Liquid coal touted as good fuel bet if ethanol fails

By Bruce Nichols

HOUSTON (Reuters) - Refining coal into liquids is the next logical step should it become clear that corn-based ethanol is not the solution to the transportation fuel problem, the developer of a coal-to-liquids plant said on Tuesday.

"Does it make sense to burn your food supply ... to make what is in our estimation an inferior transportation fuel?" Robert Kelly, chairman of DKRW Advanced Fuels LLC, told a questioner at Cambridge Energy Research Associates' 2008 conference.

"We've got a huge amount of coal here," Kelly said after a breakfast presentation, noting U.S. coal reserves are among the world's largest. "It is a huge fuel source for the next 50 years if we do it responsibly."

"It's new. We haven't done one in the U.S. at major commercial scale. It's a long development cycle," Kelly said, responding to a questioner who asked why, if coal to liquids is such a good idea, there are not more plants already.

"When we're successful, I think you'll see a lot more," Kelly predicted.

Ethanol is a good oxygenate to improve octane when added to gasoline, but it is not a complete substitute, Kelly argued. It has about 75 percent of the heat content of gasoline, which means it does not add to fuel efficiency, he said.

Liquefied coal, as produced by the Medicine Bow facility planned in southeast Wyoming by DKRW and its partners, will be high in heat content, low in sulfur, relatively low in carbon dioxide emissions and competitive in the marketplace.

Coal-to-liquid fuels can compete in the market without the government subsidies that have boosted ethanol, Kelly said. He argued government should not favor one technology over another.