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Liquid coal: A cheaper, cleaner 21st century fuel?

by Steve James

NEW YORK (Reuters) — When rail­roads ruled, it was the sweat­ing fire­men shov­el­ing coal into the fur­nace who kept the engines run­ning.

Now, near­ly two cen­turies after Stephen­son’s “Rock­et” steam loco­mo­tive helped ush­er in the Indus­tri­al Rev­o­lu­tion, that same coal could be the fuel that keeps the jet age aloft.

But with a twist: The planes of the future could be flown with liq­uid fuel made from coal or nat­ur­al gas.

Already the Unit­ed States Air Force has car­ried out tests fly­ing a B‑52 Strato­fortress with a coal-based fuel.

And Jet­Blue Air­ways Corp. sup­ports a bill in Con­gress that would extend tax cred­its for alter­na­tive fuels, push­ing tech­nol­o­gy to pro­duce jet fuel for the equiv­a­lent of $40 a bar­rel — way below cur­rent oil prices.

Major coal min­ing com­pa­nies in the Unit­ed States, which has more coal reserves than Sau­di Ara­bia has oil, are invest­ing in ways to devel­op fuels derived from car­bon.

The tech­nol­o­gy of pro­duc­ing a liq­uid fuel from coal or nat­ur­al gas is hard­ly new. The Fis­ch­er-Trop­sch process was devel­oped by Ger­man researchers Franz Fis­ch­er and Hans Trop­sch in 1923 and used by Ger­many and Japan dur­ing World War II to pro­duce alter­na­tive fuels. Indeed, in 1944, Ger­many pro­duced 6.5 mil­lion tons, or 124,000 bar­rels a day.

And coal-to-liq­uid (CTL) fuel is already in use else­where, like South Africa, where it meets 30 per­cent of trans­porta­tion fuel needs.

In addi­tion to being cheap­er than oil, advo­cates point out that the fuel is envi­ron­men­tal­ly friend­lier and would also help Amer­i­ca wean itself of for­eign oil imports.

“Amer­i­ca must reduce its depen­dence on for­eign oil via envi­ron­men­tal­ly sound and proven coal-to-liq­uid tech­nolo­gies,” said Jet­Blue’s founder and chief exec­u­tive, David Neele­man. “Uti­liz­ing our domes­tic coal reserves is the right way to achieve ener­gy inde­pen­dence.”

In a recent brief­ing to pow­er and ener­gy exec­u­tives, Luke Popovich, a spokesman for the Nation­al Min­ing Asso­ci­a­tion, said bio-diesel fuels offer lit­tle in the way of reduced car­bon diox­ide emis­sions, have enor­mous pro­duc­tion costs and present “seri­ous trans­mis­sion and infra­struc­ture” prob­lems.

In con­trast, CTL trans­porta­tion fuels are sub­stan­tial­ly clean­er-burn­ing than con­ven­tion­al fuels.

Popovich warned that the Unit­ed States risks falling behind eco­nom­ic com­peti­tors such as Chi­na, which plans to spend $25 bil­lion on CTL plants.

Amer­i­ca is “already behind the curve” when it comes to tap­ping the vast liq­uid fuel poten­tial that coal offers, said John Ward, of nat­ur­al resources com­pa­ny Head­wa­ters Inc. , which builds CTL plants.

He said plants in Amer­i­ca would like­ly each pro­duce 40,000 bar­rels of CTL fuel per day, with a typ­i­cal plant using 8.5 mil­lion tons of coal per year. In con­trast, Chi­na is focused on build­ing plants capa­ble of pro­duc­ing 60,000 bar­rels of CTL fuel per day, he said.

“There is sig­nif­i­cant investor inter­est in what could be a major growth oppor­tu­ni­ty,” said Paul Clegg, an alter­na­tive ener­gy ana­lyst with Natex­is Ble­ichroed­er.

“It is a viable tech­nol­o­gy, but the ques­tion is where do hydro­car­bon prices go now? Will we con­tin­ue to see oil above $40 a bar­rel for­ev­er?”

In Octo­ber, Mon­tana Gov. Bri­an Schweitzer and a con­sor­tium of ener­gy and tech­nol­o­gy com­pa­nies announced the state will be home to one of Amer­i­ca’s first CTL ener­gy plants.

The $1 bil­lion Bull Moun­tain plant is slat­ed to pro­duce 22,000 bar­rels per day of diesel fuel and 300 megawatts of elec­tric­i­ty — enough to pow­er 240,000 homes — in six years.

Schweitzer and the com­pa­nies behind the plant, includ­ing Arch Coal and DKRW Advanced Fuels LLC, say the pro­duc­tion of fuel and elec­tric­i­ty will not release the green­house gas­es asso­ci­at­ed with coal-gen­er­at­ed elec­tric­i­ty.

Arch has a 25-per­cent stake in DKRW and the com­pa­nies are also devel­op­ing a CTL plant in Med­i­cine Bow, Wyoming.

At a recent coal indus­try con­fer­ence, the heads of two of Amer­i­ca’s Big Four pro­duc­ers talked up CTL devel­op­ment.

Arch Coal Chair­man and Chief Exec­u­tive Offi­cer Steven Leer said it “could be a game-chang­er.” Chem­i­cal com­pa­nies and rail­roads were ask­ing him about using coal-based liq­uid fuels.

“It’s a whole new group of poten­tial cus­tomers,” he said.

Peabody Ener­gy Chief Exec­u­tive Gre­go­ry Boyce said of CTL: “Stay tuned, as the sec­tor con­tin­ues to evolve.

“I have heard reports that Chi­na can pro­duce oil for $25 per bar­rel from coal. We see it more in the $45 range here.”

Peabody recent­ly announced an agree­ment with Rentech to eval­u­ate sites in the Mid­west and Mon­tana for CTL projects. The plants could range in size from pro­duc­ing 10,000 to 30,000 bar­rels of fuel per day and use approx­i­mate­ly 3 mil­lion to 9 mil­lion tons of coal annu­al­ly.

Anoth­er alter­na­tive fuel com­pa­ny, Syn­tro­le­um , said recent­ly that its ultra-clean jet fuel was suc­cess­ful­ly test­ed in a USAF B‑52 at Edwards Air Force Base, Calif. The bomber flew with a 50/50 blend of CTL and tra­di­tion­al JP‑8 jet fuel.

“The pro­gram ... is the first step in open­ing up new hori­zons for sourc­ing fuel for mil­i­tary pur­pos­es,” said Bill Har­ri­son, a fuels expert with the Air Force Research Lab­o­ra­to­ry at Wright-Pat­ter­son Air Force Base in Ohio.

The flight test was part of the Depart­ment of Defense’s Assured Fuel Ini­tia­tive to devel­op secure domes­tic sources for the mil­i­tary’s ener­gy needs. The Pen­ta­gon hopes to reduce its use of crude oil and for­eign pro­duc­ers and get about half of its avi­a­tion fuel from alter­na­tive sources by 2016.


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