Push to Build Coal-To-Liquid Fuel Plant in Illinois Advances

Peabody Energy Corp. has pledged nearly one million tons of coal a year and up to $10 million in development funds to an Illinois plant planners say would become the nation’s first to commercially turn coal into liquid fuels for tomorrow’s big-rig trucks, buses, barges or jets.

St. Louis-based Peabody, as part of the deal announced this week, also gets an option to buy a 20 percent stake in the East Dubuque, Ill., plant planned by Rentech Inc., a Denver-based firm specializing in coal-to-liquids technology.

That process has drawn increasing attention as a potential energy source meant to lessen U.S. dependence on foreign oil. At the insistence of the coal industry, some federal lawmakers are proposing an array of “energy independence” measures calling for taxpayers to underwrite coal-to-liquid plants, from billions of dollars in construction loans to minimum prices for the new fuel.

Advocates of the technology also say it could mean possibly new markets for coal such as that found in Illinois, where the U.S. government estimates there are 38 billion tons of coal yet to be recovered. That amount trails only reserves in Montana and Wyoming.

“Transforming America’s abundant coal reserves into clean transportation fuels is an important step for strengthening U.S. energy security,” Gregory Boyce, Peabody’s president and chief executive, said in announcing the deal this week.

While much of the coal from U.S. mines is sold to utilities to be burned for generating electricity, there are potential downsides to converting the sooty black rock into liquid. The viability of such projects may hinge on oil prices remaining lofty, and environmentalists believe the process may contribute to greenhouse gases and possible global warming.

The League of Conservation Voters says burning a gallon of liquefied coal releases almost double the carbon dioxide — a greenhouse gas — as a gallon of gasoline, “turning a compact car into an SUV from a global warming perspective.”

Analysts also have noted that building coal-to-liquid plants is expensive, meaning such sites must be used over a few decades to justify the investment. That has kept big energy companies from investing heavily in the technology, at least until now.

Rentech’s John Diesch told a Senate subcommittee last month it “will take an investment approaching $1 billion” to create the coal-to-liquid plant, replacing what is now Rentech’s factory where fertilizer is made for Midwest farmers. Fertilizer plants across the country have struggled in recent years with soaring costs of natural gas, the chief feedstock for fertilizer products.

Diesch said the plant, whose transformation is expected to begin within months, would use technology he insisted produces fuel cleaner than conventional diesel because sulfur and other oil byproducts are removed.

Diesch also testified that such fuel runs cleaner than conventional fuels from petroleum, is biodegradable and can be stored five to 10 times longer than diesel, making it ideal for strategic reserves.

Peabody said the Rentech plant would crank out roughly 400,000 barrels of liquid fuel per year, as well as about 545,000 tons of nitrogen fertilizer products.

The plant would capture emissions of carbon dioxide, and Rentech is evaluating prospects of selling the gas to bottling companies or for use by area petroleum producers to boost oil output by pumping it underground.

Many U.S. lawmakers, prodded by coal companies, are looking into the technology, mulling everything from taxpayer-backed loans, tax credits and other incentives for coal companies and synthetic fuel producers to develop a domestic coal-to-liquids industry. The government hopes to push energy independence legislation through this summer.

Peabody — provider of fuel for roughly 10 percent of the electricity generated in the U.S. — is the world’s largest private-sector coal company.

Information from: AP via Yahoo News