Business in Vancouver February 27-March 5, 2007; issue 905

Power proponents irked by B.C. government about-face on clean coal power initiatives

Krisendra Bisetty

A war of words has erupted in B.C. over a government decree that has left coal-fired power plant plans in ashes.

But as one proponent considers ditching coal for wood waste and another remains stunned by the government’s about-face, a third is pressing ahead with a plan for a massive 300-megawatt coal plant in northwest B.C.

Ontario-based Fortune Minerals Ltd. (TSX:FT), which is advancing a metallurgical coal project in the area, released the results of a pre-feasibility study February 22 for a mine that would supply coal fuel for a potential power generation facility at its 100% owned Mount Klappan anthracite coal project.

The plant, which could cost between $450 million and $500 million to build, would use clean coal technologies to minimize greenhouse gas emissions, Fortune’s president Robin Goad said in an interview from London, Ontario.

Conventional coal-fired power plants are no longer an option in B.C. following the government’s new “green” initiatives announced in the throne speech and aimed at cutting one-third of the province’s greenhouse gas emissions by 2020.

Despite two coal power plant proponents having already signed long-term energy purchase agreements with power utility BC Hydro, the government said all new and existing electricity produced in the province will be required to have net zero greenhouse gas emissions by 2016.

And effective immediately, B.C. would be the first jurisdiction in North America, if not the world, to require 100% carbon sequestration for any coal-fired project, B.C., Lt.-Gov. Iona Campagnolo said in the recent throne speech.

The move prompted Vancouver-based Compliance Energy Corp. (TSX-V:CEC) to consider the feasibility of converting its $200 million, 56-megawatt Princeton power project from using a fuel mixture of coal and wood to 100% wood, including trees killed by the mountain pine beetle.

“I’m optimistic we can proceed with the project,” said CEO John Tapics.

Carbon sequestration, he said, was not an option for the company, not only because it “didn’t make sense” for its relatively small project, but because the technology was not yet commercially available.

“The science of sequestration is not fully demonstrated,” said Tapics.

A 184-megawatt, $500 million coal power project north of Tumbler Ridge, spearheaded by AESWapiti Energy Corp., a subsidiary of Virginia-based global power giant AES Corp. is also on the rocks.

“They’ve [the government] sort of gone from being great promoters of our project to be being totally, not negative, but insisting on a technology to be used that’s not yet been developed,” said David Slater, president of Hillsborough Resources Ltd. (TSX:HLB). “It’s in a way not dissimilar from the federal government that just came out of the blue and said no more income trusts.”

The Vancouver-based coal mine operator had signed a 30-year fuel supply agreement with AESWapiti, its partner in the power project, and had spent millions of dollars trying to advance it.

The proposed plant would have used 80% coal and 20% wood waste and the most advanced “clean coal” technology in the country, thereby drastically reducing the production of sulphur and nitrogen oxides, the chief culprits in acid rain, the company had claimed earlier.

The government about-face, said Slater, made it “very difficult for anyone to invest in that kind of environment.”

Goad said it was “hypocritical” for the government to allow the burning of wood waste, which he claimed generated as much, or more, carbon dioxide than coal.

“The sequestration of greenhouse gases is not technically a problem,” he said. “It can be done. It just costs more money.”

Probably in the range of 15% to 20% more but, added Goad: “I have a feeling that B.C. is prepared to pay more for its power.”

The province is a net importer of 14.5% of electricity, he said, with most of it coming from the United States or from Alberta, and a lot from coal-fired plants.

“I think we have a real opportunity here to build a plant that is not only very environmentally clean and state-of-the-art, but also resolves a critical need for energy in the province,” he said. “The northwest part of British Columbia is particularly starved for energy.”

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