SCDigest Editorial Staff

The News: A showdown is emerging in the U.S. Congress over the future of “liquid coal,” an energy source that could potentially provide a compelling alternative to Mideast oil across the globe, but environmental questions have also created opposition.

SC Digest Says:

While there are potential economic and environmental issues, the vast availability of coal in the U.S. would seem to make this an option worth pursuing. What do you say? Send us your comments here

The Impact: Liquid coal resources could have a huge impact on U.S. and global energy markets. While there are potential economic and environmental issues, the vast availability of coal in the U.S. would seem to make this an option worth pursuing, it seems to us.

The Story: The US Congress is currently working on the 2007 energy bill. This year more than ever, a big part of this debate surrounds “liquid coal.” Liquid coal is a proven technology that involves turning conventional coal into a liquid diesel fuel that can be used in both industrial applications as well as conventional diesel engines.

It has been around for a long time, used by Germany in World War II, and more recently by South Africa in the apartheid era – in both cases due to the difficulty the countries had importing regular oil.

Liquid coal, in some sense similar to shale oil, requires expensive conversion plants, and costs more to produce a barrel of oil than liquid oil sources. Most estimates put that cost at about $45-50.00 per barrel. Hence, it has not been economically feasible to develop liquid coal as an energy source until the past few years.

With oil prices persistently over $60.00 per barrel, however, and many predicting even higher levels, combined with other negatives about importing oil from the Middle East and other areas, the economics are starting to look pretty good. Liquid oil could also be distributed through current infrastructure and channels.

The opposition now is coming primarily from environmentalists and sympathetic politicians, who say liquid coal over the lifecycle of production to combustion emits twice the carbon and greenhouse gas emissions of diesel fuel (though there are unproven ideas for reducing the total greenhouse gas emissions levels for liquid coal).

As a result, for the energy bill currently being considered in Congress, a group of Democrats is lined up opposed to offering any incentives for liquid coal, while showering them on many other alternative fuels. But a group of Republicans and Democrats from coal rich states is alternatively proposing a variety of attractive incentives to liquid coal producers.

It’s not clear which way the bill will go, but one thing is clear: the U.S. has a vast amount of coal to leverage. The U.S. is believed to have about 26% of the world’s coal reserves. Next on the list are Russia with 23% of the world’s reserves, and China with 12%. By some estimates, the U.S. has enough coal to meet all of its liquid fuel needs for 200 years at current consumption rates.

China has already decided liquid coal will be a part of its future, making major investments in the technology already, with a lot more expected in the next few years.

What are your thoughts around liquid coal? Should environmental concerns trump the potential economic and security benefits of the technology? Let us know your thoughts at the Feedback button below.