(This article first appeared in the American Thinker)
An old energy source has the potential to drive down the cost of gasoline, thanks to new technology. Lower fuel prices effectively provide a non-artificial stimulus for the economy by leaving more money in taxpayers'/consumers' hands. I've long been an advocate of the notion that the best way to lower energy -- and, as a byproduct, food -- costs and to increase energy availability is to increase the supply of conventional, practical, domestic energy assets. I'm fascinated by one alternative to petroleum-based liquid fuel.
Gasification and liquefaction of coal, generally thought to be an old-technology source of motor fuel, has gotten new life in recent years.
Coal is not a popular energy source among American progressives. During his first campaign, President Obama promised to effectively eliminate coal as an energy source. The Obama administration has at least complicated coal usage. Difficulty in securing permits, the passage of cap-and-trade legislation in the House, and an EPA-proposed carbon tax, to be implemented through regulatory means, have effectively halted development or expansion of the coal-generated power plants which in the past have produced upwards of 50 percent of America's electricity. Dozens of projects have been canceled or postponed.
But, as administration roadblocks to exploration and extraction limit new sources of petroleum and oil prices remain high, converting coal to liquid fuels has become more attractive.
During World War II, driven by desperation for motor fuel after Axis access to the Ploesti oilfields was cut, Nazi Germany made synthetic gas from coal. So did South Africa during the apartheid embargoes. The technology to make liquid fuel from coal has been available for a long time, but, historically, the energy efficiency of "ersatz gas" has been poor, the emissions a nightmare, and the conversion costs high. There are legitimate doubts that coal-to-liquid-fuel can successfully compete in the market without subsidies.
Active and potential market developers of liquefied coal products are sending mixed signals. Two examples:
DKRW Advanced Fuels has a Wyoming-based subsidiary (Medicine Bow Fuel and Power LLC) operating a coal-to-diesel conversion plant that is also selling its CO2 and other byproducts. An 11,000-barrel-per-day coal-diesel unit began producing in 2006. The company claims that the technology is competitive with petroleum fuels, without subsidies, at $60 per barrel for oil, or roughly 60 percent of the current market price for Brent Crude. The plant makes methanol from coal (gasification) and then converts the methanol to diesel fuel (liquefaction).
A new DKRW methanol synthesis plant with commercial production expected to begin in 2014 will be located on a site near a producing coal mine in Carbon County, Wyoming. Chemicaltechnologies.com reports: "The low-sulfur coal feedstock will be used to produce both methanol and gasoline via synthesis gas and Fisher Tropsch type process technology." "The new 22,000 [barrels per day] unit will be based on the proven ExxonMobil MTG process technology which has been used since the 1990s."
Searches at FedSpending.org (a project of OMB Watch) produced no records of government contracts, assistance, or recovery funds for DKRW Energy, DKRW Advanced Fuels, or Medicine Bow Fuel and Power LLC.
Conversely, a coal conversion project proposed for Schuylkill County, located in the heart of Pennsylvania's coal country, was on hold for years awaiting $100 million from the U.S. Department of Energy's Clean Coal Power Initiative (CCPI). The federal money was finally denied in 2010, and perhaps as early as 2008. It was estimated that the proposed plant would cost $1 billion to construct. Developers claim the plant would have converted coal to 3,700 barrels of diesel fuel daily; 1,300 barrels of low-octane, zero-sulfur gasoline; and 41 megawatts of electricity, as well as steam for industrial use.
If, as DKRW asserts, the liquefied coal-fuel conversion process is effective and profitable, one wonders why the Pennsylvania project in coal-rich anthracite country hasn't attracted sufficient private investment to cover the federal seed money it sought. One suspects that the other 90 percent of the investment capital required from the private sector to complete the Pennsylvania project was never lined up in advance and may have contributed to the denial of federal funds.
Even though they have an energy-content deficiency when compared to petroleum, coal conversion products have a better total energy-cost-to-energy-delivered profile than corn or bio-ethanol. And America, "the Saudi Arabia of coal," has large reserves of coal that do not affect the price of corn, sugar, or other food products or their availability as food. Extracting coal creates jobs, too. But there are other problems.
Not only will drivers have to fill up more frequently, but methanol easily attracts and absorbs water from the atmosphere, complicating storage and delivery. The problem is similar to ethanol, a product which contains water left by the refining process. Coal-converted motor fuel may be limited to flex-fuel-equipped vehicles.
The contrasting outcomes of the Wyoming and Pennsylvania projects illustrate the strength of the free market and the flexibility of private capital.
Theoretically, by opening up the transportation fuel market to competition, at least for flex-fuel vehicles, firms like Medicine Bow could directly sell their product as a fuel without having to go through the more costly and inefficient conversion processes ethanol requires, but without federal subsidy or raising the prices of world food supplies. The presence of coal-converted diesel fuel in the market would increase competition, which improves products and markets and has the potential to lower prices.
If the free market can solve the technical problems, answer the arguments against coal-to-gasoline/diesel, and factor out the special-interest rent-seekers from the energy equation, sign me -- and America -- up.
Jerry Shenk can be reached at email@example.com.