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The Wall Street Journal: Australia Pushes Clean Coal

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The Wall Street Journal: Australia Pushes Clean Coal

Fears of a Backlash Against Top Export Drive Effort
By PATRICK BARTA
July 31, 2007; Page A6

SYDNEY, Australia — Australia’s efforts to protect one of its most vital industries in an age when “coal” is a dirty word place the country at the forefront of global efforts to burn the fuel more cleanly.

Australia is the world’s biggest coal exporter, and coal is the country’s No. 1 export, generating more than 20 billion Australian dollars, or more than US$17 billion, in revenue each year. Local politicians and mining executives worry that a backlash against coal fuel — believed to be a main contributor to global warming — could imperil the industry and erode Australia’s economic competitiveness.

Now, Australians are trying to position themselves as cutting-edge innovators in so-called clean-coal technology. Such technologies aim to reduce the amount of carbon dioxide released into the atmosphere when power plants burn coal to generate electricity. In many cases, the projects plan to bury CO2, a gas linked to global warming, by capturing and injecting it into the ground.

In May, Anglo-Australian miner Rio Tinto Ltd. and BP PLC of the U.K. unveiled plans to build a A$2 billion coal-fired power plant, known as Kwinana, in Western Australia that would bury most of its CO2 in an offshore underground reservoir. Another major project, ZeroGen, developed in part by a government-controlled company in the Australian state of Queensland, would perform a similar feat if it is built.

These large projects could easily fall through. Although some clean-coal technologies have been tested around the world, it isn’t clear yet if the plants will work on a large scale, and it could take a decade or more to find out.

Many Australians are skeptical of the efforts. The coal industry’s emphasis on clean-coal plants “is like the tobacco industry saying ‘we’re doing all kinds of research on low-tar cigarettes,’ ” says Bob Brown, an Australian senator from the Greens party, which focuses heavily on environmental issues. “It’s a very frightening distraction” from more meaningful steps to combat climate change, he says. But there likely isn’t sufficient political opposition to slow down the country’s powerful coal industry.

As Australia’s coal industry presses forward, U.S. power companies are withdrawing proposals to build coal-fired plants, deterred by the cost of clean coal and the potential pollution from conventional facilities.

U.S. President George W. Bush is promoting a major research project dubbed FutureGen that involves a consortium of mining companies, including Anglo-Swiss miner Xstrata PLC, Anglo American PLC of the U.K., Peabody Energy Corp. of the U.S., and Anglo-Australian companies BHP Billiton Ltd. and Rio Tinto. That project involves building a facility similar to Kwinana or ZeroGen that separates CO2 and buries it underground, presumably forever. But the U.S. project remains years away from completion, and the expected price tag has swelled to an estimated $1.5 billion from $1 billion.

Australia, with a population of about 20 million people, is among the world’s worst polluters on a per-capita basis. About 80% of its electrical power is generated from coal, compared with about 50% in the U.S. Like the U.S., Australia has refused to ratify the Kyoto Protocol designed to reduce greenhouse-gas emissions. Australia is also poised to become a bigger supplier of coal for China, which is expected to soon overtake the U.S. to become the world’s biggest source of greenhouse gases.

Although China has a sizable coal industry of its own, it has emerged as a net importer of coal supplies this year as demand has soared.

Australia hopes that by perfecting technologies to burn coal more cleanly it could defuse some criticism that might pose a threat to the industry. The country has an estimated 200 or more years of coal reserves left at current production levels, according to the Australian Coal Association.

Australia is also eager to maintain coal in its own energy mix, because using low-cost coal helps keep the country competitive with other nations that have other advantages such as lower labor costs. To speed up the effort, the mining companies of the Australian Coal Association have volunteered to pay a tax the group says will raise A$1 billion in the next decade. The Australian government has also kicked in more than A$400 million for a fund to help finance projects to reduce greenhouse-gas emissions.

Among the projects supported by the fund is an “oxyfuel” facility to be developed by CS Energy, a power company owned by Queensland. That project aims to alter the way coal is burned so power plants can more easily separate the CO2 and then store it.

Clean-coal advocates are closely watching the oxyfuel project because they believe its technology could be used to help power companies adapt existing facilities rather than build plants.

The ZeroGen project is led by Stanwell Corp., an electric-power company owned by the Queensland government, with technologies from Royal Dutch Shell PLC and General Electric Co. of the U.S. ZeroGen would include a so-called integrated combined-cycle power plant that converts coal into a synthetic gas. The gas would be burned to generate electricity while leftover CO2 would be buried underground.

Some Australian politicians and industry experts question whether sufficient funding will be raised to make the plan happen. A spokesman for ZeroGen acknowledges that the project could still fall through and that final financing hasn’t been settled, but says ZeroGen is ahead of its competitors.

At Kwinana, meanwhile, Rio Tinto and BP are conducting seismic research offshore to better understand the rock where they intend to sequester their CO2. The project would be as much as five times the size of ZeroGen. Alex Zapantis, manager of energy and sustainable development at Rio Tinto, declines to say how much public money the project will need to get up and running, though he says it is “significant.” Either way, he says, governments around the world have little choice but to step up their support.

“Wishing for a future in which coal goes away is unhelpful and unproductive,” he says. “To maintain coal as a sustainable product, this is the work that has to be done.”

Write to Patrick Barta at [email protected]

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