January 1, 2009

A Fresh Look at Coal-Derived Liquid Fuels

A. Dilo Paul, PhD, MBA

Challenges Remain

The advantages of coal-derived liquids are manifold, but many technical and public perception challenges remain. Here are the myths about coal-derived fuels that must be busted.

Costs Are High. No commercial coal-derived liquid fuels plants have been built in the U.S. Consequently, it is difficult to accurately estimate the costs of producing liquid fuels from coal. The Sasol plants were built at a capital cost of about $6 billion, equating to approximately $40,000 per daily barrel at a production rate of 150,000 bpd, although these costs cannot be directly translated to a comparable plant in the U.S.

The Sasol plants produce a substantial amount of chemical by-products, and in many years, revenue from these by-products has exceeded the revenue from fuel. Inflation and fluctuating currency exchange rates also complicate comparison; the Sasol plants were built in the early 1980s, so the capital cost of $40,000 per daily barrel would be approximately double in 2006 dollars.

In 1993, Bechtel undertook a conceptual baseline design study of a nominal 50,000-bpd bituminous coal-derived liquid fuels plant for the U.S. DOE. In 1993 dollars, Bechtel estimated the capital cost to be $59,500 per daily barrel. Adjusting for inflation to 2004 dollars, this capital cost estimate became about $80,000 per daily barrel. The report was revised in 2007 for a similar-capacity plant in the Illinois coal basin producing commercial-grade diesel and naphtha liquids from medium-sulfur bituminous coal. With the revised design, the total plant cost estimate increased to $4,528 million, or $90,574 per barrel of product per day. This high estimate is due to the significant risks related to building a first-of-a-kind plant, including uncertainties about technical performance, capital and production costs, and environmental performance. As multiple plants are built, it is likely that this capital cost will decrease through design advancements and process improvements.

Pollution Is Increased. Pollutant emissions from coal-to-liquid facilities are expected to be minimal because coal-derived sulfur compounds will be removed and converted into elemental sulfur in the gasification/gas clean-up stage. Because of the sensitivity of the FT catalyst to poisons, all contaminants must be removed to near-zero levels (ppb levels), and this ensures that overall plant emissions would be close to zero. Consequently, coal-derived diesel fuel is virtually sulfur free and exceeds requirements for ultra-low-sulfur diesel and meets or exceeds the most stringent air quality standards in the U.S.: California’s standards.

Waste solids emissions consist of a nonleachable slag from the gasification process. If power generation is included in the plant for improved economics, nitrogen oxide emissions will be minimized using low-NO_x burners in the turbines. Selective catalytic reduction and activated carbon injection can be employed in the flue gas stream to remove mercury, additional NO_x, and other contaminants. These technologies are commercially available today.

CO₂ Emissions Increase. Most of those who argue that CO₂ emissions will increase with the use of coal-derived fuels compare the well-to-wheels emission rates: 27 pounds of CO₂ emitted per gallon for conventional petroleum-derived fuel versus 50 pounds of CO₂ emitted per gallon of a coal-derived liquid fuel. The drawback with the well-to-wheels comparison is that it mixes apples and oranges: CO₂ emissions during the production of the liquid fuel (whether from coal or oil) with the CO₂ emission figures of the end user, because different people drive different vehicles — and drive them differently. Also, the end user’s CO₂ production is a function of vehicle performance chosen for the calculation of the total emissions.

If CO₂ emissions from coal-derived liquid plants are captured and sequestered, the overall CO₂ emissions would be equal to or less than those from petroleum (Figure 6). For an automobile getting 27 miles per gallon, CO₂ emissions when burning gasoline are about 0.8 pound per mile and 2.1 pounds per mile with a coal-derived liquid fuel produced at a plant without CCS. With CCS, however, the same automobile’s emissions would drop to 0.8 pound per mile. There is, however, a legitimate concern regarding the scalability, reliability, and commercial economics of carbon capture and storage technologies as applied to coal-derived liquid fuel plants.

6.    Comparing fuels. Estimated change in greenhouse gas emissions if petroleum fuels were to be replaced by one of these alternative fuels. Source: DOE

Large Volumes of Water Are Required. It is often stated that the water requirements for a coal-derived liquid fuel facility are so large that building such plants would deplete precious water supplies, particularly in areas where water is scarce. Though this may be true, most of the water used in the production of coal-derived liquid fuels can be recycled water. There are three major water needs: process water, boiler feedwater, and cooling water. Process water includes water consumed as part of the reactions occurring in the coal gasifier and the FT reactor and water used for scrubbing ammonia and hydrogen chloride from syngas. Though the former is lost, the latter two may be recycled after appropriate treatment.

The amount of water required to operate a coal-derived liquid fuels plant is a function of many variables, including the type of gasifier used to provide the syngas, the design of the FT reactor, coal properties, and the average ambient temperature and humidity. A theoretically derived rule of thumb developed by Bechtel in 1998 is that for each gallon of coal-derived liquid fuel, an eastern coal would require 7.3 gallons of water and a western coal would require 5.0 gallons. Of the total water requirements, only about 1 gallon of water per gallon of coal-derived liquid is consumed in the reaction, indicating that the remainder can be recycled. However, in the absence of real plant data, water consumption estimates could be expected to vary somewhat.

Launching a New Industry

The U.S. has pursued several efforts that were intended to develop a coal-derived liquid fuels plant, but the first plant has yet to be built (Figure 7). In 1995, the U.S. Department of Energy started and operated an Alternative Fuels Development unit in LaPorte, Texas, which has since shut down. This unit demonstrated the production of zero-sulfur coal-derived liquid fuels, dimethylether, and higher alcohols from a simulated coal-derived synthesis gas. Unfortunately, the low price of crude oil while the plant was operational discouraged any business interest in turning this effort into a commercial venture.


7.    New fuel sources. U.S. coal-to-liquids projects on the drawing board as of June 2008. Source: NETL

About a dozen announcements have been made by the private sector regarding the construction of coal-derived liquid fuel plants over the past few years, including those from Headwaters and Rentech in 1995 and, most recently, Consol Energy and the Crow Indian Nation in 2008. Unfortunately, the 2005 announcements were stifled by a powerful environmental lobby and the challenge of financing the $4 billion to $5 billion investment. Some entrepreneurs took their expertise and business acumen to China, India, Dubai, and other nations where there is greater financial support for and less environmental opposition to building coal-derived liquid fuel plants. The ironic consequence of this shift is that the U.S. might be importing coal-derived liquid fuels while it sits on the largest reserves of coal. Even worse, the feared emissions of CO₂ and other pollutants that prevented construction of these plants in the U.S. could very well be wafting their way to the U.S., thanks to a phenomena known as the Asian Brown Cloud.

Fortunately, growing national concern about unpredictable and rising oil prices and their associated impact on the economy, national security, and global competitiveness recently encouraged new activity in the public and private sectors: the first formal U.S. forum to address issues associated with coal-derived liquid fuels. Another promising response is the recent passage of the Emergency Economic Stabilization Act of 2008 (H.R. 1424) on October 17, 2008, which includes $250 million in tax credits to support the installation of gasification technology, including technologies for producing liquid fuels from coal. The tax package also aims to spur CCS through $1.1 billion in new tax credits.

Overall, converting coal to liquid fuels is one element of an integrated approach that is needed to address fuel security. At least in the near term, it could bring a higher level of stability to world oil prices and to the global economy. Over the long term, it could serve as insurance for the U.S. (or any other oil-importing nation) against artificial or unwarranted price hikes from oil-producing countries.

—A. Dilo Paul, PhD, MBA (anton.d.paul@benham.com) is a senior scientist for The Benham Companies LLC—a wholly owned subdidary of Science Applications International Corp.