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Peabody and Rentech Partner to Develop Major Coal-to-Liquids Projects in the US

18 July 2006

Peabody Energy and Rentech, Inc. have entered into a joint development agreement to evaluate sites in the Midwest and Montana for coal-to-liquids projects that would transform coal into diesel and jet fuel. Projects would be sited where Peabody has large reserves and would be designed using Rentech’s proprietary Fischer-Tropsch coal-to-liquids process.

The plants could range in size from producing 10,000 to 30,000 barrels of fuel per day (bpd). A 10,000 bpd plant would use 2 to 3 million tons of coal annually, and a 30,000 bpd plant would use 6 to 9 million tons of coal annually, based on the quality of coal.

With more than 9.8 billion tons of reserves, Peabody has dozens of sites in the United States that it is evaluating for Btu Conversion projects.

We’re seeing an overwhelming need for coal-to-liquids developments in the United States to offset reliance on expensive imported oil, and projects like these represent a major part of our energy solutions. Because of Peabody’s leading reserves, we are uniquely positioned to capitalize on this significant emerging market for coal.

—Gregory Boyce, Peabody President and CEO

Peabody Energy is the world’s largest private-sector coal company, with 2005 sales of 240 million tons of coal and $4.6 billion in revenues. Its coal products fuel more than 10% of all U.S. electricity generation and 3% of worldwide electricity.

In April 2006, a Study Group turned in the first volume of a report for Energy Secretary Samuel Bodman that identified the challenges and opportunities for more fully exploiting US domestic coal resources. Boyce, who chaired the Study Group, has become a vocal advocate of the eight-point aggressive expansion of the use of coal via “BTU conversion” for transportation and energy needs. (Earlier post.)

The number-one recommendation from the report is the massive expansion of Coal-to-Liquids Processing to produce 2.6 million barrels of coal liquids (fuels and chemicals) per day. Production at that level would meet approximately 10% of US petroleum demand and consume an additional 475 million tons of coal per year.

To achieve that level of production would, according to Peabody, require the construction of 33 large coal-to-liquids plants. Each plant—with an estimated cost of $6.4 billion—would consume 14.4 million tons of coal per year to produce 80,000 barrels per day of liquid fuel. Delivering that amount of coal would required expanding coal mining 43% above today’s level.

The CTL proposal represents largest single use of expanded coal production of any of the proposals.

Peabody is a member of the FutureGen Alliance—a project intended to establish the technical feasibility, economic viability and broad acceptance of co-producing electricity and hydrogen from coal with essentially zero emissions, including carbon dioxide (sequestration). (Earlier post.)

As described in a New York Times article in March 2006, however, Peabody is not a big believer in the rapid implementation of carbon capture and sequestration technologies—and coal-to-liquids processes generate a very large amount of carbon dioxide.

A recent European Well-to-Wheels (WTW) analysis of a broad range of fuels and powertrains (earlier post) determined that coal-to-liquids processes were the most greenhouse-gas intensive of all the synthetic diesel fuel pathways, resulting in total WTW emissions of about 350 g/km CO2equivalent (e). By contrast, current conventional petroleum diesel generates about 150 g/km CO2e on a WTW basis.

The same report determined that even with the use of carbon capture and sequestration (CCS) technologies, CTL processes would generate close to 200 g/km CO2e—still more than current conventional petroleum diesel.

Resources:

July 18, 2006 in Coal-to-Liquids (CTL) | Permalink | Comments (16) | TrackBack (0)

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"...The same report determined that even with the use of carbon capture and sequestration (CCS) technologies, CTL processes would generate close to 200 g/km CO2e—still more than current conventional petroleum diesel..."

Yikes! Makes drilling in ANWR look green by comparison.

It doesn't sound very green. Coal to liquids uses huge amount of water. On the other hand with the world on the verge of world war III it might be good to have this source of domestic energy. EVs and hybrids are a better long term solution.

This would be a good solution for the aviation industry. There are not many viable alternatives for running the Commercial Aviation Industry, or fueling the military a/c. David Neeleman at Jetblue was asked and answered the following:

Are you thinking about alternative fuel?

"We are. We can't burn ethanol on airplanes, but you can make jet fuel from coal. We've conceived some legislation, which has to do with just that. You can make this stuff for $35 to $38 a barrel. The downside is that it takes a huge amount of capital to build $4 billion plants. Nobody wants to build it and have the price of oil go below $35. So the legislation basically says you get compensation for your capital if the price goes from $38 down to $18. It's a no-risk thing for the government. With 70 plants, we could generate about 45% of our imported oil equivalent."

In my opinion CTL must be coupled to a cap-and-trade system in which there is a fixed CO2 target. While CTL seems unlikely to keep pace with oil decline it is certain that other forms of coal use (especially electricity generation) will increase. Something will have to give. It may turn out that only coal (with or without carbon capture) can provide enough jet fuel. Since only so much coal use would be allowed it means air travel could raise the price of electricity. We can't have it both ways.

Dear Lord ... let there be many breakthroughs in battery and EV technology.

Out of the blue, there comes another fossil energy advance. No, I'm not talking aout the article above, (but it will give CTL a run for its money) I'm talking about oil shale. A group of Israeli scientists have developed a process of making Kerogen (from oil shale) at >$20 a barrel. See for yourself:
_
http://www.businessweek.com/globalbiz/content/jul2006/gb20060705_516609.htm?campaign_id=alerts
Add this to this possible competing process:
http://www.greencarcongress.com/2006/05/raytheon_and_pa.html
and you will see (if properly managed) a possible way to bridge the gap between oil and various cleaner future energy sources.
_
___However, if it becomes mismanaged, it could be a catastrophe. If the world become addicted to US oil shale sourced syncrude, then we are in for a nasty 2nd half of 21st. Century.

What a major step forward... WTW of 350 g/Km CO2, that's about twice the current north American average vehicle and three times recent European vehicles.

At a low cost of $30-$35/barrel or about $1.50/gal at the pump, we could all drive V-12 SUVs, Pick-ups or 4-Ton 4 x 4 Super-Hummers. GM and Ford would survive.

Here is your real alternative fuel future. Learn to enjoy it.

You shouldn't be surprised by this. This presentation, which probably describes the kinds of plants they're talking about, implies the IRR (internal rate of return) for this kind of project, at today's oil price, would exceed 100%/year. This is enormously lucrative.

Coal to liquids uses huge amount of water.

Most of that is for cooling. If the plant is built with a dry cooling system, as it would probably have to be in the dry parts of the western US, the net water consumption (water corresponding to the hydrogen actually going into the finished product, minus hydrogen in the coal) would be modest.

Nice link Paul.
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___As for abundant cheap fuel, the govt may have something to say about that. With the average weight/usage of vehicles on the road higher than before (due to SUV's and increased trucking) there is an increase in wear and tear. Furthermore, recapitalization/reconstruction of 50's era highways will require more funds. Since the gas tax has not even covered current costs, it will likey be raised ($0.19 a gal. gasoline and then some) to cover existing and new projects. It is gas tax hike or toll roads. We are, after all, running a budget deficit.
_
___Furthermore, society is starting to recognize the cost to families due to ever longer commutes. Either we a) change land use zoning laws to provide for livable higher density housing along with car pooling
b) move to small to mid-sized cities with much shorter commutes.
c) telecommute more.
Additionally, the US intermodal transport network could use more networking/computerization/communication to make better use of rail, water and road networks. Expansion/reconstruction of railways and waterways (and associated facilities) could increase our efficiency, cut costs, and decrease highway traffic relative to freight transported.

I'm actually a firm believer in high density cities. At high density, public transport becomes very viable. I would be very curious to see how many gallons of oil the average person living in New York City uses annually compared to a person living in Atlanta....

I bet the Atlanta resident would use twice as much.

Perhaps compare energy usage?

I would still favor New York.

High density cities allow for large scale use of public transportation, which, in turn, can greatly reduce total energy consumption. THIS is truly the first step toward energy independance and a greener future.

Americans need to get there heads out of there ass. Do you really need that 4000lb SUV to drive 10 miles to work? No. Hop on a train, or a bus.

Americans need to get there heads out of there ass. Do you really need that 4000lb SUV to drive 10 miles to work? No. Hop on a train, or a bus.

Unless you place very little value on your time, this ends up being uneconomical. The extra time needed to get to and from the transit network, and to wait to get on, is a showstopper.

"You can make this stuff for $35 to $38 a barrel."

Does this account for transportation costs? My impression is that transportation bottlenecks, arising from our somewhat outdated railroad system, have pushed up the cost of using domestic coal - hence why our coal imports are at the level they are.

Anyone have a transportation cost estimate/projection?

Does this account for transportation costs?

If you look at the link I posted, the transportation cost for sending the diesel fuel by railcar from a mine-mouth FT plant would be maybe $5/barrel.

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