Imagine if the world’s most abundant fossil fuel could be tapped without moving mountains, delivered without trucks or trains, and burned without emitting greenhouse gases. Actually, the technology to make this possible has been around for more than a century. Underground coal gasification (UCG) was pioneered by Sir William Siemens in the 1860s to light the streets of London. Vladimir Lenin hailed the method in a 1913 article in Pravda for its potential to rescue Russian workers from the hazards of underground mines.
Despite its early boosters, the technology never caught on in the U.S.—mostly because it cost too much. Now the improvements in seismic mapping and drilling that have lit a fire under the U.S. fracking boom could also spur the development of a domestic coal gas industry, proponents say. “The shale gas revolution is opening doors for the coal gas revolution,” says Richard Morse, director of coal and carbon research at Stanford University. “We knew it was there but couldn’t get it out in a cost-effective way.”
The technology works like this: Underground coal seams are ignited, and the resulting combustible gas is piped out for use in electricity generation or as a raw material in chemical production. The burn can be controlled by regulating the flow of oxygen, so there’s slim chance of giving rise to another Centralia. In that abandoned Pennsylvania town, a coal seam near the surface has been burning since 1962.
The method also leaves the worst parts of coal—the mercury, arsenic, and lead—stored underground. And it allows for a much simpler capture of greenhouse gases—which can be piped back into the seam and stored there or sold to oil producers who inject it into wells to boost recovery rates.
Development of coal gas is proceeding faster in places where natural gas is expensive and coal seams are deep, including Canada, South Africa, China, New Zealand, and Uzbekistan. Both of those preconditions are absent in the U.S.—at least right now. Hydraulic fracturing has depressed the price of gas to a 10-year low of less than $2 per million British thermal units. That’s well below the $6 per MMBtu that can be attained through a typical gasification project, according to estimates by Julio Friedmann, chief energy technologist at the Lawrence Livermore National Laboratory in California. “Cheap gas is the mortal enemy,” Friedmann says.
Researchers at Stanford University and Lawrence Livermore estimate that underground coal gasification would boost the levels of exploitable coal reserves in the U.S. fivefold. But Tom Welch, a spokesman for the U.S. Department of Energy, says UCG “has limited applicability across the U.S. because we have ample supplies of high-quality, readily available coal.”
That hasn’t stopped mining companies in the U.S. from picking up reserves that would otherwise be worthless. Peabody Energy (BTU), the largest U.S. coal producer, last year paid $6.5 million for 29 coal leases in Wyoming containing what it says are “billions of tons” of the fuel. The seams are too deep to mine conventionally but could be ideal for underground gasification.
Outside the U.S., coal gas is seeing a wave of new investment thanks to advances in drilling and computer modeling that are bringing down costs, says Stanford’s Morse. Canada’s Swan Hills Synfuels is building a $1.5 billion coal gas plant attached to a 300-megawatt power generator near Whitecourt, Alberta. The company will drill down 4,700 feet to a coal seam that otherwise wouldn’t be practical to reach. “Our costs are very competitive with new coal plants,” says President David Shaigec. Australia’s Linc Energy (LNC:AU) is operating a demonstration plant in Chinchilla, Queensland, and has formed a joint venture with a Chinese company to develop gasification projects on the mainland.
Environmental groups are cautiously supportive. “It’s a much smaller environmental footprint than conventional mining and consumes much less water,” says George Peridas, a scientist at the Natural Resources Defense Council who advocates more study and testing before projects are commercialized.
Coal gas does have its downsides. As with natural gas fracking, which has been blamed for polluting water supplies with the chemicals needed to break up shale, some early gasification projects caused toxic metals to leak into the water table. “Groundwater contamination is a concern that needs to be addressed,” says Julie Lauder, chief executive officer of the London-based Underground Coal Gasification Association, whose membership has grown by a third in the past year. The industry’s solution is to go deeper than the water table and to choose sites carefully. Lauder, not surprisingly, is bullish about future prospects. “Conventional mining will soon be a thing of the past,” she says. Lenin would applaud.