HomeMy WebLinkAboutExecutive Summaries For Western Arctic And Northwest Alaska Coal Projects 1992EXECUTIVE SUMARIES
for
WESTERN ARCTIC
and
NORTHWEST ALASKA
COAL PROJECTS
Title
1992
JWA, Inc., 1992 Planning R - Electric T ether Thy
for the Northwest Coal Project May 1992
1991
SFT, Inc., 1991
Northwest Alaska Coal Project
Power Plant Evaluation - Final Report
September 1991
Manalytics, Inc., 1991
Western Ar T. ion Proj
March 1991
1990
John T. Boyd Company, 1990
Executive Summary
North Slope Coal Market Study Deadfall Syncline Reserve Area
For Arctic Slope Regional Corporation, November 1990
Arctic Slope Consulting Group; Mechanical Technology, Inc., 1990
Kotzebue and Nome Coal Study Final Report For Alaska Energy Authority, January 1990
1989
Gregory A. Reinhart, Inc. (G.A. Reinhart, Ph.D.), 1989
h 1 Syncli
Cultural Resource Site Evaluations Related to the Western Arctic Coal Development Project
December 22, 1989
54
49
42
41
39
38
Title
Arctic Slope Consulting Group, 1989
Aluaq Mine Study C ial Feasibili os
For Arctic Slope Regional Corporation, November 1989
Arctic Slope Consulting Group (James E. Callahan, Geologist), 1989 Ww : :
Geology of the Western Arctic Coal Basins : > ; ;
eee Taina Tovestions
For Arctic Slope Regional Corporation, June 29, 1989
1988
Arctic Slope Consulting Engineers, et al., 1988
Western Arctic Coal Development Project - Phase III Final Report For Alaska Department of Community and Regional Affairs, April 1988
1986
Arctic Slope Consulting Engineers, 1986
Western Arctic Coal Development Project
Phase II Final Report - Volumes I and IT For Alaska Dept. of Commuity and Regional Affairs, June 1986
1985
Arctic Slope Consulting Engineers; Hanson Environmental Research Services, 1985
Wi i velopment Project - Ph: I
limi - Compon A 7m
For Alaska native Foundation, December 18, 1985
Arctic Slope Consulting Engineers, 1985
reti vi Proj
Infrastructure Design - Preliminary Report
Alaska Department of Community and Regional Affairs, December 1985
36
34
31
23
20
19
Title
Mechanical Technology Incorporation, 1985
Village End Use Technology Assessment for Ww ic Coal Devel Proj
For Arctic Slope Regional Corporation, October 22, 1985
ASCE; Pool Engineering, Inc., 1985
reread ee jum - Task 4 - Preliminary Mine Desi
For Alaska Native Foundation, August 30, 1985
Swan Wooster Engineering, Inc., 1985
W. r Vi Technical M - Ph - Task
Port Coal Handling Unit
August 29, 1985
Howard Grey and Associates, Inc., 1985
i velopm: ject -
1985 Field Program Report For Alaska Native Foundation, August 1985
ASCG Incorporated, 1985
Wi Arcti velopm: roject - Ph
limi itutional Mark m
For Alaska Native Foundation, May 6, 1985
1984
ASCE; Ambler Exploration, Inc.; Howard Grey and Associates;
Mineral Industry Research Laboratory, 1984
Ww i Vv ject - Phi
-Devel ite Investigati
For Alaska Dept. of Community and Regional Affairs, November 1984
Dames & Moore, 1984
1 Pl: ibility A
Appendix C-1 Coal Resource Assessment Draft
For Harza Engineering Co.; Alaska Power Authority, April 1984
16
15
14
12
10
Title
1983
Dames & Moore, 1983
An Economic and Technical Assessment of the Marketability of ; 7
For Div. of Legislative Finance, February 1983
1980
Dames & Moore; Resource Associates of Alaska, Inc., 1980
Assessment of Coal Resources of Northwest Alaska
Phase I Vol. II - Task 2: Coal Resources of Northwest Alaska
For Alaska Power Authority, December 1980
Arctic Slope Technical Services, Inc., 1980
ibili District Heatin m
Wainwright
For North Slope Borough, July 31, 1980
JACK WEST PROFESSIONAL JWA, INC, ieee’
3605 ARCTIC BOULEVARD, SUITE BB ANCHORAGE, ALASKA 99503
PLANNING REPORT
ELECTRIC TRANSMISSION LINES
for the
NORTHWEST COAL PROJECT
Prepared by
JWA, Inc.
Professional Engineering
Alaska
May 1992
EXECUTIVE SUMMARY
Obiecti
The scope of this report was established by paragraph 4. "Deliverables" of the ASCG
Inc./JWA, Inc. contract (see APPENDICES).
The objectives were to analyze the four LINE ROUTES chosen by ASCG, Inc. and select
line structures, line conductors and system voltages for each route at various load capacities
ranging from 10-40 MVA.
It was assumed by JWA, Inc. that both Cape Krusenstern National Monument and the
Noatak National Preserve and Wilderness were to be avoided.
A prime objective of this report was to establish LINE ROUTE construction costs. These
are direct costs and do not include special environmental mitigations or permitting costs
and/or right-of-way acquisitions. Only 3 phase, conventional design, standard voltage lines
were considered for this report. The cost summary appears on page 2.
NORTHWEST ALASKA COAL PROJECT
POWER PLANT EVALUATION
FINAL REPORT
September, 1991
Prepared For: Prepared By:
Arctic Slope Consulting Group, Inc. SFT, ine..
P.O. Box 650 6629 West Central Avenue
Barrow, Alaska 99723 Toledo, Ohio 43617
ARCTIC SLOPE CONSULTING GROUP, INC.
Engineers e Architects * Scientists « Surveyors
TECHNICAL MEMORANDUM ON POWER PLANT EVALUATION FOR NORTHWEST ALASKA COAL PROJECT ENGINEERING FEASIBILITY STUDY
EXECUTIVE SUMMARY
A review has been made of the potential of utilizing Alaskan
coal for generation of electrical power and district heating
in northwest Alaska. The study has reviewed this potential at
the City of Nome, the City of Kotzebue, the Red Dog Mine site
and the Deadfall Syncline Mine site with transmission to Red
Dog.
A technology assessment has been performed which assumed use
of a conventional Rankine cycle for power production. Results
of this assessment indicate that the selection of spreader
stoker steam generating equipment coupled with a conventional
steam turbine-generator is the best choice. Should sulfur
dioxide scrubbing be required at Nome and Kotzebue,
consideration should be given to fluidized bed combustion
technologies. Dry scrubbers have been selected at the mine
sites. Selection of an air cooled condenser in lieu of a
conventional condenser - cooling tower arrangement is based
upon minimal water availability without significant
performance degradation.
A review of the present systems at Nome, Kotzebue, and Red Dog
was performed. From that information, forecasts of load
requirements through the year 2004 were made. Included in
these forecasts was the first phase of district heating. In
Nome, the first phase would displace 126,000 gallons of fuel
oil a year and in Kotzebue, 214,000 gallons. Red Dog
presently heats from waste heat produced by the diesel
generators. On the basis of this review, the following sizing
criteria was developed:
ad
¢ Nome: 10.5 MW electrical plus 5 million BTU/Hr
district heating requiring 2 - 65,000 Lbs/Hr
boilers, 28,100 tons per year of coal.
e® Kotzebue: 5.7 MW electrical plus 5.3 million BTU/Hr
district heating requiring 2 - 40,000
Lbs/Hr boilers, 18,100 tons per year of
coal.
@ Red Dog Mine: 16.5 MW electrical plus 40 million
BTU/Hr district heating requiring 2 - 120,000
Lb/Hr boilers, 87,000 tons per year of coal.
@ Deadfall Syncline Mine: 22 MW electrical requiring
2 - 120,000 Lb/Hr boilers, 87,000 tons per
year of coal.
Estimates were prepared for each of the plant sites. Pricing
was solicited from various vendors for major equipment. The
remainder of the estimates were prepared by SFT, Inc.
Following are the estimated prices for the plants including
district heating at Nome, Kotzebue, and Red Dog, sulfur
dioxide scrubbing at Red Dog and Deadfall Syncline, and a 90
mile transmission line in the Deadfall Syncline estimate:
@® City of Kotzebue: $32,520,000
® City of Nome: $39,120,000
@ Red Dog Mine: $61,490,000
@ Deadfall Syncline Mine: $70,130,000
It is estimated that the period of construction would be 24
months for Nome and Kotzebue, and 30 months for the Red Dog
and Deadfall Syncline mine sites.
iii
Manpower requirements were reviewed. It is expected that
these plants will require staffing of 22 persons total, for
all shifts.
iv
MANALY TICS, INC.
WESTERN ARCTIC COAL TRANSPORTATION PROJECT
Report For:
Arctic Slope Consulting Group
By:
Manalytics, Inc.
March, 1991
Project 2-324
625 THIRD STREET - SAN FRANCISCO, CALIFORNIA 94107 + (415) 788-4143 FAX (415) 777-0540
MANALY TICS, INC.
I. SUMMARY
Purpose and scope
The economic development of the Western Arctic Coal resource
depends in great measure on the ability to deliver the coal to the
end user. The Arctic environment offers unique transportation
challenges, including very shallow water, only a 90-day ice-free
season, severe weather conditions during the short shipping season,
a remote location, and a delicate ecological environment. Although
previous studies (Western Arctic Coal Development Project Phases I,
II, and III) have addressed the transportation issue, revised
market objectives specifically targeting western Alaska locations
require a fresh look at transportation options. The purpose of
this study is to determine the most cost-effective means of
delivering Western Arctic coal to locations in western Alaska for
the forecast demand levels between 1995 and 2004.
Western Arctic Coal Development Project (WACDP) has forecast the
demand for coal at 40,000 tons per year in 1995, growing to 200,000
tons per year in 2004. Table 1 shows the potential market for coal
as of 1995 and the forecast coal sales from 1995 to 2004 by
consumption point. The demands at particular destinations vary
widely, ranging from 2,500 tons per year at Point Hope to 130,000
tons per year at Kivalina for Cominco and Lik. The distances also
vary widely: Point Lay is approximately 40 miles from the load
port; Adak and Shemya are well over a thousand miles from the load
port. Finally, the water depth and availability of discharging
equipment vary widely at the discharge ports.
Conclusions and Recommendations
The cost of reclaiming and loading coal to barges is very sensitive
to the distance the product must be conveyed. The pay-load that
WP039140.RGS 1
MANALYTICS, INC.
TABLE 1
NORTHWEST ALASKA COAL DEMAND
(Tons per Year)
_ ate ne SE I AP aN ate a Ni te Se oe I PEELE NOC GEE SS TIT TE
Potential Market _________==*Forecast Sales _ 1995 1995 1997 2000 2004
N (21,000. 21,000 21,000 30,000
Kotzebue _—-12,000__ 12,000 12,000 12,000 12,000
'NSB* =—<J,000 =—=<“—*~—s*=STD—S=T,z 000° ~=—s«7,000 ~—s9, 000
Lik 65,000 - 65,000 65,000 65,000
‘cominco = 65,000 65,000 65,000
ORCL vevospusstonnnsnrsogen 15, 000 Bethel 33,000,
“21,000
SE eee
Adak 47,000 _
Total 272,000 40,000 105,000 170,000 196,000
SS—————
*North Slope Borough Communities of Wainwright, Point Lay, and Point Hope
WP039140.RGS
MANALY TICS. INC.
can be loaded on the barges is very sensitive to the water depth at
the load and discharge ports (whichever has the least depth). The
water depth at Omalik Lagoon ranges from 6 feet 1,000 feet offshore
to 13 feet 2,800 feet offshore.
The combined loading and transport cost even for the low demand of
40,000 tons per year would be prohibitive at Omalik Lagoon.
Another loading site with greater water depth closer to shore and
within economical trucking distance of the mine is required. There
is one such site, located approximately 3.5 miles north of Omalik
Lagoon (69 degrees, 13.3 minutes N) (163 degrees, 24 minutes W).
The water at this location is considerably deeper and closer to
shore than at Omalik Lagoon: 12 feet at 1,800 feet offshore. Thus,
larger barges can be used, capable of carrying significantly more
deadweight per voyage. In addition, the conveying distance from
shore to barge will be significantly shorter. Consequently, we
assumed that this location would be used for the remainder of the
analysis.
The wide range of tonnages to be shipped over time led us to break
down the transportation systems into three categories: Low Demand
(40,000 tons per year), Medium Demand (100,000 tons per year), and
High Demand (200,000 tons per year). The diversity of the destina-
tions led us to multiple systems, including water transport for
large receivers and land transport for two of the North Slope
villages.
The recommended transportation system for the Low Demand (40,000
tons) consists of an earth berm extending 600 feet into the Chukchi
Sea to a water depth of 6 feet. The berm will be replenished
continuously during the shipping season, and breached at the end of
the season to permit the beluga whale migration. It will provide
a roadbed for trucks to deliver the coal to a hopper, which in turn
will feed a radial stacker servicing 276-foot barges capable of
carrying 1,875 short tons at a six-foot draft. The capital cost of
the system would be approximately $3,350,000 if owned floating
WP039140.RGS_ 2
MANALY TICS, INC.
equipment is used, and approximately $438,000 if chartered floating
equipment is used. The operating cost at 40,000 tons per year
would be approximately $25.27 per ton for owned floating equipment
and $29.22 for chartered floating equipment (at current highly
competitively charter rates).
There are two viable alternatives for the Medium Demand (100,000
tons): a pneumatic conveyor and an earth berm. For the pneumatic
alternative, a jackup barge would be stationed 800 feet offshore in
8 feet of water. The coal would be transported through a floating
pneumatic pipeline from the shore to the jackup and then into a
300-foot barge capable of carrying 4,190 short tons at an eight-
foot draft. Optionally, the pneumatic system could be sized for
the High Demand. For the berm alternative, a berm extending 800
feet offshore would support trucks that would feed a radial stacker
loading the same size barges as the pneumatic system. The capital
cost for the pneumatic system would be approximately $7,000,000 if
owned floating equipment is used and $2,700,000 if chartered
floating equipment is used; the operating costs at 100,000 tons per
year would be $14.06 per ton for owned floating equipment and
$15.24 per ton for chartered equipment.
For the earth berm, the capital cost would be $4,771,340 using
owned equipment and $438,000 using chartered equipment; the
operating cost would be $13.43 and $14.98 per ton, respectively.
The recommended transportation system for the High Demand (200,000
tons) is a pneumatic system similar to the one for the Medium
Demand. In this case, the jackup would be stationed 1,800 feet
offshore in 12 feet of water, and the pneumatic conveyor would be
larger. The size of the barge used to transport the coal would be
the same as for the medium demand. The capital cost of the system
would be approximately $14,200,000 if owned floating equipment is
used, and $5,600,000 if chartered floating equipment is used; the
operating cost at 200,000 tons per year would be approximately
$13.99 per ton for owned floating equipment and $15.65 respective-
ly.
WP039140.RGS 3
EXECUTIVE SUMMARY
NORTH SLOPE COAL MARKET STUDY
DEADFALL SYNCLINE RESERVE AREA
For
ARCTIC SLOPE REGIONAL CORPORATION
Barrow, Alaska
By
JOHN T. BOYD COMPANY
MINING AND GEOLOGICAL ENGINEERS
Pittsburgh, Pennsylvania
Report No. 2174.1
NOVEMBER 1990
EXECUTIVE SUMMARY
Assignment
The assignment of the John T. Boyd Company (BOYD) is to determine
potential coal markets for the Arctic Slope Regional Corporation (ASRC) northern
Alaskan coal reserves. Tasks included in the scope of work are as follows:
1. Inspect the site and review data.
2. Define markets receptive to Western Arctic coal reserves and the
potential size of those markets.
3. Identify competitors in the defined markets.
4. Discuss major factors which will influence potential markets and their
respective impacts.
The market areas to be considered, in descending order of priority, are:
1. Pacific Rim
2. European
3. United States
Introduction
ASRC is evaluating surface mine development and exploring markets for
a coal deposit known as the Deadfall Syncline area. The proposed mine is
referred to as the Aluaq Mine. The reserve is located 5 miles from the Chukchi
Sea and about 40 miles south of the village of Point Lay, Alaska. Plate 1,
following this text, locates the coalfields of Alaska and shows the Deadfall
Syncline reserve area. ASRC estimates coal resources in the Deadfall Syncline
area at approximately 750 million tons. ASRC has obtained exploration permits
to perform some bulk sampling and subsequent testing in residential coal burning
JOHN T. BOYD COMPANY
2,
stoves. No permits have been obtained to develop more reliable coal quantity
estimates.
Coal Quali
Some quality testing data of the Deadfall Syncline region has been
completed. ASRC has provided the following quality data based on a typical
borehole analysis:
Moisture (%) .........--2.0005 4.6 Ash (%) 0.0.0. 0cececece ee eeee 7.6
Btu/Ib ...............000. 12,770
Volatile Matter (%)............ 33.9
Fixed Carbon (%) ............. 53.9
Sulfur (%) .............-00 eee 0.2
Lbs S02/MM Btu .............. 0.3
The low sulfur coal is ideally suited for use in steam electric generation and
is particularly attractive from an environmental standpoint since most coal
importing countries will require lower sulfur supplies in the future to meet
environmental standards. Further quality testing is required to accurately
evaluate metallurgical coal potential of the deposit.
Steam Coal Demand
Worldwide steam coal import demand is forecast to increase significantly.
Forecasted Steam Coal Import
Demand - Tons (Millions)
Import Region 1988 1995 2000
European 98 150 190
Pacific Rim 68 104 147
Other* “ 15 15 15 Total 181 269 352
“Includes South America, Canada and the United States
JOHN T. BOYD COMPANY
3
Significant increases in coal production are required to meet forecasted steam coal
demand. We project coal production will be adequate to meet demand, but that
price increases will occur to provide return on investment for mine expansion and
development.
Pacific Rim Market
The Pacific Rim Market displays the greatest potential to utilize the
Western Arctic coal reserves. Following is the projected steam coal import
demand for the Pacific Rim countries:
Steam Coal Import Demand
Tons (Millions) Country 1988 1995 2000
Hong Kong 9 11 14
Japan 31 49 67
Korea, South 12 20 29
Malaysia 1 2 2
Philippines 0 1 1
Singapore 0 0 2
Taiwan 14 19 30 Other malt 2 2 Total 68 104 147
Japan, Taiwan and South Korea will be the major market areas for steam
coal imports.
Approximately 72% of the steam coal utilized by the Japanese is imported.
Japan does have some operating steam coal mines, but the government is
beginning to implement a policy which will eventually lead to the closing of these
mines. As the mines are closed, imports of steam coal will increase. Due to
future reliance on coal imports, the Japanese should continue to promote foreign
coal development and investment.
Coal production in Taiwan has decreased from 2.5 million tons in 1983 to
approximately 1.0 million tons in 1989. Coal production should continue to
JOHN T. BOYD COMPANY
4
decline throughout the remainder of this decade. Taiwan’s domestic coal
production currently contributes 5% of the country’s total consumption. By the
end of this century, this figure should be less than 1%. Taiwan is expected to
become totally dependent upon foreign coal imports.
South Korea currently does not mine indigenous coal and all demands are
met by imports. Domestic anthracite coal reserves are of poor quality, limited in
quantity and difficult to mine. The utility industry of South Korea is expected to
continue its emphasis on coal-fired generation.
Competing Countries for the Pacific Rim Market
The countries competing for the Pacific Rim market are:
Australia
Canada
China
Indonesia
Republic of South Africa
United States of America
Union of Soviet Socialist Republic
Estimated delivered costs to Yokohama, Japan, from the competing
countries as of September 1990 are:
Average Quality
Estimated Delivered Cost to Japan Specification
FOBT Ocean Delivered
Pier Charge Cost $/MM Sulfur Ash
Origin Country ($/Ton) ($/Ton) {$/Ton) Btu. Btu/Ib (%) {%)
Australia 37.00 8.00 45.00 1.875 12,000 1.0 14.0
Canada 38.00 10.00 48.00 1.920 12,500 0.7 10.0
China 37.00 5.00 42.00 1.875 11,200 0.8 9.0
Indonesia 40.00 7.50 47.50 2.065 11,500 0.7 4.0
South Africa 32.00 11.00 43.00 1.870 11,500 1.0 16.0
U.S.A. - East Coast 39.00 18.00 57.00 2.280 12,500 1.0 10.0
U.S.A. - West Coast 38.00 12.00 50.00 2.000 12,500 0.6 10.0
U.S.S.R. 41.00 3.00 44.00 1.897 11,600 0.4 9.0
JOHN T. BOYD COMPANY
5
Coal from the proposed Aluaq surface mine would be competitive to Japan
at a delivered cost between $1.870 and $2.280 per million Btu. Based on a 12,500
Btu/Ib Aluaq coal product, delivered costs to Japan from the proposed mine
would have to range from $46.75 to $57.00 per ton in order to be competitive with
the present supply countries.
European Market
The European steam coal market is also forecast to show significant
demand increases as shown:
Steam Coal Import Demand
Tons (Millions Country 1988 1995 2000
Austria 2 2 2 Belgium 5 8 10
Denmark 13 17 19
Finland 5 8 10
France 6 6 9
Germany, West & East 11 20 28
Greece 2 4 5
Ireland 3 3 4 Italy 13 23 30
Netherlands 10 13 14 Norway 1 1 1
Portugal 2 3 5
Spain 6 7 8
Sweden 3) 7, 10
Switzerland 1 1 1
United Kingdom + 15 21
Eastern Europe mol 12 13
Total 98 150 190
JOHN T. BOYD COMPANY
Competing Countries for the European Market
The countries competing for the European market include:
Australia
Colombia
Republic of South Africa
United States
Venezuela
Estimated delivered costs to Rotterdam, Netherlands, from the competing
countries as of September 1990 are:
Average Quality
Estimated Delivered Cost to Rotterdam Specification
FOBT Ocean Delivered
Pier Charge Cost $/MM Sulfur
Origin Country ($/Ton) ($/Ton) ($/Ton) Btu. Btu/Ib (%)
Australia 37.00 13.00 50.00 2.083 12,000 1.00
Colombia/ Venezuela 37.00 8.00 45.00 1.875 12,000 0.70
South Africa 32.00 8.50 40.50 1.761 11,500 1.00
United States
(East Coast) 39.00 7.00 46.00 1.840 12,500 1.00
Ash (%)
14.0
8.0
16.0
10.0
Coal from the proposed Aluaq surface mine would be competitive to
Rotterdam at a delivered cost of $1.761 to $2.083 per million Btu. Based on a
12,500 Btu/Ib Aluaq coal product, delivered costs to Rotterdam from the
proposed mine would have to range from $44.03 to $52.08 per ton in order to be
competitive with the present supply sources.
The extremely long shipping distance from northern Alaska to European
markets is a constraint to the development of this market sector. Officials of the
U.S.S.R. have offered to open a shipping lane to Europe via the Arctic Ocean and
have also suggested the possibility of railing Western Arctic coal across the
U.S.S.R. to European markets. These options may provide a lower delivered price
but reliability of transportation systems and ultimate transit charges are uncertain.
JOHN T. BOYD COMPANY
Mainland U.S. Market
It will be extremely difficult for the Western Arctic reserve to penetrate the
mainland U..S. market region due to the existing Jones Act, which excludes non-
U.S. flag vessels from trading between any two U.S. ports of the continental U.S.,
Alaska, Hawaii, Puerto Rico and Guam. The Jones Act specifies that U.S. vessels
and crew must be utilized for coastal trade, thus increasing shipper’s costs.
Utilization of a foreign flag vessel and crew is less expensive than a U.S. ship.
Additionally, there is only one coal-burning electric generating station located
within the states of California, Oregon and Washington. The facility is the
Centralia Generating Station of Pacific Power & Light located at Centralia,
Washington, approximately 55 miles inland. Coal is currently being delivered
into the station at an average cost of $25.89 per ton ($1.58/MM Btu), and the
Western Arctic reserve could not compete with such a low delivered dollar per
ton cost.
Penetration into the western mainland U.S. industrial and cogeneration
market is hindered by transportation costs from the Western Arctic reserve and
more indigenous coal supplies.
Transportation
Transportation of coal from the Western Arctic reserve area is a critical
component of the project’s feasibility. The reserve is located within 5 miles of
tidewater at the Chukchi Sea, but also 300 miles north of the Arctic Circle. Thus,
an ice-free period of only about 3 months (July 15 to October 15) exists for
potential loading of ocean vessels and barges from the reserve location.
JOHN T. BOYD COMPANY
8
The most advantageous transport options are those which permit year-
round coal shipments. Such options would permit ASRC to meet existing
contract demands, ship coal on a spot basis and reduce potential problems
associated with freezing or spontaneous combustion. Additionally, most Pacific
Rim market customers have minimal stockpile capacity and possibly could not
receive large amounts of coal during a short time period.
Market Strategy
BOYD recommends the following market strategy for the Deadfall Syncline
reserve:
a. Develop a reliable estimate of the current mineable reserve base.
Reserves should be tabulated by mine block, seam, strip ratio
increment, and reliability classification (measured, indicated, inferred).
b. Perform a complete quality testing program on coal samples obtained
from the drilling program.
c. Develop a surface mine design plan to determine cost of coal
production.
d. Perform a detailed transportation study to determine the most cost-
effective and reliable year-round transport option.
e. Complete a comprehensive environmental assessment.
f. Obtain the permits necessary to open a pilot scale surface mine and
begin supplying domestic Alaskan markets.
g. Develop a new brochure detailing information on the mine based on
the core drilling program, quality testing, mine design and
transportation studies and forward this brochure to potential
customers.
h. Contact potential Pacific Rim and European customers. This process
should be ongoing and commence immediately in order to ascertain
sales potential and joint venture interest.
JOHN T. BOYD COMPANY
9
i. Supply a test-burn shipment of 5,000 to 10,000 tons to potential
customers.
j. Continue efforts to obtain state and federal government funding for
development of the Deadfall Syncline reserve. We do not believe
potential joint venture partners are likely to invest equity capital until
basic questions concerning reserves, coal quality, transportation
alternatives and environmental liabilities are addressed.
Following this page is:
Plate 1 - General Location Map showing Deadfall Syncline Reserve Area
JOHN T. BOYD COMPANY
V.S.5.R.
LEGEND
APPROXIMATE LIMIT OF MAJOR COAL
MEASURES
DEADFALL SYNCLINE RESERVE AREA
LOCATION (APPROX.)
RED DOG LEAD/ZINC MINE LOCATION
(APPROX.)
EXISTING ACCESS ROAD
PROPOSED HAUL ROAD
ALASKA RAILROAD
ks Anakiuvay 5 Pass,
au
2 a . Cae st Elst awe yanatag®
GENERAL LOCATION MAP
SHOWING
DEADFALL SYNCLINE RESERVE AREA
BARROW DISTRICT, ALASKA
Prepared For ARCTIC SLOPE REGIONAL CORPORATION
Scale, 1° = 150 Miles (Approx.)
John T. Boyd Company
September 1990 Mining and Geological Engineers
PLATE 1
RTZ 4) ALASKA NATIVE FOUNDATION
cee 4101 University Drive
VAs? Anchorage, Alaska 99508
KOTZEBUE & NOME COAL STUDY
Final Report
KOTZEBUE
Alaska Energy Authority LIBRARY COPY
JANUARY, 1990
Preporea by
( 2 ARCTIC SLOPE CONSULTING GROUP fn of
Engineers « Architects « Scientists « Surveyors EER, TOCROLOCY (A:
EXECUTIVE SUMMARY
Overview of the Assessment
The Kotzebue and Nome Coal Study is part of an overall
economic development program. Since 198@ there have been
fifteen economic feasibility and resource evaluation projects,
assessing the feasibility of developing the large coal
resource of the Western Arctic as an energy alternative to
fuel oil for in-state use. Findings of the projects show the
development of the local resource to be a viable means of
meeting the energy needs of Northwest Alaska. Further they
concluded, besides providing energy self-sufficiency in the
region, the overall economic development project has the
potential of enhancing the regional economy while reducing or
eliminating state energy subsidies in the area.
Having established the feasibility of mining in the Western
Arctic the resource development project has been advanced to
its implementation phase. As a first step towards development
the State determined it was appropriate and timely to assess
the initial in-state market. In 1989, the Alaska Energy
Authority (AEA) sponsored the Kotzebue and Nome Coal Study.
The purpose of this assessment was to evaluate in a
preliminary manner, the viability of using Western Arctic coal
as an alternative to fuel oil for power generation and
district heating for the communities of Kotzebue and Nome.
The scope of work included, updating the current demographics
and energy profile of both communities and an evaluation of
coal-based technologies and methods suitable for each
community. Because a new energy source and related
technologies would have an impact on the communities a socio-
economic impact assessment was included in the report.
The year long study effort involved field reconnaissance trips
to gather information and local input, an evaluation of
alternatives with a recommended alternative advanced for
further evaluation, preparation of a draft final report which
was issued and distributed to appropriate individuals,
agencies, and organizations for review and comment. All
relevant comments were incorporated into the text of this
Final Report.
The project team consisted of the Alaska Native Foundation,
(ANF) retained by the AEA to administer the project. The
Arctic Slope Consulting Group (ASCG) provided overall project
management and technical and professional services. Joining
the ANF Project Team were Kotzebue Electric Association and
di
Nome Joint Utility, Mechanical Technology, Inc., The J.R.
Heesch Company, Polarconsults, and Northern Economics.
The Recommended System
After consideration of potential coal-based power and district
heating concepts and technologies, a recommended overall
system was derived. The proposed system consist of burning
coal in a circulating fluidized bed combustor (CFB). Heat
generated by the CFB will be used as the motive heat source
for an externally fired Brayton cycle, (Air turbine).
Compressed air from the air turbine compressor will flow
through a regenerator to an external heat exchanger (in the
fluidized bed) where it will be heated to the desired turbine
inlet temperature. The heated air is returned to the air
turbine where it is expanded through the turbine section. A
generator connected to the air turbine converts the power
generated in the turbine section to electrical power for
distribution to the community. The exhaust heat from the CFB
combustor and the air turbine exhaust would be utilized as the
heat source for the respective district heating systems.
Delivered outputs from the system will be 416@ volt electric
power and 250'F hot water for use in the district heating
systen. The major components of the proposed system are
described below:
Circulating Fluidized Bed Combustor
On another related project, Battelle Memorial Institute,
Columbus, Ohio, performed a combustion test on Deadfall
Syncline coal. They recommended a fluidized bed
combustor (FBC) for our small-scale application,
primarily due to its superior emissions control, the low
ash fusion temperature characteristic of the coal, ease
of operation, and commercial availability in the small
size range required by the project.
Of the FBCs available the circulating fluidized bed
combustor was preferred due to its superior combustion
efficiency, reduced erosion/corrosion of the heat
transfer surface, and the ability to control turbine
inlet temperature independent of load. The CFB design
temperatures for this proposed air heater system is 1600'F.
Brayton Cycle
Both a steam Rankine cycle and externally fired Brayton
(air turbine) cycle were evaluated. Although costs are
comparable the Brayton cycle was selected primarily
iii
because it does not use any water. Fresh water is
usually expensive to obtain and limited in supply
throughout rural Alaska and especially in the community
of Kotzebue.
District Heating
A district heating system would transfer the waste heat
from the power system to the homes and buildings. Hot
water produced by the heat exchangers in the power plant
would be circulated by pumps through heating loops under
the streets to the buildings to be served. These loops
will consist of two paralleled insulated pipes, each of
the pane diameter. In one of these pipes will flow hot,
(250°F), pressurized water from the power plant and in
the second pipe the cooler water, (160'F), will flow back
to the power plant.
Installations
The proposed power plants and district heating facilities
for Kotzebue and Nome are anticipated to come on line in
1995. One CFB combustor and one air turbine will make
up a power system module of 2.5 MW capacity.
The proposed replacement plant for Nome will consist of
three power modules for a total installed capacity of 7.5
MW. It is anticipated the peak demand for Nome will be
about 7MW by 1995. The power plant will require two
buildings, the power house and coal storage facility.
The power house will be approximately 100 ft by 160 ft
with a maximum height of 70 ft to accommodate the CFB
combustors. With an annual coal consumption of 37, 000
tons the coal storage structure will be 150 ft wide by
300 ft long by 4@ ft high.
The district heating system will provide heat only to
structures with a floor area greater than 3000 sq. feet,
excluding Icy View and Beltz school area. The system is
anticipated to displace the combustion of 1,036,000
gallons of oil per year. This is approximately 56% of
the total heating oil consumption in Nome.
The proposed power plant for Kotzebue will consist of two
power modules for a total installed capacity of 5MW
Capacity. The 1995 peak demand is estimated at 4152 KW.
The power house will be approximately 100 ft by 120 ft.
The Kotzebue annual coal requirement is estimated at
20,000 tons per year. The coal storage building will be
about 15@ ft wide by 160 ft long by 4@ ft high.
iv
The district heating system will provide heat to the
school complex, Hansen’s store, the new hospital, the
airport, and the recreation center. It is anticipated
the district heating system will displace 672,500 gallons
of oil.
Conclusions
The assessment was a pre-feasibility level study that
resulted in preliminary observations that can be made
concerning the feasibility of developing coal-based power
Plant and district heating facilities in both Kotzebue and
Nome. Although the proposed facilities and system need
further evaluation, there appears to be no "fatal flaws” and
at this preliminary stage, the proposed project appears to be
viable from an economic, environmental, and technical point
of view.
It appears significant benefits could result fron
implementation of the project. Benefits to the Northwest
Alaska region, Cities of Nome and Kotzebue, residents of the
region, and the State of Alaska. In addition to the normal
economic benefits associated with the development of the mine
and power plants, such as employment and business
opportunities and tax revenues from the mining operation,
there would also be reductions in the cost of providing power
and energy in both communities. These long term potential
benefits appear to outweigh any potential downside effects and
warrants further investigation by the State of Alaska.
Specific conclusions are presented below based on major tasks
of the study.
Fuel Assessment
An evaluation and comparison of Deadfall Syncline coal
from the Western Arctic and Chicago Creek coal near
Deering, Alaska was performed. Results showed the
Chicago Creek coal to be an A-B Lignite coal. The
Deadfall Syncline coal was of higher rank, High Volatile
Bituminous coal. With a significantly larger resource
and better economics in both production and
transportation, Deadfall coal was found to be amore
marketable than Chicago Creek’s. This is important when
considering the regional concept of the overall resource
development project which anticipates further
penetrations within the regional market that will
increase annual tonnages produced and thereby decrease
the price of coal and, in turn, make the coal resource
more marketable.
Compared to oil Deadfall coal appears to be economic
around the low production level of 50,00@ tons per year
with a crude oil price at or above $15 per barrel.
Further, combustion of Deadfall coal was found to be
environmentally superior to that of fuel oil burned in
a diesel generator.
The report concludes that the abundance, quality and
favorable economics of Deadfall coal make it the
preferred energy source for this project.
Economic Analysis
According to the economic parameters utilized in this
evaluation, continuing use of diesel generators to
provide power in Nome over the next twenty years will
require a subsidy of over $213 million. Adding a
District Heating system to the diesel power system would
reduce the required subsidy to $7@ million over the
twenty year period. Switching to the proposed coal fired
power generation system will reduce the required subsidy
to zero and provide a surplus (profit) of between $26
million and $45 million, depending on the additional
demands for Deadfall Syncline coal.
In Kotzebue, the results over twenty years are similar.
The diesel option will require a subsidy of $137 million
versus a profit of $68 million for a coal fired power
system with district heating. Sensitivity cases looking
at lower and higher inflation rates as well as lower and
higher diesel fuel prices indicate the coal system
performs substantially better than any of the diesel
options regardless of the direction if the economy.
Switching to coal will allow AEA to eliminate the subsidy
payments currently paid to Nome and Kotzebue.
Socio-Economic Impact
Implementation of this project along with the development
of the local coal resource in the Western Arctic will
meet many social and economic objections of the state.
Besides the many benefits associated with developing a
local energy industry there are several benefits this
project will have directly on the two communities.
Kotzebue is a community of about 370@ people with an
average of 1449 full time jobs. Unemployment has been
a chronic problem in the area. In 1988 63% of the
vi
regional labor force respondents indicated that they were
unemployed. Construction of a coal based power plant in
Kotzebue is estimated to require 24,000 man hours. This
is equivalent to 11.5 full time jobs.
Operation of the facilities will require two additional
full time employees to the current staffing level. Major
cost savings in the production of power will be the
largest benefit to the community and the State of Alaska.
Installed in 1995 it is estimated Kotzebue would save
$649,000 annually by 2000 and $3,450,000 by the year
2014. °
Nome is a community of about 3700 people with an average
of 1,700.5 full time jobs. It is anticipated
construction of the power plant and district heating
facilities will require about 31,000 man hours of time
with close to $2.5 million injected into the Nome economy
in terms of wages, materials, and services.
Operation of the facilities will require two additional
people compared to the existing situation at the power
plant. The biggest impact on the community will be a
substantial reduction in the cost of power generation.
By the year 2000, five years after installation, the
community could save up to $460,000 per year. Annual
savings should increase and by the year 2014 should be
about $5,000,000 per year.
For both Nome and Kotzebue the cost to the state, to
Operate the Power Cost Equalization Program, should
diminish as a result of lessened power generation costs.
Recommendations
Since the economic and technical feasibility of mining Western
Arctic coal has been established in previous work and since
the preliminary results of the Kotzebue and Nome Coal Study
are encouraging and it appears Kotzebue and Nome can be
developed to use Western Arctic coal economically and in an
environmentally acceptable way, it is recommended the next
stage of development include an in-depth engineering
feasibility assessment of developing: 1) coal-fired power
plant and district heating facilities for the communities of
Kotzebue and Nome; and 2) a coal mining industry in the
Western Arctic designed to meet the energy demand of both
communities. Completion of this next phase of the project
would provide final economic assessment and substantial design
completion of all facilities associated with the mine and both
communities. The completed documents would be used as a
control document for project permitting, design document and
bid preparation, and construction.
vii
ARCHAEOLOGY AT DEADFALL SYNCLINE:
CULTURAL RESOURCE SITE EVALUATIONS RELATED TO THE WESTERN ARCTIC
COAL DEVELOPMENT PROJECT
by
GREGORY A. REINHARDT
22 December 1989 Gregory A. Reinhardt, Inc 6438 East Welham Road Indianapolis, IN 46220
Phone: (317) 849-3297
EXECUTIVE SUMMARY
In May of 1989, Arctic Slope Consulting Group (ASCG) engaged
Gregory A. Reinhardt, Inc., to conduct an archaeological surface
survey and test excavation program on their behalf at the
Deadfall Syncline coal mining site. The fieldwork portion of
that program ran from August 2-17, 1989, and produced a
collection consisting almost exclusively of stone artifacts,
which have been analyzed as to their basic characteristics. A
complete analysis is underway and that, along with a catalog of
the collection, will be forwarded to the University of Alaska
Museum, Fairbanks, at a later date. Meanwhile this final report
contains conclusions based on preliminary analyses. It describes
how the work was conducted and what the results may mean to ASCG
in terms of further archaeological work, hence management
decisions, pertaining to Deadfall Syncline. Recommendations
contained herein are the opinions of Gregory A. Reinhardt and
might not reflect the judgments or decisions of other
archaeologists or local, state, or federal permitting agencies.
Two years ago, S. Craig Gerlach of Edwin Hall and
Associates, working for ASCG (then ASCE) and for Howard Grey and
Associates, located ten archaeological sites along the three
ridges at Deadfall Syncline. The 1989 fieldworkers looked at those sites and determined that only four of them involve the area that ASCG had requested Gregory A. Reinhardt, Inc., to examine. Another twenty-two sites occur inside or in immediate proximity to this area, bringing to twenty-six (Figure 1) the number of sites directly affecting ASCG's work at Deadfall Syncline. All of these sites were mapped and their surfaces entirely collected of artifacts.
Based on initial data, six sites stand out as unquestionabl warranting excavation by qualified archaeologists. These sites can be ranked in two levels of priority:
—— First, sites XPL-081, XPL-082, and XPL-088 should be treated as highly significant in that they contain many microcores and/or
microblades, which may date from two to several thousand years B.C. and represent the earliest archaeological culture in Alaska,
the American Paleoarctic tradition. Therefore, considerable care
and detailed excavation will be expected by the archaeological community before relinquishing these sites to mining activities. Surface indications are that the sites cover areas of about 206
sq. meters, 88 sq. meters and 18 sq. meters, respectively. Of
this set, only sites XPL-081 and -082 are directly threatened by
current coal mining proposals.
-- Second, sites XPL-092, XPL-100, and XPL-104 should be
considered significant and, accordingly, will require excavation,
too. However, they are generally smaller and seemingly not as
important as the previous three--as far as their data potential
goes, anyway--to archaeology. Thus, albeit their careful
excavation is appropriately responsive, they probably will not
take tremendous efforts or energies to characterize before being
given over to coal mining. Their evident surface areas measure
approximately 8 sq. meters, 35 sq, meters, and 18 sq. meters, respectively. Of these sites, only XPL-100 and -104 will be
adversely impacted under current coal mining proposals.
Four other sites, XPL-079, XPL-083, XPL-099, and XPL-101,
are marginally important at best. They generally consist of
fewer surface tear clustering in smaller areas, compared
with the two sets above. Although Alaskan prehistory might
benefit from these sites' test excavation, present data suggest that their archaeological value is relatively nonvital and that
they do not promise to contribute much more information through
digging. Their respective areas appear to be 23 sq. meters, 13
sq. meters, 16 sq. meters, and 45 sq. meters. None of this group
of sites is endangered by proposed coal mining.
For ASCG management purposes, the salient news is that only
one of these sites (XPL-083) even comes close to having an
immediate effect on ASCG coal mining plans as I understand then.
This site is on the north ridge, currently being mined, and one
cannot know whether its archaeological clearance will be demanded
by relevant permitting agencies before coaling operations are permitted to resume. However, in my view, site XPL-083 on DFS 4 does not seem important enough to warrant excavation.
The remaining nine sites mentioned above all reside on DFS 2 (the south ridge) and this report assumes that DFS 2 will be the last coal seam dug. In the interim, I believe DFS 3 bears no significant archaeological evidence and should be considered cleared for ming as well. A stopgap measure, if permitting agencies for some reason impede coal mining on DFS 4, would be to
have a qualified archaeologist excavate XPL-083 now (an area of about 13 sq. meters) and hire an archaeological team to carry out the work on DFS 2 later on.
Be aware that these sites will be absolutely destroyed by ASCG's coal mining here. Also, short of electing not to mine coal, there seems no feasible way to work around several of Deadfall Syncline's sites. Archaeological sites, implying both artifacts and their spatial distributions, are truly nonrenewable resources. State and federal laws have been established to protect and/or preserve sites whenever possible, to arrange for their scientific investigation as needed, and to ensure that they receive adequate study especially in cases of their imminent devastation. Thus, ASCG should expect that permitting agencies, whose job in this case is to protect Alaska's cultural resources,
cannot conscionably release this land until mitigation measures (read “excavation") have gathered more archaeological data from Deadfall Syncline.
Exactly how much archaeological work this will mean is
simply not answerable. For one thing, what appears on the
surface does not necessarily reflect what might be found
underground, and archaeologists could easily discover that sites are much larger than first appearances intimated. Furthermore, finds made during an excavation can affect plans about where and
how much subsequent digging needs to be done to satisfy
archaeological questions concerning a particular site. We can
make informed guesses, but we do not have X-ray vision.
In addition, there is no professional agreement as to what
constitutes an adequate excavation sample from any site because
each is unique in many respects. Still, knowing that these sites
will be lost forever due to mining, archaeologists will no doubt
concur unanimously that a representative excavation sample of the
valuable ones must be taken. Samples from such threatened sites
are usually larger than would be expected if archaeologists knew
they could return there in the future with new questions,
strategies, methods, technologies, etc.
For the moment, I estimate that roughly 76 square meters of
site area warrant excavation prior to more coal mining. Let us
assume that an acceptable program of archaeological clearance for
Deadfall Syncline might involve two to four persons and from two
to three weeks fieldwork. Any dollar figures are guesses, of
course, since much information about contractors' bids is
confidential. However, this probably means at least two charter
flights into and out of Deadfall camp, roughly $3000, and maybe
another $2000 to $3000 to transport a crew and its supplies and
equipment to Alaska and/or Kotzebue. In any case, depending on
what individual contract archaeologists charge for their field
and lab time, how long they stay, and what they find, ASCG could
be looking at total costs anywhere from $40,000 to $100,000 or more.
Respectfully submitted,
Gregory A. Reinhardt, Ph.D.
GREGORY A. REINHARDT, INC
ARCTIC SLOPE REGIONAL CORPORATION
P.O. Box 129
Barrow, Alaska 99723
ALUAQ MINE STUDY
Commercial Feasibility Analysis Report
NOVEMBER, 1989
PREPARED BY
(3 > ARCTIC SLOPE CONSULTING GROUP
Engineers ¢ Scientists e Surveyors
P.0. Box 650 Barrow, Alasko 99723
Telephone: (907) 852-4556 Fox: (907) 852-5733
EXECUTIVE SUMMARY
General
The Aluaq Mine Study was commissioned by the Arctic Slope
Regional Corporation (ASRC) to examine the commercial
feasibility of developing western arctic coal for export to the
Pacific Rim Nations. The study takes a conservative approach to
development presenting a "Base Case” scenario that looks at, a
mine located at the Deadfall Syncline coal prospect site of the
Western Arctic Coal Fields producing at the rate of one million
tons per year, coal haulage from the mine overland to the
existing Red Dog Mine port facilities near Kivalina, Alaska, and
delivery of coal to Japan and Korea. The report represents the
first step towards reaching a decision regarding project
development.
Pacific Rim Coal Market
The Asian-Pacific coal market forecasts significant growth in
bituminous coal imports throughout the 1990’s. It may be
possible for ASRC coal to penetrate this market around the mid
1990's.
Coal Field Investigations
A study of coal deposits in the Western Arctic proximal to the
proposed transportation corridor from the Deadfall Syncline to
the Red Dog mine was investigated to determine potential minable
coal sites closer to the Red Dog Mine. The results of the
investigation showed the Deadfall Syncline offered the best
opportunity for future development.
ii
Mine Engineering Analysis
The Deadfall Syncline contains reserves adequate to support a
mining operation of one million tons per year for 2@ years. It
would not support production levels much greater than one
million tons.
The Aluag Mine is anticipated to have a maximum production crew
on site of 165 persons when operations are at full force.
Overall this will generate an estimated 333 permanent employment
positions.
Production levels down to 500,000 tons per year would not result
in significant change in the estimated mining cost, although the
unit cost to retire infrastructure construction would increase.
The estimate for mining and hauling costs for coal delivered to
the port is $50.00 per ton for the "base case" scenario. Of the
$5@.0@ per ton, $22.4@ per ton was estimated for the operations
and maintenance of the selected truck haulage system.
Infrastructure Evaluation
The infrastructure components of the Aluagq Mine include a 168
man camp and supporting utilities, vehicle and equipment
maintenance/warm storage facilities, 92 mile haul road and fuel
storage facilities. The total cost for the infrastructure
development was estimated at $89,700,000. The major item being
the 92 mile road which was estimated to cost $80 million
dollars.
iii
Marine Transportation Analysis
The Marine transportation system required to load and move coal
from the port site near Kivalina, Alaska to users in the Far
East involved loading coal from shore onto lightering barges
with subsequent transfer to ocean carriers at the offshore
location. The total cost of loading and transporting coal by
sea was estimated at $14.2 million. This equates to $14.20 per
ton.
Three lightering barges (550@ short tons (s.t.) carrying
capacity each) will be used to load coal on board Panamax Class
Ships (60,500 s.t. carrying capacity). A crane mounted on a
250’ barge would be used to transfer coal from lighterage barge
to ship. Loading would take 3.8 days for each ship to load,
with a nominal loading rate of 15,900 s.t. per day.
The shipping season is assumed to be 9@ days long, from July 15
to October 15. Sailing distances of 2950 nautical miles (n.m.)
and 3280 n.m. were calculated from Kivalina to Yokohama, Japan
and Busan, Korea respectively. This compares with 4300 n.m.
from the export terminal at Roberts Bank, Canada to Yokohama.
Financial Analysis
The financial Analysis evaluated two cases. Case 1 being the
"base case” scenario and Case 2 proposes to haul coal from the
mine site 5.4 miles to Omalik Lagoon on the Chukchi Sea coast.
Case 2 was developed for economic comparison with Case 1 and its
technical feasibility was not established in this report.
iv
The Case 1 estimated the delivered price of coal to be $87 per
ton or $3.63 per million Btus. Case 2 estimated the delivered
cost to be $49 per ton or $2.04 per million Btus.
Conclusions and Recommendations
The Aluag Mine Study concludes the "base case" scenario was
technically feasible as proposed, however the cost of the
overland transportation system made the commercial feasibility
uneconomic. Both the capital cost of the 92 mile haul road
and the operation and maintenance cost of a truck haulage
system were prohibitive to the viability of the project. It
was recommended to investigate other methods of overland
transportation including a railroad and possibly a slurry
pipeline as a second option. In addition to evaluating these
scenarios it was recommended to investigate government
assistance in infrastructure development.
The Marine transportation system proposed for Case 1 and Case
2 proved technical feasibility for Case 1 and economic
feasibility for both cases. Of concern is the fact it has not
been determined whether a market can be developed to receive
a relatively large volume of coal (1 million tons) in such a
short shipping season (Case 1, 90-120 days, Case 2, 75-90
days).
This report recommends investigating the use of ice-breakers
and/or reinforced ice barges to extend the shipping season as
proposed by ESCO, a Soviet bulk carrier company. Another
option is to transport coal to a year round open port such as
Dutch Harbor, Alaska with subsequent shipments of coal made
to market throughout the year. In addition, since Case 2 met
the economic competitive benchmark for coal delivered to
market it was recommended to investigate this option further
and determine if the Pacific Rim market could accommodate the
delivery constraints posed by the short shipping season at an
annual production volume between 500,000 to 1 million tons.
Other recommendations of the report to advance the project
were to: perform a resource evaluation of the Deadfall
Syncline area to establish a reserve block in sufficient size
to improve upon the mining economics; conduct a Pacific Rim
marketing effort to establish potential demand and a marketing
strategy; assess the implications of the 7i provision of the
Alaska Native Claims Settlement Act on ASRC’s active
participation in developing its coal resource; and continue
to pursue an in-state market to better establish the
reliability and economics of mining in the Western Arctic and
increase the knowledge and interest in ASRC coal.
With the potential mining cost in the $20 - $25 per ton range
it is conceivable that the Aluaq Mine could deliver coal at
a competitive price to the Pacific Rim market. To meet this
challenge significant technical and market development efforts
must be performed in order to prove commercial feasibility.
If these efforts are pursued there is a high degree of
probability ASRC will one day realize a revenue producing coal
industry with potentially a very long productive life.
vi
GEOLOGY OF THE WESTERN ARCTIC
COAL BASINS AND POTENTIAL OF
COAL BASINS AS DEVELOPABLE DEPOSITS
A PRELIMINARY INVESTIGATION
vee*
Chukchi
Sea
JUNE 29, 1989
) ARCTIC SLOPE CONSULTING GROUP
anaser . wScientists . Surveyors
EXECUTIVE SUMMARY
Arctic Slope Regional Corporation is interested in developing coal deposits located near
a proposed transportation corridor from a currently mined Deadfall Syncline coal deposit
to the Red Dog Mine (see Figure 1). The Arctic Slope Regional Corporation (ASRC) is
investigating the potential for developing ‘its coal resources for export to the Pacific Rim
nations. The recent surface transportation and port facilities developed for the Red Dog
Mine project 85 miles (138 kilometers) south of the western arctic coal deposits have
presented an enhanced opportunity to economically exploit the ASRC coal deposits.
A study of coal deposits in the western Arctic proximal to the proposed transportation
corridor comprise this report. The focus of the study is on potentially minable coal deposits
south of the Deadfall Syncline. Data studied in this report included proprietary Chevron
USA seismic, well log and shot point hole log data in addition to previous field data by the
U.S. Geological Survey (USGS), Alaska Division of Geological and Geophysical Surveys (ADGGS) and Arctic Slope Consulting Engineers.
The study results included herein conclude that there are several coal bearing “basins”
which offer potential for minable coal in the western Arctic. These basins have been prioritized by level of minable potential in this report. Field studies are recommended to
further investigate this potential.
Of the coal-bearing basins which appear most attractive in this report, the Coke Basin
located approximately 20-25 miles (32-40 kilometers) south of the Deadfall Syncline coal
deposit, contains the most potential. Seismic data indicate that the structure of the Coke
Basin is simple and coal bearing strata are gently inclined and near surface. The Coke Basin is also located within a 0.5-5 mile radius of the proposed transportation corridor to
the Red Dog Mine and are within lands owned by ASRC (See Figure 1).
Comparison of the coal occurrence and stratigraphy at Coke Basin with Cape Beaufort
and Deadfall Syncline suggests that a coal bed with an average thickness of eight feet
may be present in the Coke Basin in the upland area west of the Kukpowruk River. Due
to a lack of field data, it is difficult at this time to estimate the quantity of potential coal
reserves at Coke Basin, but comparisons with Deadfall Syncline and Cape Beaufort
suggest similarly sized reserves of high rank (B-A bituminous) and quality (12,772
BTU;7,096 Kcal/Kg), low ash (7.62%) and low sulfur (0.19%) coal.
Western Arctic Coal Basins
Preliminary Investigation
June, 1989
Department of Community and Reaional Affairs
949 E. 36th Avenue, Suite 400, Anchorage, Alask@ 99508
A Alaska Native Foundation
WS 4101 University Drive, Anchoraae. Alaska 99508
Wesiern Arctic | Coal Development Project
Q arctic slope consulting engineers April, 1988
EXECUTIVE SUMMARY
The Western Arctic Coal Development Project (WACDP) was established to
determine the feasibility of developing a coal industry in the Western
Arctic providing an abundant, economic, stable priced energy
alternative to fuel oi] to communities, military installations, and
industries along the northern and western coasts of Alaska. The WACDP
assessment was divided into 3 phases. Phases I and II provided the
information necessary to evaluate the economic, technical, and
environmental feasibility of the selected mining site. The WACDP
Phase III was initiated to augment the efforts of Phases I and II by
providing special studies identified in the Phase II report as being
necessary prior to a development decision being made on the project.
Phase III initiated: the process of gathering baseline physical data
for the Mormon West Block mining unit for mine engineering; the
performance of the first extensive and continuous environmental
observation of the WACDP environs; a marketing effort establishing the
start up and near term development of the mine; and a domestic stove
and furnace combustion test and analysis using Deadfal] Syncline coal.
The remainder of this section will present a summary of the major
findings of this report based on each major task of the project.
Environmental Assessment
Results of the Phase III Environmental Assessment Appendix D,
indicates that there are no major environmental constraints to
further consideration of the project. Continuous ecological
studies of the WACDP environs were conducted during June 20, to
October 5, 1987. Information and reports were gathered on
belukha, caribou, waterfowl and shorebirds, brown bears,
furbearers, and incidental animal populations. Input from Point
Lay residents, resource agencies, and fisheries and archaeological
consultants were integrated into the report.
iit
Major tindings reported from the field studies were: Beluhka
arrived at Omalik Lagoon on June 27. They receded north and were
absent from the area by July 13; Brown bear sitings occurred
mostly during July and August, with several incidents of bears
present in the Deadfall Syncline camp. No salmonoid fisheries
were captured or observed in Kuchiak Creek during brief fishing
efforts, suggesting that fish use of the creek is limited.
Coal Demonstration Program
The Mineral Industry Research Laboratory conducted a coal
combustion test of Deadfall Syncline coal in selected residential
coal combustion heating units. Combustion testing was performed
on a Chippewa Trader Mountain Man 85 furnace and a Harmon Mark III
stove. The mechanical performance of the furnace system was
acceptable. Furnace efficiency was no more than 40%, apparently
due to low feed rate into the furnace. The stove performed well
achieving an efficiency of 64%.
Analyses of the furnace and stove stack gases indicate that
pollutant concentrations are reasonably low for the observed burn
rates. Sulfur emissions from the stove were found to be
substantially lower than that produced by oi] heating. Oi] was
estimated to produce 76.7 1b of SOz per year. Coal was estimated
at only 6.9 1b of SOz per year.
Market Evaluation
The basic findings of the Phase III marketing effort indicate the
development of the WACDP should be viewed in stages with the start
up production rate of 30,600 tpy based on the coal demands from
three North Slope villages and the power utilities of Kotzebue and
Nome. These communities and organizations have shown the highest
interest in the project and are logical choices based on their
close proximity to the mine site and high energy costs associated
with their areas. Over a five year period the market will see
iv
expansions to an annual tonnage rate of about 47,590 tpy, the
additional tonnage consisting of the Bethel Utility demand as wel]
as various institutional demands in Kotzebue, Nome and Bethel.
Staged development will allow time for the mining and shipping
operations to gain experience and improve upon performance prior
to the operations reaching full capacity. Once the market has
reached the second stage of development the project will begin to
make additional inroads into the total potential market, first in
the villages surrounding the major communities, as well as the
coastal villages convenient to shipping. With the continued
development of the mine, both hardrock mining interests and
military installations in the region could be developed to use
Western Arctic coal.
Coal Field Geology
The purpose of the Coal Field Geology Program was to expand on the
coal geologic database within the selected Mormon Block West
Mining Unit of the Deadfall Syncline. Several geologic factors
brought to light by the bulk sampling programs and additional
exploration drilling indicated that the reserve estimate for the
Mormon West mining unit should be revised. The two factors that
have the greatest impact on the reserve estimates are, the coal
dips appear to be significantly greater than what was assumed
originally and that the recovery of coal from DFS 4 Seam will
likely be greater than had originally been assumed.
To assess the overall effect of all the new geologic information
on the reserve base, new cross sections of the mine area were
taken and analyzed for coal reserves at various stripping ratios.
The net effect of the analysis is that the estimated reserve base
for the base case stripping ratio of 4:1 is reduced to
approximately 1,050,000 tons, down from the Phase II estimate of
1,170,000 tons. This amount of coal is still adequate to cover
the first ten years of mine production.
Mine Engineering
New geologic information and the new topography data dictated that
certain revisions should be made to the base case preliminary
mining plan. Information regarding the spoil characteristics
suggest that the top 5 feet of the spoil can be successfully
ripped without blasting. This results in an estimated savings in
mining cost of about $0.48 per ton.
The cost for a steady state production level of 20,000 tpy was
investigated. It was found that adequate reserves of coal could
be uncovered with hydraulic excavator, without the need for spoil
hauling equipment. The 20,000 tons could be produced in the fall
of the year, taking advantage of maximum thaw depth in early fall
and frozen surface conditions in the late fall. The coal could be
mined in about three months with a maximum crew of 9 persons and
stockpiled at the port, for shipment to markets the foilowing
year. The estimated mining cost for the 20,000 tpy production
rate is $42.00 to $46.00 per ton for mining and delivery of
uncrushed coal to the port stockpile.
Infrastructure Development
In response to permitting agency comments, the relocation of the
proposed marine berthing facility (described in the Phase II
report) to the northeast corner of Omalik Lagoon, was estimated
instead of to the northwest corner as was initially proposed. The
analysis determined that this option would decrease mining haul
road construction costs by about $85,000 but that it would
necessitate an increase in initial dredge excavation costs by
about $186,000. Thus, the capital expense of this project would
increase by about $100,000. Further, permitting the new option
may be more difficult to do than the northwest corner option.
vi
Alternatives to a berthing facility were examined such as
lighterage of coal to line haul barges and use of slurry pipelines
or conveyor systems. The analysis showed lighterage of coal to be
the most attractive option, especially at the lower tonnages.
Camp facilities and associated costs were examined in considerable
detail. Revised cost estimates are presented for the road,
airstrip, camp, and port facilities. Under the 50,000 tpy
scenario, the revised Phase III infrastructure capital cost
requirements were estimated to be $6,230,000; under the 20,000 tpy
scenario, the capital cost is estimated at $4,730,000.
The revised Phase III infrastructure operating, maintenance, and
fuel costs are estimated at $505,000 annually under the 50,000 tpy
scenario, and $203,000 per year under the 20,000 tpy scenario.
Significant savings were realized through size reduction of the
camp facility and in the use of lightering in lieu of a dredged
marine berthing facility within Omalik Lagoon.
Financial and Economic Analysis
The financial and economic analyses focused on changes due to
project design and scale modifications. The staged development
assumes an initial production rate of 30,600 tpy (stage I)
increasing to 47,590 tpy (stage I1) over a five year period.
These production levels are achieved with essentially the same
fixed capital outlay as the 20,000 tpy base case. Fixed costs
represented by the initial capital cost were held constant with
the exception of the bulk fuel storage costs, and stockpile
loading costs. By holding capital cost relatively constant while
substantially increasing production rates it provides
corresponding economies of scale. As a result the cost per ton
drops from $106.72 for the 20,000 tpy base case to $82.81 for
stage I and to $67.57 for stage I1. This represents a price
reduction of $23.91 and $39.15.
vii
Total cost for coal use are Jess than oi] over the 20 year time
period, however the large capital investments, for coal
conversions, required in the initial years of the project affect
the operational savings. If generation equipment capital costs
are excluded from the analysis savings over the 20 year time frame
exceed $26 million. Without state assistance in the area of
power plant capital costs the project would still achieve positive
benefits at a higher production level during initial development
and/or higher oil prices.
Results of Phase III produced lower overall capital costs and
production costs than those previously reported in Phase II. In
addition the report presents a near term development strategy that
indicates two stages of development to be the preferred approach to
project. development. This approach takes advantage of increasing annual
coal volumes while decreasing production costs. With state assistance
jin the area of power generation facilities, the WACDP project can be
developed in the near term and at the lower tonnages while placing the
WACDP in a position to penetrate the market further, again increasing
the annual production rate while reducing the unit cost of coal. With
the project in full production many long term benefits to the state and
region can be realized, such as: providing an abundant stable price
energy source; providing long term permanent employment in an area of
high unemployment; reducing the states participation in energy
assistance in the region; and stimulating and diversifying the
regional and state economy.
vat
Department of Community and Regional Affairs
949 E. 36th Avenue. Suite 400, Anchorage, Alaska 99508
9 Alaska Native Foundation
Wav 733 W. 4th Avenue, Suite 2, Anchorage, Alaska 99501
Western Arctic _ Coal Development Project
T - VOLUME |
3
arctic slope consulting engineers June, 1986
EXECUTIVE SUMMARY
Introduction
This Executive Summary presents the highlights of the Western Arctic Coal
Development Project (WACDP) Phase II feasibility study. This study, which
was conducted from July 1984 through June 1986 addressed the potential for
developing coal deposits of the western Arctic as a substitute for the fuel
oil currently used as a source of energy in communities along the northern
and western coasts of Alaska. In these areas fuel oil is the predominant
energy source. However, rural residents face the highest energy prices in
the nation, a situation that has created hardships, altered lifestyles of
the residents, and suppressed economic development throughout the area.
The energy problem of rural Alaskan residents is complex. Although solving
the problem will require consideration of many important issues, solutions
must focus on two critical concerns to meet the needs of the region's
residents: 1) development of a dependable and economical source of energy,
and 2) development of additional employment opportunities within the
region.
The State of Alaska and local governments began to address the rural energy
dilemma in the early 1970's. Seven preliminary studies (performed from
1979 through 1983 by the Alaska Power Authority, the State of Alaska
Division of Legislative Finance, and the North Slope Borough) indicated
that the western Arctic coal resource represents a potentially feasible and
cost-effective substitute for fuel oil for rural communities in the region.
Preliminary geologic investigations (performed by the U.S. Geological
Survey, the U.S. Bureau of Mines, the State Division of Geological and
Geophysical Survey, and the Mineral Industry Research Laboratory at the
University of Alaska, Fairbanks) determined that western Arctic coal
deposits were bituminous in rank, high quality, and included some of the
iv
best coals in Alaska. Average heating values of the coal are in excess of
12,000 Btu/1b (on an as-received basis) with a moisture content of less
than 5 percent and a sulfur content averaging less than 0.3 percent.
Western Arctic Coal Development Project
The Alaska Native Foundation (ANF) decided to further evaluate the poten-
tial of western Arctic coal as a fuel source for northern and western
Alaska. The ANF submitted a proposal to the 1984 Alaska State Legislature
to fund an in-depth study. In June 1984 the state appropriated funds for
the project with the State Department of Community and Regional Affairs
(DCRA) acting as the sponsoring agency. The DCRA awarded a contract to the
ANF to administer the project.
Arctic Slope Consulting Engineers (ASCE) was retained by the ANF to perform
the technical portion of the project and was directly responsible to the
ANF for overall project performance. Due to the multi-disciplinary nature
of this project, ASCE assembled a project team that included a wide variety
of specialists from many different firms.
The main objective of the WACDP was to evaluate the feasibility of develop-
ing a coal industry in the western Arctic, an industry that would supply an
energy substitute for fuel oi] in rural communities along the northern and
western coasts of Alaska and provide employment for the construction and
operation of the mine and distribution of coal to and within the communi-
ties in the region. To achieve this goal, all key aspects of the industry
were to be examined, from an evaluation of the coal reserves to an assess-
ment of coal usage in the communities.
Work on the project was divided into two phases, with Phase I beginning in
July 1984. This five-month effort involved evaluating the coal resources
of the area, selection of a potential mine site, a preliminary environ-
mental investigation, and evaluation of the overall economic viability of
the project. The results of Phase I were encouraging and prompted both the
ANF and DCRA to advance the project to Phase II.
Phase II began in December 1984 and ended in June 1986. The primary
objective of Phase II was to perform in-depth: analyses of the planned
components of the WACDP to determine whether the project was feasible in
terms of technical, social, environmental, and economical considerations of
the selected site.
Overview of the Study Results
Throughout the WACDP feasibility study, information and opinions were
sought from residents, institutions, potential’ mining development firms,
both profit and non-profit organizations and corporations throughout the
study area, and various units of federal, state, and local governments.
Based on the results of the Phase I and Phase II studies, including the
review comments of agencies and organizations, it appears that development
of a coal industry in the western Arctic to serve in-state energy needs is
technically feasible and can be accomplished in an environmentally and
socially acceptable manner. Further, this development can make significant
contributions toward meeting the social and economic objectives of local
and state governments. These objectives include developing an abundant and
stable alternative to oil-based heating and electric power, creating
long-term employment, stimulating the regional economy while diversifying
the state economy, reducing participation in energy and power subsidy
programs, and creating infrastructure in rural Alaska.
These findings have led the project team to recommend that the state
endorse coal as a viable energy alternative in the region and support
regional energy resource development that would establish energy self-
sufficiency and enhance the regional economy.
This assessment provides information on: alternative designs for mine and
infrastructure development; field data from collection programs at the
sites of project components; a marketing survey; a village end use
technology assessment; and transportation, environmental, socio-economic,
vi
financial, and economic analyses. The WACDP Phase II Final Report can be
used to assist in project permitting, scheduling, final design, and project
construction.
The investigations and results of Phase II are described in this two volume
report entitled, Western Arctic Coal Development Project Phase II Final
Report and in two supplemental reports entitled, Western Arctic Coal
Development Project Village End Use Technology Assessment, and Western
Arctic Coal Development Project Environmental Assessment.
Highlights of Conclusions and Recommendations
Proposed Project
After evaluating numerous potential components and combinations of compo-
nents, the project team has recommended that the WACDP consist of the
following:
° Mining in the Deadfall Syncline area of the Western Arctic Coal
Region;
° Establishment of infrastructure and support facilities that would
include a haul road, a mining camp, landing facilities for aircraft,
freshwater supplies, and water treatment facilities;
° Coal transport by truck from the mine to the coastline; and
° Marine transport of coal by tug and barge to consumers or distributors
in the region, including establishment of an on-site marine berthing
facility for barges.
vii
Project Area
The selected mining area, known as the Deadfall Syncline, is located within
the Arctic Foothills Province near the base of the Amatusuk Hills. This
area is approximately six miles from the Chukchi Sea and about 40 miles
south of the North Slope Village of Point Lay. The western boundary of the
National Petroleum Reserve-Alaska is about 35 miles east and the Cominco-
NANA Red Dog mineral deposit is about 70 miles south of the prospect area.
The entire mine development area, including subsurface rights, is under the
ownership of the Arctic Slope Regional. Corporation.
The Deadfall Syncline area has relatively low relief with gently rolling
hills accented by hogbacks formed of weather-resistant sandstone. Charac-
teristic of the foothills province are the bedrock materials consisting of
sandstone, siltstone, and shale. Bedrock materials will be the primary
material encountered when mining, thus allowing the use of conventional
methods of coal mining.
The project area has an arctic marine climate characterized by long, cold
winters and short, cool summers. The mean temperature of the area is
10 degrees F. A continuous permafrost layer approximately 1,000 feet deep
underlies the entire area.
The sea bed of the Chukchi Sea abutting the western shoreline of the
project area is very flat and water depths 2,800 feet from the coast are
only 13 feet. In addition, the Chukchi Sea is frozen or clogged with ice
nine months of the year.
Coal Resource
The Deadfall Syncline prospect is within the Western Arctic Coal Region, a
region that forms the western tip of the Northern Alaska Coal Province.
This province represents the largest coal bearing area in Alaska and
perhaps in the world. Coal occurs in the sedimentary rock sequence, the
Nanushuk Group of Early to Late Cretaceous Age, and may underlie 30,000
viii
square miles of northern Alaska. Coal resource estimates range from 402
billion to 4 trillion tons, an amount with potential for meeting energy
needs of the entire nation for over 300 years.
The Deadfall Syncline prospect was selected as the preferred mining area
after five regional mining sites were evaluated. Nine coal seams ranging
in thickness from 4.5 to 18.0 feet were identified in the Deadfall Syncline
prospect during the 1984 WACDP Exploratory Drilling Program. Bedding dips
range from 11 to 24 degrees.
Deadfall Syncline coal is considered high quality fuel. Its ASTM ranking
is High Volatile "B" Bituminous with an average (as-received) heating value
in excess of 12,000 Btu's per pound (13,000 to 14,000 Btu's per pound on an
ash-free basis). The average ash content of the coal is about 10 percent,
with a moisture content of 4 to 5 percent. Coal from this deposit has a
total sulfur content of 0.1 to 0.3 percent with pyritic sulfur less than
0.03 percent and little or no sulfate sulfur. The coal also has coking
qualities.
As part of the Phase II study, the estimated sulfur dioxide emissions from
the combustion of Deadfall Syncline coal were compared with sulfur dioxide
emissions from fuel oi] combustion. These data indicate that the sulfur
dioxide emissions from the combustion of this coal will be approximately 20
to 50 percent lower than the fuel oi] currently used in the region.
The coal reserves present in the Deadfall Syncline, assuming a production
rate of 100,000 tons per year (tpy), are listed below for three different
stripping ratios.
ix
Reserves by Stripping Ratio
Sel Sal 10:1
Coal Supply Coal Supply Coal Supply
ars Classification (tons) ears (tons) (ye ) (tons) (years)
Indicated 10,973,000 110 24,253,000 242 57,864,000 579
Inferred 11,000 ,000 110 25,000,000 250 58 ,000 ,000 580
Total 21,973,000 220 - 49,253,000 492 115,864,000 1159
Significant coal reserves probably exist in unmeasured seams which have
been mapped. Additional field work will increase the lateral extent and
measured reserves present in these seams. Further, significant reserves
probably exist within seams which, due to the low density of field data
throughout most of the Deadfall Syncline area, have yet to be identified
and measured.
Mining and Reclamation Plans
The first 10 years of mining will occur in the Mormon Block West mining
unit located along the western section of the northern limb of the Deadfall
Syncline structure. This mining unit is approximately 6,800 feet long and
extends west from the Mormon Benchmark. Within this unit, three parallel
coal seams with a thickness range of 7 to 11 feet will be mined indivi-
dually at a 4:1 stripping ratio. The coal structure is non-complex.
The Mormon Block West mining unit was selected as the preferred initial
mine site for three reasons. First, this mining block is closer to the
port site than the Kuchiak Block which is located to the east of the
selected site. Thus, the initial infrastructure costs could be lower.
Secondly, the potential for environmental impacts is lower at the Mormon
Block West. During mining of this area, mitigative measures can be devel-
oped that will minimize the effects of mining in the more sensitive Kuchiak
Block. Finally, the development of this mining unit will result in better
management of the Deadfall Syncline coal field. The coal seams are thicker
and can be mined at lower. ratios than at the Kuchiak Block. Further, due to
the low production level expected during the initial years of production,
the Kuchiak deposit can be mined in a more cost-effective manner in the
future when production levels are expected to increase.
During Phase I, the preliminary financial analysis indicated that the
economic cutoff point for the project would require a minimum production of
approximately 50,000 tpy. Although production may be lower during the
initial years of development, this level has been defined as the “base
case" in the Phase II studies.
To achieve this level of production or a higher level if market conditions
dictate, cut-and-fill mining techniques were selected. The complexity and
scale of this mining method is directly comparable to those currently used
by Eskimos, Inc. at the Barrow gravel pit. Use of the cut-and-fill
technique will minimize the active mining area and is expected to minimize
the impacts on wildlife movement. In addition, this method will allow
revegetation to occur in one portion of the mine site while mining con-
tinues elsewhere, thus limiting the time when the mine area is biologically
non-productive.
Prior to removal of overburden, topsoil will be removed and stockpiled for
use in revegetation. Mining will entail removing overburden using drilling
and blasting techniques to break the sandstone and siltstone. Dozers, a
power shovel, and trucks will be used to transfer overburden from the
initial cut to a temporary stockpile. To the extent possible, this
overburden and the dredged material from the marine terminal and entrance
channel, will be used in the construction of infrastructure facilities.
After overburden removal, the equipment will be used to excavate the coal
and transport it to the marine terminal. Prior to final stockpiling at the
terminal, the coal will be reduced to the desired size in a portable
crusher. From the crusher, coal will be discharged into the stockpile via
the radial stacker used to load the barges.
After coal is removed from the initial cut, mining will progress to the
next cut, with overburden from this cut used to backfill the previous cut.
Stockpiles of topsoil will be redistributed over the backfilled area prior
to revegetation. If there is not sufficient topsoil to provide an adequate
upper soil layer for revegetation, crushed siltstone and sandstone,
nutrients, and other additives will be placed over the backfill.
This process will be repeated during active mining, with an average area of
six new acres disturbed each year at the base case production rate of
50,000 tpy. Since it has been assumed that production will increase to as
much as 250,000.tpy, mining is expected to disturb a total area of approxi-
mately 180 acres during the first 10 years of operation.
The following major equipment will be used during mining:
° 4 cubic yard hydraulic front shovel
° 450 hp ripper dozer
° 200 hp winch dozer
° Three 35-ton off-highway trucks
° overburden drill
° powder truck
° 300 ton-per-hour coal crusher (at port stockpile)
Mobile equipment was selected to ensure flexibility for operations sched-
uling and to facilitate production increases. The initial equipment fleet
is expected to have sufficient capacity to handle the planned production
for the first 7 years of operation. During the seventh year, 2 tractor-
trailer coal haulers and a front-end loader will be added to accommodate
the anticipated production through the end of the tenth year of operation.
The low annual precipitation, the presence of a continuous layer of
permafrost, and the lack of major streams in the area of the project will
minimize runoff. To control this runoff, sediment ponds will be estab-
lished on thaw-stable ground within the mine site. After initial settling
xii
has occurred, runoff from the ponds will be directed into the channel of an
ephermal stream that traverses the mine site and discharges into a 25-acre
lake filtered from the water.
The mining and barge loading operation will consist of a single 12-hour
shift, 7 days per week, 6 months of the year for the “base case" production
rate. The mining operation will begin on April 1 and end August 15 of each
year, and the barging operation will begin in mid-July and end about
September 30. Mining and barge loading will require 20 people and approxi-
mately 26,250 crew hours.
Infrastructure Development
The infrastructure requirements of the project will consist of a 5.4 mile
haul road from the mine to the coastline, a 4000 foot private airstrip,
the marine berthing facility consisting of a basin and channel dredged to a
depth of 13 feet, and a 24-person work camp and support facilities.
Onshore support facilities at the marine berthing site will be constructed
from the dredged material to the extent possible and will be located
adjacent to the basin. A general description of each component is pre-
sented in Section 2.0, Project Description.
Marine Transportation
Coal will be shipped from the marine terminal on towed barges. The sizes
of tugs and barges used will be dependent on market conditions and the
physical limitations of the terminal and the entrance channel. A shipping
season of 75 days (1,800 hours) is possible, extending from about July 15
to September 30 depending on sea ice coverage and distribution. As a
result of the short working season and lack of adequate drafts at receiving
ports, the estimated costs for coal shipment are relatively high.
xiii
Potential Component Impacts
The results of the comprehensive environmental evaluation of the WACDP mine
and infrastructure components continue to indicate that there are no major
environmental constraints to further consideration of the project. Although
the project area and planned facility sites have been investigated since
1984, additional information is needed regarding soil behavior under
site-specific conditions to evaluate erosion, soil transport by surface
waters, and revegetation practices. These data will also be useful in
further assessments of water quality considerations. To more completely
understand potential impacts and to develop mitigative measures, more
detailed site-specific information should be obtained. Recommended studies
include an evaluation of the anadromous fish habitat of Kuchiak Creek,
belukha and caribou surveys, important hydrological characteristics in the
Mormon Lake drainage, site-specific vegetative surveys, and reported
cultural resources in the area of Omalik Lagoon. The project team has
recommended that these studies be done to augment the environmental data
base ensuring compliance with the environmental assessment requirements of
the Alaska Surface Coal Mining Program and other regulatory agency require-
ments. Another concern is that the mining operations cause no significant
impact on the subsistence activities of the community of Point Lay.
Potential Socio-Economic Impacts
The Village of Point Lay, located approximately 40 miles north of the
proposed project area is the community most likely to be affected by
project development. Residents of Point Lay have expressed their concerns
regarding numerous issues important to their social and cultural customs.
These concerns, which have been addressed in the Final Report, include the
potential effects of the project on Kuchiak Creek, the impacts on belukha
whales if there is marine transport activity in late June to early July,
the influence of disturbance and human activity on caribou movements in the
Deadfall Syncline area, and the impacts of mine development on furbearers,
xiv
especially wolverine and marmot. Construction and operation of the project
are not expected to result in any significant impacts on the existing
social or economic conditions of the area.
Point Lay currently has relatively low levels of unemployment; however,
some Point Lay residents are expected to seek employment at the mine.
Although mining skills are available in Point Lay, the village workforce
will not be able to fill all of the positions required for project opera-
tion.
Market Evaluation
The potential market area of the WACDP included a geographic region of the
state stretching from Wainwright on the northern coast of the Chukchi Sea
south to Kodiak Island and including all of the Aleutian Chain. Military
bases, industrial users, and 130 communities within the market area were
identified as the potential demand for coal heating and power generation.
The annual total potential demand for coal in this region is estimated to
be in excess of 500,000 tons per year. At this demand level the WACDP has
the potential to displace over 80 million gallons of fuel oi] annually.
The WACDP study evaluated the near term potential of developing a coal
industry in the western Arctic. From the preliminary marketing and
economic analysis performed in Phase I, the study “base case" or initial
mine production level was established at 50,000 tons per year (tpy). This
is only 10 percent of the total potential demand of 500,000 tpy and
therefore, it is reasonable to postulate there is enough potential market
volume to accommodate a coal industry in the western Arctic.
Actual demand will be primarily determined upon the relationship between
the price of fuel oil or diesel in the community relative to the price of
western Arctic coal in the same community. These factors are in turn
dependent upon the world price of crude oi] relative to the price of WACDP
coal. The latter is significantly affected by the economies of scale
associated with the annual production level of the mine. As the production
level increases, the cost of coal decreases. For instance, at the study
"base case" 50,000 tpy production level, it is anticipated WACDP coal can
be delivered to the City of Nome at about $113 per ton ($4.71/MMBtu). At a
production level of 100,000 tpy coal can be delivered to Nome at about $68
per ton ($2.83/MMBtu). As a comparison to oil prices, from a June 1986
survey of oil distributors, oi] is being sold in Nome for $1.51 per gallon
($10.94/MMBtu) .
Two important factors are demonstrated by the Nome example. First, there
is sufficient disparity between coal and oil prices to anticipate a certain
level of coal demand based on economic considerations. The significance
of this factor in the decision to use coal in the market area can be
supported by the results of the Phase II market analysis. The analysis
shows the clear majority of potential customers interviewed would base
their willingness to use coal on its overall economic value.
The second important factor is that expansion of the annual production
tonnages will provide considerable economic benefits to the consumer. The
potential of this occurring throughout the life of the project is high due
to the following facts: (1) the total potential demand is large enough to
provide opportunities for expansion of the project to accommodate future
market demand; and (2) the Deadfall Syncline coal resource is sufficient to
handle any increases in the production level within the study area. For
instance, at a production level of 100,000 tpy and a stripping ratio of
5:1, the coal prospect has a supply life in excess of 400 years.
With such a large resource and relatively high potential demand available
to the project, there is a high degree of flexibility in developing a
market strategy. The findings of the WACDP study recommend that the
initial marketing effort be directed toward the larger institutional and
commercial space heating energy market. This strategy has been recommended
for the following reasons: (1) since most of the larger institutions and
commercial users do not receive major energy subsidies, they are expected
to have greater incentive to convert to a more economic energy alternative;
(2) large single space heating users will provide the highest return on
xvi
investment; (3) large single users optimize on transportation equipment
thus reduce coal costs; (4) coal space heating technology is highly
developed and easy to install; and (5) institutional/commercial space
heating conversions are easy-to-implement programs. Further, once the
economics and mechanics of coal uSage are proven within a community,
additional conversions are likely to occur and marketing efforts can be
redirected toward smaller institutions as well as residential customers.
Another large single user market exists that warrants consideration.
Development of coal-fired power generation in the larger communities,
industries, and military complexes within the study area would substan-
tially increase the production level, thus lowering overall coal cost to
all consumers. There are, however, drawbacks when considering power
generation conversions to coal in the near term. They are: (1) there are
only a few locations available due to the lack of small scale (1-500 kW)
coal-fired power generation technology; (2) even though it can be shown
that conversion to coal would substantially reduce annual operating costs,
the initial capital expenditures for coal-fired power generation equipment
is relatively high; and (3) the amount of time associated with the develop-
ment of new power generation facilities is considerably longer and more
complex compared to space heating conversions.
Power plants are the largest single consumers of energy in the market area.
Although the process of converting these facilities to coal-fired technol-
Ogy may have near term drawbacks, the benefits in pursuing such conver-
sions can lead to: (1) decreased cost of coal to all consumers; (2)
reduction in the level of state financial participation in the Power Cost
Equalization Program.
There are several factors other than production level and oil prices that
affect marketability of coal. They are: (1) instability of government
regulatory and taxation policies increases production costs, changes the
feasibility of the project, and impairs the ability of the mine operator to
secure long-term contracts with set prices; (2) current state subsidy
programs favor the use of oi] and reduce the incentive of local utilities
xvii
and homeowners to conserve or develop alternative local resources such as
coal; (3) the market area is characterized by high unemployment and
therefore, many residents and institutions lack the capital to take
advantage of a more economic energy alternative; and (4) acceptance of
coal by potential consumers is important in determining the marketability
of coal in the region. Many people in the study area were found to have a
relatively high awareness of coal use. Of the people interviewed in the
Phase II Market Survey, 34 percent said they had experience in the use of
coal. Historically, many individuals harvested coal locally or purchased
it through the Bureau of Indian Affairs.
Financial Analysis
Mine development costs will require a capital expenditure of about
$16,000,000 at the 50,000 tons per year (tpy) production level. This cost
estimate includes the component costs associated with pre-development,
mine and infrastructure development, and non-production costs such as
insurances, taxes, royalties, and profit. The yearly operating costs
amount to about $2,000,000. The total annual cost, including operating and
annual capital costs, is estimated at less than $4,600,000 resulting in a
cost per ton of coal of about $91 per ton FOB at the shipping port and
loaded on the barge.
Unit costs for transportation, exclusive of handling or port charges, will
range from $10 to $14 per ton for higher volume shipments between developed
port sites. For middle volume shipments between developed or partially
developed port sites, transportation costs will range from $23 to $28 per
ton. Transportation costs may be as high as $50 per ton for lower volumes
and over-the-beach unloading operations.
The cost of coal in several communities throughout the study area are
presented in Table 1. The coal costs are compared to the diesel costs for
space heating on a per million Btu basis. The coal costs shown here
represent the retail basis within the community and include FOB costs at
xviii
the mine port site, transportation costs, and a 20 percent mark-up for
retail handling and profit. At demand levels greater than 50,000 tons per
year the cost of coal will be reduced significantly.
TABLE 1
_ Comparison of Coal and Diesel Sold for Space Heating
(50,000 tpy Production Level)
Coal Diesel Per Per Per Per Community Ton . MMBtu Gallon MMBtu
Kotzebue $ 108 4 4.50 $1.60 $ 11.60 Nome 113 4.71 1.51 10.95 Bethel 121 5.04 1.24 8.99 Dillingham 124 5.17 1.07 7.76 Dutch Harbor 125 5.21 0.79 5.73 Kodiak 137 5.71 0.74 5.37
Note: Assumes 12,000 Btu per pound coal and
138,000 Btu per gallon diesel fuel.
During the initial years of the project, the market demand may not require
that production levels exceed or even meet the base level of 50,000 tpy.
Under these conditions, there could be a net loss to investors, or at best,
a small profit. As both market demand and production increase, the return
on investment will improve, with a positive return on investment expected
over the life of the project.
Finally, there are two major projects in the region that will require large
amounts of energy and can substantially influence the economics of the
project. Both the Red Dog and Lik mining and mineral processing projects
will have high energy demands. Even if no other residential, institu-
tional, or commercial energy users convert to coal usage, implementation of
the WACDP can be justified if either of these two projects is developed to
use coal as the primary source of fuel. Thus, if either or both of these
projects uses western Arctic coal for fuel, production levels would
increase and the unit cost of coal for all customers would be substantially
decreased.
Economic Analysis
Rather than attempt to forecast the price of crude oi] in 1990 and deter-
mine if coal will be competitive with oil, a "threshold" or “break even"
approach has been developed which determines the relationship between crude
oil prices and coal prices at various production levels.
Crude oil pricing and coal production costs associated with economies of
scale are the two major factors in determining a break even point. If the
price of oil remains low or inflates at the same rate as coal, coal will be
competitive with oi] at higher coal production volumes. However, if the
price of oil begins to inflate at a greater rate than coal, western Arctic
coal will become economical compared with oi] at all levels of production.
During the economic analysis costs were adjusted from those developed in
the financial analysis to approximate the true economic costs and benefits
that would arise from the use of western Arctic coal rather than oil. At a
production level of 50,000 tpy the project is economically viable compared
with crude oi] at a market price of $20 per barrel. Adjusting for an
economic cost of capital at 10 percent per year, i.e., that the state
should receive a return of 10 percent per year on its investments, the
project becomes economically viable at a crude oil price of about $17.50
per barrel. At an economic cost of capital of 5 percent, the project would
be viable with crude oi] prices of about $15.50 per barrel. At demand
levels greater than 50,000 tpy, the economic price would be significantly
lower. For instance, at 100,000 tpy the project becomes economically
viable, without economic adjustments, at around $15 per barrel of crude
oil.
With a vast resource and relatively large potential demand available to the
project it appears the WACDP is sufficiently promising economically to
warrant further state support for additional investigation to bring the
project to the point where a firm decision can be made with a reasonably
high degree of confidence.
Implementation Plan
Implementation of the WACDP will entail numerous activities as discussed in
the Phase II Final Report... These activities consist of marketing, obtain-
ing the required permits, performing final design efforts, and construction
and operating the selected mining and transportation systems.
The market analysis conducted as part of the Phase II studies has identi-
fied many prospective customers in a large potential market area. Prior to
project implementation, marketing and sales efforts must be undertaken and
sufficient contractual commitments must be obtained to justify further
development of the WACDP.
A total of 24 permits will be required for project implementation includ-
ing 11 federal and 12 state permits and 1 permit from the North Slope
Borough. Completion of the permitting process is expected to take from 12
to 24 months for the federal permits, and from 7 to 8 months for the state
and local permits. Since applications for the state and local permits can
be submitted concurrently with the federal permits, the entire permitting
process can be completed within 2 years of initiation.
Site related activities required before the project can be implemented
include the detailed site-specific vegetation surveys previously discussed
and additional drilling and bulk sampling to verify the quality of the
coal. (The quality of western Arctic coal is well known; however, large
power plant users require bulk samples in order to match the power plant
requirements to fuel quality.) Final mine and infrastructure designs,
which will be based on the Phase II findings, must be prepared, and
purchasing and shipping agreements must be completed for equipment and
materials. Once the necessary equipment, materials, and personnel are on
the site, construction of the facilities can begin.
xxi
All of the above activities, including construction, can be completed
within approximately four years of initiation of the project. Therefore,
if project implementation were to begin in the third quarter of 1986, coal
could be available for transport from the marine terminal in the third
quarter of 1990.
xxii
WESTERN ARCTIC COAL DEVELOPMENT PROJECT
PHASE II
PRELIMINARY REPORT
COMPONENT IMPACT ASSESSMENT
Wesiern Arctic Coal Development Project
1.0 EXECUTIVE SUMMARY
1.1 Overview of Study Results
A framework was developed for documenting the evaluation of po-
tential environmental impacts of WACDP components that was con-
sistent with National Environmental Policy Act (NEPA) guidelines.
Engineering, environmental, social, and economic options for
various project components were screened for environmental im-
plications and then integrated into logical alternatives. Three
alternatives for each of the mine and supporting infrastructure
plans were then evaluated according to nine criteria that were
broad in scope and yet sufficiently comprehensive to satisfy
extensive considerations of the options. Discussion of alter-
natives, components, and options is sufficiently detailed to
illustrate the overriding environmental concern that led to
selection of preferred items.
A preliminary mine plan selected the preferred alternative of a
mine located in the Mormon Block West area for purposes of avoiding the Kuchiak Creek drainage during the initial ten years
of mining activity and shorter haul distance to the coastal port
site. Significant details that remain to be considered include
water quality aspects of sedimentation ponds, behavior of the
silty soils under site-specific mining conditions, and revegeta-
tion program.
Infrastructure alternatives were complicated by extensive dredg-
ing costs required by construction of a port facility. An
initial preference selected an over-the-beach offshore loading
facility to be used during the first few years of operation,
later opting for a larger facility within a diked portion of
Omalik Lagoon. Confirmation of the "perched" nature of the la-
goon (in reality a thaw lake being claimed by the sea) during
the 1985 Site Investigation requires a dike to mitigate environ- mental impacts ‘of draining the "lagoon" through an entrance chan- nel. Infrastructure components other than the port meena
were essentially the same for all three alternatives.
A 5.4-mile roadway alignment was selected by engineering and environmental consultation during the 1985 summer site investi-
gation. The route considered soil types, drainage, habitat
types, snow drifting, expected wildlife populations, and anti-
cipated environmental costs. The latter included estimated numbers of resident and migrant animals to be displaced by hab- itat disruption. Mitigative measures are discussed to illus- trate the advantages of predevelopment cooperation of engineer- ing and environmental personnel.
1-1
Two airstrips (one 4000' long by 100' wide, the other 4000'-
by 150'), a 20-man camp with vehicle maintenance facilities
located near the mine site,and a potable water source situated
midway between the mine and port are expected to have generally
less environmental impacts than other project components. The
linear nature of the airstrips made their projected environ-
mental impacts generally similar to roadways. A source of gra-
vel or other construction material has not been established.
1.2 Highlight of Conclusions and Recommendations
Integrated consideration of WACDP components provided effective
analysis of environmental implications and practical approaches
to mitigation. Expansion of the environmental data base pro-
vides a more comprehensive evaluation that continues to indicate
that there are no major environmental constraints to further
consideration of the project.
Additional information is needed regarding soil behavior under
site-specific conditions to evaluate erosion, transport by sur-
face waters, and revegetation practices. These data also have
application to water quality considerations. A source for gra-
vel or other substrate material for airport and road construction
needs to be clearly identified.
Recommendations are made to maintain the effective direction of
the WACDP; evaluate anadromous fish habitat on Kuchiak Creek;
estimate vital hydrological parameters in the Mormon Lake drain-
age; perform site-specific vegetative surveys; ascertain the
status of peregrine falcons in the project environs; examine re-
ported cultural resources in the area of Omalik Lagoon; and
generally to augment the environmental data base in areas of
needed information for imput to the Alaska Surface Coal Mining
Program and other regulatory agency requirements.
WESTERN ARCTIC COAL DEVELOPMENT PROJECT
INFRASTRUCTURE DESIGN
PRELIMINARY REPORT
Western Arctic Coal Development Project
1.0 EXECUTIVE SUMMARY
1.1 Overview of the Study Results
Phase I of the Western Arctic Coal Development Project (WACDP) Feasibility
Study concluded that the project was economically and technically feasi-
ble. Based on these conclusions, Phase II of the project was initiated.
The Alternative Assessment Interim Report of Phase II of this project,
specifically Infrastructure Development (Task 5) (March, 1985), presented
conceptual designs for selected facilities which would be required to
support mining operations. This Phase II Infrastructure Development
Preliminary Report will present conceptual design alternatives based on
refinement of designs made in the preliminary report and on field data
collected during 1985. Additionally, this report will present the costs of
selected facility options.
1.2 Highlight of Conclusions and Recommendations
Based on bathymetry and operational plans for the port facility, it was
determined that the best location for the marine berthing components would
be in the vicinity of and integral to Omalik Lagoon. The dredging of a
channel offshore and a turnaround basin within the lagoon would be re-
quired. It was also determined that the best location for the coal
stockpile would be within the lagoon at the most efficient point of
delivering the coal to shipping operations.
It was determined that the most desirable location for a road connecting
the marine berthing facility and the mine would be based on four factors.
First, it was assumed that the mine would be located at the start of West
Mormon Block. Second, it was necessary to locate the road in proximity to
the source of potable water near the proposed camp site. Third, the road
1-1
alignment would have to be located away from the thermally unstable
polygonal ground areas. And fourth, the road would have to link the mine
with the marine berthing facility on Omalik Lagoon. It was also determined
that capital costs could be reduced by using mine equipment for the
construction of the road and that dredge spoil materials could be used to
construct the roads and portions of the port facility, and coal stockpile
pad.
Design alternatives for the airport were refined to integrate infrastruc-
ture elements thus reducing construction and operating costs. It was also
determined that airfield costs could be reduced by using mining equipment
for airstrip construction. Further, placement of the airfield near the
mine site would enhance the efficiency of both facilities.
The size of the required work camp was based on the estimated manpower
needed for the mine and related facilities and that placement of the camp
facilities near the mine would reduce travel time for mining personnel and
thus overall operations costs.
For efficiency, it was decided that the coal stockpile should be located
near the marine berthing facility and that a hopper-feed, stacker-conveyor
system would be most efficient in the formation of the 50,000 ton coal
stockpile. Also, conveyors or front-end loaders would be used to reclaim
the stockpile and to load the coal onto the barges.
From an economic standpoint, it was determined that the most reasonable
alternative included: a 13 foot dredged marine berthing facility, con-
structed in phases; a private airfield along the road alignment; used camp
facilities and a conveyor loading facility. Initial capital costs of the
entire infrastructure system were estimated at $7,234,000 with operating
costs of $656,000 per year. Economic and operational efficiency of this
system's components was judged to be high while construction and mainte-
nance difficulty was judged to be low. Further, ready expansion of this
system is anticipated.
WESTERN ARCTIC COAL DEVELOPMENT PROJECT
PHASE II
TECHNICAL MEMORANDUM
PRELIMINARY MINE DESIGN
arctic slope consulting engineers
Western Arctic Coal Development Project
1.0 EXECUTIVE SUMMARY
Phase II of the Western Arctic Coal Development Project (WACDP)
was initiated based upon the preliminary finding of technical
and economic feasibility for the project in the Phase I part of
the study. The Phase I report was a preliminary economic
evaluation and the results indicated that coal from the
Deadfall Syncline could reasonably be expected to provide
Western Alaska consumers with an economically attractive energy
option to fuel oil. The goal of the Phase II effort is to
perform an economic and technical feasibility study for
development of the Deadfall Syncline coal resource in
sufficient detail to allow the potential mine developer to
reach a decision on whether or not to proceed with mine
development.
This preliminary mine design technical memorandum provides a
preliminary design and cost analysis for the mining portion of
the overall project scope. The following narrative describes
the findings for the various components reviewed by this study.
Mine Development
° The Deadfall Syncline resource area may be logically divided
into two general mining units. The Kuchiak Block, located
east of Kuchiak Creek; and the Mormon Block, named after the
USCGS monument "Mormon" nearby, located west of Kuchiak
Creek.
° Mining costs are expected to be nearly equal for either the
Kuchiak Block or the Mormon Block and reserves at either
location appear to be adequate for at least the first ten
years of production.
° The Mormon Block was chosen as the preferred initial mine
site due to its proximity to the port site, resulting in
lower infrastructure costs, and the potential for reduced
environmental impact.
° Mining at the Mormon Block would begin near its western-most
end and proceed in an easterly direction towards the drainage
divide between the coastal plain and Kuchiak Creek.
° The first ten years of production are expected to occur in
the area west of the Kuchiak Creek/Coastal Plain drainage
divide. This will result in little or no impact to the
Kuchiak Creek drainage. Site specific data and experience
obtained during the initial 10 years of operation should
provide the knowledge which will allow for future development
of the Deadfall Syncline area while providing a high level of
protection for the existing environmental resources.
° Development of the Mormon West Block for initial mining will
result in better management of the Deadfall Syncline coal
field. Development of reserves in the Kuchiak Block would
necessitate mining at lower stripping ratios to offset higher
hauling costs. Depletion of lower ratio reserves at this
time in the Kuchiak Block could result in reduction of
overall coal tonnage which could be recovered from the
Deadfall Syncline and impair future production at higher
annual rates.
Mining System
° 35 ton off-highway trucks and a 4 cubic yard hydraulic front
shovel system is chosen as the technically and economically
appropriate system for overburden removal and coal
production.
° Overburden material breakage will best be accomplished by
drilling and blasting, which provides a flexible as well as
economically attractive alternative to dozer ripping.
° The same loading and hauling equipment will be used for both
spoil and coal removal. Trucks and loaders should be
purchased with both coal and rock attachments to provide for
efficient production in both operating modes.
° The initial equipment fleet should be able to produce coal at
the annual demand anticipated for the first 10 years of
operation with only the addition of two tractor-trailer coal
haulers and a front end loader about year 7.
Mine Schedule
° A six month, single 12 hour shift operation is the preferred
annual operating schedule for the base case production rate
of 50,000 tons per year.
° The six month schedule will actually provide for production
of approximately 75,000 tons of coal annually without
resorting to a double shift or adding to the equipment fleet.
° A single shift operation will result in higher average
equipment productivity and thus lower per ton mining costs.
° The increased production rates anticipated over the initial
10 years of operation can most economically be achieved by
increasing the operating season to 8 months followed by
addition of a coal haul dedicated equipment fleet, without
resorting to a double shift operation.
° A production surplus or net stockpile of 14 percent of the
cumulative coal demand over the initial 10 years can be
created without resorting to a double shift operation or
increasing the annual schedule beyond the 6 or 8 month
operating season. :
Drainage Control
The low annual precipitation and continuous permafrost
typical of the project area will result in relatively low
drainage volumes which must be handled by the mine drainage
control system.
Spoil materials were found to contain very low levels of
potentially toxic metals and to be slightly basic in
character. Therefore, no chemical treatment of mine
discharge should be required to meet state and federal water
quality standards for acidity or metal content. Water
treatment will therefore be limited to removal of sediments
from mine drainage.
Sediment ponds are the preferred method of controlling water
quality in drainage from areas disturbed by mining.
The small stream which crosses the Mormon West Block was
observed by the WACDP field crew to be dry during July 1985.
This would tend to indicate that the stream is ephemeral in
nature, that is, flowing only in response to precipitation
events. Therefore, mining through this small drainage should
not be a serious technical problem and because it is
ephemeral, should be permissible under current regulatory
constraints.
A small lake and bog west of the Mormon pit area collects all
drainage from the proposed initial mine site and is
recommended as the location where final sediment removal from
mine drainage is accomplished.
Reclamation
The total surface disturbance for the pit area at the Mormon
West Block is expected to be about 180 acres for the initial
10 years of mine operation. Approximately 6 acres per year
of new disturbance will occur at the 50,000 ton per year
production rate.
Backfilling and grading of mine spoils can be accomplished
contemporaneously with coal removal. Use of a truck/shovel
mining system allows the operator to selectively place
overburden without increasing costs and results in minimal
need for regrading after backfilling is complete.
The mining operation will be conducted as a cut and fill
operation after creation of the initial cut. In this way, a
minimum amount of area, about 18 acres, will be involved in
the open cut at any given point in time. This should
minimize impact to movement of wildlife, such as caribou, and
provide for contemporaneous revegetation of the backfilled
pit, which will decreasé the amount of time in which the land
is biologically non-productive.
° Initial cut spoils not used for construction of
infrastructure facilities will be stockpiled and used for
backfill in the final cut.
° Topsoil salvage and redistribution can be accomplished with a
reasonably low level of effort if existing topsoil materials
are judged to be the most suitable material for resurfacing
of mine spoils. The top 12 inches of soil on the hogback
ridges appears to be the only suitable surface material for
use as topsoil. There may be an insufficient quantity of
this material for adequate coverage over the entire disturbed
area. Therefore, in portions of the pit where a hogback
ridge is not encountered, properly amended sandstone and
siltstone materials may need to be used as a topsoil
substitute.
Labor Requirements
° A maximum crew size over the initial 10 years of the mining
and hauling operation is expected to be 20 persons actually
at the mine site, including the cook and bullcook, but
excluding shipping and barge loading personnel. 18 persons
will be required, for at least a portion of the season, at
the base coal production rate of 50,000 tons per year.
° Average hourly cost for production and supervisory personnel
is expected to be from 39 to 50 dollars per hour.
° Many of the mine workers, especially in the area of
maintenance, will need to be able to perform a variety of
tasks. Flexibility of the work force will greatly enhance the
efficiency of the overall operation.
Mining Costs
° Direct mining costs, excluding contingencies and
infrastructure costs, are expected to be $43.17 per ton
broken down as follows:
Capital Recovery $ 9.21 per ton
Operating $10.85 per ton
Labor $21.55 per ton
Reclamation $ 1.56 per ton
° Unit labor plus operating cost for coal mined from the Mormon
West Block are calculated to be $5.43 per bank cubic yard for
overburden stripping and $10.90 per ton for coal mining.
These costs include allocation of the maintenance and support
costs associated with the stripping and mining function.
° There are several measures which could be taken to reduce the
average overall stripping and mining cost of $43.17 per ton
for the base case production rate. The measures which were
identified and the anticipated cost reduction for each are as
follows:
1) Increase coal haul speeds by construction of a wider
haul road.
Reduce cost by $1.10/ton
2) Utilize 179,000 bank cubic yards of spoil materials
for infrastructure construction.
Reduce cost by $1.12/ton
3) Purchase of remanufactured equipment as opposed to
new.
Reduce cost by $1.70/ton
4) Purchase of stockpiles, in excess of consumption, by
consumers totalling 14 percent of the projected
cumulative consumption over the initial 10 years of
operation.
Reduce cost by $1.08/ton
5) Reduce the daily operating schedule from 12 hours per
day to 10 hours per day.
Reduce cost by $0.55/ton
Regulatory Compliance
° Analysis of applicable regulations governing coal mining
operations was performed and considered in development of the
preliminary design proposed herein and it is anticipated that
the mine can be permitted essentially as proposed.
° Assuming the mine is permitted, as proposed herein, there do
not appear to be any fatal flaws in the development plan that
would result in non-compliance with applicable performance
standards.
A typical mining scene for the proposed mining plan is depicted
in Figure 1-1. In this drawing the coal has been removed from
the open cut and stripping of the next cut is underway. The
shovel and trucks are removing blasted overburden from a
portion of the next cut while drilling and explosive loading is
underway on the remainder of the cut. The dozer is preparing a
ramp to the bottom of the pit for access to the coal which will
be uncovered next and the trucks are beginning to backfill the
pit from which coal was recently removed. A grader is
performing final regrading on the most recent backfill and
topsoil has been stockpiled adjacent to the active pit area
awaiting redistribution after completion of backfilling. The
scale of the drawing is reasonably representative of a typical
cut in either of the three seams to be mined and exemplifies
the relatively low amount of area involved in the active part of the mine.
SWAN WW OS 1
WESTERN ARCTIC COAL DEVELOPMENT PROJECT
TECHNICAL MEMORANDUM
PHASE II - TASK 5
PORT COAL HANDLING UNIT
AUGUST 29TH, 1985
Prepared for :. Arctic Slope Consulting Engineers 313 E Street, Suite 2
Anchorage, Alaska 99501
Prepared by : Swan Wooster Engineering Inc.
Suite 950 Lloyd Five Hundred Building
500 N.E. Multnomah
Portland, Oregon 97232
swan woostet a
1.0 EXECUTIVE SUMMARY
The Western Arctic Coal Development Project Team requested a review of the Port Coal Handling Unit in the light of a change in the original design parameters and operating criteria.
This technical memorandum presents the results of a review of the materials handling systems proposed for the Onalik Lagoon Port based on handling 50 000 tons of bulk coal per year, with no provision for unitized coal handling. ‘
The results of this review indicate that the basic bulk materials handling systems proposed in the June 12th report are suitable for handling 50 000 tons of bulk coal per year with revised operating procedures. Capital and operating cost for the revised system are presented in the memorandum together with revised personnel requirements.
85TRS6
VILLAGE END USE TECHNOLOGY ASSESSMENT
FOR WESTERN ARCTIC COAL DEVELOPMENT PROJECT
October 22, 1985
Prepared for:
Arctic Slope Consulting Engineers
313 E. Street, Suite 2
Anchorage, Alaska 99501
Prepared by:
Mechanical Technology Incorporated
968 Albany-Shaker Road
Latham, New York 12110
1.0 EXECUTIVE SUMMARY
This Village End-Use Technical-Assessment evaluates the technologies avail-
able for converting coal to electric power and heat for the Western Arctic
Coal Development Project (WACDP). Kivalina and Nome were selected as the
model communities. Kivalina represents an isolated village with little
infrastructure whereas Nome represents a larger, well-established community.
The source of the coal is the Deadfall-Syncline coal deposits, located approx-
imately 40 miles south of Point Lay.
The recommended coal-burning technology for burning the high-grade WACDP coal
is a chain grate stoker. Although the low sulfur content of the coal elimi-
nates any requirement for a sulfur removal system, new Alaskan air quality
control regulations require the installation of a baghouse to control the
release of particulate matter from the exhaust. Conversion of the heat energy
released in the combustion process is best accomplished by either a steam-
injected, externally fired gas turbine or a conventional condensing steam
turbine. Coal-fired power systems can reduce the operating cost of providing
electricity to Alaskan communities by as much as 502. Heat may be recovered
from the exhaust of these systems and delivered to a large building(s) in the
community through a district heating system. The district heating system is
very attractive because heat is supplied without burning additional fuel.
To provide coal-fired residential heat, the modern, air-tight coal stoves
offer a clean, economical solution. Many of the rural Alaskan ‘natives are
familiar with burning coal; this having been a common practice 20 years ago.
The current technology in residential coal-burning stoves would provide up to
a 602% reduction in annual fuel cost to the user and a 2 year return on his coal
conversion investment. Demonstrating that the new stoves now available are
efficient, clean, and safe will make acceptance of coal burning a reality.
Currently, available technologies do not offer a coal-fired alternative that
is economically comparable to a diesel engine in the small size required in a
village the size of Kivalina. Connecting many of these villages in a power
grid provides a method to deliver coal-fired power at a price less than the
Current cost of operating individual diesel engines and reduces the total
number of skilled power plant operators required.
1-1
WESTERN ARCTIC COAL DEVELOPMENT PROJECT
PHASE Il
1985 FIELD PROGRAM REPORT
PREPARED FOR: ALASKA NATIVE FOUNDATION
733 W. 4TH. AVENUE , SUITE 2
ANCHORAGE, ALASKA 99501 .
PREPARED BY: HOWARD GREY AND ASSOCIATES , INC.
3105-A LAKESHORE DRIVE, SUITE 103
ANCHORAGE, ALASKA 99517
AUGUST, 1985
1.0 EXECUTIVE SUMMARY
1.1 Overview of Study Results
This report presents the results of our preliminary 1985
subsurface exploration and geotechnical engineering study for the
Western Arctic Coal Development Project (WACDP). This phase of
the project was performed offshore of Omalik Lagoon and within
two physiographic provinces north of Cape Beaufort in northwest
Alaska.
This study concentrated on developing geotechnical parameters for
proposed marine berthing facilities, roadways and mine plant
support structures.
Preliminary results indicate the proposed development is feasible
from a geotechnical standpoint, provided standard arctic
engineering principles are followed.
A critical aspect is the development of a marine berthing facility. Additional studies will be required to identify and
evaluate geomorphologic conditions of the shore and near-shore
locales.
1.2 Highlights of Conclusion and Recommendations
The following is a brief review of surficial soil conditions
encountered during the field exploration program and design
considerations developed from the field data.
Exploration in the offshore area seaward of Omalik Lagoon
revealed recent sediments varying from very dense silty clayey
sands to hard sandy silty clays. The engineering characteristics
of these soils do not appear to be a limiting factor in construction of the various proposed offshore facilities.
However, it is recommended that this preliminary information be
supplemented by detailed studies prior to final design, including
a thorough review of beach and near-snore geomorphology and
processes.
Cursory examination of the coastal plain soils (those recently
combined marine and terrestrial deposits between the Arctic Ocean and the northwestern edge of the Amatusuk Hills), disclosed a mixture of frozen organics, silts and clays. Sediments within the Omalik Lagoon borings were frozen beneath a thin seasonal
frost layer and bottom fast ice.
Construction in this area is feasible using standard arctic permafrost design parameters. This will require thick fill sections or other means to resist thermal degradation of the
Ld,
underlying ice-rich soils, particularly where foundation and
roadway stability is critical.
Within the foothills region, two distinct soil types were
encountered. These consisted of bedrock and scree materials from
the Cretaceous Corwin formation and intervening recent fine
grained deposits of silts and clays overlain by thin organics.
These latter soils occupy erosional depressions in the bedrock
sequence.
Facilities located on bedrock and the less-frost-susceptible
scree materials may utilize more conventional construction
methods by reducing the need for protection against thermal
degradation and frost heaving. Construction methods followed in
the areas of fine grained soils wiil be similar to those
recommended for the adjacent coastal plain.
The exploration program included a search for borrow material
sites to be used in construction of the proposed facilities. No
significant gravel sources were identified by this preliminary
effort. As an alternative, limited gravel reserves may be
obtained from recent beach deposits. In addition, the abundant
sandstone bedrock within the foothills area could be usead as a
borrow source, recognizing additional processing may be required.
WESTERN ARCTIC COAL DEVELOPMENT PROJECT
PHASE II
PRELIMINARY INSTITUTIONAL
MARKET ASSESSMENT
Wesiern Arctic Coal Development Project
1.0 EXECUTIVE SUMMARY
Report Description
The economics of mining and transporting western Arctic coal to market is
highly dependent on the scale of operation. Therefore, the most likely
“worst case" production level will occur at start-up of the mine. This low
level demand places limitations on the market area and potential users
within the area. The initial market most likely will be met by either a
single large or group of moderate size institutional users.The insti-
tutional market is focused on in this report because it has similar
problems associated with the high cost of oi] as do the residents of rural
Alaska, however, it is made up of relatively large energy demands and has
the resources to evaluate and convert its existing energy systems to coal.
For this report, the market area was modified from the Western Arctic Coal
Development Project (WACDP) Phase I Final Report to establish a market area
that would have the highest probability of being competitively supplied
with coal. The selected market extends from the village of Wainwright in
the North Slope Borough region to the Yukon River in the Calista Region as
far up the river as Pilot Station.
This report provides estimates of the start-up demand for the institutional
market and discusses various factors that influence the potential use of
coal by the institutional market and the development of coal.
The remainder of this section will present a summation of the major
findings of this report based on each major task of the report.
Market Demand
° It was difficult to determine the individual energy consumption for
most of the community institutions except for the school districts,
and the Nome and Kotzebue Utilities. Therefore, only those institu-
tions mentioned above were considered in the analysis thus making the
analysis conservative. The school district's energy demand for space
heating totaled 7,156 tons of coal per year. The energy demand for
the Nome Joint Utility and the Kotzebue Electric Association was
25,007 tons of coal per year. The community institutional demand
composed of the school districts and two utilities makes up sixty (60)
percent of the total potential community demand.
° The total potential demand for all communities in the selected study
area is 54,599 tons per year.
° The potential demand for the military in the selected study area is
10,297 tons per year.
° The potential demand for the industry in the selected study area is
121,900 tons per year.
° The total potential demand in the selected study area is 186,696 tons
per year. The mining industry represents sixty-five (65) percent of
this demand and thus will have a significant impact on the overall
economics and marketability of western Arctic coal.
Considerations Affecting Marketability
e Federal, state, local policies in the area of taxation, regulation,
and assistance have a significant impact on the development, opera-
tion, and use of coal. Stability in legislation and taxation policies
are important to identify all costs of production and operation that
percent of the energy consumed in a rural community is burned to
produce electricity. Efforts along these lines have been made in
foreign countries where their small scale communities and other
conditions are very similar to Alaska. Therefore much of their
research and development efforts may be applicable to rural Alaska.
. Coal distribution is a critical factor in the economics and accept-
ability of coal. Large institutions are favorable for the initial
development of coal because its users optimize on the coal handling,
transportation, and distribution of coal by having a single large
demand and preference for coal delivered in bulk form. The cost of
coal packaging appears to be prohibitive at the initial operation of
the mine.
. If the proposed Red Dog Project imported coal from British Columbia
for their use and sold coal to the larger institutions in the study
area, this would substantially impact the marketability and possibly
the viability of developing western Arctic coal. This appears to be
the only significant factor that could impede the development of
western Arctic coal.
° Oil prices have a significant influence on the marketability of coal
and feasibility of its development. Oi] prices have dropped in the
area and bear monitoring.
Start-up Production Level
° The initial start-up production level of 20 thousand tons per year
verifies the results of the Phase I Final Report but may prohibit the
development of the mine without short-term assistance.
° Inclusion of the Red Dog Project into the start-up scenario increase
the initial demand for coal by a factor of five. The Red Dog Project
alone can justify the development of western Arctic coal.
1a &
° The development of the western Arctic coal can be expected to occur in
phases. The initial phase will lay the groundwork for the development
of the mine and would be made up of one or a small group of relatively
large institutional users that are willing to receive coal in bulk
form and are in relatively close proximity to the coal development.
Once the mine becomes established as a viable coal supplier, the
development will enter into the next phase which is likely to include
incremental additions to capacity to serve a wider range of custo-
mers.
e The North Slope Borough, North Slope Borough School District, and the
Nome Joint Utility expressed the most interest and willingness to
convert to coal. Their total energy demand for coal is 17,917 tons
per year.
° There are many questions surrounding the Red Dog Project such as,
when, what energy source, if coal is selected as the energy source
then whose coal. With the Red Dog Project having such a large energy
demand this leaves the same degree of uncertainties with the WACDP in
terms of marketability, viability, demand forecasting, and market
penetration.
This report represents the first contact by the WACDP with potential coal
users. The acceptability of coal does not appear to be an obstacle to the
development of western Arctic coal. Based on these findings, it appears
further contact with the institutional market will be beneficial upon
completion of several tasks in the WACDP Phase II effort that will deter-
mine cost delivered to market and cost of conversion.
Department of Community and Regional Affairs
949 E. 36th Avenue, Suite 400, Anchorage, Alaska 99508
Alaska Native Foundation
733 W. 4th Avenue, Suite 2, Anchorage, Alaska 99501
Western Arctic _ Coal Development Project
etlen 2 hae ee
arctic @tgpe consulting ¢
st
EXECUTIVE SUMMARY
Project Description
The Western Arctic Coal Development Project is evaluating the potential of
substituting western arctic coal for fuel oi] presently used for space
heating and power generation in western Alaska. This Phase I Document
provides a summary of the results of the 1984 Field Program which includes;
logs of all holes drilled; analytical data; an estimate of strippable
reserves present in two project areas; and a review of various data
collected to date.
Based on existing data, two project areas were identified and targeted for
field investigation in 1984. The two sites are referred to as Cape
Beaufort Project Area and Deadfall Syncline Project Area. Cape Beaufort is
located adjacent to the Chukchi Sea while the Deadfall Syncline area lies
about 6 miles inland and about 20 miles northeast of Cape Beaufort.
Helicopter supported field work was based out of an abandoned DEW-Line camp
at Cape beaufort. Field work began in early August and was terminated at
the end of September. A Nodwell mounted Simco 2800 HS drill was used to
drill 27 holes up to 150 feet deep in the Cape Beaufort area. A total of
47 holes up to 110 feet deep were drilled in the Deadfall Syncline area.
Geologic mapping, surface sampling, and bulk sampling were carried out
concurrent with drilling operations.
Project Objectives
The overall objectives of the 1984 Pre-Development Site Investigation were
to evaluate the coal resources at Cape Beaufort and the Deadfall Syncline
areas of the western arctic. This included reviewing existing geologic
data pertinent to the project area, conducting an on-site geologic recon-
naissance of the proposed drilling area, obtaining all permits and permis-
sions necessary, and through the drilling program determine lithology
a 2d |
identification of coal seams, record subsurface waters, gather coal samples
for laboratory analysis, determine mining parameters such as coal thick-
ness, continuity, strike length, overburden depths and estimation of
mineable reserves. The amount of reserves at any one site was to be
sufficient to supply the market area for a thirty year period. Results of
the Field Program provided critical input into the mine site selection
Process and the preliminary economic evaluation. All.the objectives for
the 1984 Field Program were met and the results of which are presented in
this document.
Project Results
Various reserve estimates for the two areas are presented based on strip-
ping ratios of 10:1, 7:1, and 5:1. Final mining parameters may vary from
those used in calculating the reserves. Within the Cape Beaufort area,
four seams were identified and drilled resulting in an estimate of
22,409,000 tons of mineable coal at a maximum 10:1 stripping ratio.
However, if the high ash seam 7 is left in place, reserves are reduced to
about 5,737,000 tons. A preliminary estimate of coal reserves within the
Deadfall Syncline project area is based on seven seams and totals
15,810,000 tons of strippable coal predicated again on a maximum 10:1
stripping ratio.
If reserves are projected beyond the limits of the measured reserves and
the same mining parameters are applied, additional stippable reserves of
some 25 million tons are possible in the Cape Beaufort area. Similarly,
some 59 million tons of stippable coal reserves are possible in the
vicinity of Deadfall Syncline. It is likely that additional field work can
significantly expand the present reserves estimates.
After review of the preliminary data, it was assumed that the Deadfall
Syncline area was a preferred site for initiating coal mining operations.
Although the proposed Deadfall mining area is located several miles further
from tidewater, coal quality and mineability appear to outweigh the
- iii -
transportation factor. This data was presented at the Mine Site Selection
Follow-up Meeting where the Deadfall Syncline site was selected for further
evaluation for the Western Alaska Coal Development Project.
- iv -
Bethel Area Power Plan
' Feasibility Assessment
APPENDIX C-1
COAL RESOURCE ASSESSMENT
DRAFT
Prepared for
Harza Engineering Company
and the
Alaska Power Authority
by Marvin L. Feldman
Glenn R. Cass
of
Dames & Moore
San Francisco
Draft
April 1984 os
DRAFT
Chapter I
INTRODUCTION AND SUMMARY
Purpose
The purpose of this study is to evaluate the technical,
economic and environmental feasibility of using coal to supply
part or all of the electrical generation and space heating needs
of the study area.* This information is developed as part of
the Bethel Area Power Plan,- a feasibility study conducted by
Harza Engineering Company and sponsored by the Alaska Power
Authority.
The economic component of the analysis will provide input
to one or more energy supply plans which are presented in the
Regional Report. This will allow an economic comparison of coal
energy supply plans with plans based on other energy sources.
An energy supply plan is defined as one or more energy supply
options which together meet a specified demand for electricity
and space heat.
Scope
The scope of this study includes analysis of:
re Coal resources available to the study area.
2. Costs to mine and transport coal from source.
3. Conceptual design and cost of coal handling facilities
in Bethel.
4. Determination of end-use cost per ton of coal from
each of the identified coal sources.
5. Determination of the net present value of the costs of
the designated coal supply system over the life of the
project.
6. A preliminary assessment of the environmental impacts
and regulatory complexity of the proposed coal energy
supply plan(s).
tS The study area comprises the City of Bethel plus 12 nearby
villages.
DRAFI
The cost analysis is economic rather than financial in
nature. This means that costs are determined without considera-
tion of the sources of revenue or ownership of capital facili-
ties. This economic analysis, therefore, indicates the total
cost to the State of Alaska and the citizens of the study area
without consideration of institutional mechanisms or con-
straints. Once the energy supply plan with the lowest economic
cost is identified, the Alaska Power Authority can proceed to
detailed feasibility studies.
Major Assumptions
Specific assumptions appear throughout this study. For
convenience, the most basic economic and conceptual modeling
assumptions are listed below.
Economic Assumptions
Key economic assumptions are as follows:
1. Inflation rate: zero.
2. Inflation-free present value discount rate: 3.5 per=-
cent.
3. Project life: 58 years.
4. Profit or rate of return on capital investment: Zero.
Modeling Assumptions
Key modeling assumptions are as follows:
ie Coal supplies all of the area's electrical require-
ments by a central steam turbine power plant in Bethel
with interties to all twelve villages in the study
area. It was later found that it was not economically
feasible to intertie some villages (see Appendix £).
However, because of the small electrical requirements
of these villages, it would affect the total coal
demand by less than 1 percent, which is negligible.
2. Eighty percent of the space heating requirements are
met by direct combustion of coal.
3. The electrical and space heating requirements are
those specified by Darbyshire & Associates in their
report of 10/15/82.
arccic Slope Consulting Eng.
A@PSTORN ARCTIC COAL Piwuecr
34034— 2a
AN ECONCMIC AND TECHNICAL ASSESSMENT OF THE
MARKETABILITY OF WESTERN ARCTIC SLOPE COALS
Dames & Moore
B2OMLF#10
1.0 INTRODUCTION AND EXECUTIVE SUMMARY
1.1 PROBLEM SETTING
The people of rural Alaska are faced with burdensome energy costs, costs
which consume a disproportionate share of most families’ cash income. Recent
studies conducted for the Alaska Power Authority, such as the Northwest Alaska
Coal Feasibility Study (Dames & Moore, 1981), The Kotzebue District Heating
Study (ASTS et al 1982), and the Bethel Area Power Plan (Dames & Moore, 1982)
indicate that the vast resources of the Western Arctic Slope coal deposits are
the most cost-effective energy source potentially available. Development of a
coal mine in this area, whether at a large scale for export or at a small
scale for domestic use would profoundly affect Northwestern Alaska, bringing
with it needed jobs and revenues. However, the marketability and consequent
economic viability of such a mine has not been previously determined.
1.2 PURPOSE, SCOPE, AND STUDY ORGANIZATION
The purpose of this study is to make a preliminary determination of the
marketability of Western Arctic Slope coals, both in the Alaska domestic
market and in the international market. To accomplish this task, Dames &
Moore has drawn upon existing literature and on the Western Arctic Coal
Resource Assessment recently completed by Arctic Slope Consulting Engineers.
This is a level-of-effect reconnaissance study. The level of funding and the
preliminary nature of the data on which the marketability findings are based
preclude any rigorous determination of marketability. Another important task
of this study therefore, is to identify the areas of uncertainty which could
significantly influence marketability. The reader is referred to Section 4.2
for a list of these areas.
The study is organized into three main sections. Section 2.0 addresses
the marketability of Western Arctic Slope coal in Alaska. Section 3.0 addres-
ses the marketability on an international market. Findings and recommenda-
tions are presented in Section 4.0. Section 5.0 consists of a bibliography.
ist
B21MLF#10
1.3. AN OVERVIEW OF THE STUDY METHODOLOGY
The following steps outline the analytic approach used in determining the
extent of domestic (Alaskan) marketability:
1.
10.
Define the potential market area for Western Arctic Slope coal.
Determine existing diesel fuel usage.
Project future (year 2000). deisel fuel usage in the potential
market area.*
Convert future demands to coal equivalents.
Postulate high medium and low demand scenarios.
Determine competitive coal sources.
Determine the costs of transporting and handling coal from the Arctic
Slope and from competing sources.
Compare the delivered cost of coal from the competing sources to the
cost of Arctic Slope coal.
Compare the cost of Arctic Slope coal to the cost of existing diesel
fuel uses.
Explore social and political and environmental factors affecting
Alaskan marketability.
The methodology for determining the international marketability of Arctic
slope coals involves:
1.
2.
3.
4.
5.
6.
Analysis and projection of Asian demand for both metallurgical and
thermal coal.
Analysis of quality requirements and contract terms.
Determination of the price structure of competiting coal sources.
Estimation of costs to ship Arctic Slope coal to Asian markets.
Determination of the maximum competitive price per ton F.0.B. Cape
Beaufort.
Comparison of the competitive price with the cost of production.
* The potential market area (shown in Figure 2-10) encompasses most coastal
communities north of the Alaska Peninsula.
B22MLF#10
1.4 SUMMARY OF RESULTS AND POLICY IMPLICATIONS
Our analysis of international coal markets indicates that quantities
of Arctic Slope thermal coal up to five million tons would be potentially
competitive at a price of about $49 per ton F.0.B. Cape Beaufort. Metallur-
gical grade coal (up to one million tons) would also be marketable and would
command an additional $3-4 per ton premium over thermal coal. The preliminary
cost estimates in ASCE (1982) indicate that a mine operating at a scale of
about 2 to 5 million tons per year could produce coal at the above price.
However, both the cost estimates and the resource availability to sustain
these levels of production are not yet firmly established.
If a Western Artic Slope mine of export scale were operational (even at a
one million ton per year scale), coal from such a mine would be the least
expensive source of coal available to the coastal communities north of the
Alaska Peninsula. By the year 2000, the fuel cost savings for switching
from the existing diesel fuel-based energy system to one largely fired by coal
would amount to as much as $88 million per year* (in constant 1982 dollars).
Coal from a smaller scale mine--one designed to serve only the demands of
coastal Alaska--would be of questionable marketability. A mine producing only
100,000 tons per year would be adequate to serve 30 percent of the space
heating needs of the area as well as 80 percent of the electrical demands of
Kotzebue, Nome, and Bethel (our low demand scenario). However, such a mine
would produce coal at about $103 per ton according to ASCE's preliminary
estimates (Table 2-6). At this price, and given the marine transport and
handling cost estimates developed in Section 2.4, Arctic Slope Coal would not
be competitive with coal from Canada (Prince Rupert) for the southern two dis-
tribution centers (Bethel and Dillingham). Since these two areas account for
63 percent of the low scenario demand, the market for Arctic Slope coal all
but vanishes at this price.
* Based on the energy demands in Table 2-1 and the coal versus oil cost
comparison in Table 2-11.
B23MLF#10
Lowering the cost of Arctic Slope coal to $90 per ton (as assumed in our
medium demand scenario), does not materially change the marketability picture.
Bethel and Dillingham could still obtain coal from Canada at a much lower
cost.
Only if coal were available from Cape Beaufort (or other Western Arctic
Slope deposits) at about $50 per ton would it be competitive with coal from
Prince Rupert in crucial southern distribution centers. This again, as with
the export market demand, suggests a scale of operation on the order of two
million tons per year.
If the conclusion that a small scale mine is uneconomic is substantiated
by further analysis (subseqent to this study), two policy options emerge with
regard to the development of Western Arctic Slope coal:
1. The mine must operate at a scale of about 2 million tons per year
from the outset; or
2. If a small scale operation is necessary to establish mining experi-
ence and export contract credibility, the output of such a mine
must be sold at a subsidized price at least to Bethel and Dillingham
users.
The findings in this study are based on a careful analysis of existing
information. We have identified the following policy-sensitive issues needing
further research, in order to more accurately determine the marketability of
Western Arctic Slope coal.
Vo Establish extent of economically mineable coal reserves.
Vo Accurately determine that heat content of the coal.
—o Accurately estimate costs to mine the coal.
° Determine air quality impacts of extensive coal use.
—o Determine costs to retrofit facilities to burn coal.
—o Refine coal transportation and handling costs.
-o Analyze social and institutional impediments to coal utilization.
Dames & Moore
in Association With
Resource Associates of Alaska, Inc.
Prepared for:
ALASKA POWER AUTHORITY
ASSESSMENT OF COAL RESOURCES
OF NORTHWEST ALASKA - PHASE I
VOLUME II - TASK 2: COAL RESOURCES
OF NORTHWEST ALASKA
December 1980
Dames & Moore
Job No. 12023-003-20
a
ABSTRACT
This investigation of the coal resources of northwest Alaska was
undertaken by Resource Associates of Alaska, Inc. (RAA) as a subcontract
to Dames and Moore, who is to provide the Alaska Power authority with a “Phase I" assessment of the possibilities and options regarding potential
use of coals in northwest Alaska for local sources of energy. A substan-
tial effort has been made in a short time to assemble available infor-
mation on coals in northwest Alaska. This includes documentations fron public and private sources, native corporations, RAA internal files, and
personal contact with leading individuals who have worked in the area.
Over 400 references have been utilized.
Compilation of information about the project area revealed three
general coal-bearing areas in northwest Alaska. These include: (1)
Vast bituminous coal resources in Cretaceous and Mississippian sediments
on the North Slope and Lisburne Peninsula west of the National Petroleum Reserve in Alaska, (NPRA), (2) potential for large lignitic coal deposits in Tertiary basins of the Seward Peninsula and (3) smaller, but significant
occurrences of generally subbituminous to bituminous coals of Cretaceous
age in the Kobuk River area.
Forty-nine coal-bearing areas and occurrences in northwest Alaska are
discussed in some detail in the 182 pages of text. This presentation is
illustrated by 30 figures, 43 tables and 4 plates. A brief summary of
information on coal resources of northwest Alaska and a very general rating
of potential based on size and other geological aspects is present
on Plate IV.
cearemng YE ALASKA INC