Coal-to-diesel plant deal official

Writer: Owen Covington

NMA Mining Week

Muhlenberg Fiscal Court will be investing more than half a million dollars to help build what could be the first large-scale coal-to-diesel fuel conversion plant in the country.

The county will send $625,000 from its coal severance allotment to a joint partnership between Fuel Frontiers Inc. of Washington, D.C., and Kentucky Fuel Associates Inc. of Louisville that has plans for up to eight of the plants in Kentucky.

The two private companies have paired up to build the first plant in Muhlenberg County with plans for the facility to begin producing 70 million gallons of diesel fuel annually from coal by the end of 2011.

"I've been looking all over the place for this kind of support," said Jack Young, president of Fuel Frontiers. "We are here. We are committed here."

Muhlenberg Judge-Executive Rick Newman made the county's commitment to the project official Monday during a presentation to local and state leaders at the county's Career Advancement Center in Powderly.

"Obviously it's a start to revitalize the coal industry. Years ago, that's what this county was all about," Newman said. "I think we can build on this. ... It's definitely a shot in the arm."

Construction is scheduled to begin next year and should require up to 300 workers to complete the facility, which will employ about 80 workers when it begins commercial production of diesel fuel in late 2011.

Over time, the plant could be expanded to nearly triple its production and employ up to 200 people, Young said.

Young would not say Monday how much the plant will cost to build because of shifting costs and designs. However, according to previous reports, the plant could cost about $400 million when it is expanded to three production lines.

Rep. Brent Yonts, a Greenville Democrat, has been working with Kentucky Fuel Associates during the past year to help it navigate the state grant process and generate support for the project.

A next step will be to tap into state funds under House Bill 1, a comprehensive energy bill designed to spur alternative energy production and passed by the General Assembly during a special session last August.

"When they first came into Kentucky, there was no (incentives) program for them," Yonts said.

Much of the attention last summer was on the incentives House Bill 1 would have made available for a multibillion dollar coal-to-synthetic natural gas plan proposed by Peabody Energy Corp., but the expansive legislation also included perks for the development of other energy sources.

House Speaker Jody Richards said that legislation was one prong of a multipronged approach to encourage alternative energy development and conservation in Kentucky.

"This (project) is the first baby of House Bill 1," Richards said Monday at the Powderly event. "Western Kentucky is uniquely situated for this because they have the infrastructure."

Young said the partnership has found three excellent sites in Muhlenberg County for the plant, which will require access to a rail network and water. When it begins operating, the plant will use about 10,000 gallons of water, likely from the Green River, each hour.

The process will gassify the coal at high temperatures, clarify the gas and then use the Fischer-Tropsch process, which has been around since the 1940s, to convert the gas to diesel, Young said.

The plant will use 2,000 tons of coal a day, with each ton of coal producing between 2.2 and 2.5 barrels of diesel fuel, said David Maland with Fuel Frontiers.

The increase in how much fuel can be squeezed from each ton of fuel and the price of oil, which has risen above $120 a barrel, has made the conversion process more economical and has driven up interest, Young said.

The price of oil could be cut in half and the process would still be profitable, Young said.

The "ultra-clean" diesel that is produces has less particulate matter and sulfur than typical diesel fuel, and the conversion process has few harmful emissions, Young said.

"There is no problem in the emissions from this plant. There's no carbon release. We capture all the carbon," Young said. "This is going to be cleaner than ... a 7-11 store."

Yonts said he is confident the project, which is in the design phase, will become a reality.

"There's a lot of people watching this plant nationwide," Yonts said.