Liquefied-coal industry gains energy

McClatchy NewspapersAugust 22, 2008 

WASHINGTON — High oil prices are energizing a nascent liquefied-coal industry that hopes to power trains, planes and automobiles from the nation's coal reserves, using modern-day offshoots of technology that powered Adolf Hitler's war machine.

The U.S. military and commercial airlines are looking at liquefied coal and other alternative-fuel options to escape rising energy costs. The Crow Tribe recently signed a deal with an Australian company to build a $7 billion coal-to-liquid plant in Montana.

Nearly a dozen companies are pursuing plans for starting coal-to-liquid complexes early in the next decade to tap into a potential high-growth market fed by consumers seeking relief from gasoline prices, says Corey Henry, a spokesman for the National Mining Association, a leading member of the Coal-to-Liquids Coalition.

But whether the industry grows beyond its infancy depends largely on its ability to convince skeptics — including environmentalists and Democratic congressional leaders — that liquefied coal can be produced cleanly without contributing to global warming.

Industry supporters say it can, promoting technology that strips out carbon dioxide and other impurities. But the Natural Resources Defense Council calls liquefied coal "the height of folly," saying it would deepen the country's dependency on fossil fuels.

"This is the filthiest, most impractical and expensive way you could ever dream up to make fuel," said Julia Bovey, the environmental group's Washington spokeswoman.

The liquefied-coal industry could be an economic boost for coal-producing states such as Illinois, Kentucky, Pennsylvania, West Virginia and Wyoming. The U.S. has 27 percent of the world's coal supply — 493 billion tons — and is sometimes referred to as "the Saudi Arabia of coal."

In addition to abundant natural resources, industry advocates also cite readily available technology, notably the Fischer-Tropsch process, which has been used for nearly eight decades to convert both coal and natural gas into liquid fuel.

Invented in Germany in the 1920s by chemists Franz Fischer and Hans Tropsch, it was first extensively by Nazi forces during World War II. German synthetic-fuel plants were frequent targets of Allied bombing raids.

Today, the world's biggest user of the Fischer-Tropsch process is South African energy giant Sasol. Planned U.S. coal-to-liquid plants will either use Fischer-Tropsch or a gasification process that converts coal into gasoline.

Regardless of the choice of technology, coal-to-liquid proponents say, the result is an environmentally friendly fuel devoid of pollutants that contribute to global warming. Carbon dioxide from coal is pumped into the ground — the technical term is sequestered — and used to force out deposits of hard-to-get oil. Sulfur and other chemicals are also stripped out and developed into marketable byproducts.

Henry said the U.S. has made two previous, but unsuccessful, "kicks at the can" to develop a synthetic-fuel industry — shortly after World War II and during the energy crisis of the 1970s, when President Jimmy Carter established the Synthetic Fuels Corp. In both cases, the efforts evaporated when oil again became abundant — and cheap.

By contrast, he says, the price of oil is now "sky high." Also contributing to the bright prospects for a 21st century synfuel industry, Henry adds, is "the growing awareness of Americans that they need to reduce their dependence on foreign oil."

Most companies jumping in on the ground floor of coal-to-liquid development are also diversified into other alternative fuels, such as biomass. Pioneers in the synfuel industry include Baard Energy of Vancouver, Wash.; American Clean Coal Fuels of Portland, Ore.; Rentech Inc. of Los Angeles and Houston's DKRW Energy.

DKRW — founded by four former employees of Enron, the failed Houston energy company — is developing a liquefied coal plant through its DKRW Advanced Fuels branch, headed by Robert Kelly. DKRW, Kelly said, plans to have a liquefied coal plant "up and running" near Medicine Bow, Wyo., by 2013 to produce gasoline for the Denver market.

American Clean Coal Fuels is building a plant in Oakland, Ill., to produce 30,000 barrels of fuel a day after it starts up in 2012 or 2013. The plant is expected to cost about $3.6 billion, said president Stephen Johnson, and will create an estimated 800 jobs. Rentech has plans for 28,000-barrel-a-day plant in Mississippi that will make fuel from petroleum coke, a derivative of the oil-refining industry.

Among obstacles facing the industry are the high construction costs ($1 billion to $8 billion to build a plant), tighter credit, a slowing economy and opposition among Democrats in both houses of Congress. Legislation that could lead to government contracts and attract investors to the still-fragile industry is stalled in the House, complained Rep. John Shimkus, R-Ill., a leading coal-to-liquid advocate in Congress.

"Southern Illinois is perfectly situated for someone to consider a coal-to-liquid refinery," he said. "We have the coal, we have the work force. We're ready. All we need is a signal from the federal government."

McClatchy Newspapers 2008

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