We'll get right to the point:
Our United States Department of Energy demonstrated that, based on economic conditions in 2006, a Coal conversion facility using an indirect, Fischer-Tropsch process to convert high-Sulfur mid-west bituminous Coal into both low-Sulfur Diesel fuel and a Gasoline feedstock, both suitable for processing in a standard petroleum refinery, could make a profit of 20% with a crude oil market price of $65 per barrel and a cost of Coal, delivered, of $38 per ton.
But, we'll need some preamble before we get to the excerpts, to emphasize the importance of those numbers.
Without citing or linking to references, you can look it up if you don't believe us, the price for West Texas Intermediate Crude closed Friday, June 8, 2012, at $84.10 per barrel; that is, 1.3 times the cost stipulated by the USDOE, in 2006, in the context of their report we enclose herein.
The available quoted prices for bituminous Coal vary over a broad range, and do not include delivery.
As can be seen in:
http://www.ferc.gov/market-
the United States Federal Energy Regulatory Commission documents that prices for Appalachian and Illinois Bituminous Coal on May 15, 2012, ranged between $35 and $65 per ton, at the mine mouth. An average, as we figure it, of fifty bucks a ton.
As can be learned via:
Rail Coal Transportation Rates to the Electric Power Sector; and:
http://205.254.135.7/coal/
charges for the rail transport of Coal fell, in 2008, the latest numbers we could find, between, roughly, three to five cents per ton per mile, with higher numbers in states, like West Virginia, where there are more hills.
And, Purdue University, via:
in a presentation entitled "Coal Transportation Economics" calculated that the average cost, in 2005, for transporting a ton of Coal by rail, overall and in total, was $11.60 per ton.
Thus, a coarse average cost for Coal, delivered, at a Coal Liquefaction facility as envisaged by the USDOE back in 2006, would today be around 61 bucks a ton, which is 1.6 times the cost of Coal used by the USDOE to estimate a 20% profit for Coal-derived Gasoline and Diesel back in 2006, when the cost of petroleum-based Gasoline was only about three-quarters of what it is now.
So, just guessing, with all things considered, the estimated profit from a Coal conversion facility might be something a little less than the USDOE's 20%; let's say 15%. We'll have more discussion on that profitability picture, following excerpts from the initial link in this dispatch to:
"Baseline Technical and Economic Assessment of a Commercial Scale Fischer-Tropsch Liquids Facility
DOE/NETL-2007/1260; Final Report for Subtask 41817.401.01.08.001
April 9, 2007
NETL Contact: Michael Reed; Senior Systems Analyst; Office of Systems Analyses and Planning
Background: Economic and national security concerns related to liquid fuels have revived national interest in alternative liquid fuel sources. Coal to Fischer-Tropsch fuels production has emerged as a major technology option for many states and the Department of Energy. This report summarizes the preliminary results of an NETL study to assess the feasibility of commercial scale, coal-to-liquids production using a high Btu Midwestern Coal.
Executive Summary: This report examines the technical and economic feasibility of a commercial 50,000
barrel per day (bbl/day) coal-to-liquids (CTL) facility in the Illinois coal basin. The facility employs gasification and Fischer-Tropsch (F-T) technology to produce commercial-grade diesel and naphtha liquids from medium-sulfur bituminous coal. The scope of the study includes conceptual design development, process analysis, component descriptions, capital and operating cost estimates, and a comparative financial analysis.
(Note: Though they take a while to get around to stating it directly, and as might not be well-reflected in our excerpts, "naphtha liquids" can be used to make/formulate Gasoline, among other things.)
The plant design evaluated in this feasibility study incorporates coal gasification technology and an F-T reactor system using an iron-based catalyst.
The concept includes a cluster of four gasification plants, each containing two gasifier trains for a total of eight gasifier trains. Clean syngas from the gasification plants is pooled and ducted to a central CTL plant. The CTL plant contains F-T reactors, hydrotreating units and hydrocracking units capable of producing 27,819 bbl/day of commercial-grade diesel liquid and 22,173 bbl/day of naphtha liquids, which could be shipped to a refinery for further upgrading into commercial-grade end products or for use as a feedstock for the chemicals industry.
The CTL plant also generates electric power, both for internal use and for export to the grid.
The plant design includes equipment to separate and compress carbon dioxide to 2200 psia for injection into a pipeline. Subsequent off-site use and/or sequestration of carbon dioxide are not considered in this design.
(And, the above is rather important, as we address following the excerpts.)
The analysis is based on Illinois No. 6 bituminous coal and ConocoPhillips’ E-GasTM gasification technology. The gasifier features a two-stage, oxygen-blown, entrained flow, refractory-lined gasifier with
continuous slag removal. A dedicated air separation unit supplies 95 mole % purity oxygen to the gasifiers. Syngas leaving the gasifier is cooled in a fire tube syngas cooler, producing high-pressure steam, and then directed to a water scrubber to remove particulates and trace components.
(Conoco owns a suite of intriguing Coal gasification technologies, as we've documented, for instance, in:
West Virginia Coal Association | Conoco 2011 Coal + CO2 + H2O + O2 = Syngas | Research & Development; concerning: "United States Patent 7,959,829 - Gasification System and Process; 2011; Assignee: ConocoPhillips Company; Abstract: A system and process for gasifying carbonaceous feedstock (wherein) solid carbonaceous material is partially combusted, then pyrolyzed along with a first slurry stream comprising carbonaceous material in two separate reactor sections, thereby producing ... synthesis gas (and) wherein said carrier liquid is selected from group consisting of water, liquid Carbon Dioxide, (or) mixtures thereof (and) wherein (the) carbonaceous material is ... coal, lignite, ... and mixtures thereof"; and:
Conoco Converts More Coal to Methanol | Research & Development; concerning: "United States Patent 4,430,444 - Making Methanol Using a Slagging Gasifier; 1984; Assignee: Conoco Inc.; Abstract: A process for producing methanol from solid carbonaceous material comprising providing a gasifier means and a methanol formation means connected to said gasifier means ... . A process for producing methanol from solid coal".
We'll address their "E-Gas" (TM) technology specifically at more length in future dispatches. It was actually acquired by Conoco from Dow Chemical and some associated companies.)
The resulting syngas stream is reheated and sent to a packed bed hydrolysis reactor, in which carbonyl sulfide (COS) and hydrogen cyanide (HCN) are converted to hydrogen sulfide (H2S).
(Which, as they do go on to explain, and as we've documented to be feasible in other reports, such as:
Florida Hydrogen and Sulfur from H2S | Research & Development; concerning: "United States Patent 6,572,829 - Photocatalytic Process for Decomposing Hydrogen Sulfide; 2003; Assignee: University of Central Florida; Abstract: System for separating hydrogen and sulfur from hydrogen sulfide (H2S) gas produced from oil and gas waste streams";
enables the commercial recovery of byproduct Sulfur.)
A mercury removal system, consisting of a packed bed of sulfur impregnated activated carbon, removes mercury, arsenic and other trace materials from the syngas stream, while a dual-stage Selexol unit sequentially removes H2S and CO2 from the cool, particulate-free gas stream.
(We've previously documented that processes for the extraction Mercury, as a product, from flue gas, even though concentrations are quite low, do exist; though we can't at this time track down the specific references among our earlier reports. We will follow up in coming days with further documentation of the fact that Mercury can, economically if not profitably, be extracted from Coal syngas and Coal combustion exhaust gas.)
The clean syngas is then sent to the Fischer-Tropsch slurry reactors to produce marketable hydrocarbon liquids.
Conclusions:
The conceptual design evaluated is technically feasible using equipment that has been demonstrated at commercial scale ...
(Coal gasification followed by the Fischer-Tropsch synthesis of liquid hydrocarbons has been practiced commercially in South Africa, by Sasol, for more than half a century, as we've documented.)
The conceptual design uses high sulfur bituminous coal to produce distillate and naphtha liquid pools via indirect coal liquefaction (F-T process). With the addition of additives, the distillate can be converted to a saleable diesel fuel. The naphtha liquids can be shipped to a refinery for upgrading into gasoline or directly marketed as a chemical feedstock.
This plant produces 22,173 bbls/day of liquid naphtha that is shipped to a refinery for further upgrading to commercial grade products or for use as a chemical feedstock.
The plant also produces 27,819 bbls/day of diesel product. The total coal input requirements are 24,533 tons/day of Illinois #6 coal. All production figures are calculated at 100% of design capacity.
The plant produces a net power output of 124 MWe which can be exported to the grid.
(The surplus power is sold for additional income, to help offset the cost of hydrocarbon synthesis.)
Total sulfur production is 612 tons per day and total carbon dioxide capture is 32,481 tons per day.
(The above is actually meaningful. As seen in:
http://minerals.usgs.gov/
The total plant cost is $3.65 billion. Total capital costs including working capital; start up costs, and owners costs are $4.07 billion. Adding allowances for financing costs results in a total project cost of $4.53 billion.
Commercial-scale CTL plants using Midwestern bituminous coal represent promising economic opportunities. Based on the specific plant configuration evaluated, the financial analysis projects a nearly 20% return on investment, a net present value of more than $1.5 billion, and a payback period of 5 years.
Plant capacity factor and EPC costs have a strong impact on the financial analysis but even with major changes to these inputs, positive financial returns are still possible. For example, a capacity factor reduction of 25% would lower ROI from 20% to 15% ...
Project viability depends heavily on crude oil price scenarios. The base case, tied to a crude oil price of $61/bbl, provides a 19.8% ROI. At crude oil prices greater than $37/bbl, the project would achieve ROIs greater than 10%, and a 15% ROI can be achieved at crude oil prices greater than $47/bbl.
Policy actions impact expected ROIs. Federal loan guarantees have the largest ROI impact, increasing the ROI by more than 11 percentage points from the base case. F-T subsidies provide a 9 percentage point increase in ROI."
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We are compelled to end our excerpts there, since the full report contains extensive discussion of project financing and taxation scenarios that are beyond both our, admittedly limited, understanding and our scope.
But, there are some interesting things that should be noted. For instance, Table 5-3 on Page 51, and discussion following, summarizes the base case scenarios that were utilized to calculate the various annual Returns on Investment.
An annual taxation rate centered around 40% was utilized for those ROI calculations; and, we have to ask:
How, in the world, could that be justified?
Making liquid fuel out of our domestic Coal, as we documented in:
West Virginia Coal Association | CTL vs. Real Oil Cost | Research & Development;
could save our national, US economy $300 Billion a year; which was the cost, the loss, to our economy, calculated by "The Institute for the Analysis of Global Security", incurred - through military expenditures, unemployment, lost taxes and transfer of wealth - by our importation of OPEC oil.
Couldn't those savings in the costs to US society be extended to tax cuts for the industry that made the savings possible?
Further, although some allowance is made for the sale of excess electricity generated by the Coal conversion process, and, the for the commercial sale of byproduct Sulfur that is proposed to be captured, the discussion of Carbon Dioxide ends with it, after it has been extracted from the Coal gasification product stream, being simply put into a "pipeline", to somewhere.
How, we are compelled to wonder, would the ROI change if, as an integral part of the total Coal conversion process, the by-product Carbon Dioxide were, instead, directed to a subunit operating a process like that disclosed, for just one example, in our report of:
USDOE Converts CO2 to Gasoline | Research & Development; concerning the US Government-owned technology disclosed in: "US Patent 4,197,421 - Synthetic Carbonaceous Fuels and Feedstocks; 1980; Assignee: The United States of America; Abstract: This invention relates to the use of a three compartment electrolytic cell in the production of synthetic carbonaceous fuels and chemical feedstocks such as gasoline, methane and methanol by electrolyzing an aqueous sodium carbonate/bicarbonate solution, obtained from scrubbing atmospheric carbon dioxide with an aqueous sodium hydroxide solution, whereby the hydrogen generated at the cathode and the carbon dioxide liberated in the center compartment are combined thermocatalytically into methanol and gasoline blends";
and, therein converted into even more of the liquid fuels being made from Coal via an indirect process of gasification, which process, in the first place, generated the Carbon Dioxide as a byproduct while making those liquid fuels at a profit of "19.8%"?
What if the Ash arising from the initial Coal gasification were directed into a follow-on process, like that disclosed in:
West Virginia Coal Association | Exxon Converts Coal Conversion Residues to Cement | Research & Development; concerning: "United States Patent 4,260,421 - Cement Production from Coal Conversion Residues; 1981; Assignee: Exxon Research and Engineering Company; Abstract: Cement is produced by feeding residue solids containing carbonaceous material and ash constituents obtained from converting a carbonaceous feed material into liquids and/or gases into a cement-making zone and burning the carbon in the residue solids to supply at least a portion of the energy required to convert the solids into cement";
and, the revenue from the sale of essentially free byproduct Coal Ash, to a cement maker, were applied to reduce even more of the costs of making "marketable hydrocarbon liquids" from Coal?
Further, in point of fact, the costs to us of foreign oil dependence are even greater than those intimated above in our reference to an earlier report. And, we will have more on that to follow in coming days.
In sum, though:
It is herein established, by our own United States Department of Energy, that we can convert our abundant domestic Coal into both Diesel fuel and Gasoline, using nothing but domestic United States resources and labor, and, rather than continuing to take a loss by importing OPEC oil, make a profit of very nearly 20% while doing so.
Again, a "20%" profit might not sound all that exciting at first; but, it is only one component of a multiple profit stream that could accrue to a Coal conversion process; and, it is counter to the huge loss we are, as a nation, taking now by continuing to import OPEC oil.
Why aren't we, in Coal Country, following up on, as our own United States Department of Energy puts it, such "promising economic opportunities"?