Tanis Graham is having trouble sleeping.
At night, the shop owner in the small town of Hanna worries about the downturn in the oil and gas industry and how she’s going to afford the Alberta government’s plan to increase the minimum wage to $15 an hour.
And in the past few weeks, Ms. Graham, 43, has been kept awake by news that the nearby coal-fired generating station will be closed a decade earlier than scheduled due to the province’s new climate-change strategy.
About 110 people from the area are employed at the coal mine that supplies the generating station, including Ms. Graham’s partner. If the coal industry leaves the town of 2,500 in Alberta’s east-central badlands, she too might have to leave the community where she was born and raised.
“Where’s my boyfriend going to work? I’d probably have to sell my business and move,” the genial former town councillor said over morning coffee in her bistro and gift shop on the main street.
“One hundred people are going to lose their jobs and they’re going to have to move away. But out of those 100 men moving away, there’s another 100 people in town who are going to move away – nurses, accountants – everybody that it takes to run our town,” she said.
Coal – the combustible sedimentary rock that has powered everything from the Industrial Revolution to China’s growth as an economic mega-power – is still a quietly powerful economic force in Western Canada.
The country produces more than 60 million tonnes of coal on an annual basis – and more than 80 per cent comes from British Columbia and Alberta, two provinces with a wealth of reserves. The Coal Association of Canada says the coal mining industry directly and indirectly employs 42,000 workers, most of whom make higher-than-average wages in more remote parts of the country where jobs are needed. The industry is a significant aboriginal employer as well.
Jeff Vinnick/for The Globe and Mail
But the global coal industry is suffering.
Coal prices have been on a downward trajectory since 2011, and have plunged this year. Demand for thermal coal – the kind used in coal-fired power plants – is being weakened as China’s appetite wanes and India increasingly produces its own. Power producers are also turning more to natural gas, which is abundant, inexpensive and less carbon-intensive.
The price for metallurgical coal, a major steel-making ingredient, is also getting clobbered with no turnaround in sight. Steel production in China is expected to plummet by 23 million tonnes next year, an amount equal to a quarter of annual output from the U.S.
And coal’s status as the largest source of climate-changing greenhouse-gas emissions (GHG) – along with its contribution to smog and a host of nasty air pollutants – means developed countries are increasingly averse to using the world’s most plentiful fossil fuel for power generation.
“The momentum behind coal’s surge is ebbing away – and the fuel faces a reversal of fortune,” says the International Energy Agency.
Across Western Canada, that means the companies and communities that rely on coal are seeing their world shrink.
“I don’t know if anyone could have a rosy outlook for coal these days. It’s certainly, from a GHG perspective, one of the dirtiest fuels – if that’s the right way to put it,” said Siegfried Kiefer, president and chief operating officer of Canadian Utilities Ltd., an Atco Ltd. company that co-owns the Sheerness Generating Station just outside Hanna.
Most of Canada’s top GHG emitters are coal plants, including the Sheerness Generating Station, according to Environment Canada data.
“I do see the writing on the wall for coal-fired electricity in most of the developed world, as likely to be coming to an end,” Mr. Kiefer said.
“But it has served a purpose over time. It was one of the most affordable fuels, too.”
Kevin Frayer/Getty Images
Kevin Frayer/Getty Images
’A declaration of war on coal’
While British Columbia and Alberta are both coal powerhouses, the two provinces’ coal industries face very different sets of challenges.
Viewed by many as an archaic fuel source, coal is still – by far – the world’s most widely used source of electricity. Cheap and plentiful, the global growth of coal-fired electricity is driven by emerging economies. Developed countries are decreasing their use but still burn vast amounts of the black and brown stuff. Coal makes up more than 20 per cent of power generation in the United Kingdom and about 40 per cent in the United States. When it comes to Canadian generation, coal is still king in Saskatchewan, Nova Scotia and Alberta.
Metallurgical coal is abundant in British Columbia, as well as a few areas of Alberta. The export market for metallurgical coal is a major economic driver for Canada’s most westerly province.
Alberta’s coal reserves are vast. Coal-bearing formations underlie about 300,000 square kilometres of Alberta – almost half of the province, according to the government. And due to that wealth of supply, Alberta still relies on coal for at least 55 per cent of its electricity production. According to provincial figures, almost 80 per cent of Alberta’s marketable coal is thermal coal, the type used for power generation. Most of Alberta’s coal mines are set up to serve nearby electric power plants with long-term contracts.
But if it didn’t exist before, the Paris climate change talks this month have crystallized a broad global perspective that deep, near-term reductions in the use of coal for power generation is one of the most important steps in reining in rising greenhouse gas levels.
The province’s coal industry has long flown under the radar as higher-profile oil sands production attracted environmental controversy and scorn.
The province’s new climate-change plan, unveiled last month, will allow GHG emissions from the oil sands to increase before they are capped. Duane Bratt, a Calgary political scientist, has called the plan “a declaration of war on coal.”
The strategy includes a $30-a-tonne carbon tax in 2018 that will, in effect, almost triple the current carbon levy for coal-fired power plants, according to Mr. Kiefer. The plan also includes a 15-year window before the province’s coal-fired power plants must be shuttered.
“For the government to allow oil sands to grow emissions, and for [the energy minister] to meet some kind of commitment she’s made in Paris, she has to throw coal under the bus,” said John Schadan, president of Westmoreland Coal Co.’s Canadian operations, which includes the Sheerness strip mine just outside of Hanna.
He argues that his industry is not against taking action on climate change. But “I think the pain has to be shared across all industries – not just coal.”
Broadly speaking, natural-gas electricity generation produces half the carbon emissions of coal. The Alberta government wants the megawatts currently produced by coal to be replaced with a combination of natural-gas-fuelled power and renewable energy sources such as wind and solar.
Despite predictions of power price spikes and disruption from critics of the plan, the government says simply that there will be no pollution from coal-fired electricity generation by 2030. “Coal-fired plants will be phased out and replaced by renewable energy and natural-gas-fired electricity, or by using technology to produce zero pollution,” according to the province’s climate-change plan.
Jason Franson/The Canadian Press
“I think it’s an issue that’s being addressed all over the world,” Marg McCuaig-Boyd, Alberta’s Energy Minister, said in an interview. She noted that a facilitator will be appointed to work with the coal industry on a transition plan, capital will not be stranded in Alberta’s deregulated power market and workers in coal-dependent communities will get help with job transitioning.
Under federal regulations, many of Alberta’s coal-fired power plants were set to be retired before 2030, even prior to the introduction of Alberta’s new climate-change strategy. However, six of a total of 18 generating units in the province – including units 1 and 2 at the Sheerness Generating Station near Hanna – would have had a lifespan beyond that deadline.
For towns such as Hanna – but also Alberta communities such as Forestburg, Battle River, Wainwright, Wabamun and Keephills that have hundreds employed in mines and at power plants – the wholesale end to the industry is being greeted with alarm.
Many in Hanna ask why Alberta can’t take a strategy closer to Saskatchewan’s – a province investing in carbon capture and storage (CCS) technology.
While Alberta had in past years committed to reducing emissions from coal-fired plants through CCS technology, those plans have gone by the wayside. With a $1.5-billion investment in the Boundary Dam project, Saskatchewan stands alone in the world in its push to forge ahead with post-combustion, commercial-scale CCS for coal-fired power. Although the project has been beset by technical difficulties and cost overruns, SaskPower says the goal is to make “a viable technical, environmental and economic case for the continued use of coal.”
Darryl Dyck/The Canadian Press
Bad times in B.C.
In northeastern British Columbia, concern is centred on low prices for steel-making metallurgical coal – the effects of which have already been devastating. Five metallurgical coal mines were shut down between the spring of 2013 and fall of 2014, throwing more than 1,300 employees out of work.
The impact has been especially painful in Tumbler Ridge, where prices for single-family detached houses have plunged. In the first 10 months of this year, detached homes sold in the community averaged $128,333, down 47 per cent from $240,901 in the same period of 2013, according to the B.C. Real Estate Association.
After Tumbler Ridge Mayor Don McPherson took a walk down several streets, he noticed that four out of every 10 homes appeared vacant. Hundreds of workers, contractors and their families have moved away. He reckons the population has declined to roughly 2,000 residents from more than 3,300 in 2013. “Nobody wanted to move. It wasn’t their choice. They didn’t have any work,” he said.
In the early 1980s, the coal industry effectively created Tumbler Ridge, with modern homes carved out of the forest.
This is the second time that tough times have threatened the district municipality’s very existence. Back in 2000 and 2001, hundreds of spacious homes on large lots sold for less than $35,000 after the Quintette mine closed in 2000. The Bullmoose mine shut down in 2003.
While Mr. McPherson isn’t counting on Tumbler Ridge becoming a boom town again any time soon, he is optimistic that enough residents will stick around to prevent the community from turning into a ghost town. “We’ve diversified with some wind power and tourism,” he said, adding that drilling for natural gas in the nearby Montney play also helps.
Given forecasts for a prolonged slump in global coal markets, the fate of existing and planned mines is uncertain in northeastern British Columbia. Benchmark spot prices for metallurgical coal have continued their slide, recently falling to $73 (U.S.) a tonne. In 2011, the commodity fetched more than $300 a tonne.
It’s unfortunate that coal markets have turned as far down as they have, and we don’t see any sort of light at the end of the tunnel here.Paul Vining, CEO of Cline Group LLC
Walter Energy Inc. laid off 250 B.C. employees after it temporarily closed its Willow Creek mine near Chetwynd in 2013. Last year, the Birmingham, Ala.-based mining company suspended operations at its two remaining northeastern B.C. mines, chopping 415 workers at its Wolverine mine near Tumbler Ridge and cutting 280 staff at its Brule operation near Chetwynd. This week, Walter Energy’s wholly owned Canadian subsidiaries filed for bankruptcy protection under the Companies’ Creditors Arrangement Act.
London-based Anglo American PLC suspended coal mining at its Trend mine in the fall of 2014, laying off more than 360 workers. Anglo American had been making plans to expand coal production in the region, but depressed coal prices forced the company to abandon a proposal to start coal deliveries from its Roman property.
Anglo American had been hoping that if coal prices rebound, it would be able to restart production.
A sixth northeastern B.C. project, Teck Resources Ltd.’s Quintette property near Tumbler Ridge, planned to restart in 2014 but remains mothballed.
Vancouver-based HD Mining International Ltd. is still considering plans for a much-delayed coal venture near Tumbler Ridge. In 2013, the Federal Court of Canada dismissed a challenge by two unions over HD’s hiring of about 200 temporary foreign workers from China to kick-start a preliminary phase.
In southeastern British Columbia, Teck’s five metallurgical coal mines remain open, although the Coal Mountain site might close in late 2017. Most contractors have watched their work disappear. Most unionized coal miners remain employed, although some job losses are in store. “Our members haven’t hit the panic button yet,” said Alex Hanson, president of Local 9346 of the United Steelworkers union.
There were nearly 3,700 unionized and non-union staff at the five mines in the Elk Valley last year, according to a study by Resource Works, a research group whose supporters include the Business Council of British Columbia.
Last month, Teck announced plans to cut 1,000 jobs globally, or about 10 per cent of the total work force, as the diversified mining company seeks to control expenses. “This reduction will affect all groups and will include a reduction in senior management positions. Implementation details will be established on a site-by-site basis and those details will be communicated to employees by management,” Teck chief executive officer Don Lindsay said in an internal memo to staff. “I recognize this will be a difficult time for all staff, particularly directly affected employees and their colleagues.”
Sparwood Mayor Cal McDougall, a former lands and housing administrator at Teck, said his community and others nearby are accustomed to the roller-coaster ride of commodity prices. “Sparwood and Elkford are resource-based, and we understand that as the resource goes, so do our communities.”
Exports as an option
Alberta has some metallurgical coal that has also been caught in the spiral. This fall, Grande Cache Coal said it will wait for better coal prices and will temporarily shutter its coal mine in northwestern Alberta, beginning on Christmas Eve. The move means more than 220 people will be laid off, in addition to hundreds of jobs the company cut earlier this year.
“It’s a very deep-reaching cut,” local union leader Gary Taje said. “The whole community is impacted.”
In Alberta’s thermal-coal towns close to railway lines, exporting to Asian markets is one option for keeping the coal industry going.
The proposed Vista mine project near Hinton was envisaged as an export-focused 10-million-tonne-a-year mine employing around 1,000 workers, and one of the largest thermal-coal mines in Canada. But with the collapse of commodity prices, the project has been put on hold indefinitely.
“It’s a beautiful area and it’s a good mining project,” said Paul Vining, chief executive officer of Cline Group LLC, which bought the Vista project earlier this year. He says there’s no way his company can justify spending “several hundred million dollars” to develop the project with coal prices where they are. He said the earliest the mine will produce any coal now is 2019.
“It’s unfortunate that coal markets have turned as far down as they have, and we don’t see any sort of light at the end of the tunnel here.”
Back in Hanna, coal was used by local farmers long before the mine and power plant were built, and will likely still be used after those facilities close down.
Harley Hutton’s great grandfather would make a two-day trek with a team of eight horses and two wagons to collect coal from the local mine. The fuel was used to heat the family’s farm house. Now, the 47-year-old rancher, the fourth generation of his family to farm just outside of Hanna, drives to the mine, loads up his grain truck, and is back with seven tonnes of coal in about two hours.
A coal boiler unit about the size of a small car is attached to Mr. Hutton’s workshop and two farm houses. A couple of times each week, he must refill the unit and clear out the cigarette-like coal ashes. Shovelling ashes is not as easy as cranking the thermostat, but it’s significantly less expensive. He says using coal through the winter costs him $1,000 for the entire season, instead of $1,000 a month for natural gas.
“I like using coal,” Mr. Hutton says. “Coal has its place, you know.”