Best Practices in CMM Utilization Achieving NearZero Methane

Best Practices in CMM Utilization: Achieving Near-Zero Methane Emissions from Coal Mine Mining Prepared For: Workshop on Best Practice Guidance for Effective Methane Drainage and Use in Coal Mines Prepared By: Clark Talkington, Vice President ADVANCED RESOURCES INTERNATIONAL, INC. Arlington, VA 9 -10 March 2017 Ranchi, India

Outline • Review of CMM utilization technologies • Best practices in CMM project planning and development • Best practices for CMM project implementation and operation • Case study • Conclusions

Best Practices in CMM Utilization: Technology Overview

Utilization of drained CMM • Technologies that use or destroy drained gas are the same as those that use natural gas – Power generation from internal combustion engines and turbines – Boilers to provide heating and hot water (generally replacing coal) – Natural gas pipeline injection – Town gas (lower concentration and lower pressure) – Flaring – Chemical manufacturing – Industrial burners (e. g. , coal processing, fertilizer manufacturing, soda ash drying) – Mine shaft heating (direct burner or closed loop oil/water heat recovery) – CNG/LNG • The technical challenge for CMM utilization projects is not the technology; it is the successful integration with mining operations and optimization of gas availability

End-Use options for CMM • There is no hierarchy to define the “Best” end-use technology • A project developer will be guided by Transportation Fuel CNG Refueling Station Power Generation • Markets • Mining company priorities • Availability of financing • Public policy priorities Chemical Feedstock Methanol Production Plant Regional and Export Gas Sales Power Plant with 500 k. W Gensets Flaring Industrial Use Cooling Combined Heat & Power

Best Practice CMM capture and use employs range of degassing and utilization technologies to achieve Near. Zero CH 4 emissions mining Source: U. S. EPA CMM Finance Guide (based on original drawing from the UNECE Best Practice Guidance on Effective Methane Drainage in Use in Coal Mines

Over 200 CMM/VAM projects operational around the world The Global Methane Initiative (www. globalmethane. org) has identified more than 200 operational CMM/VAM projects at active and abandoned mines worldwide Power generation 709 MW of generation capacity Gas sales 2, 716 million m 3 per year Annual Emission Reductions Source: Global Methane Initiative database of CMM projects. Accessed October 2016. http: //projects. erg. com/cmm/ 29. 4 million tonnes CO 2 equivalent

Stakeholders Critical to Achieve Best Practice Mine Company Management Mine Staff CMM Project Developer Mine Safety Regulatory Authority Best Practices Mineral Rights Holder Company Shareholders Environmental Regulatory Authority

Best Practices in CMM Utilization: Planning, Developing, and Implementing a CMM Project

A great 20 th Century philosopher once said. . . Wise men say only fools rush in. . . Elvis Presley 1961

Steps in delivering a CMM Project 1. Project due diligence – Is a project there? 2. Project risk assessment and management plan - What are the risks and how can risks be mitigated? 3. Project structure – Who is taking the lead and how are the risks and rewards allocated? 4. Project design – Identifying the supplier and hoping for reasonable costs. 5. Financing – So how do we pay for it? 6. Operation – Up and running so it should be easy from here.

Project due diligence • Coal production history and forecast • Current and future mining method, mine layout, geologic cross-sections, understanding of vertical and horizontal stresses • Credible geologic data including reliable gas content, permeability, porosity, moisture content and ash content data for the mined seams and surrounding strata • Historic CMM and VAM production - if possible monitor current CH 4 production for a reasonable period • Topography, weather, site access, project altitude • Understand markets for CMM and market access • Foundation evaluation for CMM plant • Mine safety & health, occupational safety & health, construction, environmental, and noise regulations and permitting

; Assess project risks • CMM projects face many risks – OPEX and CAPEX increase – Regulations changes – Market prices collapse – Gas availability declines – Mine closes – Project developer and mine operator have disagreement • Not all risks are equal – some have greater impact than others • Know and understand the risks to develop effective mitigation strategies • Develop standardized risk assessment tool

; Common CMM deal structure Mine. Co Shareholders $ Mine. Co $ Developer $ $ Gas & Site Access $ $+ Investors $ Supplier CMM Project Developer Model Project is Special Purpose Vehicle (i. e. , “ring-fenced)

CMM project design • Ensure site is accessible for deployment of equipment. • Determine preferred end-use option(s) based on market analysis. • Take steps to improve gas availability if necessary. • If selling power to the electricity grid or CMM to the natural gas grid engage utility and dispatch authority to ensure interconnect is possible and power/gas can be dispatched. • Develop a professional and transparent proposal process and issue Request for Proposal to multiple equipment suppliers. • Work closely with the chosen supplier to spec equipment and size the plant. • Plant should be designed to employ multiple end-use options to achieve Near-Zero emissions. • Obtain all necessary permits and authorizations. • Ensure access to adequate funds for CAPEX and 1 st year OPEX including staffing

Financing CMM Projects • Unless self-financed, securing 3 rd party capital requires valid revenue source from environmental or energy commodity markets. – However, financially strong companies can finance off their balance sheets • Equity – Equity financing is generally easier to obtain than debt – Investors expect high returns • Debt – Commercial banks reluctant to issue debt to CMM projects; Bilateral and multilateral financial institutions more open to CMM projects – For debt some banks have required 100% cash collateral • Suppliers may be open to vendor financing. • Project developers are expected to demonstrate significant “skin in the game” to secure financing

Implementing & operating a CMM project • 2 -4 weeks is often budgeted for start-up and commissioning but expect longer – there always problems • Establish a clear chain of command with defined responsibilities for all staff associated with the plant • Implement a formal liaison program between the mine and the CMM project operator • Invest in and implement a quality monitoring, surveillance, and maintenance plan for the plant site, and address technical and operational problems quickly • Implement a monitoring, reporting, and verification program for energy sales and greenhouse gas emission reductions • Establish a continuing education and training program for staff covering plant operation and maintenance and occupational health and safety

It should be easy now, right? “Everyone has a plan until they get hit” Mike Tyson • Gas availability declines • Equipment fails • Mine idles or closes • Staffing turnover • Markets deteriorate • Financing margins are called • Regulations change • Mine management priorities change

Best Practices in CMM Utilization: CMM Project Development Case Study: Duerping Mine, China

Case Study: Duerping Coal Mine, China • Owned by Xishan Coal & Electricity Co Ltd, a subsidiary of Shanxi Coking Coal Ltd (Jiaomei Group) • Xishan Coal Field near Taiyuan City, Shanxi Province • 1, 600 m above sea level • Metallurgical coal mine • Production capacity = 5 Mtpa • 700 Mt reserves • 50 year life • Relative emissions = 17. 7 m 3/t (567 ft 3/st) • CH 4 emissions increasing as mine goes deeper and production increases • Drainage system before project – in place prior to project development – Prior CH 4 concentrations: 25 -30% – Drainage efficiency = 15% • No CMM utilization prior to the CMM utilization project *Acknowledgment to Sindicatum Sustainable Resources and Xishan Coal & Electricity Co.

Near Zero Emission Mining Objectives for the Duerping Mine CMM Project: 4) 4)

Approach for the Duerping Mine CMM Project: Steps 1 and 2 Step 1: Determine Gas Availability • Confirmed gas content data, structure of the coal matrix and permeability of the coals • Modeled CH 4 liberation rates Step 2: Improve Gas Quality & Quantity • Enhanced methane purity – Improved borehole sealing (2 -stage) – Regulated Suction • Raised gas capture – Increase orifice - plate size in the choke – Improved borehole design and pattern – Controlled extraction from sealed areas

Step 3: CMM project design • CMM power plant includes: – Power generation - 12 MW – 5000 m 3 per hour enclosed flare – Closed loop oil-based heat recovery system – Passive vent – Minimal gas processing: dewater with knock-out pot and chiller and use 2 -stage dust control • Employed a conservative approach for power plant design – Sized project at 80% of the average CH 4 flow – Assume 80 -85% availability for gas engines

Step 4: CMM Plant Operation • After start-up, implemented best practices to maintain plant operations – Training for mine and SSR staff – Team to worked with the mine staff to maintain gas availability. – Telemetry to monitor operations remotely. – Regular walk-throughs and scheduled maintenance including • Operational monitoring – Constant observation to ensure project is operating as planned – Alarms and notice system alert staff to problems

Step 5: VAM Plant • Preparation – Installed continuous emissions monitoring system for 3 years recording CH 4% data every 15 minutes – Regular air flow data at the fan provided by mine staff • Contracted with manufacturer in 2011 – One 35 m 3/sec RTO – One 20 m 3/sec RCO – Plant is destruction only • Project registered as CDM project in November 2011 • Construction in 2012/2013 • Plant is currently idled due to low CDM prices

Sindicatum Sustainable Resources Duerping CMM Power Plant • 12 MW power using IC engines • Flaring • Waste heat recovery • Passive vent Courtesy of David Creedy, Ph. D. & Sindicatum Sustainable Resources, Inc. Duerping Phases 1&2

Duerping power plant & flare performance 2, 500, 000 Cumulative CERs 2, 000 1, 500, 000 1, 000 Annual CERs 500, 000 0 2/09 - 6/0910/094/1010/103/1110/118/12 9/1212/12 1/13 - 2/14 3/14 - 5/15 6/15 - 8/16

Best Practices in CMM Utilization: Conclusions

Conclusions • Every project is unique – can systemize general development approach but will need to tailor each CMM project to the unique circumstances at that mine. • Projects have many moving parts. Be prepared to face range of issues – changes in mine operations, gas quality issues, grid issues, engine maintenance, etc. • A dedicated, experienced in-house engineering team ensures that technical problems can be resolved quickly. • Economics are improved significantly if flaring is included in project design and there is a market for carbon offsets or other revenue drivers such as feed-in tariffs. • Automated data collection and processing increases accuracy, expedites verification, and can save money over the long term. • When modeling project finances, build adequate contingencies into the model. • Even at a near-zero emission project, there will be some GHG emissions – it is virtually impossible to eliminate all GHGs

Thank You Clark Talkington Vice President +1 (703) 528 -8420 (office) +1 (703) 966 -9755 (cell) ctalkington@adv-res. com Office Locations: Washington, DC 4501 Fairfax Drive, Suite 910 Arlington, VA 22203 Phone: (703) 528 -8420 Fax: (703) 528 -0439 Houston, TX 11490 Westheimer, Suite 520 Houston, TX 77077 Phone: (281) 558 -9200 Fax: (281) 558 -9202 Advanced Resources International www. adv-res. com Knoxville, TN 603 W. Main Street, Suite 906 Knoxville, TN 37902 Phone: (865) 541 -4690 Fax: (865) 541 -4688