Introduction
The U.S. Environmental Protection Agency's (EPA's) Coalbed Methane
Outreach Program (CMOP) works with the coal mining industry to
promote the recovery and utilization of coal mine methane (CMM).
Because CMM poses a hazard to miners, it is intentionally released
before, during, and after mining activities through mine ventilation sys-
tems. In some cases, degasification systems (also referred to as
"drained" gas) are necessary to supplement ventilation.
Methane is also a potent greenhouse gas (GHG) that is more than 20
times as effective at trapping heat in the atmosphere as carbon diox-
ide over a 100-year period. However, if it is collected and used for
energy, methane is a valuable fuel source. Recovering CMM benefits
the environment by reducing GHG emissions, produces a valuable
energy source that can be profitably utilized in a number of ways, and
improves mine safety and productivity.
This brochure provides an overview of U.S. government agencies and
international organizations that provide different financing mechanisms
and support to develop CMM projects.
How much CMM is available for profitable recovery?
About 130 billion cubic feet (Bcf) of CMM were emitted in the United
States in 2002—the equivalent of 53 million metric tons of carbon
dioxide. Of that total, ventilation air methane emissions accounted for
more than 80 Bcf of emissions. Mines used 44 Bcf of drained gas in
2002, while emitting the remaining 8 Bcf from drainage systems.
175,000
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Ventilation Air Methane Emissions
(Vented to Atmosphere)
1990 1991 1992 1993 1994 1995
1997 1998 1999 2000 2001 2002
What are potential markets for CMM?
Natural gas pipeline or local distribution sales
The majority of CMM recovery projects in the United States involve
selling the methane directly to natural gas pipelines. The gas might
require processing to remove contaminants or blending (called "spik-
ing") with higher-quality gas to increase its heating value to meet
pipeline specifications.
Eectridty markets
Using CMM to produce power via turbines or internal combustion
engines is a potentially profitable way to generate revenue by selling
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Financing Coal
Mine Methane
Projects:
Opportunities for
Environmental,
Economic, and
Energy Gains
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that energy to the electricity grid. Alternatively, mines can reduce
costs by using the power generated onsite to run ventilation fans and
other equipment.
Alternative uses
There also are a number of alternative uses for CMM:
• Onsite use to offset mine costs associated with coal drying or mine
heating in winter time.
• District or regional heating.
• Manufacturing and processing end uses (e.g., dimethyl ether, car-
bon black, methanol, or desalination).
• Fuel to power fuel cells.
• Vehicular fuel in the form of liquified natural gas (LNG) or com-
pressed natural gas (CNG).
• Flaring.
Carbon markets
Methane emissions reductions associated with CMM projects might
be traded in emerging carbon markets. Contracts could generate rev-
enue for coal mines at a fixed price per emission reduction for a num-
ber of years.
What are typical project investment costs?
Capital investment costs for CMM projects vary greatly depending on
the project scope and site-specific requirements. Capital investment
requirements might include: drilling and infrastructure costs for
drainage wells; connection to the nearby natural gas pipeline; installa-
tion of a processing plant to remove contaminants; and procurement
of equipment such as compressors, engines, microturbines, and/or
generators. Other upfront investment costs include feasibility studies
and analyses, engineering, permitting, and royalties. Similarly, operating
costs will vary greatly depending on the site's characteristics. Detailed
feasibility studies and cost analyses are required to accurately gauge
individual project costs and projected returns on investments.
How are CMM projects financed?
A number of financial resources are available to private developers of
CMM projects, including grants, loans, and guarantees.
Private investment
In the United States, the vast majority of direct project funding has
come from the private sector—from mining companies or private
investment firms that have provided the capital investment for gas
processing, blending, and transport for pipeline sales.
Specialists in carbon markets. Some private investors and
brokers are focusing on financial investments in GHG emis-
sion reductions. A number of brokerages and specialists
offer assistance in GHG emissions transactions. A partial list
can be found at .
U.S. government agencies
For CMM recovery and utilization projects located in the United
States, several government agencies provide funding resources.
Department of Energy (DOE) grants have provided funding for a num-
ber of demonstration projects, including those using CMM to produce
power via internal combustion engines and fuel cells.
• DOE's Inventions and Innovations Grants Program is conducted
through the Office of Energy Efficiency and Renewable Energy
(EERE). These grants are open to U.S. citizens, U.S.-owned small
businesses, or U.S. institutions of higher learning.
• DOE's National Energy Technology Laboratory (NETL) sponsors
research to advance fossil energy exploration, supply, and end-use
technologies. Its primary mission is to ensure that U.S. fossil energy
resources can meet increasing demand for affordable energy.
Solicitations for research funding are posted on the Web site at
.
Small Business Administration Loan Programs. The Small Business
Administration (SBA) operates a loan fund that assists small business-
es engaged in energy technology and energy efficiency by guarantee-
ing loans if key conditions are met. SBA's CAPLines Loan Program
provides federally guaranteed revolving lines of credit to small busi-
nesses.
EPA's Environmental Finance Program assists communities in funding
environmental projects by helping to lower costs, increase investment,
and build partnerships,
International project Unancing
For international CMM recovery and utilization projects, a number of
U.S. government agencies provide assistance.
Overseas Private Investment Corporation (OPIC) supports projects in
developing countries and countries in transition by insuring U.S.
investments overseas, providing financing through loans and loan
guarantees, and financing private investment funds,
U.S. Export-Import Bank (Ex-lm Bank) helps finance overseas sales of
U.S. goods and services, and provides credit insurance, as well as
loan guarantees and project finance,
U.S. Department of Commerce BISNIS Finance Link provides export
assistance service for U.S. companies seeking financing, particularly in
the Newly Independent States of the former Soviet Union.
U.S. Trade and Development Agency (US TDA) provides funding for
feasibility studies that will promote the export of U.S. goods overseas,
including drilling equipment and power production equipment for
CMM recovery,
United Nations Development Programme (UNDP) and the United
Nations Environment Programme (UNEP) provide grant funding
through the Global Environment Facility (GEF) to developing or transi-
tional economies,
A natural gas pipeline.
World Bank. The World Bank's mission is to fight poverty and improve
the living standards of people in the developing world. It provides
loans, policy advice, and technical assistance and knowledge sharing
services to low- and middle-income countries,
• The International Finance Corporation (IFC), part of the World Bank,
has a mandate to further economic development through the private
sector. Working with business partners, it invests in sustainable pri-
vate enterprises in developing countries and provides long-term
loans, guarantees, and risk management and advisory services to its
clients,
Asian Development Bank (ADB). An independent, multilateral financial
institution dedicated to reducing poverty in Asia and the Pacific, the
ADB provides financial support for regional or country-specific devel-
opment projects through grants and loans. The ADB has supported
CMM projects in China,
Where can I learn more about financing CMM projects?
Resources describing financial resources in more detail and other
information, including CMM and financial experts, can be found by vis-
iting the CMOP Web site at .
In the United States, the vast majority of direct project
funding has come from the private sector—from mining
companies or private investment firms that have provided
the capital investment for gas processing, blending, and
transport for pipeline sales.
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