Energy & Environment

Coal Converts

When it comes to lining up new energy sources, a number of states see plain old coal as the cleanup hitter.
by | April 2006

Valley, in northeastern Pennsylvania, is so larded with mounds of black rock and dark pits of swampy ooze that it sometimes resembles a volcanic moonscape. The only thing that's ever come bellowing out of the ground here, however, is hard and shiny anthracite coal. During mining's heyday in the first half of the 20th century, mining companies hauled the purest anthracite out of the valley by the train load, leaving behind the waste coal--small hunks of anthracite mixed with other rock--in messy, acid-leaching piles everywhere.

Off-roading through the black wasteland in his Cadillac Escalade, John Rich Jr. sees something more than an unmitigated environmental disaster. He views this mess as the seed of American freedom from foreign oil. This spring, Rich plans to break ground on the first plant in the U.S. designed to convert coal into a liquid fuel. By 2009, he expects to be churning out 40 million gallons of extra-clean diesel. The plant would also produce enough electricity to power 40,000 homes--all from the heaps of waste coal and tailings lying at the bottom of blackened ponds. "That's feedstock," Rich says, angling the Escalade past a dark lake surrounded by heavy black dunes. "Feedstock, feedstock everywhere."

Nobody paid much attention to an idea like that back in the days when gasoline went for a buck a gallon and pumping clean natural gas into power plants was cheap. Now, with gasoline prices hovering well over $2 per gallon and natural gas prices double what they were a few years ago, investors and politicians are starting to notice coal. Pennsylvania is giving Rich $47 million in tax breaks to help get his coal-to-liquids plant built, and Governor Ed Rendell agreed to fuel Pennsylvania's fleet with Rich's output for 10 years.

"We export $30 billion a year, mostly to foreign countries, to pay for energy purchases," Rendell says. "If we could produce that energy in Pennsylvania, think of the impact that would have on our state's economy."

Coal has always played a huge role in the U.S. energy mix. Even as windmills and biomass grab headlines today, the reality is that half of the nation's electricity comes from coal-fired power plants. As sky-high energy prices converge with the sort of advanced technologies that John Rich is promoting, coal consumption is only going to increase. Coal is relatively cheap and incredibly abundant. In the Gilberton Valley, it's sitting right there on the ground, all over the place.

The coal push is also getting a boost from coal-state governors claiming that coal benefits national security. The world's oil supply may be running out, Rendell notes, but America's heaping coal reserves could sate the national energy appetite for 300 years. West Virginia's Joe Manchin last year weighed in on the hurricane-induced energy crisis by announcing that he would find sites for industry to build next-generation plants that make diesel or power from coal. And Montana's Brian Schweitzer picks his analogies carefully when he calls his state's vast eastern plain the "Saudi Arabia of coal." Schweitzer is trying to drum up public and private support for a massive $1.5 billion coal-to-liquids facility.

The governors are fond of calling their various initiatives by the name "clean coal." The coming coal boom, however, brings with it some serious environmental consequences. Coal raises thorny questions about greenhouse gases that contribute to global warming. Coal mining also suffers a bad reputation, especially in Appalachia, where destructive mountaintop removal techniques are common. "Coal sounds like a wonderful solution to our dependence on foreign oil," says Cindy Rank, mining chairwoman for the West Virginia Highlands Conservancy. "But it will only cause more problems and greater destruction if we push to get more coal out of the ground as fast as we can."

Yet environmentalists are split on the coal question, particularly when it comes to global warming. The new technologies make it theoretically possible to lock greenhouse gases away, but such techniques aren't proven and will cost money. With an entire generation of dirty-coal power plants set to retire, many environmentalists want the next generation of coal plants to at least be capable of sequestering carbon dioxide. "We had this moment in the '90s where everybody was building natural gas power plants," says Judi Greenwald, director of innovative solutions with the Pew Center on Global Climate Change. "We're about to get into a moment in the next decade where people will mostly be building coal. So here's your shot. You've got to get this right."


One reason why coal is so hot today is because it's a flexible fuel. You can do much more with coal besides simply burning it, as conventional power plants do. The most innovative projects on the drawing board today squeeze energy out of coal by first turning it into a versatile synthetic gas.

Gasifying coal involves heating it above 2,000 degrees Fahrenheit, along with oxygen, inside a pressurized chamber. The resulting gas, basically a blend of hydrogen and carbon monoxide, can be used for a variety of purposes. For example, the gas can be burned in a combined- cycle power plant, in much the same way that natural gas power plants work. Or, through a chemical process known as Fischer-Tropsch, it can be converted into a number of different liquid fuels.

John Rich's plant in Pennsylvania will do both. Sitting in his office, across the street from the black piles and pits, Rich describes how he'll turn waste coal into zero-sulfur diesel. He holds up a small vial of clear wax, a product of the Fischer-Tropsch process. "This is the basic building block," he says. "We can cut this into aviation grade kerosene or diesel fuel--which for all intents and purposes is home heating oil--and it can be upgraded into a gasoline- type feedstock. Once you've broken down the carbon into its basic building block, hydrogen, there's a lot you can reconstitute it back into."

There's another advantage to coal gasification, Rich says. Once coal is reduced to a gas, it's easy to take out the hazardous pollutants. Rather than sending mercury, particulates and sulfur up the flume, those pollutants will be captured and sold off commercially. Rich even hopes to capture some of the greenhouse gas, carbon dioxide.

There's nothing new about converting coal into a liquid fuel. Germany used the Fischer-Tropsch process during World War II, and a South African company has been doing it for years. Rich's $612 million plant would be the first of its kind in the U.S., though. That's why Pennsylvania is offering some help. So is the U.S. Department of Energy, which is putting up a $100 million low-interest loan. "No one's done this before," Rich says, sounding exasperated. "You say to the bankers, 'This is what we want to do.' And they say, 'Let's go visit a plant.' And we say, 'There is none.' And they say, 'Forget it.'"

To aid Rich's Wall Street pitch, Governor Rendell agreed to have the state purchase 20 million gallons of diesel per year for 10 years. Rendell also persuaded a consortium of trucking businesses to buy the rest of Rich's output. "He can go to Wall Street and say, 'Here, you don't have to speculate on whether we'll be successful,'" Rendell says. "'Here are the contracts, we know there'll be a return on investment.'" In addition, Rendell notes, the state is getting a below-market price.

Pennsylvania is getting something else out of the deal: cleanup of the waste-coal mess. The state is requiring Rich to fill in mining pits with solid wastes, as has already been done in a couple of places. Four feet of soil will top it, creating farmland from the mining industry's black scars. Pointing out a grassy plain covered in Christmas trees, Rich says that the "whole area was devastated, and we landscaped it and tied it back into the mountain. We're cleaning up the environment."


Rich's primary intent is to refine diesel. His plant, however, will also make electricity by burning some of the synthetic gas. This will generate enough power to run the facility and to sell a modest 41 megawatts over the power grid.

The process of burning synthetic gas for power is called "integrated gasification combined-cycle," or IGCC for short. Electricity may be incidental to Rich's plans, but both in Pennsylvania and across the country, IGCC is just as hot a topic as coal-to-liquids. Pennsylvania wants to shut down the state's dirtiest coal plants and replace them with new IGCC plants. "You could put a million scrubbers on an old coal-fired power plant and never even approach the environmental performance of a coal gasification plant," says Kathleen McGinty, secretary of Pennsylvania's Department of Environmental Protection.

As a marketable technology, IGCC is a bit more developed than the Fischer-Tropsch process. An IGCC power plant in Tampa has been producing 260 megawatts of power since 1996. The big reason why IGCC is getting so much attention now is because of global warming. Greenhouse gases such as carbon dioxide aren't currently regulated by law, but some players in the electric industry expect it to come eventually and are beginning to act accordingly. Citing the inevitability of greenhouse gas regulation, Cinergy and American Electric Power have both announced plans to build IGCC plants.

Gasification addresses the global warming problem in two ways. First, gasifying coal is much more efficient than burning it. That means that an IGCC plant uses less coal to yield more power. Secondly, it creates the opportunity to capture carbon dioxide.

The big unresolved question is what to do with the CO2 once it's been captured. The most popular idea is to sequester the gas by pumping it underground. That's something the oil industry has been doing for years, for the purpose of pulling hard-to-reach oil out of the ground. Expanding on this strategy has an obvious shortcoming: If the intent is to mitigate global warming, then it's pointless to use the byproduct of one fossil fuel in order to tap another.

Other ideas are floating around for sequestering CO2. They include pumping the gas into underground saline formations or deep coal seams, and more naturalistic schemes to store CO2 in plant tissues and soils. Optimistic as some environmentalists are about the possibilities, others remain deeply skeptical. "The effectiveness of CO2 storage in those systems is completely unknown," says Anne Hedges, program director for the Montana Environmental Information Center. "It's a nice theory, and I sure hope it works. But there's absolutely no evidence it does on a long-term basis."

Cost is another hurdle for IGCC. PacifiCorp, based in Portland, Oregon, is studying options for building a Western power plant by 2012. Part of its analysis is a side-by-side cost comparison of IGCC versus a conventional coal-fired power plant. The IGCC option prices out 10 to 20 percent higher--and that doesn't include any efforts at sequestering the CO2. "We're told by regulatory mandate to pick the least-cost reliable plant, and the least-cost reliable plant is conventional coal," says Bill Edmonds, PacifiCorp's director of environmental policy. "It's going to require incentives to get over the hurdle to IGCC."

Incentives are one approach. A Western Governors Association task force recently called for development of four or five power plants that use coal and also sequester at least 60 percent of their CO2 emissions. The task force suggested states pass regulatory and financial incentives, including hastening permitting and allowing utilities to manage the risk of a new technology by ensuring for full cost recovery. In March, the Wyoming legislature passed a bill giving utilities tax breaks for building coal gasification or liquefication plants.

California is taking more of a demand-side approach. In November, the California Energy Commission put strict limits on the kind of power that California will import. Specifically, the commission said that California utilities may not purchase power from plants that produce more CO2 than the latest natural gas-fired plants do. In truth, that's a back-handed way of promoting IGCC. What California is saying is that if Western coal-builders want to sell into California, they'll have to try a clean technology with some kind of CO2 sequestration. California calls this policy a "greenhouse gas portfolio standard." John Geesman, an energy commission member, says that it's just the latest example of California using its market clout for the good of the environment.

It's possible, however, that California's policy could trigger a new energy crisis. Why? Because the reality of CO2 sequestration hasn't caught up with California's good intentions. Until sequestration becomes more practical, the policy means that California won't be using much new coal at all. It will be using natural gas. And natural gas prices are near record highs.

What worries Donald Soderberg, chairman of the Nevada Public Utilities Commission, is that California's energy ills have a way of infecting its neighbors, too. "We're very hopeful about coal gasification," Soderberg says. "But we still need some time to get the bugs out of this. In the meantime, if we're left with only natural gas combined cycles being built, we've got a problem."


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