COAL can go to liguid for U.S. needs

More on Coal to liquid

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.
Copyright 2006 Reuters