Transgas Development Systems LLC announced it’s plans to build a coal-to-liquids plant in Mingo County, at Roanoke, West Virginia. The project is expected to cost $3 Billion and is scheduled to be completed in 2013. When complete, the plant will convert 3 million tons per day of coal to 6.5 million barrels per day of ultra clean gasoline.

Transgas has selected Uhde’s proprietary PRENFLO gasification technology. Transgas has signed a license agreement with Uhde Corporation of America. The plant will have two 1,000 MWth PRENFLO (TM) gasifiers in the Direct Quench version. The syngas will be converted to gasoline.

The project will meet or exceed the EPA standards and requirements for regulated pollutants. The facility will be carbon capture ready. It’s unknown if the project plans to sequester the CO2, transport the CO2 to oilfields for use in enhanced oil recovery operations or release the CO2 to the atmosphere.

Transgas is considering financing options other than the traditional solicitation of private, non-recourse financing for the project. It’s reported that one option Transgas is considering raising equity with a stock offering to raise funds to construct the project.

A recently released study by the Rand Corporation concludes that a U.S. Coal-to-Liquids (CTL) industry will be cost competitive with petroleum refineries. It also concludes that a domestic CTL industry will be equivalent to the petroleum industry regarding greenhouse gas emissions when CO2 is captured and sequestered underground or used for enhanced oil recovery.

The report was prepared at the request of the Department of Energy and the U.S. Air Force. The Rand Corporation is known for preparing neutral reports that are well grounded and based on science and facts. It is intended to be a reference document for federal agencies to use when evaluating legislation regarding alternative energy.

The Rand report, Producing Liquid Fuels From Coal, is 200 pages and can be downloaded in electronic form or purchased as a paperback book. The report is positive about developing a CTL industry in the U.S. The summary states these reasons for developing a CTL in the U.S.:

The U.S. has 270 billion tons of coal reserves and can support a CTL industry far into the future. The technology for producing CTL is proven and has advanced in recent years. The technology for capturing and sequestering CO2 has advanced and a CTL industry can be equivalent to the existing petroleum refining industry regarding CO2 emissions. A domestic CTL industry offers the United States economic benefits and strategic security benefits. A domestic CTL industry can compete financially with petroleum refineries for producing liquid fuels.

The cost to build CTL plants is high approximately $2 to $4 billion each plant. There are risks that are impediments to developing this industry with private investment. A domestic CTL industry is important for the U.S. For this reason, the United States government should offer a package of financial incentives and risk mitigation measures to propel the development of the CTL industry.

A domestic CTL industry could be providing the U.S. with production in excess of 3,000,000 barrels per day of liquid fuels by 2030. This will achieve a large measure of T. Boone Picken’s recommendation that the U.S. wean itself from importing foreign crude oil.

The Rand Corporation report card gives CTL a “Passing” grade.

The Federal bailout is necessary, but the Economic Recovery Plan should be used for projects that will set the U.S. on a path for long term prosperity. Construction of Coal-to-Liquids plants will produce jobs and energy independence for the U.S. economic recovery. Most Americans are convinced that the bailout is needed for the mortgage industry and quite a few are convinced it’s also necessary for the auto industry. But, the new Obama administration will be developing an Economic Recovery Plan for long term prosperity. The construction of new Coal-to-Liquids plants in the U.S. should be included in the Economic Recovery Plan.. Each project would be about employ approximately 2,000 construction workers, provide business for the EPC and manufacturing companies nad create permanent jobs and lasting value to the local community tax base. Each project will be similar in size to the construction of a grassroots refinery.

Coal-to-Liquids is coal processing technology that does not release emissions into the air the way the existing coal power plants do. Skeptical? I don’t blame you. But, consider this. Refineries don’t BURN crude . . . they CONVERT into other useful products. The same is true of Coal-to-Liquids plants. CTL plants don’t BURN coal . . . they CONVERT it into other useful products much the same as a refinery. Just as a refinery creates gasoline, diesel and jet fuel from crude oil, a CTL plant creates the same products gasoline, diesel and jet fuel from coal. That’s not a typo. It’s correct and coal-to-liquids technology is tested, in service and proven.

If you have seen some “Clean Coal” commercials on television, this is the technology. It’s commonly referred to as clean coal technology, because the coal is converted in a closed loop system of pipes and equipment just like a refinery. In a closed loop system, the synthetic products can be recirculated through specialized equipment until the contaminants are removed. In fact, gasoline, diesel fuel and jet fuel are actually considered to be cleaner that the petroleum derived products.

So Why Doesn’t The U.S. Have These CTL Plants?

1. The oil industry lobby is powerful.

2. The CTL plants are very expensive and government loans or loan guarantees are needed.

3. The environmentalists are against anything that has the word “coal” in it. We all are interested in protecting the environment, but this technology is not any more dirty than a refinery when the CO2 is sequestered or used for enhanced oil recovery.

The benefits of coal-to-liquids plants for the U.S. are staggering. The U.S. has more proven coal reserves than any other country in the world including Russia and China and they are much larger land masses. The U.S. is the Middle East of coal. With an energy policy that supports both coal and petroleum, a coal-to-liquids industry in the U.S. can quickly achieve T. Boone Pickens dream of this county becoming energy independent and no longer dependent on foreign crude oil. This is actually a strategic objective of the Air Force. The gasoline, diesel and jet fuel products can be transported by truck or pipeline to where they are needed. In addition to long term prosperity and security, the construction of these plants will provide jobs for engineering companies, construction workers and equipment manufacturers.

Why it’s important now.

Up to now, the past administrations have taken the position that the Federal government shouldn’t be assisting private industry. Finally in 2008, the Department of Energy offered to provide $8 Billion in loan guarantees for coal-to-liquid plants. Each plant costs from $2 B to $5 Billion so this is a paltry amount especially when one considers that now the Federal government is spending more than $700 billion on bailouts.

The Economic Recovery Plan should include substantial loan funding and loan guarantee programs for the fledgling U.S. coal-to-liquids industry. This is the kind of Federal government support that the country needs to strengthen the economy.

The Crow Nation signed a 50 year agreement with the Australian-American Energy Co. to build and operate a coal gasification Coal-to-Liquids plant on the reservation near Billings, Montana. Many Stars Coal-to-Liquids project will be a win-win project for the Crow Nation, the State of Montana and Australian-American Energy. The project is the Many Stars Project and is expected to cost $7.4 billion.

Governor Schweitzer was at the Many Stars Project signing ceremony. Mr. Schweitzer has long been a proponent of coal gasification for the State of Montana. Mr. Schweiter met representatives of Australian-American Energy and encouraged them to visit Montana and consider the state for a coal-to-liquids project.

The plant will convert 14,000 tons per year of coal to syngas and produce 50,000 gallons per day of liquid fuel such as diesel, naptha (gasoline) and jet fuel. The project will capture the CO2 and pump it through pipelines to be used by third parties for enhance oil recovery (EOR).

The project will create high paying jobs for the residents of the Crow Nation. Crow Chairman Venne said that the Crow Reservation has more than 10 billion tons of coal reserves and this plant will provide jobs and security for the residents. The agreenment between the Crow Nation and Australian-American Energy calls for the Crow Nation to provide the coal and water resources. The Australian-American Energy company will provide the financing and build and operate the plant. After the plant is paid off, the Crow Nation will receive 50% of the profits from the plant.

T. Boone Pickens is right about the strategic importance to stop spending $700 billion each year on imported foreign crude oil. This is the equivalent of a Federal bailout equal to the 2008 bailout every year. The Obama administration should include coal derived liquid fuel as a key component of the U.S. Energy Policy.

Coal-to-Liquids is proven technology. The U.S. does not have many coal gasification plants, because we’re a capitalist society. Our plants are built for profit by private for-profit companies. This means that as long as it is more profitable to use crude oil for energy, private for-profit companies will do so. But, this does not necessarily mean that this strategy is the best long term energy policy for the United States.

The best long term strategy for a domestic energy policy may not be utilization of whatever energy source is cheapest today. T. Boone Pickens hits a nerve with the American public with his television advertisements that the U.S. is going broke purchasing crude oil for its oil based energy.

The Chinese government refuses to be dependent upon foreign import crude oil and is building coal gasification plants to provide electricity, diesel, gasoline, jet fuel, substitute natural gas, fertilizer, hydrogen and other chemicals. South Africa used it’s coal reserves to develop energy through the operations of SASOL.

It’s reasonable to consider that the current U.S. energy policy based on purchasing foreign crude oil could bankrupt the county in the future. Most people still remember President Reagan’s famous speech towards the end of the Cold War with Russia, “Mr. Gorbachev knock down this wall.” The primary reason that the U.S. won the Cold War is that Russia went bankrupt. The specter of the U.S. going bankrupt by continuing to import foreign crude oil shoud be considered a national security risk.

The United States should develop coal-to-liquids energy projects as one component of a comprehensive energy policy designed to relieve national dependence on imports of foreign crude oil. These projects will cost between and $4 and $8 billion and Federal loan support is needed to get this industry jump started. The Federal government should provide loan guarantees for 50% of the cost of the projects.

The United States has a tremendous potential to offset oil imports with coal-to-liquid (CTL) plants.  China is deploying a government strategy to be energy independent by relying on its coal reserves for power, gasoline, diesel, jet fuel and chemicals feedstocks.  The U.S. can too.  The U.S. has 250 billion tons of proven coal reserves and probably has coal reserves much higher than 250 billion tons. These reserves are the equivalent of approximately 400 billion barrels of oil or more than the total oil reserves of Saudi Arabia.

With this amount of coal reserves and proven CTL process, the U.S. can reduce it’s dependence on foreign oil by 50% or more. This is the most practical path for the U.S. to achieve independence from reliance on foreign oil. China has been in the spot light since the Olympics have been on television. Many Americans may be surprised that this is exactly how China plans to provide power for it’s billions of people without relying on imported foreign oil. The Chinese have more than 30 coal gasification and CTL projects underway and will be producing by some estimates approximately 1 million barrels per day of ultra-clean diesel, gasoline and jet fuel from coal by the year within 10 years.

Ironically, China only has about 1/2 the coal reserves of the United States. The United States has literally right under it’s feet the answer to it’s power, fuel and chemical needs . . . and yet does not move forward with development. U.S. coal consumption has not increased significantly in the last 5 years.

There are issues associated with building CTL plants, but both have answers and viable solutions can be developed.

The first issue is the cost of the building a CTL. The cost is approximately $1 to $4 billion depending upon the process units involved and the scale of the plant. The Federal government needs to step up to the plate and provide loan guarantees. Let’s face it, this is more important than providing bailouts for home owners that purchased homes with adjustable rate mortgages (ARMs).

Second, CO2 is now considered by most people to be a green house gas (GHG) that contributes to the warming of the atmosphere so this cannot be ignored and there must be an environmental solution to rmitigate this effect. The general public must be informed about the differences between pulverized coal power plants and coal gasification plants. Both produce about the same amount of CO2, but it is much easier and cheaper to collect the CO2 stream with coal gasification. (And, of course, you can make liquid fuels with the gasification process.) The U.S. projects will be environmentally responsible as opposed to the Chinese projects that emit the CO2. There are solutions for CO2: food grade for use in carbonated drinks, enhanced oil recovery, and sequestration. There is more than enough sequestration capacity and enhanced oil recovery capacity for off take of the CO2 from U.S. CTL projects. Each project must consider these CO2 options individually.

Consol Energy and Synthesis Energy Systems (SES) announced that the West Virginia coal gasification project will not be funded. CoalGasificationNews.com had reported on the West Virginia Gasification Project. Consol Energy had previously announced the West Virginia Gasification Project and the project was planned to be a Coal-To-Liquids project. The project would gasify West Virginia coal and produce methanol and convert the methanol to gasoline.

Both companies have announced that they will cease funding the Front End Engineering Design (FEED) for the Benwood, West Virginia project. SES cited the credit crisis in the financial markets as the reason for the project to be put on hold. The U.S. market continues to be a primary market opportunity for SES.

Southeast Idaho Energy, LLC re-issued it’s air permit for the Power County, Idaho coal gasification project. There were major revisions to the project and therefore the permit had to be re-submitted. The capacity was revised from 3,000 to 4,000 tpd coal and petcoke to 2,000 to 3,000 tpd coal and petcoke. It was revised to include two GE gasifiers (one operating and one spare) instead of one large ConocoPhillips gasifier. It was revised to produce end products of ammonia, urea, and urea ammonium nitrate (UAN) and the production of Fischer-Tropsch diesel fuel was eliminated.

The plant is projected to produce 2.3 million tons per year of CO2. The project plans to capture most of the CO2 that it produces and partner with a CO2 pipeline carrier to distribute the CO2 to Wyoming for enhanced oil recovery (EOH). This scope of work is outside of the coal to liquids project due to different contracting issues and risk profile.

The project schedule is described as:

Submit revised air permit application    April 2008

Groundbreakingearly    2009

Phase 1 construction    2009 to 2011

PHase 1 start-up    2011 to 2012

The plant will spend approximately $50 million to install a cover over the coal handling system. This will reduce the particulates to well under the air quality guidelines. The company is voluntarily including a cover over the coal handling operations, because it is aware of certain past particulate issues.

Water consumption will be optimized. The plant design will be based on zero discharge water design to maximize recycle and minimize waste and discharges.

The project is being developed by Refined Energy Holdings LLC a subsidiary of Green Rock Energy. The proposed site for the project is located on 450 acres southwest of American Falls, Idaho. The Idaho Department of Environmental Quality (IDEQ) is reviewing the air permit application.