CONSOL Energy and Synthesis Energy Systems Announce Funding of Front-End Engineering Design Package for West Virginia Coal Gasification Project

CONSOL Energy and Synthesis Energy Systems Announce Funding of Front-End Engineering Design Package for West Virginia Coal Gasification Project

July 28, 2008 Filed Under: Coal Mining, Lead Mining  

CONSOL Energy Inc., the nation’s largest producer of bituminous coal, and Synthesis Energy Systems Inc., a global industrial gasification company, intend to develop through a joint venture their first U.S. coal gasification and liquefaction plant to be located in West Virginia. CONSOL (through its subsidiary Terra Firma Company) and SES have formed Northern Appalachia Fuel LLC (”NAF”), as the company through which the development will occur.

The Board of Directors of CONSOL and SES have authorized funds for development activities, including the front-end engineering design (”FEED”) package. Each member company will contribute equally to this phase of the project. NAF is finalizing agreements with Aker Solutions US Inc., a subsidiary of Aker Solutions ASA (OSL: AKSO), to perform the FEED. The FEED will include a carbon management strategy that will focus on carbon sequestration in a deep saline aquifer. At a later date, NAF will file for environmental and other permits necessary for the construction of the plant.

CONSOL and SES propose to site the plant near Benwood, West Virginia, south of Wheeling. It is expected that the plant will be a ‘mine mouth’ facility with feedstock supplied directly from CONSOL’s nearby Shoemaker complex. The feedstock will be a blend of run of mine coal and coal otherwise not recovered in the normal preparation process. Coal will be converted to syngas utilizing SES’s proprietary U-GAS® technology. It is expected that the syngas will be used to produce approximately 720,000 metric tons per year of methanol that can be used as a feedstock for the chemical industry. It is also expected that the project will be capable of converting methanol production to approximately 100 million gallons/year of 87 octane gasoline. NAF is currently negotiating with ExxonMobil Research and Engineering to license their proprietary methanol-to-gasoline technology. As envisioned, the project will include a river terminal facility, where products will be stored in tanks for off-loading into barges for ultimate delivery.

CONSOL and SES also have signed a memorandum of understanding (”MOU”) with the State of West Virginia and its partner, the Regional Economic Development Partnership (”RED”), a private West Virginia non-profit development corporation focused on generating business opportunities through job creation and economic stimulus in the Ohio, Marshall and Wetzel counties of West Virginia. Under the provisions of the MOU, the State and RED will provide financing and tax incentives to the project over a 10-year period.

“This project has the potential to transform West Virginia from a major coal producing state to a national energy center as well,” said J. Brett Harvey, CONSOL Energy President and Chief Executive Officer. “By converting some of our region’s abundant, high-Btu coal into gases and liquids, not only will we create economic value for the state, but we will help West Virginia become the linchpin of American energy security.”

Harvey thanked both the State of West Virginia and the RED for their assistance and support of the project. “In every conversation I have had with Governor Manchin in recent years, we have talked about ways to leverage West Virginia’s coal position into a national energy leadership position — a position in which jobs, economic growth, and the enhancement of American energy security flow from the harnessing of West Virginia’s resources and the ‘can-do’ attitude of its people,” Harvey said. “His vision is sound. With West Virginia’s help, our success with this plant will make the vision a reality.”

“We are proud of the progress we have made to-date toward the development of the first industrial size U-GAS® gasification plant in the United States and we appreciate the support that the State of West Virginia and the RED have demonstrated for this initiative,” said Tim Vail, President and Chief Executive Officer of SES. “Together with our partner, CONSOL Energy, SES will be taking a first step toward securing energy independence in the U.S. as we convert raw and residual coal from CONSOL’s Shoemaker mine and plant into gasoline in an environmentally responsible and cost efficient manner,” Vail added.

“It’s clearer than ever that one of the biggest issues our state and country faces is meeting our energy needs,” said West Virginia Gov. Joe Manchin. “Technological solutions like this plant at Benwood will lead to more environmentally friendly ways to use our coal and hold the key to America’s energy security. I am committed to making West Virginia the leader in clean coal technology and the construction of clean coal power and fuel liquefaction plants. We have the resources and expertise to realize our goal.”

Both of West Virginia’s United States Senators voiced their support as well. “America cannot meet its energy needs,” said Senator Robert C. Byrd. “West Virginia has the coal, the brains, and the determination to meet that challenge and demonstrate to the world that we intend to be part of the solution.”

Senator Jay Rockefeller also added his support. “We are in the midst of a serious energy crisis in America. Today, with this project and others in the works, West Virginia is announcing to the world that we’re not waiting around anymore,” Rockefeller said. “We’re getting started with a CTL plant that will create jobs, meet modern environmental standards, and develop our most abundant domestic resource — coal. This plant will help put our state on the path to energy security and greater economic growth.”

About CONSOL Energy:

CONSOL Energy Inc., a high-Btu bituminous coal and coal bed methane company, is a member of the Standard & Poor’s 500 equity index and has annual revenues of $3.8 billion. It has 17 bituminous coal mining complexes in six states and reports proven and probable coal reserves of 4.5 billion tons. In addition, the company is a majority shareholder in one of the largest U.S. producers of coalbed methane gas, CNX Gas Corporation. CONSOL Energy was named one of America’s most admired companies in 2005 by Fortune magazine. It received the U.S. Department of the Interior’s Office of Surface Mining National Award for Excellence in Surface Mining for the company’s innovative reclamation practices in 2002, 2003 and 2004. In 2002, the company received a U.S. Environmental Protection Agency Climate Protection Award.

About Synthesis Energy Systems, Inc.:

SES is an energy and technology company that builds, owns and operates coal gasification plants that utilize its proprietary U-GAS® fluidized bed gasification technology to convert low rank coal and coal wastes into higher value energy products, such as transportation fuel and ammonia. The U-GAS® technology, which SES licenses from the Gas Technology Institute, gasifies coal without many of the harmful emissions normally associated with coal combustion plants. The primary advantages of U-GAS® relative to other gasification technologies are (a) greater fuel flexibility provided by our ability to use all ranks of coal (including low rank, high ash and high moisture coals, which are significantly cheaper than higher grade coals), many coal waste products and biomass feed stocks; and (b) our ability to operate efficiently on a smaller scale, which enables us to construct plants more quickly, at a lower capital cost, and, in many cases, in closer proximity to coal sources. SES currently has offices in Houston, Texas and Shanghai, China. For more information on SES, visit or call (713) 579-0600.

Source: CONSOL Energy Inc.

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