Liquid coal touted as fuel of the future

By Steve James
Globe and Mail
18-Dec-2006

NEW YORK

When railways ruled, it was the sweating firemen shovelling 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 (U.S.) a barrel - far 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 the Second World War 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 per cent of transportation fuel needs.

In addition to being cheaper than oil, advocates point out that the fuel is environmentally friendlier and would also help the United States 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 officer, 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.

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

The United States is "already behind the curve" when it comes to tapping the vast liquid fuel potential of coal, said John Ward, of natural resources company Headwaters Inc., which builds CTL plants.

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