As the price of oil rises, coal company executives smell a huge opportunity: they are planning to ramp up a new global industry to turn coal into liquid fuels (diesel, kerosene and jet fuel), plus basic feedstocks for the chemical industry to make plastics, fertilizers, solvents, pesticides, and more. The coal-to-chemicals industry is already going gangbusters in China.

U.S. coal companies like Peabody and Arch plan to combine well-known coal-to-liquids technology and rapidly-evolving coal-to-chemicals technologies with untested methods of capturing carbon dioxide (or CO2, the main global-warming gas), compressing it into a liquid, and injecting it a mile below ground, hoping it will stay there forever. (Burying CO2 is called "carbon capture and storage," or CCS.) If coal executives succeed in convincing the public to pay for all this, low-carbon renewable energy systems and waste-free "green chemistry" will be sidelined for decades to come.

The coal industry has nearly universal support in Congress. During President Bush's 2008 State of the Union address, one of the few lines that drew enthusiastic applause was, "Let us fund new technologies that can generate coal power while capturing carbon emissions." A few days later, the president announced his latest budget, with $648 million in taxpayer subsidies for "clean coal." A few days after that, the government announced it was ending its participation in the nation's first "clean coal" demonstration, the Futuregen project in Mattoon, Illinois. Obviously, Washington is experiencing policy angst over global warming, and "clean coal" lies at the heart of the debate. Both coal-to-liquids and coal-to-chemicals depend entirely on carbon burial being possible, affordable, and convincingly safe and permanent.

Despite political support in Congress, "coal-to-liquid fuels" had its coming-out party earlier this year, and it did not go well. Here's the story:

In 2006, the Western Governors' Association began a process called "Transportation Fuels for the Future: a Roadmap for the West." They set up teams to work on fuel efficiency, ethanol, biodiesel, electric propulsion, hydrogen, natural gas, and coal-to-liquids. The Western states hold 59 percent of the nation's coal reserves, so Western governors (many of whom who need coal money to get reelected) are hoping to use American coal to provide America's energy and to get us loose from foreign oil. So far, so good.

Most of the governors' teams were polite and well-behaved, but the coal-to-liquids (CTL) team started brawling right from the start. The CTL team was stacked with coal industry reps (or their stand-ins)¹ who naturally came in with the preconceived idea that Uncle Sam should spend billions subsidizing coal-to-liquids in the Western states. And that was precisely the conclusion that the team reached in its final report [PDF]. But then the mud hit the fan. It got so bad that the representative from Natural Resources Defense Council quit the task force.

Even Princeton University got muddied in the fray. The Western Organization of Resource Councils, a coalition of seven community groups with 9,500 members and 45 local chapters, accused [PDF] Robert H. Williams of the Princeton Environmental Institute of using an "accounting gimmick" to make coal-to-liquids seem environmentally benign compared to the alternatives. For the past five years, Princeton has been funded by the coal, oil, and automobile industries to figure out how to bury carbon dioxide in the ground, to help the coal-to-liquids ("synthetic fuels" or "synfuels") industry thrive.

When it was all over, a group of 14 national and regional environmental groups² wrote a searing letter [PDF] to the Western governors demanding that the whole coal-to-liquids study be discarded and re-done. Of course their request was ignored, but it revealed widespread, united opposition to coal-to-liquids among grassroots groups across the Western states. Even some of the big national groups, NRDC and Environmental Defense, who often work at cross purposes with grassroots groups, opposed coal-to-liquids. Oddly, NRDC is a wildly enthusiastic cheerleader for burying CO2 in the ground -- more enthusiastic than even the U.S. Chamber of Commerce -- yet they strongly oppose turning coal into liquid fuels. Some would call NRDC's stance a "nuanced" policy; others might call it schizophrenic. (Recently NRDC's support for CCS appeared to be wavering when George Peridas, one of NRDC's two main CCS cheerleaders, acknowledged, "There are cheaper ways and cleaner ways and preferable ways to meet energy demands, but I think CCS will ultimately be needed, too.")

The Denver office of Environmental Defense chimed in with its own withering assessment [PDF] of the governors' coal-to-liquids report. Martha Roberts and Vicky Patton of ED wrote, "The CTL [coal-to-liquids] working group's recommendation for considerable federal subsidies to support development of carbon-intensive CTL transportation fuel seriously misses the mark and leads the nation in the wrong direction, veering recklessly distant from climate security."

The Western Organization of Resource Councils sent its own blistering critique [PDF] of the CTL team's conclusions. They pointed out that, in 2007, the National Academy of Sciences said they couldn't be sure that the Western states had more than 100 years of coal remaining. Deploying a CTL industry might cut that to 50 years. If access to some known coal reserves were denied by landowners who didn't want their land strip-mined, available coal could fall below even a 50-year supply. Relying on resources with finite supply means that, by definition, a coal-to-liquids industry isn't sustainable. They also pointed out that the CTL team envisioned a "mature" industry producing 5 million barrels of liquid fuels per day, but such an industry would require, annually, two and a half times as much water as the city of Denver, Colo. Where would that water come from?

For all their political clout, coal and coal-to-liquids advocates did not fare well in the governors' final report, "Transportation Fuels for the Future" [PDF]. The final report pointed out the following:

• Even with CCS, coal-to-liquids will release as much CO2 into the air as petroleum-based fuels do today. Without CCS, coal-based fuels will release twice as much CO2 (per unit of usable energy) as petroleum-based fuels. (Actually, as Environmental Defense pointed out [PDF] in its critique of the governors' CTL report, even with complete carbon burial, liquid fuels from coal would still emit 3.7 percent more CO2 per unit of usable energy, than today's petroleum-based fuels.)
• CTL plants "will require a massive infrastructure build out, including rail transportation, water supply, and treatment facilities, transmission lines, carbon capture facilities, and carbon dioxide pipeline transport to storage sites." (pg. 16)
• "A mature CTL industry will use up underground carbon dioxide storage capacity which may compete with the storage capacity needs to dispose of carbon dioxide arising from the use of coal for electricity generation." (pg. 16)
• "... it is uncertain whether there is sufficient coal for both fuel production and electricity generation."

So CTL may seem like a workable idea on the face of it (at least in China), but the details seem fraught with problems that will be very difficult to resolve.

Not the least of these is the united grassroots opposition that surfaced during the Western Governors' Association's attempt to promote coal-to-liquids. Even with a major split in the environmental movement over burial of CO2 in the ground, everyone is united in opposition to coal-to-liquid fuels. This opposition will be difficult to overcome, even for an industry with Congress and all the presidential candidates (except Ron Paul) comfortably in its pocket.

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¹ The initial coal-to-liquids team included Paul Bollinger (DOD/Air Force, which aims to develop jet fuel from coal); Graham Parker (Pacific Northwest National Lab, a taxpayer-supported "clean coal" research organization); Greg Schaefer (Arch Coal, 2nd largest U.S. coal company); Dick Shepard and Dave Perkins (Rentech, "clean coal" technology providers); Robert Williams (Princeton Environmental Institute, funded by coal, oil and automobile companies to demonstrate feasibility of, and smooth the way for, "clean coal" and synthetic fuels from coal), and Chuck McGraw, Natural Resources Defense Council (big supporters of "clean coal" but not of coal-to-liquids). Mr. McGraw resigned from the coal-to-liquids team in September 2007 "after ascertaining that the report would not adequately represent their organization's viewpoint," as the CTL team's final report stated ungrammatically.

² Appalachian Voices; Natural Resources Defense Council; Friends of the Earth; Montana Environmental Information Center; Valley Watch; Western Organization of Resource Councils; Greenpeace; Montana Audubon; Dakota Resource Council; KyotoUSA; Center for Biological Diversity; Climate Protection Campaign; Powder River Basin Resource Council; Sierra Club, Wyoming

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