The Sage Grouse

A company called DKRW is soliciting state and local financial incentives to build a multi-billion dollar coal conversion plant near Elk Mountain. So far, all plans for coal-to-fuel plants in Wyoming have created nothing more than short-term economic disruption for investors, speculators and local governments.

Post-1973 Arab oil embargo: Wyoming was mapped with all sorts of proposals for coal-to-gas and coal-to-liquid fuel projects. Energy companies bought up speculative reservoir permits and proposed to build dams on the Middle Fork of the Powder, the main stem of the Powder, La Prele Creek, and enlarge Lake DeSmet and elsewhere. Only two of those projects (LaPrele and Lake DeSmet reservoirs) were actually built, but they have been used solely for non-industrial purposes for 40 years.

Oil companies (Shell, Mobil, Exxon, Sun, Atlantic Richfield, Kerr-McGee) bought land and got into the coal mining business on a large scale in Campbell County, only to eventually divest all of their mines to actual mining companies (Amax, Kennecott, Arch, Peabody).

Texaco, then owner of Lake DeSmet, proposed first a federally subsidized coal-to-gas plant, then a power plant. Both projects were abandoned without turning one shovelful of dirt. People speculated on land, local governments were excited, but the bloom faded. This was not a new experience for Johnson County, having watched Reynolds Aluminum play with Lake DeSmet’s water and coal reserves for decades before selling all of them to Texaco.

Then came the Hampshire project, a massive coal conversion plant proposed for Campbell County. Speculators bought land and businesses in reliance on a projected massive influx of workers; industrial siting permit hearings were convened, then the big money behind it succumbed to the inevitable conclusion that the project would never cash flow. Some people around Gillette and Buffalo were really stung when the plug was pulled.

Now there is discussion of a boom in Carbon County. Am I rushing down there to buy land? Not.

These projects are talked about only when massive subsidies are offered. It’s expensive to build a plant which uses coal as the fuel to drive the chemical processes needed to turn long-chain carbon molecules (coal) into short-chain molecules (gasoline and diesel). Costly pollution controls must be built for every stage of the process. Operating and maintaining just the pollution controls will add great expense to the product. These plants tend to catch fire from time to time. The Germans made gasoline from coal in WWII because they had to, not because it was economic; they didn’t worry about pollution controls.

The Carbon County Commission has approved issuance of $245 million in industrial revenue bonds. Who is going to buy them? Who is going to pay them off if DKRW, the putative owner, goes under?

What we really need in Wyoming is a new plant which will convert crude oil to motor fuels. Oil refineries use proven, economic technology. Huge pipelines, some built and more coming, will carry Canadian and North Dakota oil to Oklahoma and Texas for refining. Oil producers around here are taking big discounts in price because of a lack of refinery capacity. Building a new refinery on an impervious substrate like the Pierre Shale or the copious bentonite deposits in northeast Wyoming could reduce the risk of groundwater contamination. Abundant, locally cheap natural gas could be used to power a refinery. But, is it politically possible to build a new refinery in Wyoming?

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  1. The principals of DKRW are all veterans of Enron.
    I’m not saying whether that’s good or bad, but it would be worthwhile investigating what they did for Enron and whether they were involved in that scandal. Due diligence, folks.
    That being said, coal-to-liquid conversion is horrendously expensive and not something the private market is ready or willing to embrace. The energy market would have to be desperate indeed before coal-to-liquid even approached the break-even point, much less started making money. This is the sort of thing that needs to wrap itself in national security to become more viable, as an insurance policy to provide a secure fuel source to the Defense Department. I can’t imagine any other scenario that would generate the needed subsidies.

  2. The current business model for all these projects whether they be coal-to-liquids, solar, wind, or high speed rail to Vegas seems to be to privatize the profits while socializing the costs through subsidies or government guaranteed loans. Unfortunately, this encourages political corruption. Consider, for example, Solyndra. They were awarded something in the neighborhood of $450 million in loan guarantees. They take the money in. They go bankrupt. The money disappears and is untraceable. The company directors and officers take the fifth and skate scott free. The taxpayer is left holding the bag. Read the news. This process has been repeated a half dozen times in the solar industry. It will happen again in Harry Reid’s unwanted high speed train from L.A. to Vegas. Who benefits? Follow the money? Folks, I don’t care whether you’re are right or left of the political spectrum, you should be aware that this is happening, and the rape of the taxpayer should make you enraged.