'Liquid coal' too costly for Pentagon despite GOP push

Reprinted with permission from Environment & Energy Publishing, LLC. www.eenews.net.
Not for republication by Wyoming media.

Using “liquid coal” in U.S. military aircraft and vessels as an alternative to gasoline tied to world oil prices would come at an enormous cost and impact on carbon emissions, said a Navy official Friday.

Tom Hicks, deputy assistant Navy secretary for energy, said in testimony to Congress that the rising price of oil “dramatically impacts the military.” For every $1 a barrel increase in oil, the Navy and Marine Corps pay more than $30 million. “We don’t have that money to spare.”

Yet investment in technology to convert coal into liquid transportation fuel isn’t a clear alternative. Huge amounts of water and new coal resources would be needed, Hicks said, and capital costs could reach $10 billion per plant. That would result in a coal-to-liquids product that has more than double the carbon emissions of conventional petroleum.

The United States has the largest coal reserves in the world. Boosters of expanding coal’s role in meeting U.S. energy demand have long pushed the idea of converting coal to liquid fuels. As growth in domestic demand slows, coal-state members of Congress are considering policy options to bolster the domestic market.

Meanwhile, coal companies operating in the Powder River Basin in Montana and Wyoming are looking for ways to ship more coal to Asia. Producers in West Virginia and Kentucky are profiting from rising exports of their steel-making coal.

Efforts to repeal ban on high-carbon alternative fuels

The Republican resurgence in Congress has resulted in new efforts to bring the government on board as a major purchaser of alternative fuels tied to coal and oil. To do so, several proposals would repeal a congressional ban on the Pentagon’s using high-carbon alternative fuels.

The GOP-led House last month approved language embedded in the Defense Department’s spending bill that would lift the ban, and Republicans recently proposed a second stand-alone bill.

The language in the defense measure repeals Section 526 of the 2007 Energy Security and Independence Act. The Air Force is working to certify planes to run on synthetic fuels that can be made from coal, natural gas and biomass. But the 2007 law blocks the Air Force from using large amounts of coal-to-liquid fuels because the life-cycle greenhouse gas emissions would be much larger than those of conventional petroleum.

“The coal-to-liquids that I’m familiar with, as addressed in this bill, appears to me would go backward,” said Rep. Jay Inslee (D-Wash.).

Military considerations are twofold: first, the economic impact of rising oil prices, and second, the longer-term viability of investing in fuels with significant greenhouse gas footprints such as coal-to-liquids.

“From the Navy’s perspective, there is a better way,” Hicks said in his testimony. Biofuel is a better option, he added.

A 1-trillion-barrel U.S. shale oil reserve

The research group, Rand Corp., presented findings to the subcommittee on the potential for oil shale development. Rand estimates that recoverable oil shale resources concentrated in the West could be as high as 1.1 trillion barrels of oil.

Oil shale has a long, discordant history in the United States. In the 1980s, Exxon Corp. abandoned an expensive effort in western Colorado to extract oil shale. Towns and local economies that had been built up around the project took big hits. The retreat put thousands of people out of work. U.S. oil shale has since been considered uneconomical by multinational oil companies, as they steered capital spending toward securing foreign oil reserves that could be sold into the global oil market.

Shortly after taking office, President Obama put the kibosh on a lease sale for oil shale development authorized at the end of the Bush administration.

Extracting the oil shale is still technically complex, and there are significant environmental issues. Rand estimates for greenhouse gas emissions range from slightly lower than the life-cycle production of conventional oil to a 50 percent increase.

“Without legislation that would place a cost on emitting greenhouse gases, early oil shale production plants would likely fall in the upper half of this range,” said James Bartis, a senior policy researcher at Rand.

Bartis disagreed with assertions made in the Republican bill. He called claims of 2 trillion undiscovered technically recoverable barrels of oil “erroneous.” Further, he said, there’s little evidence to suggest oil shale is among the best resources for creating U.S. jobs. “I see no reason to promote oil shale as above other promising areas for advancing technology and creating jobs,” he said.

Oil shale has a long way to go, Bartis told the subcommittee. To move forward, he suggested that the Energy and Interior departments and U.S. EPA develop a federal plan for promoting the construction of a small number of pioneer commercial plants. Interior should also implement a 15-year schedule for offering small research and development lease tracts.

For both oil shale and coal-to-liquids, Bartis said the challenge is gaining commercial experience at a reasonable cost. He said there are roles for the government during the early stages of development, but discouraged government ownership when projects start commercial production.