The WSJ (and Climate Progress) on Liquid Coal

The Wall Street Journal (subs. req’d) has a good article on liquid coal today. The article focuses on the push by the Coal to Liquids Coalition to convince the Pentagon to sign long-term contracts to buy the dirtiest of fuels. The WSJ presents the many reasons this makes no sense:

Others are skeptical. They say the armed forces buy and consume a large percentage of fuel overseas, making it less useful to rely on fuels produced domestically. If the military wants to develop an assured supply of domestically available fuel, one option would be to create a military petroleum reserve that could be tapped in a crisis.

“Right now, coal-to-liquids looks to me to be pretty darn low on the reasonable list of alternatives,” said James Woolsey, former director of the Central Intelligence Agency. Mr. Woolsey is participating in a report being prepared by the Defense Science Board, which advises the Pentagon, on the military’s energy policy.

Joseph Romm, a senior fellow at the Center for American Progress, a left-leaning think tank who is also participating in the Defense Science Board’s report, said the military doesn’t need its own dedicated fuel supply.

“The notion that the Pentagon has to spend all this money to give itself assured supply is kind of a contrived argument,” Mr. Romm said. “The consensus of just about everybody on the panel was it didn’t make sense.”

[A left-leaning think tank? I guess that's the U.S. equivalent of the leaning tower of Pisa.]

The article has a nice chart on coal use and reserves:

The piece also discusses environmental issues:

A major problem confronting the coal-to-liquids industry is global warming. The Fischer-Tropsch process produces more than twice as much carbon dioxide, the main global-warming gas, as refining fuel from petroleum.

Proponents say coal-to-liquids plants can be outfitted to capture carbon dioxide and store it in underground caverns. It can even be piped to oil fields and pumped underground to help retrieve oil. But adding this capability also adds hundreds of millions of dollars to the cost of each plant.

A coal-to-liquids plant that doesn’t capture carbon dioxide can turn a profit with oil at $40 per barrel, but a plant with this capability can be profitable only when oil trades above $50 to $55 a barrel. The industry estimates that building an 80,000-barrel-per-day coal-to-liquids refinery would cost $7 billion to $9 billion, compared with less than $2 billion to build a similar-size petroleum refinery.

There are other environmental problems with coal-to-liquids plants, skeptics say. The Fischer-Tropsch process also uses five to seven gallons of water for each gallon of fuel produced, according to a 2006 Energy Department report. “Many of the places they talk about putting these plants, like the West, don’t have this type of water to waste,” Mr. Romm said.

This problem recently led China to scale back major investments it was making into coal-to-liquids plants. In July, China’s National Development and Reform Commission, the state’s industrial watchdog, restricted approval for coal-to-liquids plants, according to the Xinhua News Agency.

This technology should be a nonstarter for the Pentagon:

The military faces a five-year limit on how long it can sign contracts for supplies. Without the certainty that the military will be there to buy this product, regardless of what happens to oil prices, investors are unlikely to back coal-to-liquids plants.

But the lobbyists haven’t given up:

The Coal To Liquids Coalition hopes to extend the contracting authority to 25 years. Earlier this year, the House rejected several provisions that would provide loan guarantees and tax breaks for coal-to-liquids plants as part of comprehensive energy legislation moving through Congress. Changing the military’s contracting authority is now probably the coal industry’s best chance of receiving federal support.

And they have friends in the Air Force:

The Air Force, which consumes the most fuel of the military services, supports using coal-to-liquids fuel. It recently certified the B-52 bomber to run on a blend of Fischer-Tropsch fuel and normal fuel. The Air Force plans to do the same for its entire fleet by 2011. The Air Force intends to buy about 400 million gallons annually by 2016. The service supports legislation that would allow it to sign 25 year contracts for supply, even at historically high prices above $50 per barrel, said William Anderson, assistant secretary of the Air Force for installations, environment and logistics.

That’s all we need — the Air Force committing to buy liquid coal for 25 years, long after this fuel has been rendered uneconomic by the inevitable introduction of US climate controls.