LITTLE ROCK — Mining the soft, brown coal that lies in the earth of much of southern Arkansas has been touted for decades by some politicians and local officials as a way to infuse money into the area, and two state lawmakers are renewing that theme.
They’re pushing for a taxpayer-funded study of how lignite could be used by private companies, although no company has expressed interest in mining, refining or using it, and they’re asking their colleagues to help provide the public funds for the study.
Reps. Kim Hammer, RBenton, and Garry Smith, D-Camden, jointly sent a letter asking legislators to try to get local planning and development districts to spend some of their state funds on a $2.9 million survey offered by a federal research center. The offer expires July 1.
Hammer and Smith said business resulting from the study could revive the economy of the area and stop population decline.
Lignite is a low-grade coal with less heating power than the best coal, according to the Arkansas Geological Survey. The agency estimates that lignite is in a region from Ashley County near the southeast corner of the state north past Pine Bluff to North Little Rock in central Arkansas, and from Miller County in the southwest corner of the state north past Texarkana, thennortheast toward North Little Rock. There’s also a band of lignite along Crowley’s Ridge in Craighead, Greene and Clay counties in northeastern Arkansas.
An estimated 4 billion tons of lignite is recoverable out of the 9 billion tons thought to exist in Arkansas, Smith said.
“That means it’s not going to take an act of God to get it out of the ground,” he said.
In the study, the federal Energy and Environmental Research Center would look at whether it would make sense financially for a company to turn Arkansas lignite into either synthetic natural gas through gasification or into crude oil through liquefaction, by testing both possibilities and seeing which of the two costs less. Smith said it would also develop a more thorough understanding ofthe state’s deposits because it would take samples from three times the depth of any other publicly funded study. It would also produce a marketing report.
Previous studies of the value of burning lignite found it would be cheaper to bring in coal from the west to burn in Arkansas.
At least $2.2 million for the $2.9 million study would have to come from the state or private donations. The federal government has pledged $650,000.
Gov. Mike Beebe’s spokesman Matt DeCample said the governor will provide whatever surplus money he can but it would only be a portion of the total needed.
Hammer and Smith asked lawmakers who have lignitein their districts to ask local planning and development districts to dedicate $5,000 each and the rest of the lawmakers to ask the districts to dedicate $1,000 each.
Act 1117 of 2011 gave the districts some leeway in deciding what to do with the money, including construction, buying equipment and making improvements. Department of Finance and Administration Deputy Director Tim Leathers said each district can choose how the money is spent.
Businesses and citizens also are being asked to donate, said Smith. He said he has spoken about donating with economic development groups and businesses that would benefit from bringing new industry to the area.
Mining companies have said they are interested in the results but that the study is for Arkansas residents, Smith said.
“There’s no one individual company that’s going to benefit,” he said. “No one’s going to gain anything from this $2.9 million study except the people of Arkansas.”
He would not name the mining companies that have expressed interest. He said none had made firm commitments to mine Arkansas lignite.
“As soon as we have something concrete ... there’ll be names given,” he said.
According to the National Mining Association, most of the country’s lignite is mined by three companies: Westmoreland Coal Co. of Colorado Springs, Colo.; North American Coal Corp. of Dallas; and BNI Coal of Bismarck, N.D. North American Coal is a subsidiary of Cleveland, Ohiobased NACCO Industries Inc.
Smith said an Australian mining company wants to work with Jackson, Miss.-based Lion Oil company to turn lignite into oil.
NACCO spokesman Christina Kmetko would not confirm whether the company, which has an Australian subsidiary, had considered or would consider mining in Arkansas.
Lion Oil Vice President of Refining Steve Cousins said his company was approached about the possibility in 2010 but no agreement was reached.
Southern Arkansas University in Magnolia has agreed to hold the money collected for the new study in a special account until enough is raised, spokesman Jeremy Langley said. No money had been collected as of Monday.
Southern Arkansas University, along with the state Geological Survey and Department of Economic Development, is part of the Arkansas Lignite Resources Pilot Program created by Act 641 of 2007 by the state Legislature.
The three entities will look at ways to use lignite as an energy source.
The budget for the proposed study states that a subcontracting drilling company would receive an estimated $850,000 in state funds. Smith said he has no company in mind for the job.
The last time a company contacted the Economic Development Commission for information on lignite was three years ago, spokesman Scott Hardin said. The company wanted information on turning lignite into gas or oil.
LIGNITE’S PAST
In the 1970s, ’80 and ’90s, companies repeatedly rejected Arkansas lignite after conducting their own studies. The state also has performed studies on lignite and its potential financial benefit to south Arkansas.
Both the public and private studies dealt with burning lignite for energy, not turning it into oil.
The state geological agency, then called the Geological Commission, used $652,741 in state funds to conduct a study from 1975 to 1985, which estimated there were 9 billion tons of lignite within 150 feet of the surface.
In 1976, Sheffield Nelson, then president of Arkansas Louisiana Gas Co., deemed Arkansas lignite “little better than high-grade dirt.” Samples taken by his company, he said, were shown to have lower heating quality than Texas lignite.
In 1977, Arkansas Power & Light Co. (now Entergy) and Arkansas Electric Cooperative Corp. conducted a $300,000 study on the potential of using lignite to generate electricity. The result was not made public.
That same year, Southwestern Electric Power Co. announced it would locate its first lignite-fired generating plant in Texas instead of Arkansas because samples of Arkansas lignite were inferior.
A study by the University of Arkansas Industrial Research and Extension Center released in March 1977 indicated that mining lignite could produce 37,000 new jobs and at least $190 million in income for state residents.
In 1979, AP&L announced plans to construct a ligniteburning plant near Hampton by 1981. But by 1983, AP&L executives were calling the plant a “long shot” and delayed construction until 1990.
In 1988, AP&L burned 222,000 tons of Arkansas lignite from Saline County mixed with western coal over three months in its White Bluff Steam Power Plant near Redfield in Jefferson County. Arkansas lignite was 3 percent of the mixture. In 1989, the utility shelved its plan to continue burning Arkansas lignite, saying it would increase the cost of generating energy compared with Wyoming coal. The higher cost of using lignite would be passed on to consumers, the company said.
THE FUTURE
An Entergy manager said in March 1993 that “for the near future and for the long term past 2000, I can’t see anything putting up the demand for lignite.”
Entergy spokesman Jill Smith recently said that nothing has changed.
“Entergy’s Arkansas coal[- fired] plants are not permitted to burn lignite. Entergy periodically revisits this issue, but burning lignite has not proven to be an economically or environmentally preferred choice of fuel,” she said. “Coal from Wyoming remains morecost-effective.”
Southwestern Electric Power Co. spokesman Peter Main said: “We don’t have any operations or interest in production of electricity with lignite in Arkansas.”
SWEPCO and Arkansas Electric Cooperative are majority and minority owners, respectively, of the $2.1 billion, 600-megawatt John W. Turk Jr. coal-fired plant under construction near Hope in Hempstead County. The plant is 63 percent complete. It would burn low-sulfur coal from Wyoming, Main said.
Nelson said recently that lignite mining still isn’t a viable option.
“I still feel basically the same,” said Nelson, now a partner in a Little Rock law firm. “It just didn’t hold much hope realistically then, and I don’t think it holds much hope this time around either.”
Nelson said the circumstances that caused interest to wane in the 1980s still exist.
“I just don’t see lignite playing a large role in Arkansas,” Nelson said. Forty years’ time “still doesn’t make a poor-burning fuel a good fuel.”
THE HOPE
Hammer said a new study would look at technology advances in recent years that could turn lignite into other energy, namely a microrefinery being developed by the University of Texas at Arlington that could potentially turn lignite into crude oil at a cheaper price than oil.
He said previous decisions not to use Arkansas lignite were based on old technology.
“It wasn’t cost-efficient, but now it is, so now is the time to pick it up and go,” Hammer said, referring to the microrefineries. “My understanding that the technology being produced ... is a more cost-effective method than has been used before.”
The microrefinery would turn coal or lignite into crude oil on site at a smaller cost than the usual crude oil, according to a University of Texas news release.
The university is trying to get a patent on the microrefinery so it can be used commercially.
Smith said the microrefineries will cost about $7 million each.
“We could put one in every county,” he said.
A 2009 report by Arkansas’ Bureau of LegislativeResearch stated that using two microrefineries would employ about 400 people full time with wages around $25 an hour. It was based on the economic results of the Red Hills Lignite Mine in Ackerman, Miss., owned by North American Coal, said Richard Wilson, assistant director of the Bureau of Legislative Research.
It estimated that each mine would create $1.8 million a year in royalties to landowners, $18 million a year in supplies from the local economy, $2 million a year in state sales-tax revenue and $350,000 in state severance tax on removing the coal.
The report stated the oil from lignite could be made for about $40 a barrel. It estimated that 4 billion tons of Arkansas lignite oil sold at $80 a barrel could potentially bring in $640 billion over the 584-year life span the deposits would have if mined at a rate of 10,000 tons per day.
The Arkansas Democrat-Gazette asked North American Coal to review the study and assess the validity of its findings. David Straley, manager of government and public affairs for the company, said the firm was not comfortable commenting becauseit does not have firsthand knowledge of mining lignite in Arkansas.
“We’re just not in a position where we can comment on these assumptions,” Straley said. “It just wouldn’t be appropriate for us to comment.”
TAXPAYER MONEY
Some lawmakers said the state should pay for such a study to interest energy companies in Arkansas lignite. Others have criticized efforts to use state taxpayer money to fund a study whose results will eventually be used by private companies.
Beebe noted that no study was needed to create interest in natural gas drilling in the Fayetteville Shale.
“The development of lignite is private enterprise. The state doesn’t mine lignite,” he said.
Smith said gas companies were able to exploit landowners in the Fayetteville Shale who didn’t know what the natural gas was worth. He said if Arkansas pays for a study the state owns the results and can make sure landowners get fair-market value for their lignite.
Using state money to study lignite is not new.
According to the bureau, since 1975 the state has spent $1.1 million on “lignite investigation” by the state Geological Survey.
Hammer said the state needs to fund the new study to show it is interested in creating a lignite industry.
He said a mining company will have to spend money on a lignite mine and wouldn’t want to have to search for it too.
“If I was a private investor I wouldn’t spend $2.5 million on hope,” Hammer said.
Front Section, Pages 1 on 05/22/2011