What if I told you:
- I could guarantee oil at no more than $75/barrel
- We would have a 100 year supply at current usage levels
- Gas would cost about $2.50
- We could eliminate at least 25% of our foreign oil import
- At $75/barrel, we could eliminate sending $67B dollars a year to foreign governments
- The most it would cost US taxpayers is an amount equal to what we just paid for the phony stimulus checks.
Would you be interested?
In 2006 when oil was running about $75/barrel, the CEO of Jet Blue, David Neeleman put together a plan to develop an industry that converted coal to oil. The technology for this process was developed in WWII and was used by the Germans to manufacture oil as they were being shut out from other sources. Following WWII the abundant availability of cheap oil, along with lobbying from oil companies and environmentalists caused various US trials and efforts towards commercializing coal gasification technology to be forgotten.
So why can’t we get coal gasification going now? First, as you may have already guessed, environmentalists go crazy any time coal is mentioned. The gasification process does release carbon dioxide (oooooooh, the boogieman of global warming!). However, recent advances in cleaning processes have advocates claiming that they can actually make the process less carbon impactful than today’s burning of natural oil. Additionally, carbon dioxide is used by traditional oil companies to claim oil otherwise unattainable. The carbon dioxide is pumped deep into wells which causes oil to move towards the surface. Once in the ground, the carbon dioxide naturally is reabsorbed into the ground.
The second reason coal gasification hasn’t moved forward is that it is economics. Neeleman’s plan had an estimated cost of $4B per plant that was capable of producing 20M barrels of oil each year. The estimated break even point is about $55/barrel. One can imagine the difficulty of gathering capital to produce a commodity that has the significant fluctuations of oil. Even in 2006, there were well known analysts saying that oil would settle back to $30 or $40 per barrel. Neeleman’s proposal would be that the US government would guarantee the capital investment. Ironically, in exchange for the guarantee, Neeleman’s plan offered a windfall profit to the government of 25% of any amount that oil went over $75/barrel.
Neeleman’s plan called for 45 plants for a total guarantee of $180B (this would be a guarantee not a handout). With 45 plants they could replace about 25% of our current imports.
As with other solutions, coal gasification isn’t going to solve our energy problem overnight. However, also like other solutions, if we don’t start, we’ll never get there.
It’s time for Congress to quit telling us what won’t work or spending time on asinine pandering like voting to sue OPEC or degrading oil executives.
If Congress took our energy problem seriously they would recognize that for the forseeable future there are no alternatives to petroleum for transportation. It’s time to take the Ben Bernanke approach, throw out “business as usual” and develop new tools that address the very specific issue of expanding supply. Anything else is just wasting time. Unfortunately, that’s one of the few things that Congress seems competent in doing.
Look the problem with your plan is it uses coal. You said that, I just wanted to repeat it, because that is the problem. Never mind the US has 100s of years of coal supplies. In China they have 3 planned coal to liquids manufacturing test operations planned, one is supposed to be in pilot now and producing next year. The technology was developed in the 1920s and Germany used it during WWII for their oil needs. It’s well understood and it works fine. The US Air Force is trying to establish coal to liquids for some of their air bases right now, they are also testing the synfuel produced in operational aircraft.
As global warming kicks in, and it gets colder, maybe the coal to liquids plan will be pulled off the shelves. It sure makes sense, unless of course if you are a Democrat Socialists and control of people is your goal. Heat is good, cold is bad, you die if you don’t have heat, you only sweat if you get a little warm.
First you’d have to unlock the coal that Clinton locked up in the 1990s as a sop to the ChiComs and the Indonesians.
Steve, bill-tb
Oil = bad
Coal = VERY bad
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Before you run off and invest your millions on this idea, you should contact a few ex-Allis-Chalmers folks who worked on the concept.
Jimmuh Carter sold the Chairman of A-C on the thing. It is rumored that A-C’s investment into the project was the immediate cause of its demise.
History counts, folks.
Dad29
The technology works without a doubt. It has been used in South Africa by Sasol for years to provide oil there. If AC had issues it was likely with the economics as oil dropped back to $10/barrel after Carter’s nonsense. The economics vary but most estimates I see are breakeven between $45 – $60/barrel. The question becomes do you believe in peak oil and what do you think will happen to oil prices in the future? Crash or higher?
They tried to build a coal gasification plant in Buleah North Dakota but it was a horrible and miserable failure. If this idea is really worth it, get the plant up and running and see where it goes.
Dan,
Yes it was but it too was built in the 70’s when Jimmuh was telling the world we needed to add layers in the winter. That plant was converting to natural gas (I think) and natural gas got deregulated shortly after the plant went into service…damndest thing happened, lots of NG showed up and prices plummeted making the plant economically obsolete. Again,the question is what are we willing to bet oil prices will do? If this is a bubble and they come back below $100 then we shut up and ride it out. If you believe peak oil, these suckers can provide a part of the answer.
Thanks to growing up in Wyoming and having some interest in energy stocks, I keep up with this sort of news pretty well.
One of my stocks does research into coal to liquids and into improving heavy crude refining. Their technology is fairly well proven. The problem they’re having is regulatory, and business caution. Nobody wants to be the first adopter to upgrade their refinery to the technology that improves heavy sour crude yields and government hurdles keep delaying the coal to liquid.
Happily the part of Wyoming where I grew up is making quite a push to develop a CTL plant (not related to my stock), which is encouraging, and companies are showing an interest in adopting the improved process for refining.
Companies are cautious because in the 70s and 80s OPEC cut the legs out from under oil shale recovery and coal to liquid efforts and such. Of course in the 70s and 80s China, India, and the rest of South East Asia weren’t so much into development.
I don’t think prices are coming down, so I think there’s reason to be optimistic that these technologies will be further developed.
Justin, couldn’t have said it better myself…oh wait, I did! :)
You’re right on all accounts. The hard knock lessons learned in the late 70’s/80s is what has kept a fair amount of $ on the sidelines for alternatives to petroleum. There is still a high degree of skitishness out there. However, when you’ve got people like T. Boone Pickens saying “game over”, I would bet the alternative investments will be good this time around.