Peabody and Rentech Enter Into Development and Coal Supply Agreements for First Commercial US Coal-to-Liquids Facility
Peabody Energy has entered into agreements with Rentech, Inc. to fund up to $10 million of engineering and development costs for Rentech’s planned coal-to-liquids project in Illinois and to supply the facility with nearly 1 million tons of coal annually. As part of the agreements, Peabody has an option to acquire a 20% equity interest in the project through increased funding.
Rentech is converting its existing fertilizer production facility in East Dubuque into a coal gasification complex that would produce synthetic transportation fuels using Rentech’s patented processes that are based on Fischer-Tropsch technology. (Earlier post.)
The facility also would continue to produce nitrogen fertilizer products. Converting the plant from expensive natural gas to coal is expected to significantly reduce operating costs. The project would be the first commercial coal-to-liquids facility developed in the United States.
The Rentech plant is expected to produce approximately 400,000 barrels per year of Fischer-Tropsch fuels. It will also produce approximately 545,000 tons of nitrogen fertilizer products per year. The project is under development, and the plant conversion is scheduled to be complete by 2010.
Fischer-Tropsch fuels burn more cleanly than conventional diesel because sulfur and other oil byproducts are removed, although the production process generates large amounts of carbon dioxide. Various estimates put lifecycle CO2 emissions (well-to-wheels) of coal-to-liquids synthetic diesel without any form of carbon dioxide capture and sequestration at around double that of petroleum diesel. With carbon capture and sequestration, the WTW footprint of FT diesel is much closer to that of conventional petroleum diesel.
The Rentech facility will be carbon-capture ready, designed with a process unit that would capture pure carbon dioxide (CO2) and separate it from the gas stream. Rentech is evaluating CO2 marketing opportunities with bottling companies and sequestration opportunities including potential use for enhanced oil recovery.
Separately, Peabody has entered into a long-term agreement with Rentech to supply nearly 1 million tons of coal annually to the coal conversion facility from its Illinois operations, providing a reliable source of fuel for the project.
Development of coal-to-liquids facilities is gaining increasing bi-partisan political support, with a number of bills to be considered in Congress this summer. The Southern States Energy Board, in its 2006 American Energy Security Study, is calling for producing 5.6 million barrels of diesel per day from coal. This would require about 1 billion tons of US coal annually.