Copper Fox Metals Inc.
Welcome To the Copper Fox Metals Inc. HUB On AGORACOM Copper Fox Metals is a Canadian-based resource company focused on developing the world-class Schaft Creek Project in northwestern British Columbia.
There was some talk about power usage and the costs for various options as they would apply to large mining projects.
Those that believed diesel generation was not that cost intensive compared to building transmission lines may find this article helpful.
Here they basically look at 3 various sized mines and in all studies diesel generation was extremely onerous. I've only bolded a few statements for clarity.
ENERGY FOR YUKON: THE NATURAL GAS
OPTION
Eagle Plain Case Study
(Energy to Mines (E2M) - Update 2010)
Prepared for the Yukon Department of Energy, Mines and Resources,
Oil & Gas Resources Branch by:
Wolf Island Engineering, Leading Edge Projects Inc., Confer Consulting
Ltd. and Ellwood Energy Projects Ltd.
November, 2010
2
Eagle Plain Case Study
Executive Summary
Project Description
This study compares the relative costs of various energy supply options for three potential
Yukon mine sites with very different energy requirements. The selected mines are: the Casino
Mine located west of Pelly Crossing requiring 100 Megawatts (MW); the Selwyn and
MacTung Mines on the eastern border of the Territory (33 to 45 MW); and a hypothetical mine
located 25 km from the existing Yukon Energy Corporation’s (YEC) electrical grid with an
electrical demand of five MW. The latter is representative of previous mine developments in
Yukon.
Several of the supply options are based on transporting natural gas to a generation station at
Stewart Crossing and utilizing the Yukon high voltage electrical transmission system to deliver
power to customers. The Whitehorse-Aishihik-Faro (WAF) grid currently has capacity to
transmit an additional 40 MW. A significant benefit of this supply option is the provision of
energy to YEC to meet its electric generation requirements.
In the course of preparing this study, many scenarios were modelled. The following scenarios
are presented in this study to provide a range of possible energy supply options:
Electrical generation at the mine sites using diesel delivered by truck (the base case for
all mines);
Electrical generation at the Casino mine site using natural gas delivered by pipeline
from Eagle Plain;
Electrical generation at the Casino mine site using natural gas delivered as Liquefied
Natural Gas (LNG) by truck from Eagle Plan and LNG from Stewart Crossing (gas
piped from Eagle Plain to Stewart Crossing);
Electrical generation at the Selwyn and MacTung mine sites using natural gas delivered
as LNG by truck from Ft. Nelson, BC;
Electrical generation by YEC at Stewart Crossing using natural gas delivered by
pipeline from Eagle Plain. Existing and new transmission lines are then used to
transmit the electricity to the three mine projects; and
Electrical generation by YEC at Whitehorse using natural gas delivered by pipeline
from the Alaska Highway Pipeline Project (AHPP) into new or expanded transmission
lines from Whitehorse to Casino.
Results
Each energy supply option assumes a mine life of 10 years and a fuel inflation rate of 3% per
year (1 % above inflation). The price of diesel reflects 2009 delivered fuel prices for YEC and
Yukon Electrical Co. Ltd. (YECL).
1 For the purposes of this study the price of natural gas is
1
See Page 29 of the E2M 2008 Case Study. YEC/YECL filing to the YUB dated February 2010 estimated the
2009 average rate for the incremental cost of diesel is 27.99 cents/kWh with the exception of Old Crow.
3
based on an estimate of the cost of development and production at the wellhead. The actual
price will be a negotiated price between the gas provider and its customer. The various energy
supply scenarios are compared on the basis of the real levelized cost of energy over the mining
project life.
In every scenario, using diesel is substantially more expensive than the natural gas options in
relative cost terms. This suggests there is substantial opportunity for a supplier of natural gas
and a customer to reach a mutually beneficial agreement. The natural gas supplier gains an
opportunity to sell what has been a stranded resource. The buyer gains lower energy costs and
the potential for long term energy price stability through contracts. Yukon receives direct and
indirect benefits from increased economic activity and an additional energy source which will
strengthen Yukon’s energy supply system. In addition, using natural gas results in 34% less
greenhouse gas (GHG) than using diesel.
The study also found that for the size and duration of the potential energy loads envisioned it is
less expensive to build a small diameter pipeline than an electrical transmission line. Further,
the study found that it was feasible to utilize the WAF grid to deliver energy from central
Yukon to Eastern Yukon. This provides more options for servicing mine loads in the east with
natural gas from Eagle Plain.
A final observation of the study is that the Alaska Highway Pipeline Project can materially
assist in the commercialization of Eagle Plain gas to serve local markets. The AHPP could
provide impetus to construct a pipeline connecting MacKenzie Delta natural gas to the AHPP
at Whitehorse. This large diameter pipeline would transect Eagle Plain basin which would
significantly lower the cost of service for Eagle Plain gas. The Eagle Plain basin could provide
an additional 300 or 400 million cubic feet per day (MMscfd)
2 to AHPP through this
connecting pipeline.
2
Figure 12, page 30, Fekete Engineering, North Yukon Conceptual Oil and Gas Development Scenario and Local Benefits
Assessment, November 2005.
4
Background: E2M Study 2008
In 2008 the Oil and Gas Resources branch (OGR) released the Energy to Mines (E2M) Study.
3
The report was a preliminary investigation of the “potential opportunity to utilize natural gas in
electric power generation in Yukon and to test the economic viability, risks and obstacles of
the concept. To do this, a proposed Yukon pipeline grid was designed to ship natural gas from
Eagle Plain to various mine sites and electrical generation sites in Yukon.” The study found
that natural gas electrical generation, using gas delivered to the mine site by pipeline from
Eagle Plain, compared favourably with extending electrical transmission lines from the YEC
electric grid. As well, the study found that both natural gas generation and electrical
transmission to mine sites were much more economic than diesel-generated power at the mine
sites.
E2M concluded that there was merit in undertaking a more in-depth natural gas/electric
generation study. The result of the more in-depth analysis is this paper -
Eagle Plain Case
Study
. As indicated by the title it is one component of the project Energy for Yukon: the
Natural Gas Option
. It updates the numbers in the original study and assesses other scenarios
and delivery options for utilizing natural gas as an energy source. In both reports the cost
estimates, while stated in absolute terms, are more usefully viewed in relative terms.
This study was completed by Wolf Island Engineering with the cooperation, analysis and input
from Leading Edge Projects Inc., Confer Consulting Ltd. and Ellwood Energy Projects Ltd.
Scope and Methodology
The scope of this study is to determine and compare the costs of the various options for
generating electricity with natural gas from Eagle Plain for various Yukon mine sites as well as
for transmission on the YEC electric grid. The proposed mines used in the study are the
Casino Mine located west of Pelly Crossing, the Selwyn and MacTung mines located on the
eastern Yukon border and a hypothetical mine located 160 km from Stewart Crossing and 25
km from the existing YEC electrical grid with a demand of five MW and a life of seven years.
The latter is representative of several previous Yukon mines. Location of these mines can be
seen on Figure 1 – Advanced Exploration Projects in Yukon.
The various energy supply options compared in this study are as follows:
Electrical generation at the mine sites using diesel delivered by truck (the base case for
all mines);
Electrical generation at the Casino mine site using natural gas delivered by pipeline
from Eagle Plain;
Electrical generation at the Casino mine site using natural gas delivered as LNG by
truck from Eagle Plain or from Stewart Crossing with gas piped to Stewart Crossing;
Electrical generation at the Selwyn and MacTung mine sites using natural gas delivered
as LNG by truck from Ft. Nelson, BC;
3
Wolf Island Engineering, Energy to Mines Study, January 10, 2008, revised December 1, 2009.
5
Electrical generation at Stewart Crossing using natural gas delivered by pipeline from
Eagle Plain with a new transmission line (Casino), or into the existing grid with new
transmission lines (Selwyn, MacTung, or hypothetical mine); and
Electrical generation at Whitehorse using natural gas delivered by pipeline from the
AHPP into new or expanded transmission lines from Whitehorse to Casino.
The mining locations and the YEC electrical transmission grid are also shown on Figure 1 –
Electrical Infrastructure, Mining and Oil & Gas in Yukon.
Figure 1 – Yukon’s Transmission System and Proposed Mines
6
Conceptual Yukon Pipeline
For the purposes of this study, a Yukon pipeline was conceptually designed in order to deliver
natural gas to central Yukon. For more detail, see Figure 2 – Conceptual Yukon Pipeline Grid,
on the next page.
The “Yukon Mainline” would take gas from the Eagle Plain basin and follow the Dempster and
Klondike highways to Stewart Crossing to take advantage of the 138 KV transmission grid
being extended from Pelly Crossing to Stewart Crossing. Gas delivered to Stewart Crossing
would generate electricity to be delivered to customers through the existing electric grid and
possibly new transmission lines depending on the required load. As well, the Stewart Crossing
Compressor Station could deliver natural gas into a Casino Lateral. This lateral would be
constructed cross-country delivering natural gas to the Casino mine site where it would be used
to generate electricity for the mine operations.
The Stewart Crossing delivery point could also be used to produce LNG for delivery by truck
to smaller and/or remote mines in central and southern Yukon.
Figure 2 – Conceptual Yukon Pipeline
Eagle Plain
Production
Stewart
Crossing
Casino
Yukon Energy takes 25 MMscfd to
generate 100 megawatts for sale to
a major customer (e.g. Casino) and
some for the electrical grid.
Casino – uses
100 megawatts for
mine operation
504 km of 8 inch
pipeline to Stewart
Crossing flowing
50 MMscfd
125 km of 6 inch
pipeline flowing 25
MMscfd
Yukon
Mainline
Casino
Lateral
Conceptual Yukon Pipeline
E4Y - 2010 Project; Eagle Plain Case Study
7
Yukon’s Mining and Electrical Generation Sectors
As can be seen from Graph 1
4, Yukon’s electrical demand from mines alone is forecast to be in
the order of 200 megawatts (MW) by 2016. Of the 200 MW approximately 20 MW is within
the service range of YEC’s transmission grid. The current installed capacity of YEC is 139
MW of which 75 MW is hydro generated.
5 While this is sufficient to meet current demand,
anticipated new industrial load combined with base load growth will require additional
generation capacity as soon as 2012 to avoid relying on diesel generation. The YEC planned
hydro expansion (Mayo B) will assist in meeting this gap. However, if all the new industrial
loads within the service range of YEC proceed as proposed, YEC will be short of hydro
generated energy in the near future. Alternatively, if none of the proposed new mines proceed
YEC will have sufficient energy to meet its future obligations with its existing hydro generated
energy.
As a regulated utility, YEC must prudently balance planning and assessing new investments
for future load growth while at the same time not over building new generation. As an isolated
electric grid YEC does not have the option of selling surplus energy into other markets and
buying deficits from adjacent generators. Getting the balance of load and generation right is
even more problematic if trying to balance the differing characteristics of hydro and mining
projects.
Mining projects respond to the commodities market and for this reason frequently need to be
developed relatively quickly, paid for quickly and ramped up and slowed down quickly over
their lives in response to mineral prices.
Hydro projects, high voltage transmission lines and pipelines are capital intensive, require long
lead times to plan and build and have fixed costs with a long payback period. For this reason
they typically require one or more credit worthy customers who are willing to sign long-term
contracts before financing can be secured.
Electrical generation projects using either turbine or reciprocating engines, with diesel or
natural gas as the fuel, typically have more flexibility. This is also the case for LNG
manufacturing and delivery facilities. They can often be staged to better match the build up of
power needs over time, thus requiring lower initial capital. They can often be modularized in
truckable units and hence can be moved to new locations if required.
For the purpose of this study, proposed mines off the electric transmission grid were selected
for assessing natural gas as an alternative energy source. The Casino mine is somewhat
atypical of previous mining projects in Yukon in that it will have a relatively high power
requirement and is expected to be in operation much longer than most previous projects.
Therefore, Casino was chosen as a base market for natural gas electrical generation given its
proposed energy requirement of 100 MW of demand over a 30 year mine life. The Selwyn and
MacTung mines near the Yukon/Northwest Territories border were selected based on their
advanced stage of exploration, significant energy requirements (33 to 45 MW) and proximity
to each other. These mines represent an intermediate group in terms of power requirements
and longevity.
4
Department of Economic Development
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Copper Fox Metals Inc.
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