U.S Fuel Corp. (fka USFF)

[techjunkie]

Coal rush
by John S. Adams

http://www.missoulanews.com/News/News.asp?no=5158

Schweitzer’s plan to convert coal to gas

You don’t have to be an independent trucker to feel the gas squeeze these days. With crude oil prices hovering close to $70 per barrel and gasoline topping $4 per gallon in some parts of the United States in the wake of Hurricane Katrina, Americans are looking for answers to the nation’s growing fuel crisis.

Gov. Brian Schweitzer believes Montana is sitting on the answer, and it’s in the form of the nation’s second largest coal reserve. Schweitzer wants the state to begin using an 80-year-old technology developed by Nazi Germany to turn Montana’s vast supplies of coal into usable, ultra-clean-burning diesel and aviation fuel. Sound like a plot from an Ira Levin novel? Maybe, but there’s far more fact than fiction to the process of converting coal into usable liquid fuels, and Schweitzer thinks it could be a boon for the state and the nation.

“Unless we choose to change our appetite for foreign oil, we will continue to put money directly into the hands of people who are trying to change our way of life,” Schweitzer told the Independent in an interview last week.

During a speech in Seattle last month to launch the Progressive Legislative Action Network, Schweitzer talked about his idea for turning coal into liquid fuels and billed it as a way for the United States to free itself from dependency on Middle East oil.

“We can do it cheaper than importing oil from the sheiks, dictators, rats and crooks that we’re bringing it in from right now,” he said.

The process of turning coal into liquid fuel isn’t new. During World War II, General George S. Patton’s Third Army drained synthetic fuels from captured German vehicles after he overextended his fuel supply lines. Patton’s troops later rolled into Germany using synthetic fuel manufactured from coal.

The original process was developed by German researchers Franz Fischer and Hans Tropsch in the 1920s. The Fischer-Tropsch process, as it came to be known, uses gasified coal or natural gas to produce paraffin wax that can then be refined into diesel, naphtha and liquid petroleum gasses such as butane and propane.

Petroleum-poor but coal-rich Germany used the Fischer-Tropsch process to supply its war machine with diesel and aviation fuel after allied forces cut off petroleum imports. Germany’s yearly synthetic oil production reached more than 90 million tons in 1944.

The Fischer-Tropsch process was also used to produce most of South Africa’s diesel fuel during that country’s isolation under apartheid. The South African company Sasol has produced about 1.5 billion barrels of synthetic fuel from about 800 million tons of coal since 1955 and continues to supply about 28 percent of that nation’s fuel needs from coal.

While the technology for producing synthetic fuels from coal or natural gas has been around for decades, it was not profitable when oil prices were below $30 per barrel.

“The only reason you would have built [a Fischer-Tropsch plant] over the last 20 years is because of political reasons,” says Schweitzer. “South Africa is producing about 200,000 barrels a day, but they built those plants in response to fuel embargoes.”

With oil prices more than doubling the break-even point of producing synthetic fuels, oil companies and world leaders are beginning to take a serious look at the future of Fischer-Tropsch fuels. Schweitzer predicts they could be produced at a cost of about $1 per gallon in Montana if large-scale commercial plants could be developed in the state.

China, the world’s top producer and consumer of coal, is escalating efforts to make use of its estimated one trillion tons of coal. China planned to invest about $15 billion in several new projects, according to the Xinhua News Agency. Royal Dutch/Shell and Sasol are separately in the process of constructing 10 coal-to-liquids plants there.

Sasol and the natural-gas rich country of Qatar are working on a $900 million joint venture to build the Oryx GTL (gas-to-liquids) plant. The project is billed as the world’s largest and most advanced gas-to-liquids plant and is “poised to deliver the world’s cleanest diesel early in 2006” when the plant begins commercial operation. Closer to home, the Great Plains Synfuels Plant near Beulah, N.D., began operating in 1984 in response to the 1970s energy crisis and today produces more that 54 billion cubic feet of natural gas using the Fischer-Tropsch process.

“The Department of Energy was going to build hundreds of those plants but then oil prices dropped and we all forgot about it,” says Schweitzer, who visited the Beulah plant three weeks ago. “The cost of production [of syngas] at that plant last year was $3 per MCF (thousand cubic feet). Now the price of [natural gas] is $7 per MCF.”



Franz Fischer at work in 1918.





Cleaner energy
Whereas petroleum-based fuels are high in greenhouse gas emissions, Fischer-Tropsch fuels burn cleaner and are more environmentally friendly to produce. According to a 1999 study published by the Society of Automotive Engineers, when burned in a standard semi tractor, conventional diesel emitted 12 percent more nitrogen oxides and 25 percent more particulate matter than Fischer-Tropsch fuel. Nitrogen oxides are the primary contributor to smog, while particulate matter is a threat to human health.

“I would not even be interested in this if this wasn’t a cleaner, less polluting process than gasoline and diesel,” Schweitzer says.

According to Eric Stern, the governor’s senior adviser on the project, one of the reasons Fischer-Tropsch fuels burn cleaner is because many of the impurities are removed during the synthesis.

“Sulfur, arsenic and mercury are removed entirely,” says Stern. “They are taken and sold off for safe use in other industries.”

Carbon dioxide, the major contributor to global warming, is also removed and sequestered underground or used for advanced oil recovery.

Mel Scott, a spokesman for Syntroleum, a gas-to-liquids company with a demonstration plant in Tulsa, Okla., says Americans would probably be surprised if they started up a diesel engine burning Fischer-Tropsch fuel.

“The first thing you would notice is there is no smoke behind your vehicle; there’s no odor and your engine is going to run smoother and would start immediately,” Scott says.

Scott says that’s because Fischer-Tropsch diesel is ultra-clean and contains almost none of the impurities found in petroleum diesel.

According to Schweitzer, getting to the coal is also more environmentally friendly than the hard rock mining responsible for much of the environmental damage in the western part of the state.

“For 40 years we have been surface mining in eastern Montana. Basically you peel off the top forty feet of overburden and remove about 40 feet of coal. When you’re done mining you put the material back in,” Schweitzer says. “This process is basically deep farming. The overall environmental impacts are substantially less than hard rock mining.”


Building partnerships
Significant public and private investments will be required before Montana can become a national energy powerhouse. Shell, BP and Exxon are all working on gas-to-liquids technology and Schweitzer recently met with Shell president John Hofmeister and General Electric’s CEO Jeff Immelt to discuss the future of coal-to-liquids in Montana. Schweitzer said representatives from Sasol are coming to Montana later this month as well. Sasol is the only company in the world producing liquid fuels from coal on a commercial level, and they do it with patented technology that can’t be bought off the shelf. Syntroleum is also interested in the prospect of turning Montana coal into liquid fuels, but the company will need large investments to develop its own technology.

Syntroleum uses a patented process of turning natural gas into synthetic fuels, and Mel Scott says the company, with Sen. Conrad Burns’s support, is trying to secure federal research and development dollars set aside in the recent highway and energy bills to add coal gasification to the front end of the process.

“What we’re looking at is trying to help build an industry. I think the government has the foresight to see we can’t continue down the crude path forever,” says Scott.

Scott says if only five percent of domestic coal reserves are converted to synthetic fuel, that would be equivalent to the 21 billion barrels in the United States crude oil reserves.

The federal government sees the possibilities of the technology, and built an 80-percent loan guarantee from the Department of Energy into the new energy bill. According to Schweitzer, lenders are interested in investing in the development of a coal-to-liquids technology with such a guarantee.

“If we build a $1.5 billion plant, $1.2 billion of that is guaranteed by the federal government,” says Schweitzer. “I just came back from a meeting with venture capitalists in San Francisco. Once we explained what we are trying to do their tongues were hanging down to their bellybuttons.”

The Department of Defense is also interested in seeing the nation’s coal converted to battlefield diesel fuels. According to Stern, Schweitzer met with Dr. Theodore K. Barna, assistant deputy under secretary of defense for advanced systems and concepts, when he was in Washington, D.C., last May. Barna reportedly told Schweitzer the U.S. military wants to convert all battlefield equipment, including fighter planes, to one single fuel.

“When [Barna] said, ‘we want this fuel that we can make out of coal,’ the governor was very interested and immediately began researching Fischer-Tropsch,” says Stern.

Schweitzer predicts Fischer-Tropsch plants could begin producing synthetic fuels in as little as five years.

“We are already the leaders in this,” says Schweitzer of Montana’s role in the future of Fischer-Tropsch fuels. “I want to create the first coal-to-liquids plant in the country here in Montana. This will be the precursor to others who want to build plants in the West.”

Since the state owns much of Montana’s coal reserves, Schweitzer says the state would have an equity partnership role in the production of Fischer-Tropsch plants here.

Schweitzer says one ton of Montana coal could produce 1.5 barrels of diesel or aviation fuel. Considering the state has an estimated 120 billion tons of coal, that would mean Montana could produce 180 billion barrels of fuel, says Schweitzer.

“My vision is that in a dozen years from now, well after I’ve left office and people don’t even remember my name, that the Legislature will have more money than they know what to do with,” says Schweitzer.

Too good to be true? Not according to the governor.

“Here’s the deal,” explains Schweitzer, “This sounds too good be true. Well, this happens to be one of those cases where it’s a win-win-win. More jobs, cleaner energy and a better economy.”