ST. LOUIS (AP) - Peabody Energy Corp. has pledged nearly one million tons of
coal a year and up to $10 million in development funds to an Illinois plant
planners say would become the nation's first to commercially turn coal into
liquid fuels for tomorrow's big-rig trucks, buses, barges or jets.
St. Louis-based Peabody, as part of the deal announced this week, also gets
an option to buy a 20 percent stake in the East Dubuque, Ill., plant planned by
Rentech Inc., a Denver-based firm specializing in coal-to-liquids technology.
That process has drawn increasing attention as a potential energy source
meant to lessen U.S. dependence on foreign oil. At the insistence of the coal
industry, some federal lawmakers are proposing an array of "energy independence"
measures calling for taxpayers to underwrite coal-to-liquid plants, from
billions of dollars in construction loans to minimum prices for the new fuel.
Advocates of the technology also say it could mean possibly new markets for
coal such as that found in Illinois, where the U.S. government estimates there
are 38 billion tons of coal yet to be recovered. That amount trails only
reserves in Montana and Wyoming.
"Transforming America's abundant coal reserves into clean transportation
fuels is an important step for strengthening U.S. energy security," Gregory
Boyce, Peabody's president and chief executive, said in announcing the deal this
week.
While much of the coal from U.S. mines is sold to utilities to be burned for
generating electricity, there are potential downsides to converting the sooty
black rock into liquid. The viability of such projects may hinge on oil prices
remaining lofty, and environmentalists believe the process may contribute to
greenhouse gases and possible global warming.
The League of Conservation Voters says burning a gallon of liquefied coal
releases almost double the carbon dioxide -- a greenhouse gas -- as a gallon of
gasoline, "turning a compact car into an SUV from a global warming perspective."
Analysts also have noted that building coal-to-liquid plants is expensive,
meaning such sites must be used over a few decades to justify the investment.
That has kept big energy companies from investing heavily in the technology, at
least until now.
Rentech's John Diesch told a Senate subcommittee last month it "will take an
investment approaching $1 billion" to create the coal-to-liquid plant, replacing
what is now Rentech's factory where fertilizer is made for Midwest farmers.
Fertilizer plants across the country have struggled in recent years with soaring
costs of natural gas, the chief feedstock for fertilizer products.
Diesch said the plant, whose transformation is expected to begin within
months, would use technology he insisted produces fuel cleaner than conventional
diesel because sulfur and other oil byproducts are removed.
Diesch also testified that such fuel runs cleaner than conventional fuels
from petroleum, is biodegradable and can be stored five to 10 times longer than
diesel, making it ideal for strategic reserves.
Peabody said the Rentech plant would crank out roughly 400,000 barrels of
liquid fuel per year, as well as about 545,000 tons of nitrogen fertilizer
products.
The plant would capture emissions of carbon dioxide, and Rentech is
evaluating prospects of selling the gas to bottling companies or for use by area
petroleum producers to boost oil output by pumping it underground.
Many U.S. lawmakers, prodded by coal companies, are looking into the
technology, mulling everything from taxpayer-backed loans, tax credits and other
incentives for coal companies and synthetic fuel producers to develop a domestic
coal-to-liquids industry. The government hopes to push energy independence
legislation through this summer.
Peabody -- provider of fuel for roughly 10 percent of the electricity
generated in the U.S. -- is the world's largest private-sector coal company.
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