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Report touts doability of coal-to-liquid

Americans could be getting 15 percent of their transportation fuel from coal by 2030, but making that happen will require a kick-start by the federal government, a new study says.

The study, released Wednesday by Rand Corp., is being greeted with skepticism by two people who often disagree on coal issues: Tom FitzGerald, executive director of the Kentucky Resources Council; and Bill Caylor, president of the Kentucky Coal Association.

Both said a better way to wean the nation from dependence of foreign oil is placing more emphasis on batteries for plug-in hybrid vehicles that recharge at night, when demand for coal-produced electricity is low.

The Rand Corp. is a non-profit research organization that often studies energy issues. The main author of the report is James Bartis, a senior policy analyst who testified before the Kentucky General Assembly last year.

The 200-page study said that the technology already exists to make liquid fuel from coal, but an industry has been slow starting in this country because of financial and environmental uncertainties.

"The prospects for developing an economically viable CTL industry in the United States is promising," the report says.

The financial uncertainties include the cost of building plants to convert coal to liquid fuel, and the future course of world crude oil prices.

A major environmental concern is whether and how greenhouse gases will be controlled.

Without "effective measures," to capture emissions from liquid coal, a coal-to-liquid industry could double the amount of carbon being put into the atmosphere.

The only practical way currently available to capture carbon is to pump it into oil fields to increase oil production.

The study says, however, that carbon sequestration technology, storing carbon deep underground, is advancing.

Of potential note in Kentucky, a coal-producing state, is an increase in mining to produce liquid fuels. That increase could range from "minimal" to 50 percent by 2030, the study said.

The study said that the ecological effects of mining are mitigated in part by federal and state laws and regulations, but is said that "residual impacts of mining activities can still adversely change the landscape, the local ecology and water quality."

That's only one of the things that Doug Doerrfeld, a board member for the environmental group Kentuckians for the Commonwealth, find wrong with using coal to make transportation fuel.

He also pointed out that, after the oil embargoes of the 1970s, the federal government put billions of dollars into developing a synthetic fuels industry that never got off the ground.

"I don't see anything new here at all," Doerrfeld said Tuesday. "They want billions of dollars of tax money to be put in this scheme because private capital won't do it."

Doerrfeld also questioned whether there are enough coal reserves to meet the nation's future energy needs. The study says there are.

The federal government could take a hands-off approach to the coal-to-liquid energy, or can invest heavily, the study says.

It recommends a middle approach, called an "insurance policy."

That would include sharing the costs of a few site-specific studies of new plants to assess the risk, using federal incentives to get production started, and conducting multiple large-scale demonstrations of ways to deal with carbon. If the price of crude oil went very high, the federal government would get some of its money back.

A plant that would produce 40,000 barrels of fuel a day would cost between $4 billion and $5 billion, the report said. For the fuel it produces to be competitive, the price of a barrel of crude oil would have to be $55 to $70.

The price of crude was well under that on Tuesday.