal supplier, which is unnamed, has announced its intention to temporarily suspend operations at the end of December 2015. There is no impact to M1 as a result of this announcement. The remaining fuel to be delivered under contract from the supplier is currently stockpiled on the supplier’s site and will be delivered, as originally scheduled, throughout the remainder of the fourth quarter of 2015, said Maxim. Receipt of these deliveries coupled with coal on hand provides M1 with sufficient fuel to run at full capacity until the third quarter of 2016. In addition to this, M1 has the ability to use natural gas co-fired with coal to extend its production beyond the third quarter of 2016. Also, due to the depressed thermal coal markets, there is ample supply of thermal coal in Alberta from other suppliers to further lengthen M1’s coal position, the company said.

M1 was commissioned in 1972, and accordingly, is allowed to operate to its full capacity to Dec. 31, 2019, under Canadian greenhouse gas (GHG) regulations. After that point, M1 is allowed to operate at an annual capacity factor of up to 9% (using coal as a fuel supply), which is approximately 113,500 MWh per annum, until Dec. 31, 2029.

On June 25, 2015, the Government of Alberta announced that it is amending the Specified Gas Emitters Regulation (SGER). The price for emission fund credits increases from C$15 per tonne of CO2 to $20 per tonne on Jan. 1, 2016, and then to C$30 per tonne on Jan. 1, 2017. Over that same period, intensity reduction stringencies, which require lowering production of CO2 relative to a baseline, will move from the current level of 12% below the baseline to 15% on Jan. 1, 2016, and then 20% on Jan. 1, 2017.

MAXIM said it is well positioned under the amended SGER regulation. M1 has the flexibility of burning natural gas and coal to manage adherence to its intensity baseline and create resalable Emission Performance Credits. The increased cost of emission fund credits is expected to drive an increase in the market price for Emission Performance Credits as either form of credit can be used to satisfy an emitter’s obligations under the regulation. This change, coupled with the previously announced changes on June 10 to position M1 as a low cost producer of electricity in Alberta, is expected to mitigate any adverse impact associated with the stringency reduction.

It is anticipated that increases in industry-wide SGER compliance costs will result in higher Alberta power prices that will ultimately be borne by Alberta power consumers. In addition to the GHG regulations, Canadian federal and Alberta provincial environmental regulations are also being developed and/or revised for other air pollutants such as SO2, NOx, volatile organic carbons, and particulate matter.

Up to 2013, Maxim generated NOx credits at M1. As of Jan. 1, 2013, Maxim commenced consumption of these credits to maintain compliance. Under current legislation and production profile, MAXIM does not anticipate requiring additional NOx credits and/or implementing other mitigation alternatives for the foreseeable future. M1’s rate of consumption of these credits is heavily influenced by coal-fired generation and, as such, may fluctuate given changes in the levels of production and the fuel source used for production at M1.

MAXIM also has been able to generate SO2 credits at M1 up to Dec. 31, 2012. Under current legislation, MAXIM anticipates that these credits would not be exhausted until M1 is no longer able to operate at its full capacity while using coal as a fuel supply. Similar to the NOx credits, the consumption of these credits is driven by coal-fired generation and as such may fluctuate given changes in the levels of production and the fuel source used for production.

Said Maxim: “During the first quarter of 2015, the Corporation revised its business plan for M1. This facility is now expected to remain a coal-fired facility until 2019, at which point it will be converted to a natural gas-fired facility and have a 40 year life-extension.”

Maxim has other projects ongoing at or near the Milner site: 

  • The SUMMIT project owns metallurgical coal leases for M14 and Mine 16S. Current estimates for M14 are 18.9 million tonnes of low-mid volatile met coal reserves with a mine life of 17 years. M16S is located 30 kilometers northwest of M14 and represents 29% of SUMMIT’s total area of coal leases. M14 is permitted for a run-of-mine production rate of up to 1,300,000 tonnes per year. MAXIM has also received approval from the Alberta Energy Regulator to construct and operate a Coal Beneficiation Plant. This Coal Beneficiation Plant, to be located on MAXIM’s existing M1 complex, will bifurcate M14’s run-of-mine coal into an estimated annual production of 950,000 tonnes of high-quality, low-mid volatile and met coal for shipment to export markets. These approvals provide SUMMIT with all the government approvals to construct and operate M14. In November 2014, MAXIM received delivery of five pieces of mine equipment including two continuous miners and three shuttle cars. The units are in storage awaiting development of M14. Maxim expects that the long-run average price forecast for metallurgical coal will allow for the economically viable development of this project.
  • The Alberta Utilities Commission (AUC) and Alberta Energy Regulator (AER) have approved MAXIM’s application to convert the fuel source for its proposed M2 project from coal to natural gas and to increase the capacity of the proposed expansion from 500 MW to 520 MW. The M2 facility is to be located adjacent to the existing 150-MW M1.
  • MAXIM is proposing to increase generating capacity at the M1 site by building M3, which will be comprised of two gas-fired turbines located next to M1. The development of M3 will also result in a reduction to total greenhouse gases and air emissions from current levels. Exhaust energy from M3’s gas turbines will be converted to steam and utilized to generate electricity in the existing M1 steam turbine, displacing coal-sourced steam. Before giving effect to the development of M2, M3 will increase the nameplate capacity at the Milner site from 150 MW to 236 MW. Total emissions of carbon dioxide, nitrogen oxides, sulfur oxides and particulates at the M1 site will decrease compared to running the existing M1. On Feb. 12, MAXIM received approval from the AUC to construct and operate M3. M3 is now pending approval from the AER, which is expected to be received in the fourth quarter of 2015.
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.