Usibelli mine a steady supplier of low-cost Interior energy

Photo/Adam Elliott/For the Journal

JUNEAU — For 70 years, since 1943, the Usibelli coal mine at Healy has been a steady supplier of energy to Interior Alaska, at one time for space heating and in recent years for power generation.

The mine is 112 miles south of Fairbanks and has plentiful resources for the future — enough to sustain its coal production for decades more. By far, coal is the most affordable fuel for making electricity, one-sixth the cost of diesel and half the cost of power generated with natural gas.

Usibelli is also one of the Interior’s major employers and has been so for decades. About 140 were employed directly at the Usibelli mine in 2012, earning $20.9 million in income, $15 million in direct payroll and $5.9 million in benefits.

The total employment effect is larger, however. Coal mining at Healy created 577 jobs overall in the Interior Alaska region with $44 million in payroll. Statewide, Usibelli’s mine sustained 692 jobs with $52 million in payroll.

The figures are from a McDowell Group study of Usibelli’s contribution the state’s economy. It was published in November.

In 2012, Usibelli also spent $72 million for goods and services supplied by 400 different vendors and suppliers in the state, the study said. The $72 million includes $51 million spent directly on supplies and services and another $12 million in personnel-related spending, McDowell Group said.

Usibelli produces about 2 million tons a coal per year. About half of the coal produced by is used in six Interior coal-fired power plants. The other half is sold in export markets, with the coal shipped by rail to Seward and loaded on ships.

McDowell Group laid out details on the mine’s most important contribution, however: The coal that is produced generates 29 percent of Interior Alaska’s electricity, and at a cost one-sixth that of power generated with oil, which supplies 41 percent of the Interior’s power, McDowell Group said in the report.

Coal power is also one-half of the cost of natural gas used to generate power in Southcentral Alaska, which supplies about 11 percent of the Interior needs, the report said. McDowell Group based its cost comparisons on data supplied by Golden Valley Electric Association of Fairbanks, the Interior regional electric utility.

Given the cost advantages, it seems unlikely that natural gas delivered to Fairbanks even through a large gas pipeline could undercut  coal.

“If the military bases in Interior Alaska switched to natural gas, their heat and electricity costs would rise 250 percent assuming the lowest-cost near-term delivery option,” according to the report. “In 2012, diesel-generated electricity cost GVEA an average of about 30 cents per kilowatt-hour, or kWh,” the report said. “The cost to generate with naphtha, a liquid fuel also made from crude oil, was about 17 cents per kWh, and natural gas-fired power purchased over the Intertie from Southcentral Alaska averaged 11 cents per kWh. Meanwhile, the cost to generate power with coal averaged 5 cents per kWh.”

If coal use were discontinued in the Interior, electricity costs could rise by about 25 percent depending on what alternative fuels are available, the report said.

“Including GVEA, UAF (University of Alaska Fairbanks) and the military bases, the absence of coal as a fuel source would have a cost of $200 million or more annually,” McDowell Group said.

02/13/2014 - 12:33pm