The Kentucky House of Representatives voted 94 to 5 in favor of a bill to permit companies constructing carbon dioxide (CO2) pipelines to use eminent domain to acquire pipeline right-of-ways. This is a long time practice approved for pipelines for oil and natural gas. There are several requirements contained in Kentucky HR 213. The CO2 pipelines must be used to transport CO2 for sequestration, enhanced oil recovery or other CO2 management programs. In addition, the existing ‘Eminent Domain Act of Kentucky’ legislation must be followed.

Kentucky HR-213 is not law yet. The bill will be sent to the Kentucky Senate and the Senate must vote for the bill. After Senate approval, the bill must be signed by the Governor of Kentucky. The Governor of Kentucky supports coal gasification project development in the state and is widely expected to sign the legislation when it reaches his desk.

ConocoPhillips and Peabody Energy have been evaluated several sites in Kentucky for a coal gasification plant while CO2 capture and sequestration has been ongoing. The companies announced before Christmas that the site chosen is near Central City, Kentucky. The plant will be called Kentucky NewGas.

A few days after selecting the site for the coal gasification plant, ConocoPhillips submitted an application to the State of Kentucky for the air quality permit for the project. The project will be a coal gasification substitute natural gas (SNG) plant.

When complete the plant will process about 3.5 million tons of coal per year and produce about 50 to 70 billion cubic feet of substitute natural gas (SNG). SNG is chemically equivalent to natural gas and can even be transported in natural gas pipelines without problems.

The plant will be a mine-mouth plant to eliminate the high cost of transporting coal. It will use the ConocoPhillips E-Gas proprietary gasification technology. The E-Gas gasification process grinds the coal into small particles and mixes it with water to produce a slurry. The coal slurry is pumped into the gasifier reactor vessels along with pure oxygen to convert the coal under intense heat to a molecular gas form. The resulting synthetic gas is primarily carbon monoxide and hydrogen. The impurities are removed from the syngas while it is in the plant equipment system so there is no emissions to the atmosphere. After it is cleaned, the final product is methane, a clean burning gas like natural gas, that can be used to fire turbines and produce electricity.

Kentucky is aggressively pursuing coal gasification projects with a comprehensive offering.  Kentucky has taken an innovative and progressive approach to developing coal gasification plants in the state.  The state is a coal state and realizes the importance of using coal as an energy source. This knowledge and understanding of the importance of coal derived energy as one piece of a national energy policy is demonstrated by the permit process.

Kentucky offers an attractive incentive package to developers that are looking for a site for a coal gasification project. The state will tailor a package that provides long term financial incentives for a project that relies on long term financing. The states economic development agency has a explanation of the benefits available, “Incentives for Energy Independence Act“.

The state is proactively evaluating possible sites for development. Kentucky has engaged a consultant to assist with locating possible sites for coal gasification projects. This process took over two years and identified 42 sites fit for the intended purpose. This means that these sites are essentially “pre-approved” by the state.

Kentucky understands the economics and the necessity of using coal for generating electricity. More than 90% of the states electricity is generated with coal. The Governor recognizes the importance of finding solutions for the sequestration of CO2 and is moving to forward with facillitating the development of CO2 solutions in the state.

The infrastructure necessary to support a commercial scale coal gasification plant is existing. The state has an extensive network of rail lines. The rivers can be used for barge transportation. There is a well developed network of pipelines for transporting SNG, liquid fuels, and CO2.

Consider Kentucky for siting a coal gasification plant.

Coal gasification is a proven technology. Sasol in South Africa has been using the technology for many years, because South Africa doesn’t have an abundance of natural gas like the U.S. The advantage that coal gasification technology has when compared to other traditional coal technologies used for power plants such as “pulverized coal” technology is the ease of removing the CO2.

With the modern coal gasification process, the CO2 is removed from the coal syngas ‘in the pipe’ prior to using it to fuel gas turbines. With the older pulverized coal process, the CO2 is removed ‘in the stack’ after combustion. It’s much easier, efficient and economical to remove the CO2 with the coal gasification process.

Kentucky released a carbon study based a coal gasification facility that would produce 10,000 bpd on an equivalent diesel and naptha basis. The study is based on using 4,844 tpd Eastern Kentucky coal. The findings are shown below:

• The 4,844 TPD coal feedstock entering the plant would have 3,386 TPD carbon.
• The liquid diesel and naptha fuels would contain 1,205 TPD of carbon. This is typical for any diesel and naptha.
• In the AGR (CO2 removal) Unit, 1,172 TPD carbon is removed and another 805 TPD carbon is removed in the FT Recycle Unit. This is a total 1,977 TPD of carbon (primarily CO2) that is removed through gas processing while ‘in the pipe’. Anotherwords before it is ever exposed to the air we breath.
• Only 203 TPD carbon is emitted from the stack.

THIS IS ABOUT 90 PERCENT CARBON REMOVAL.

At this point, the 1,977 TPD CO2 is still ‘in the pipe’ and has not been released to the air. The CO2 can be pressurized and pumped through pipelines and injected into geological formations deep beneath the surface of the earth for sequestration. The National Energy Technology Laboratory (NETL) and many other organizations are studying carbon sequestration technology. Currently field validation tests are being conducted.

The NETL has seven regional partnerships conducting localized validation studies that are specific to the geological formations in each region. There are approximately 350+ state agencies, universities and private companies participating in this work. It’s considered to be a given that it will work, because oil formations have held oil and natural gas for millions of years. The objective of the work is to develop more knowledge about specific geological formations so that scientific conclusions can be made to predict the potential for storage in different areas.

Governor Breshear announced that The Kentucky Economic Development Finance Authority has made a preliminary decision to award $550 million in tax incentives to “Clean Coal Power Operations” to build a new coal gasification plant in Kentucky. The site is at the Riverpoint West industrial park along the Ohio River in McCracken County. The estimated project cost is reported to be about $7.6 billion.

The Clean Coal Power Operations planned project will be a coal gasification plant and will produce ultra low sulfur diesel, other products and power. There is a 2 mile deep geological formation that is believed to be suitable for CO2 injection and sequestration. The first phase of the plant will employ about 830 people when complete.

Kentucky legislative leaders are backing coal gasification projects to improve the state economy. Since the passing Kentucky Hb 1 in 2007, the state has approved special tax considerations for six energy projects. This is the largest approval to date.

Peabody Energy and ConocoPhillips announced that Kentucky is selected as the site for a new coal gasification plant. The companies are conducting a $60 million feasibility study. If it is completed, it’s expected to cost approximately $3 billion. Kentucky was selected over Indiana and Illinois. Consideration was given to the $250 million in tax incentives that the states Economic Development Finance Authority awarded to Kentucky Syngas, a Peabody subsidiary. Five counties in Kentucky are being considered: Henderson, Ohio, Webster, Union and Muhlenberg.

Rick Bowen, Peabody Energy executive, made the announcement on the campus of the University of Louisville engineering school. He said that if the project moves forward it will be operational in 2012. The project will benefit the environment by applying carbon capture technology to remove more than 90% of the carbon (CO2) emissions.

The project would convert 2.5 million tons of Kentucky coal per year and provide about 1,200 construction jobs and more than 500 full-time jobs. Kentucky is one of the poorest states in the U.S. with plentiful coal supplies. Currently, more than three-fourths of all the coal mined in Kentucky is shipped out of state. The proposed coal gasification plant in the state will add value to the local economy.

Governor Steve Beshear announced that the State of Kentucky is joining the newly created Western Kentucky Carbon Storage Foundation. The non-profit foundation is dedicated to researching the opportunities for carbon storage in the state. The project funding is $7.8 million total.

The foundation partners include Peabody Energy, ConocoPhillips and E.ON U.S. The foundation work will be supported by The Geological Survey and the University of Kentucky. The feasibility of storing carbon in the form of CO2 will be evaluated. The evaluation process will include drilling a well 8,300 ft. into the Knox and Mount Simon geological formations in Hancock County. After the drilling is completed, CO2 will be injected into the geological formations. The storage formations will be closely monitored and evaluated to determine the suitability for long term storage of large volumes of CO2 gas.

The coal gasification industry depends on suitable sequestration sites for CO2 for commercial scale plants to constructed and operated. This test program will advance the knowledge of CO2 capture, injection and sequestration.