As the global warming battle continues, look for “coal to fuel” projects to gain momentum.

By Jim Ostroff, Associate Editor, The Kiplinger Letter,  Jan 9, 2009

Coal is likely to be a big winner in the new Obama administration. Over the next two years or so, look for Congress to provide several billion dollars for investments in research and development to commercialize processes that transform coal into motor fuels for autos, trucks and jets.

The federal funding initiative will be part of a concerted plan that earmarks incentives to boost alternative energy, including solar, wind and geothermal power. The effort will help the U.S. reduce carbon dioxide emissions and oil dependence. But the Obama plan also recognizes that it will take decades for alternative energy sources to replace fossil fuels.

In the meantime, coal will be touted as one homegrown solution to ease U.S. reliance on oil imports, which now account for nearly two-thirds of daily usage. Within 20 years or so, look for coal plants to make up to 3 million barrels a day of gasoline and diesel fuel. Rocket science won’t be required. The technology to convert coal to motor fuel was developed by Germany during the 1930s and has been used for years by South Africa’s Sasol.

Part of the push behind coal-to-fuel projects is fear of oil supply disruptions or cutoffs in the U.S., China and elsewhere. Oilbound economies aren’t convinced that the recent collapse in oil prices to $40 a barrel and less should distract them from funding coal-derived fuels. Policymakers in those countries know that the break-even benchmark of $50 a barrel for oil will be reached and exceeded in coming years, once the economic morass ebbs.

The fight against global warming continues, especially a coming era of heightened initiatives to reduce carbon dioxide emissions. But that won’t knock coal out of the box. To reduce harmful emissions, some carbon content of coal-derived fuels will be removed at the processing plant and stored permanently underground. Plus, the fuel will be blended with alcohols made from biomass to yield a mixture that emits lower levels of greenhouse gases than today’s motor fuels, says James Bartis, a senior policy researcher at Rand, a public policy think tank.

Ersatz fuel will help temper world oil prices by slowing the growth in demand. Meanwhile, the new coal fuel plants likely will be built in other coal-rich countries, including Australia, China, Germany, Russia and Slovakia. Coal-to-fuel processing plants will spur the creation of a new industrial sector, too. Within approximately 20 years, look for the coal fuel industry to generate more than $50 billion in sales.

Pentagon unveils new CTL technology development program

as reported by www.futurecoalfuels.org, Sept 17, 2008

The U.S. Defense Advanced Research Projects Agency (DARPA) earlier this month unveiled a new “aggressive” program designed to enable the Department of Defense “to effectively and economically” utilize U.S. coal reserves “as part of an overall strategy to ensure a secure future energy supply for our military services.”

In a Sept. 4 Broad Agency Announcement (BAA), DARPA emphasized that “the military’s reliance on fuels derived from foreign oil imports represents a vulnerability that could adversely affect our national security should a disruption in these sources occur,” thus necessitating the need for a program capable of accelerating the development and use of advanced coal-to-liquid (CTL) fuels technology.

“Given the abundance of U.S. coal reserves, it is reasonable to assume that coal derived fuels could play an increased role in meeting future U.S. energy needs,” said DARPA.  “

Under the program, DARPA’s Strategic Technology Office will review proposals focused on short term projects capable of demonstrating the ability to reduce the cost of CTL plant construction, further reduce carbon dioxide emissions and improve the water usage performance of CTL plants.

The agency is allotting approximately $4.5 million in funding to support successful demonstration projects.  Project proposals must be submitted to DARPA by Nov. 12, with the agency pledging to issue a consolidated question and answer response document after Sept. 30 to help guide those drafting proposals.

The State of Montana announced on August 8, 2008 the signing of an agreement between the Crow Nation and Australian-American Energy Company for development of a Coal to Liquids project in southeastern Montana.

August 8 , 2008

CROW AGENCY, MONTANA – Governor Brian Schweitzer along with the Crow Tribe of Indians (Apsáalooke Nation) and Australian-American Energy Company LLC (AAEC) today announced agreements to develop a $7 billion coal-to-liquids project on the Crow Reservation in southeastern Montana.
The Many Stars Project is initially targeted to convert 38,000 tons per day of coal into
50,000 barrels per day of ultra-clean diesel, jet fuel and naphtha. The project would provide up to 4,000 jobs during construction and 900 permanent jobs on the reservation after start up,
which is expected in 2016.
Governor Schweitzer, who has long been an advocate of coal-to-liquid fuels
technology, praised the project. He was introduced to AAEC at an international coal-to-liquids
conference in New York during the summer of 2007 and invited the company to more closely
assess Montana’s abundant resources. His administration has worked closely with both the
Crow Nation and the company in helping make this project a reality.
“Montana is on the move,” said the Governor. “This will be one of the first clean-coal
technology projects in the state and meets one of my goals of bringing new economic
development to Montana. The Many Stars Project will also be a significant contributor to our
nation’s need for energy security and has the potential for providing superior military fuels to
near-by bases.”
Crow Chairman Carl Venne praised the project’s positive impacts. “The Crow Nation
has over 10 billion tons of coal resources,” he said. “We made a decision to pursue this type of
clean-coal project because it provides long-term economic and social benefits for our people
for many generations to come. The Many Stars Project will help us become self-sufficient.”
Venne noted that future plans with AAEC include expanding the CTL plant to
125,000 barrels per day. As part of the agreement, AAEC also will be assisting Little Big
Horn College in creating needed training and educational programs to meet the human
resource needs of the project. Additionally, discussions are underway with Montana State
University and Idaho State University for education and training of the energy workforce that
will be necessary for the project, Venne said.
Allan Blood, chairman of AAEC, said the agreements between the company and the
Crow Nation are the result of many months of open discussions, collaborative planning and
tough negotiations.
“We are pleased to be bringing our Australian experience in clean coal projects to
Montana,” Blood said. “The Many Stars project is important on so many levels. It provides
good jobs in a part of Montana that needs them, it helps address U.S. dependence on foreign
fuels and it will demonstrate this is a technology that can be used in a way that addresses
environmental concerns.”
Blood noted that the project design calls for capturing CO2 for geo-sequestration and
supply to enhanced-oil recovery projects to both provide an environmentally responsible
project and further create additional energy opportunities in otherwise declining regional oil
fields.
“With over 100 billion tons of coal resources in the state, Montana is the `Saudi
Arabia of Coal’ and we are doing our part to help make energy security with clean fuels a
reality,” the governor added. “We anticipate this project being a model for clean-coal energy
projects in Montana and the United States. We know we have a lot of work ahead of us, but
this agreement today is an important first step.”
Under terms of the agreement announced today, the Crow Nation has committed coal
and water resources for the project while AAEC will provide the development capital and
project management. Both the Crow Nation, through its company Apsáalooke Energy
Company LLC, and AAEC will participate in the board of directors of the project company.
“AAEC has assembled a remarkable team here in the U.S. with their key executives
bringing an average of 30 years of experience managing energy projects world-wide,” Venne
said.
Added Blood: “AAEC is committed to working closely with the Crow Nation, the
State of Montana and the federal government to bring this important project to fruition.”
Venne said the Interior Department has been involved in the project since talks first
began last year. Members of the Crow Nation also have met with representatives of the U.S.
Department of Energy regarding the project, Venne said.
The documents the Crow Nation and AAEC signed today include an exploration
agreement under which AAEC will spend 12 to 18 months to further evaluate the coal
resources and select a final site for the mine and plant. AAEC has already completed its initial
feasibility study for the coal-to-liquid fuels project and will begin the environmental
permitting process later this year. Construction is expected to begin in 2012.
“The economic impact of this project cannot be overstated,” Venne added. “At the
same time, it fits with our desire to use Crow resources efficiently and responsibly for our
people.”
Apsáalooke Energy is a wholly owned company of the Crow Nation, which has
12,000 enrolled citizens and spans more than 2.2 million acres in southeastern Montana.
Australian-American Energy Company, LLC is a subsidiary of Australian Energy
Company Limited (AEC), headquartered near Perth, Australia. AEC was the original
developer of the APEL (now Monash) CTL Project in Victoria, Australia and is currently
developing a $2 billion clean-coal conversion project, the Latrobe Valley Urea Project, also in
Victoria.

A subsidiary of a Chinese state-owned oil giant has thrown its weight behind an ambitious, $3 billion coal-to-liquids (CTL) project planned for South Australia.

Australia-focused energy company Altona Resources Plc, which is listed on London’s Alternative Investment Market, has signed an in-principle agreement with CNOOC (Beijing) Energy Investment Co Ltd to cooperate in the development of Altona’s Arckaringa project in SA.

The project includes a 10 million barrel per year open cut mine and a 560 megawatt power plant.

Interest in CTL, which involves converting coal into liquid hydrocarbons, is growing amid concerns about “peak oil”.

“We have always recognized that Altona would need a partner of major stature, given the size of the Arckaringa project,” Altona chairman Chris Lambert said.

“With their immense resources and capabilities, CNOOC Energy is an ideal partner for Altona to work closely with in evaluating technology, off-take, financing and construction opportunities.”

He said the project would provide a major new source of base load power and diesel to SA, “which has a significant looming power deficiency and currently imports all of its distillate requirements”.

CNOOC Limited incorporated in Hong Kong in August 1999, was listed on the New York Stock Exchange (code: CEO) and The Stock Exchange of Hong Kong Limited (code: 0883) on 27 and 28 February 2001, respectively. The Company was admitted as a constituent stock of the Hang Seng Index in July 2001.

The Group is China’s largest producer of offshore crude oil and natural gas and one of the largest independent oil and gas exploration and production companies in the world. The Group mainly engages in oil and natural gas exploration, development, production and sales.