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DOE looks at law to aid coal, formally asks for help developing modular plants

U.S. Department of Energy Secretary Rick Perry said this week that the agency is looking "very closely" at using a 1950 national defense law to support ailing coal-fired and nuclear power plants, while its Office of Fossil Energy formally requested information from stakeholders on developing small-scale, modular coal-based plants.

The rarely invoked Defense Production Act is one of several federal emergency authorities that coal and nuclear industry groups and the Trump administration have floated to avoid further retirements of power plants they say are needed for grid reliability and national security.

The Defense Production Act was enacted during the Korean War to ensure availability of critical materials and resources for the U.S. national defense. Among other authorities, the law allows the president to direct private companies to sign contracts with the government to fulfill orders for scarce materials deemed necessary for national defense. The act also authorizes the government to make loans and loan guarantees to avoid shortfalls of critical resources.

Just recently, the department's Office of Fossil Energy formally asked for input on developing projects to promote the advancement of coal-fired power plants that would combine stable power generation with operational flexibility, high efficiency and low emissions. The office is looking for plants with greater than 40% efficiency and the ability to respond to flexible demand, a challenge for many older, large coal plants that are now a part of the U.S. coal fleet, according to a May 8 news release.

This week, coal proponents expressed concern about the growing reliance on natural gas, with Consol Energy Inc. CEO Jimmy Brock suggesting that companies are beginning to show signs of supply discipline that could increase prices.

"Do we want all of our eggs in a high-risk basket?" Brock said May 10 at the Eastern Fuel Buyers Conference in Orlando, Fla.

To ensure grid reliability, Brock suggested getting rid of the New Source Review, which requires expensive, new pollution controls to be added when "major" modifications are made to an existing "major source," including coal-fired power plants.

Keeping coal in a diverse generation mix is "the right thing to do," Southern Co. Vice President of Commercial Operations Scott Teel said this week. Coal and gas have long accounted for about 80% of Southern's generation mix, he said, but gas's share has gone from about 10% to about 50% in recent years.

Total U.S. coal production during the first quarter of 2018 fell 3.2% from the previous quarter to 187.0 million tons, the second straight quarter volumes have declined due to a contraction in utility coal consumption as older coal-fired power plants are retired. Despite this recent downward trend, top coal mines in some of the country's coal basins, including Central Appalachia and Illinois, reported increases in production in the first quarter of this year due in large part to solid export demand.

The top 25 coal mines in Central Appalachia saw a 7.1% year-over-year increase in production to 8.8 million tons in the first quarter, while the 25 largest Illinois Basin coal mines reported 25.2 million tons of coal produced during the quarter, up from 24.5 million tons from the same mines in the year-ago period, according to an S&P Global Market Intelligence analysis.

This week's batch of coal companies that reported first-quarter earnings showed mixed results.

Natural Resource Partners LP on May 9 reported net income of $26.1 million in the first quarter, compared with $5.9 million a year earlier.

Hallador Energy Co. on May 7 reported first-quarter net income of $2.1 million, compared with $7.4 million during the year-ago quarter. The company increased its full-year sales forecast from 6.8 million tons of coal to 7.0 million tons after completing work on its Princeton Loop truck-to-rail loading facility that an executive said "fundamentally changed our marketing ability."

Corsa Coal Corp. on May 9 reported net and comprehensive income from continuing operations of $2.0 million, compared with $11.9 million in the first quarter the previous year.

Companies that reported losses during the quarter include Foresight Energy LP, posting a net loss of $21.6 million, compared with a loss of $111.2 million in the same quarter a year earlier, and Rhino Resource Partners LP, posting a net loss of $2.8 million, compared to a net loss of $2.0 million in the year-ago quarter.

Upcoming events:

Virginia Coal and Energy Alliance: The alliance will host its 39th Conference & Exposition on May 21-22 at the Meadowview Conference Center in Kingsport, Tenn.

American Coal Council: The council will hold a Coal Q&A Webcast on May 15 at 2 p.m. ET.