The Oil Rush
How high-tech prospectors are trying to squeeze fuel--and fat profits--out of the earth while transforming the petroleum market
Coal feedstock needs to be cheap and plentiful, which is why in an old mining region 100 miles northwest of Philadelphia, Rich feels his company is well suited to pioneer. "People say, 'You're at the right place at the right time,'" he says. "But we've been at the right place all of the time." Rich first became intrigued a decade ago, when he learned of a new gasification technology that allowed extremely small particles of coal to be used. The Rich family's company had literally tons of such material--waste coal, or culm--sitting in piles where it is viewed as one of Pennsylvania's most intractable pollution problems. Indeed, at least 200 million tons of culm mar some 8,500 acres of the Keystone State. Rich partnered with Sasol, which still produces liquids from coal in South Africa, and others to draw up plans for a plant to process 4,700 tons of culm into more than 5,000 barrels per day of diesel fuel.
Reception to his idea was lukewarm--until oil prices began to rise. Then the government got onboard in a big, bipartisan way. The proposal first won a $100 million Department of Energy grant and $47 million in Penn-sylvania state tax credits. Then, last August, Congress made Rich's $612 million plant eligible for about $490 million in federal loan guarantees--an assurance sought by Wall Street banks lining up private financing for the first-of-its-kind facility. Finally, Pennsylvania's Democratic governor, Ed Rendell, put together a public-private consortium to buy nearly all the diesel fuel Rich produces. So, much of the risk has been stripped away from the project, except for one that consumers would welcome but the unconventional oil business dreads: a big drop in oil prices.
Like oil sands and oil shale, coal-to-oil raises environmental issues, and the project is undergoing federal review. Rich and his allies in government tout the resulting product as "ultraclean fuel" because sulfur and other pollutants are stripped out in the process. Rich says he will aim to market the sulfur and other manufacturing byproducts. But critics say those plans are not assured, and for other contaminants, like mercury, there is no easy answer. "If they had the magic technology to take the waste coal piles and make them vanish from the Earth, that would be great," says Mike Ewall, director of the Philadelphia-based Energy Justice Network. "But that's not possible."
Carbonated. Perhaps the biggest environmental issue for all unconventional oils is that they would be likely to cause a spike in greenhouse gas emissions just as climate change is becoming a more pressing political issue. The National Energy Technology Laboratory estimates, for instance, that from manufacturing process through tailpipe, diesel from coal would produce twice the carbon emissions of conventional diesel. Yet it would be easier to capture the nearly pure carbon dioxide emissions produced by such a high-tech plant than the air-diluted gases put out by old-fashioned coal power plants. Rich says he plans to sell part of his plant's CO2 emissions to the carbonated beverage industry.
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