Synthesis Energy Systems and CONSOL Energy to Explore Coal Gasification Projects

6 September 2007

Synthesis Energy Systems, Inc. (SES) and CONSOL Energy Inc., the largest producer of bituminous coal in the US, will investigate the development of coal-based gasification facilities to produce feedstock for various industrial chemical manufacturers whose plants have been shut down due to the high cost of natural gas.

Under the agreement, SES and CONSOL Energy will perform engineering, environmental and marketing activities to analyze the feasibility of projects that would use coal gasification technology to convert coal from preparation plant tailings provided by CONSOL Energy’s coal mining complexes located in the eastern United States into higher-value products including: methanol, ethanol, mixed alcohols, ammonia and SNG.

Coal mining uses water to process impurities from coal prior to shipment; the tailings are the fine wastes that are suspended in the water. The slurry of water and coal waste is retained in large impoundments—“slurry or tailings ponds&rdquo—created by dams of coarse coal refuse. The sediment settles, and the wastewater is recycled back into the coal washing process.

The projects will initially be focused geographically within CONSOL Energy’s Northern Appalachian mine sites in Pennsylvania, West Virginia, and Ohio. The joint agreement requires completion of a successful project feasibility study and further negotiation of a definitive agreement by both parties before any projects will be undertaken.

CONSOL Energy mining complexes produce an estimated 20 million tons per year of coal preparation plants tailings that include un-recovered coal that could be used to make valuable liquid and gas products rather than be landfilled as waste.

SES owns an exclusive global license for U-GAS gasification technology that has been developed over the past 30 years by the Gas Technology Institute, and was designed especially to convert low-rank waste coal, which would otherwise be disposed in landfills, to synthesis gas (syngas).