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Plant Being Considered to Make Fuel From Coal

Posted on: Friday, 8 July 2005, 12:00 CDT

Booming oil prices are prompting a company to explore constructing a factory in western North Dakota to make liquid fuel from lignite, which may mean an investment of $750 million or more, Sen. Kent Conrad said.

Conrad declined to identify the business, saying its officials had requested that he not give its name. John Baird, an attorney for Headwaters Inc., which is developing an ethanol plant near Underwood, said the company is looking into projects to make fuel from coal.

"We've thought about North Dakota. We've thought about several states," Baird said Wednesday in a telephone interview. "There is nothing beyond that."

Headwaters, which is based in South Jordan, Utah, already does business in North Dakota. It is a majority partner with Great River Energy in a proposed ethanol plant near the company's Coal Creek electric power station at Underwood.

Great River, which is based in Elk River, Minn., supplies wholesale electricity to rural cooperatives in Minnesota and Wisconsin. Headwaters already uses Coal Creek fly ash to make lightweight concrete and has an agreement to market a lignite drying process that Great River intends to test at the power plant.

Headwaters has developed technology to convert coal into a clear, minimum-emissions diesel fuel, the company says. The process can also be used to manufacture liquefied petroleum gas, detergents, lubricants, plastics and specialty waxes.

Shenhua Group, China's largest coal company, licensed the technology three years ago to construct a $2 billion factory for converting coal to diesel fuel and gasoline. It is located in Majata, Inner Mongolia, in northern China.

In June 2004, Headwaters and Rentech Inc. of Denver formed a joint venture to combine their respective technologies for converting coal to fuel.

Conrad said the company that is interested in a North Dakota project asked him to include provisions for federal loan guarantees in a comprehensive energy bill that the Senate approved last month. The measure's final version still must be worked out in a House- Senate conference committee.

He said the guarantees were to help assemble financing for a project, not to subsidize its operations. "It's a lot of money to raise, even for something that's viable in terms of the economics of the sale of the product," Conrad said.

If oil prices, which have edged above $60 a barrel, remain in the high $40s or stay above $50, converting coal to liquid fuel would be an attractive prospect, the senator said.

The initial plant investment could be $750 million, with the possibility of increasing production in stages. The company has suggested the project investment may grow to $3 billion, with hundreds of employees, Conrad said.

"This is something they've been working on for more than a year," he said. "They have very detailed projections and plans ... They've put a lot of money into this."

Source: Bismarck Tribune

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