Coal Mine Methane Recovery & Utilization in the United States: Emerging Trends

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1 EXHIBIT 60

2 Coal Mine Methane Recovery & Utilization in the United States: Emerging Trends Pamela M. Franklin, Ph.D. Coalbed Methane Outreach Program US Environmental Protection Agency US Coal Mine Methane Conference St. Louis, Missouri September 25, 2007

3 US EPA Coalbed Methane Outreach Program Voluntary program since 1994 We don t have any sticks, just carrots! Our mission To promote the profitable recovery and use of coal mine methane by working cooperatively with coal companies and related industries Our focus Greenhouse gas emission reduction opportunities: coal mine methane rather than coalbed methane 2

4 CMOP Focus: Mitigation of CMM Ventilation Air Methane Ventilation shafts produce large volumes of very dilute methane (~ 1% or less) that is challenging to recover Recovery of CMM from diverse sources Pre-Mine Drainage Gob/Goaf Gas In-Mine Abandoned (closed) Mine Methane Drainage of CMM from active or closed mines yield gas streams quality ranging from low to high concentrations of methane 3 Photos Courtesy Various Sources

5 US Gassy Coal Basins Only about 50 US coal mines are considered gassy PENNSYLVANIA ANTHRACITE UINTA PICEANCE SAN JUAN POWDER RIVER ILLINOIS BLACK WARRIOR NORTHERN APPALACHIAN 20 underground coal mines conduct drainage / degasification CENTRAL APPALACHIAN Bituminous Coal Basin Anthracite Coal Basin 4

6 US Coal Production World s 2 nd largest coal producer 2005 production: 1.1 billion short tons 50% bituminous, 42% subbituminous Trends in coal production Shift towards surface mining 2005: Underground coal = 33%, surface 67% Shift towards Western US 2005: 44% US coal production east of the Mississippi River 5

7 US CMM Emissions (2005) Post-mining (surface) 3% Abandoned (UG) mines 9% Surface mines 16% Post-mining (UG) 11% Degas systems (vented) 7% Ventilation emissions (UG mines) 54% United States ranks 2 nd globally in CMM emissions 2005 total emissions: Bcf 6

8 Trends in US CMM drainage, recovery, and utilization 50 Recovered & utilized Emitted from drainage Market penetration % 90% 80% 35 70% Billion cubic feet % 50% 40% 30% Market penetration 10 20% 5 10% % 7

9 CMM Utilization ~10 projects operating at active mines Most projects inject natural gas into pipeline network Projects use drained gas from underground mines Gas from advance degas wells and gob wells Nearly 80% of all drained gas is recovered & used 41 Bcf CMM recovered and used (2005) The most emissions avoided globally! 37.8 Bcf from active mines, 3.4 Bcf from abandoned mines Photo courtesy of Resource Enterprises, Inc. 8

10 Innovative US CMM Projects at Active Mines CONSOL VP and Buchanan Mines Integrated CMM projects: pipeline, 88 MW power plant, coal drying PENNSYLVANIA ANTHRACITE UINTA PICEANCE SAN JUAN POWDER RIVER ILLINOIS BLACK WARRIOR NORTHERN APPALACHIAN CENTRAL APPALACHIAN CONSOL Bailey Mine Microturbine (70 kw) Bituminous Coal Basin Anthracite Coal Basin Shoal Creek and Oak Grove Natural gas pipeline injection Pinnacle Mine Pipeline injection project uses surface directional drilling to maximize gas production JWR Blue Creek Mines BCCK Cryogenic plant converts gob gas into pipeline quality gas

11 Primary CMM Use: Eastern US Pipeline Injection Well-capitalized and extensive natural gas infrastructure in Appalachian Basins Large portion of CMM is high-quality gas requiring minimal treatment Gob (goaf) gas in the Eastern US can be upgraded Economically co-mingled with high-quality gas Processed to meet pipeline standards 10 Photos courtesy of Resource Enterprises and BCCK

12 Other Uses of CMM at Active Mines Power generation ~90 MW capacity total Coal drying Heating mine ventilation air Photos courtesy of Resource Enterprises, Inc. 11

13 Drained Gas Recovery & Use: Comparison of US Coal Basins Mil m3 Bcf Northern App Central App Warrior Illinois Western CMM Vented CMM Drained CMM Used Source: Inventory of U.S. Greenhouse Gas Emissions & Sinks: , US EPA

14 Future Opportunities: Increasing US CMM Recovery and Use Drained gas Ventilation air methane Closed (abandoned) mines Surface mines 13

15 Increasing Drained Gas Market barriers Recovery and Use Pipeline access and system constraints in Western US Low power prices Legal barriers Ownership of CBM and coal mine methane is often unclear State legislation defining ownership rights has had key impact on US CBM production Key distinction between fee lands and public lands Technological barriers Achieving additional drained gas recovery 14

16 Future Opportunities: Ventilation Air Methane (VAM) Largest source of coal mine methane Low methane concentrations (typically < 1%) Technologies now available to harness ventilation air methane EPA and DOE are co-sponsoring technology demonstration project at abandoned coal mine in West 180 Bm3 160 Virginia Total Methane Emissions (Billion Cubic Feet) Ventilation Air Methane Year Drained Gas

17 Future Opportunities: Abandoned Mine Methane About 20 projects use gas from 30 abandoned mines EPA developed methodology for estimating emissions from abandoned coal mines Opportunities abound! Free from constraints of active mining Emissions avoided Challenges remain Finding surface owner Obtaining gas rights Predicting gas flows Annual Methane Emissions (mmcf) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Emission Avoided Net Emissions (mmcf)

18 Future Opportunities: Surface Mine Methane Surface mines account for ~ 67% of US coal production but only ~16% of US CMM emissions Mines in 13 states account for 90% of total Emissions not well characterized Currently: coal basin-specific emission factors EPA is investigating potential to mitigate methane emissions from surface mines 17

19 Why has CMM Recovery and Use Been Successful in the US? Strong institutional knowledge Degasification operations began in the early 1970 s to enhance mine safety Financial incentives Section 29 Credits (now expired) provided incentives to drill CBM/CMM wells Forward-thinking industry Some coal companies consider themselves to be energy companies Many coal companies see methane as a commodity rather than a nuisance 18

20 Remaining challenges to CMM development Low electricity prices in many regions Lack of clarity regarding methane ownership regulations, status Sparse natural gas pipeline infrastructure (western US) US Pipeline Capacity Source: US Dept of Energy 19

21 Conclusions US CMM emissions are projected to decline Reducing emissions will become more challenging Markets for drained gas are well established Opportunities for additional recovery still remain Future opportunities Ventilation air methane, largest source of CMM emissions Recovery of abandoned mine methane Surface mines are virtually untapped 20

22 Thank you! Pamela Franklin +1 (202) Barbora Jemelkova +1 (202) Jayne Somers +1 (202)