www.statejournal.com/story.cfm?func=viewstory&storyid=28573
Financing Questions Pose Problems for Coal-To-Liquid Projects
Posted Thursday, September 6, 2007 ; 06:00 AM
CTL proponents look to the fall for Congress to help provide some financial certainty to the industry.
Story by Pam Kasey Email | Bio
Although it's been nearly two years since Gov. Joe Manchin announced the West Virginia Coal Conversion Initiative in October 2005, the coal-to-liquid fuels industry it aimed to create is barely in its infancy.
That same situation is mirrored across the nation: Often cited as a solution to the nation's dependence on imported oil, liquid transportation fuels from coal nevertheless are getting a slow start.
What is holding the industry back?
Money and CO2
The coal-to-diesel plant that Los Angeles-based Rentech Inc. has proposed for Mingo County is the bright spot in West Virginia's coal-to-liquids, or CTL, industry.
The main obstacle to the development of the industry is money, according to Rentech Senior Vice President for Government Affairs and Corporate Communications Tom Sayles.
"The financing is the big challenge, right?" Sayles asked rhetorically.
"There's some concern on the part of bankers that there's a certain amount of commodity risk that goes along with these plants," he said. "That is to say that, if (the price of) oil were to precipitously fall, what would that to do the economics of the project?"
Other producers agree. Executives with coal-to-liquid companies such as Baard Energy LLC and Sasol North America made similar statements at the Coal-To-Liquids Coalition summit in Beaver earlier this month.
A second obstacle involves the greenhouse gas carbon dioxide.
"What you'll hear from some of the environmental community is that the production process for making CTL is twice as dirty as it is for petroleum-based fuels," Sayles said, "but that assumes you don't use any modern production techniques and don't do any sequestration."
U.S. Rep. Nick Rahall, D-W.Va., has been a strong proponent of CTL in West Virginia.
"What is needed in order to quickly develop a full-scale CTL industry that can reduce our dependence on foreign oil in the next decade is large investment in the near-term," he said, "and government and business are both looking seriously at how to accomplish that."
Energy Bill
CTL proponents widely expected that supports for the industry would be included in the 2007 federal energy bill.
Supports that were discussed widely earlier in the year included government subsidies for up to 10 coal-to-liquid plants and guarantee of a minimum market through long-term contracts with the U.S. Air Force.
But when the U.S. Senate and then the House of Representatives finished their bills over the summer, neither version mentioned it.
It's not over, according to Sayles.
"We're told those issues were deferred to the fall, and they'll come up again" when the two versions of the bill are negotiated in conference committee, he said.
Lawmakers could reassure the financing community through price supports for CTL, a possibility Rahall confirmed is under discussion.
"The expectation is that any energy-related debate taken up in Congress this fall is certain to include efforts to provide for a CTL industry," Rahall said. "The Congress has been looking at numerous options to help provide some financial certainty to the industry, including loan guarantees and price floors that will ensure that CTL can still compete even in the event that oil prices drop in the future."
Rentech likes the idea of a price floor.
"We support the voucher bill," Sayles said, "which provides a price floor and a ceiling over that price, a kind of risk-sharing with the government. If the government could minimize some of that real or perceived commodity risk, it would go a long way to expediting the development of the industry."
Lawmakers could address greenhouse gas concerns in the energy bill, too.
"Rentech at least has taken the view that the way to solve that is to apply a standard across the board to CTL (and CTL-based fuels), a standard that says that the plants producing those products should be cleaner than the products they'll be replacing," Sayles said.
Rentech's production process captures significant amounts of CO2, he said. The company currently is studying options near the proposed Mingo County plant for using the captured CO2 to assist in the recovery of coalbed methane, leaving the CO2 stored, or sequestered, underground.
Rahall pointed out that the House energy legislation did include language initiating a framework that enables sequestration.
Rentech also is considering an alternative process -- "CBTL" -- that would use biomass as part of the feedstock, reducing the amount of CO2 produced up front.
Sayles said he is confident that Rentech can produce liquid transportation fuels from coal at least as cleanly as current diesel production processes.
"Incentives like the voucher bill could be predicated on that kind of a standard, requiring that we be cleaner than the fuels we displace," Sayles said.
He hopes that whatever Congress decides to do about CTL, it creates certainty for investors.
"What the market dislikes most is uncertainty," he said.
Rentech Inc. Sees Economic Opportunity in Mingo County
Rentech Inc. is well into its validation and scoping phase of development of a coal-to-liquids plant in Mingo County.
"In the validation and scoping phase, one of our main charges was to verify that there was a carbon dioxide solution for the area," said Rentech financial analyst John S. Marr, who is part of the company's Mingo County development group.
The company is seeking ways to store the greenhouse gas carbon dioxide, or CO2, that would be captured at the plant during the production of diesel fuel from coal.
"There's quite a bit of opportunity there with the Devonian shale that's in the Appalachian basin," he said. "CO2 can be sequestered (stored) in or below the Devonian shale."
Another possibility is enhanced coalbed methane recovery, he said, in which a company that is pumping coalbed methane from the ground would use CO2 from the Rentech plant to help push it out.
Neither of these uses of CO2 has been tried commercially, Marr said, although researchers at Virginia Polytechnic Institute and State University (Virginia Tech) are studying sequestration in Devonian shale, and enhanced oil recovery is in use elsewhere.
Another aspect of this phase is to validate a customer base for the plant's diesel fuel.
The company has stated in the past that the likeliest market for its 20,000 barrels per day of diesel fuel is local coal companies, which use diesel already and might enter mutually beneficial purchase agreements for coal and diesel.
Other possible markets include area railroads and the West Virginia National Guard, Marr said.
Working with the Mingo County Redevelopment Authority, Rentech also is looking at other win-win arrangements.
The plant may "co-feed" West Virginia hardwoods for as much as 20 percent of the feedstock for the liquid fuel, Marr said, a process that would further reduce the plant's CO2 footprint.
And it may be able to use in its production process water that active coal companies currently pump from flooded mines.
Rentech has begun an economic impact study with Marshall University, Marr said, and will have specific numbers from that study by about the end of the year.
But the company has estimated in advance of that study that plant construction would employ as many as 2000 at its height, and that operation of the plant would employ about 250 permanently.
It would also create perhaps another 200 mining jobs, Marr said, for about 6 million tons of coal a year -- 4 percent of West Virginia's current coal production.
The soonest Marr sees the plant up and running is early 2012.
Copyright 2007 West Virginia Media. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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für meinen Geschmack bin ich nicht ganz zufrieden!
der auch steigende € zerstört unseren Gewinn!
Volumen naja!
Der 25 Wochenzyklus war bisher "fakt" seit 2006! das kann und darf sich auch ganz schnell ändern...
Ich kann mich nur wiederholen, der der investiert ist soll froh sein!!!!!!!!!!!!
