Montana's governor eyes coal to solve U.S. fuel costs

[mrpayroll]

http://news.yahoo.com/s/nm/20050825/pl_nm/energy_montana_dc

By Adam Tanner
Thu Aug 25, 1:55 PM ET

HELENA, Montana (Reuters) - Montana's governor wants to solve America's rising energy costs using a technology discovered in Germany 80 years ago that converts coal into gasoline, diesel and aviation fuel.

The Fischer-Tropsch technology, discovered by German researchers in 1923 and later used by the Nazis to convert coal into wartime fuels, was not economical as long as oil cost less than $30 a barrel.

But with U.S. crude oil now hitting more than double that price, Gov. Brian Schweitzer's plan is getting more attention across the country and some analysts are taking him very seriously.

Montana is "sitting on more energy than they have in the Middle East," Schweitzer told Reuters in an interview this week.

"I am leading this country in this desire and demand to convert coal into gasoline, diesel and aviation fuel. We can do it in Montana for $1 per gallon," he said.

"We can do it cheaper than importing oil from the sheiks, dictators, rats and crooks that we're bringing it from right now."

The governor estimated the cost of producing a barrel of oil through the Fischer-Tropsch method at $32, and said that with its 120 billion tons of coal -- a little less than a third of the U.S total -- Montana could supply the entire United States with its aviation, gas and diesel fuel for 40 years without creating environmental damage.

An entry level Fischer-Tropsch plant producing 22,000 barrels a day would cost about $1.5 billion, he said.

The Democratic governor of this Republican state said he had met with Shell president John Hofmeister, General Electric's CEO Jeff Immelt, as well as officials from the Department of Defense, and the Burlington Northern Santa Fe Railroad to discuss his proposals.

Schweitzer added that the recently passed federal energy bill includes an 80 percent loan guarantee for a Fischer- Tropsch plant.

A former cattle rancher who lived for seven years in Saudi Arabia working on irrigation projects, Schweitzer is also seeking energy deals with other states, especially California.

California "says they need 25,000 megawatts of electricity during the next ten years," he said. "We'll give you a delivered price and we'll forward contract that for the next 20 years.

"Transmission companies from England, from Canada, from all over America are coming to my office and saying 'we'll build these transmission lines as soon as you have the contracts to build the generation."'


If this is true, what will the oil companies do to stop this? ;)

It looks like we are now going to have to :bow: before Montana :lol:

Chris

[X]

These types of solutions are the reason I favor oil going up in price and the government getting out of the way instead of subsidizing particular alternative fuels such as hybrids and fuel cells.

I'm not thrilled about the government loan guarantee though. But at least it's just a loan guarantee instead of a tax credit.

[Duran]

A $1.5 billion dollar plant (not including transportation infrastructure, I'm sure) will give us 22,000 barrels a day? The US alone consumes in excess of 20 million barrels/day. 22,000 isn't even worth talking about. Even if they did do this, that 22,000 is so small it would do nothing to lower prices. It would just provide Montana with 22,000 barrels of income at whatever oil's current price is.

[al_bundy]

there are thousands of oil rigs around the world each producing a tiny percentage of oil

little here, little there and you get enough to power the world

[Duran]

there are thousands of oil rigs around the world each producing a tiny percentage of oil

little here, little there and you get enough to power the world

Each oil rig doesn't cost $1.5 billion to build.

[X]

The plant is essentially a refinery. Just as a small oil refinery would cost a ton of money, larger ones are relatively less expensive for the amount of oil they process.

I'd wait for some development to be done and facts to emerge before rejecting this due to the cost of a single prototype plant.

[VinVega]

Not sure how accurate this site is, but what the hey.
http://www.poncier.com/articles/Oil_well
These costs are exclusive of any testing (i.e. flow rate testing) and are clearly extremely high. The absolute cost is largely a reflection of the remoteness of the location being drilled, hence the relative cheapness of the Irish Sea (shallow water, close to coast) in comparison to the West of Shetlands (deep water, long way from coast and other facilities).

Onshore wells can be considerably cheaper, particular if the field is at a shallow depth. Here costs range from less than one million $US to $15 million for the very deep and difficult wells.

Oil companies do not generally own their own oil rigs, rather they tend to rent them from service companies. Typical rent costs for an offshore oil rig in 2000 were upwards of $160,000 per day. For a land rig upwards from $10,000 to about $35,000 per day 2005 depending on size and equipment.

A little snipit from an article about a rig collapse:
Link (http://www.reliefweb.int/rw/rwb.nsf/AllDocsByUNID/91f8f78092313fecc1256a16004bbe54)
The Italian-built rig, installed at a cost of more than 400 million dollars, produced 84,000 barrels of crude oil and 1.3 million cubic meters (4.6 million cubic feet) of natural gas per day.

$1.5 billion does seem a little steep for such a small quantity of oil. :shrug: Would this be pork? ;)

[X]

The Fischer-Tropsch process allows synthesis directly into gasoline, methane, etc. So it seems that the cost of the plant should be compared with the cost of a refinery and the cost of an oil rig should be compared with the cost of a coal mine.

[Mordred]

$1.5 billion does seem a little steep for such a small quantity of oil. :shrug: Would this be pork? ;)Granted, I'm relying on the words in the original article and not the actual facts, but going by those alone they say that it can convert coal into gasoline, diesel and aviation fuel.

Now, it may not cost much to run an oil well, but I'd enjoy watching you try to drive after filling up with crude oil.

[al_bundy]

At $65 a barrel oil, 22,000 barrels a day is around $514,000,000 million revenue in a year.

$32 in expenses is $250 million per year. Just like any big project like this it requires all kinds of government tax breaks.

At say a 6.5% or 7% interest rate this will probably barely break even over 20 years when you account for discounted cash flow without any government help. If it's OK for state governments to help Toyota and Dell with tax breaks, I don't see a big deal about this.

[wmansir]

:hscratch:
Schweitzer pursues coal-to-oil conversion

By CHARLES S. JOHNSON
Gazette State Bureau
May 21, 2005

HELENA - Using an updated version of the technology the Nazis used to manufacture diesel fuel from coal during World War II, Gov. Brian Schweitzer believes Montana could produce oil and other petroleum products from the millions of tons of coal reserves it owns in southeastern Montana.

When he was in Washington, D.C., earlier this month, Schweitzer met with a top Pentagon official, Theodore Barna, assistant deputy undersecretary of defense, to discuss the federal government's plan to encourage the manufacturing of petroleum fuels by using various clean-coal technologies.

The Defense Department is pushing the idea to develop a single American-manufactured fuel that it can buy, but wants it developed privately, Schweitzer said.

Fired up by the idea, Schweitzer intends to devote much of his time in the coming months exploring the possibility of having one and possibly more of these plants built in Montana by private industry.

"We're not talking about one plant here," Schweitzer said. "I want to get the first one off and going, and it could look like this all over Montana."

Schweitzer envisions a plant where the state-owned Otter Creek coal reserves are located in Powder River County. It would cost $2.5 billion to build a private project over two years with 5,000 construction workers, he said, citing Pentagon estimates. About 1,000 people would operate the plant permanently, not counting those working to mine the coal to fuel the plant. Such a plant would produce 30,000 barrels of fuel daily.

"I'm going to spend a great deal of energy and time meeting with potential investors, potential partners like oil and gas companies, pipeline companies, construction companies, coal companies and financiers to see if we can't put the resources together to build the first plant on Otter Creek," he said.

Montana owns 600 million tons of coal, co-located with 600 million tons owned by Great Northern Properties and 1.2 billion tons owned by the Northern Cheyenne Tribe, he said.

The coal-conversion process produces no air pollution, uses no water and creates electricity as a byproduct. The petroleum fuels produced could be shipped out of state by pipeline.

"It sounds too good to be true, doesn't it?" Schweitzer said in an interview Friday. "This is a physicist at the Department of Defense saying we're getting serious about this, and we'll buy all you produce."

At the heart of the plan is using an updated version of the Fischer-Tropsch technology, developed by two German scientists in 1923 to convert coal into petroleum products. Hitler used the process to power German tanks and other vehicles during World War II when the country was short of oil. More recently, when much of the world wouldn't trade with South Africa during apartheid, that country used the same technology to produce oil.

"What you do first is the coal gasification process," Schweitzer said. "You crush the coal up, heat it and get your gas. From there, it's a chemical reaction. You have a big tank and use either cobalt or iron as the catalyst. What you get out of that is the building blocks to make fuel. You get carbon monoxide and you get hydrogen. With those two, you can make any fuel you would like to make - diesel, gasoline, heating fuel, plastics, fertilizer or pure hydrogen."

So why hasn't anyone been using Fischer-Tropsch technology in the United States?

"It's kind of been left on the shelf because this process costs more than oil's been worth," the governor said.

The answer, Barna told Schweitzer, is that break-even point with Fischer-Tropsch technology is when oil is $35 a barrel. When oil costs more than $35 a barrel, it's cheaper to make these fuels from coal through this technology.

Pentagon officials "are interested in this obviously for national defense, where they find that 50 percent of their fuel to run the military is coming from countries we're likely to be fighting, and that is not a very good position to be in," Schweitzer said.

Sen. Keith Bales, R-Otter, who lives near the state-owned coal reserves, applauded the idea.

"If the technology is there, I think it is a great thing to do," he said in a phone interview Friday. "It could be a very big boon for Montana."

What's more, Bales said, such a development would generate a huge amount of money in royalties for the state school trust.

Bales, however, was pragmatic, saying, "It's tough to get anything new going on in this state." He cited environmental permitting, Land Board issues and other concerns, including likely lawsuits, that could delay such a project.

"Powder River County has been hoping something would get started," Bales said.

Schweitzer said Montana has a huge advantage over other states because it owns the Otter Creek reserves, which the federal government traded to it after President Clinton halted a proposed gold mine near Yellowstone National Park.

"So, clearly, we can move mountains in terms of bringing private resources to bear here," Schweitzer said. "The state can help in training people to run it, siting pipeline and bringing financial instruments to bear."

Schweitzer said this Fischer-Tropsch technology will be a major focus of his state energy summit set for Bozeman on Oct. 19 and 20.

"I'm not going to be shooting from the hip here," he said. "I'm going to bring in the best there is to be our advisers."

Barna could not be reached for comment Friday.

It looks like he "updated" his numbers over the last couple of months. At the rate this technology is developing I say we wait until it is free.

[darkessenz]

Don't forget to add in the costs of maintaining a HUGE military presence in the Middle East. 500 billion alone for Iraq.


(500 Billion! WHAT! Who the Fuck decided to spend that much military money on another state?) http://www.costofwar.com/

[OldDude]

At the heart of the plan is using an updated version of the Fischer-Tropsch technology, developed by two German scientists in 1923 to convert coal into petroleum products. Hitler used the process to power German tanks and other vehicles during World War II when the country was short of oil. More recently, when much of the world wouldn't trade with South Africa during apartheid, that country used the same technology to produce oil.

"What you do first is the coal gasification process," Schweitzer said. "You crush the coal up, heat it and get your gas. From there, it's a chemical reaction. You have a big tank and use either cobalt or iron as the catalyst. What you get out of that is the building blocks to make fuel. You get carbon monoxide and you get hydrogen. With those two, you can make any fuel you would like to make - diesel, gasoline, heating fuel, plastics, fertilizer or pure hydrogen."

So why hasn't anyone been using Fischer-Tropsch technology in the United States?

"It's kind of been left on the shelf because this process costs more than oil's been worth," the governor said.

This is a little misleading. The Fischer Tropsch is pretty clean as it starts from a mixture of CO and H2 known as synthesis gas (also water gas or town gas). However, first the coal has to be converted to coke and then the water gas has to be produced by steam reformation of coke over a fire in a sealed chamber. Making coke produces lots of nasty coal tar. Steam reformation uses lots of water and heat, part of which you get back in the Fischer Tropsch reaction. All the heat used in the steam reformation reaction comes from burning coal, lots of CO2 and usually not very clean. One little stage in what he proposes is clean. The rest is dirty. Google water gas or town gas

[alarican]

Think of all the steaks you could grill also!

[wmansir]

Here is a very informative paper (http://www.worldenergy.org/wec-geis/publications/default/tech_papers/17th_congress/3_1_18.asp#Heading4) on the subject. It lightly touches on the chemistry involved, but focuses mostly on the technology, environmental (both point of use and life cycle) and economic feasibility. The article was produced by Sasol Tech (http://www.sasol.com), a company that produces synthetic fuel in South Africa, so take it with a grain of salt. I couldn't find an exact date, but the text suggests it was probably written in 1998.

South Africa's fuel usage is 30% synthetic, from coal, but the government artificially regulates the pump price, literally making synthetic fuel equal to what it would hypothetically cost (http://www.sasol.com/sasol_internet/downloads/FuelPrices_SouthAfrica_calculated_1116589733064.pdf) [PDF] to actually import oil. As you can read in the paper, Sasol supports the government's position that until social reforms are achieved the oil industry cannot be deregulated, probably because they are raking in the cash with the current high crude prices.

[OldDude]

Here is a very informative paper (http://www.worldenergy.org/wec-geis/publications/default/tech_papers/17th_congress/3_1_18.asp#Heading4) on the subject.


That is a good paper. Before anyone gets too excited about using coal this way, carefully read the economics and CO2 burden info vs making syn. gas from methane, and using the same process (sections 1,2, 6). It might be better to use this to convert "stranded natural gas" where a gas pipeline is unfeasible to make a higher energy density liquid fuel.

Still, eventually, we will use all the natural gas as well as the oil, and need to use the coal. This is probably the best way.