Extending the reign of King Coal


The coal market isn't as sexy or as global as oil, so it often works outside the media spotlight. But when it comes to understanding how the U.S. energy-security-enviro challenge is shaping up, coal is an excellent place to look because, in America, coal is cheap, plentiful within the country, a huge provider of jobs and megawatts, and a tremendous source of greenhouse gases. 

The global outlook for demand is strong, as Asia's appetite for electricity grows. This year, China became a net importer of coal. As for the United States, part of its energy challenge is improving security of supply — reducing dependence on the understandably dreaded "foreign oil." Making liquid fuels using our own American coal sounds appealing. And perhaps no consumer is more interested in coal-to-liquid (CTL a.k.a. "Fischer-Tropsch") than the U.S. military, which has huge transportation fuel needs and few alternatives to oil (it's kind of hard to build a jet that runs on electricity).

For the coal industry, getting access to the American gas tank would be a tremendous boost, giving it a whole new market outside of power generation and heavy industries like steel. The WSJ filed a must-read report last week, "Coal Industry Hopes Pentagon Will Kindle a Market," that really gets at the key issues. CTL is a huge emitter of carbon dioxide, and the process uses between 5 to 7 gallons of water for every gallon of fuel it produces. But those inconvenient facts aren't dissuading some folks:

The effort nevertheless has some backers at the Pentagon. The Air Force, which consumes the most fuel of the military services, supports using coal-to-liquids fuel. It recently certified the B-52 bomber to run on a blend of Fischer-Tropsch fuel and normal fuel. The Air Force plans to do the same for its entire fleet by 2011. The Air Force intends to buy about 400 million gallons annually by 2016. The service supports legislation that would allow it to sign 25 year contracts for supply, even at historically high prices above $50 per barrel, said William Anderson, assistant secretary of the Air Force for installations, environment and logistics.

"If the legislation helps spur on a market that is necessary, we believe, to ensure our long term national security, we believe it's something that has a lot of merit," Mr. Anderson said.

According to Jeff Goodell, the author of Big Coal, the rise of Wyoming coal is one of the key industry dynamics fueling the CTL push. At 18:05 minutes into this excellent June interview with NPR's Terry Gross, Goodell explains how Wyoming coal, in comparison to Appalachian coal, is easier to mine, makes less of an environmental impact, contains less sulfur, burns cleaner, and requires utilities to spend less on scrubbers at coal fired power plants (but it has a lower heat content, so you have to burn more of it). You can practically "dig [it] out with a spoon" in Wyoming, Goodell says.

In contrast, Appalachian coal has been mined for over a century, and because much of the easy-to-mine coal has been extracted, the coal remaining is in thinner seams and is more expensive to extract. So part of the push for CTL, Goodell says, comes from eastern coal states, for which CTL could be a huge boost. Sen. Byrd of West Virginia has likened American coal to "acres of diamonds under our feet." A large federal backing of CTL hasn't come yet, but keep your eye on it. China, like the U.S. Air Force, is in the process of building CTL capacity. And we know how much U.S. legislators like to keep up with China.


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