Coal is Back

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At a Defense Department briefing this spring for the nation's governors on potential future international conflicts, Montana Governor Brian Schweitzer was intrigued by one war scenario. In the hypothetical case, conflict with an oil-exporting nation interrupted U.S. petroleum supplies and forced reliance on alternative energy sources that have yet to exist. The official's message: Leaders should think about tomorrow's needs today. If mining states could make gasoline from abundant coal, for example, the military would buy every drop. "That piqued my interest," says Schweitzer, whose state may hold about a third of the United States' coal deposits. Now he's spreading the word. Schweizter has campaigned aggressively all year to launch such a project. "I have people contacting us weekly, saying 'We want in.'"

Talk about back to the future: Coal, the miracle fossil fuel that jumpstarted the industrial age, but has been viewed in recent decades as backwards and dirty, is hot once again. Technology and economics may be aligning to make the black rock more useful and economically efficient than ever. And guess what: the U.S. has more of it than any place else—27 percent of the world's total. Coal-burning power plants fuel half of the nation's electricity. That was true even during the 1990s, when utilities built plants that burn cleaner natural gas. Back then, natural gas, which cost a quarter what it does today, was viewed as the bankable alternative souce for electricity generation. Now, coal is the darling. More than 120 new plants have been proposed and domestic and international demand are soaring.

But what fires up Schweitzer and a growing number of industrialists is an 80 year-old chemical trick that actually allows coal to run cars. The process, in which coal is converted into synthetic gasoline or diesel, was first developed by two German scientists in 1928, allowing Nazi Germany to produce more than 124,000 barrels a day in 1944, the last full year of World War II. Sasol, a South African firm, has the only existing large-scale plants, and operates in 20 countries. In the U.S. advocates have suggested for decades that "coal-to-liquid" production is a way to reduce dependence on foreign oil. At least nine other states are looking into it, including Illinois, West Virginia and Arizona.

So what's the hold-up? The main obstacle has always been economics. From the mid-80s until 2003, oil prices—ever volatile--averaged out to about $25 a barrel. Making gasoline synthetically was way too expensive in comparison—$40-$46 per barrel. But with oil in the $60 range, liquefied coal is looking better than ever. "If one were assured of some stability in that base price, then they'd say, 'Oh, I guess I will invest the $6.5 billion it takes to build a coal liquification plant," David Garman, Under Secretary of Energy, told TIME.

Companies are gearing up for that possibility. Sasol executives have already toured Montana and Illinois to gauge interest, conducted discussions with firms such as General Electric and sought out lawmakers in Washington, DC, to talk about investing in the U.S. President Bush and Congress nudged matters forward this summer by creating tax-incentives and loan guarantees that make investing in coal-conversion plants less risky financially.

A related technology may help American utilities clean up coal-fired electricity generation and eventually capture climate-warming greenhouse gases. Cinergy and American Electric Power are each working with GE and Bechtel to design power plants that would burn manmade "natural gas" derived from coal. The gasification process, which is also the first step in turning coal to diesel, would strip much of the filth and toxicity from coal before it's burned. Tampa Electric already uses this kind of technology at its Polk Power Station, which started out in the mid-90s as a joint project with the Energy Department.

Global-warming concerns are driving engineers even harder. An unlikely trio of industry, the government and environmentalists wants to capture the carbon dioxide produced during combustion, the leading contributor to global warming, and store it deep underground. But that can only be accomplished—if it can be accomplished —with a gasification or liquiefaction plant. "With [current] plants there's no technology you can bolt on that really allows you to deal with that issue," says Jim Rogers, CEO of Cinergy. "We need to be building technologies that allow us to deal with CO2."

Schweitzer acknowledges some concerns environmentalists and others have about developing state land, but still argues coal-to-diesel plants can be developed with smokestack-free potential. The Billings-based Northern Plains Resource Council says that Schweitzer has not realistically confronted the emissions of heavy metals and other pollution from the would-be plant.

Like most schemes for strengthening the nation's energy options, Schweitzer's is equal parts pie-in-the-sky, politically impractical, prohibitively expensive—and worthy of consideration. . "We don't respond to vision in this country. We respond to crisis," he says. "This is big thinking for a farm boy. But if not Montana, who? And if not now, when?"— Reported by Pat Dawson/Billings