Spinning coal into gasoline

Questions hang over promise of clean diesel and energy independence


When Montana Gov. Brian Schweitzer, D, talks about turning coal into diesel fuel, he speaks in glowing terms. The so-called synfuels will burn cleanly, he says, and building a coal-to-liquid plant will bring jobs to Montana and energy independence to America.

Creating synfuels to power the nation’s cars, trucks and military vehicles has become one of Schweitzer’s rallying points. The governor has attracted national attention by pushing the Bull Mountain plant, proposed for a site south of Roundup in the south-central part of the state. At the same time, Wyoming is shooting for its own facility near Medicine Bow. Montana has 120 billion tons of coal; Wyoming has 64 billion tons. With climate change making conventional uses of coal less palatable, the two plants could provide a relatively clean future use for it.

But it will take more than Schweitzer’s lofty rhetoric and Western charm to make coal gasification a reality in the West. It will take political force to plow through environmental doubts and a daunting permit process, and technological know-how to iron out production glitches. And it will take lots and lots of money: Startup costs for even the smallest plant range from $1 billion to $1.5 billion.

When oil prices hit $70 a barrel, however, all sorts of long-dormant alternative energy schemes leap to life. Getting financing is "definitely doable," Schweitzer says. "I’ve been to New York and spoken with firms like Goldman Sachs. When you’ve got shoulders as big as GE and Arch Minerals (providing technology and coal respectively) to stand on, people listen."

New life for an old process

The creation of synfuels involves two major steps. First, coal is heated and converted to gas. Then, using the Fischer-Tropsch conversion process invented by the Germans in the 1920s, the gas is converted to paraffin, then low-sulfur diesel. The process gives off carbon dioxide, but in a form that is easy to re-use, although plenty of questions remain about carbon dioxide transport and storage. Today, nearly 30 percent of South Africa’s fuel needs are satisfied by one company, Sasol, which produces 150,000 barrels of fuel per day from coal.

Energy analysts say that coal-to-diesel plants can turn a profit as long as crude oil stays above $40 per barrel; it’s topped $40 since 2004, and hit a high of $74 this July. And the Energy Policy Act of 2005 eases the pain of startup costs by providing 80 percent of the financing for coal-to-diesel plants. However, the act also limits its total loans for synfuels to only $2 billion. Given the fact that there are at least six coal-to-diesel plants planned nationwide, each with a price tag as high as $4 billion, the Montana and Wyoming plants will have a lot of competition for limited federal funding.

"We don’t know of any coal-to-liquids plant in the U.S. being built without government help," says Bethany Haley of the Houston–based DKRW Advanced Fuels, one of the principals behind both the Medicine Bow and Roundup endeavors. "We plan to finance our projects. It would help if the government would contribute, but we plan to go ahead even if they don’t." Schweitzer says that Burlington Northern Railroad and JetBlue Airways have expressed interest in securing long-term contracts to purchase fuel from the plants. This would cover some startup costs and encourage other investors to contribute.

Diesel and water don’t mix

Regardless of the costs and the financing, turning the West’s coal into gasoline has its drawbacks. The process would encourage more coal mining, with its attendant environmental costs; it uses enormous amounts of water; and it may be limited in its ability to help the U.S. achieve energy independence.

"(The plants are) gold-plated Cadillacs," says Jeff Goodell, author of the recent book Big Coal. "It’s about the major contracts to build these billion-dollar plants and make a lot of money off that process. If you really want to displace Middle Eastern oil, there are many better ways to do it, like hybrid cars and bio-fuels."

And the diesel provided would be just a few drops in the barrel: The plant south of Roundup would produce 22,000 barrels of diesel per day, the Medicine Bow plant, 10,000 per day. In 2005, the U.S. consumed 4.1 million barrels of diesel per day. In other words, the country would still need a lot of foreign oil.

It also might need more water: According to a 1998 Department of Energy study, it takes 5 gallons of water to produce one gallon of diesel from coal, meaning the Bull Mountain plant would slurp 1.5 billion gallons of water each year. While proponents of the plant argue that the high-moisture coal will require less water than that, they agree that the process is a thirsty one. That leads to concerns for the already dry area: The nearby Musselshell River is already overused, and bringing water from Yellowstone River would require pumping and pipelines.

"We ultimately think there’s a better way," says Patrick Judge of the Montana Environmental Information Center. "We can meet future load growth with renewable technology and sidestep all the harmful side effects. Montana can meet its own needs 70 times over on wind power alone."

Schweitzer’s vision needs a lot of work before it becomes a reality. And even if the plants are built, says Ellen Pfister, a rancher from Shepard, Mont., with summer range close to the property, the economic boom will most likely end up in a bust. "After the construction wages go away, most of the money will be going out-of-state," she says.


The writer splits his time between Sheridan and Cheyenne, Wyoming.

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