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New fuel may fire up economy.

Can a new technology turn Alaska coal into a competitively-priced fuel? That's what a consortium of companies hopes to prove in an Anchorage-based demonstration project.

Dark and sooty, a single lump of Alaska's subbituminous coal looks mighty insignificant. But the humble mineral may some day bring Alaska rich rewards, if a new technology and a group of companies succeed in turning the coal into a new form of commercial fuel.

The technology is an advanced coal upgrading technique, which uses hot-water drying (HWD) to make low-rank coal-water fuel (LRCWF) from coal. It was developed at the Energy & Environmental Research Center (EERC), formerly a U.S. Department of Energy technology center and now a private research agency at the University of North Dakota.

The companies include 12 international firms and research institutions who've formed a coalition called The Alaska Low-Rank Coal-Water Fuel Consortium. The group wants to build a $25-million commercial demonstration project for the technology at the inactive Knik Arm Power Plant in Anchorage.

With coal from the Usibelli Coal Mine at Healy and the untapped, vast Beluga-Yentna coal fields in Cook Inlet, the project hopes to prove that LRCWF can work as a substitute for heavy fuel in oil-fired utility and industrial burners.

The project "is an exciting alternative," says John Sims, vice president of marketing for Usibelli Coal Mine Inc., a consortium member. "It addresses a very big international market."

All that lies in the way of the project: $25 million and capturing a market niche in the volatile world energy picture.

A Timely Technology

To understand how coal-water fuels (CWF) are produced with hot-water drying, imagine putting a slurry of pulverized coal into a pressure cooker (in this case, inside a tubular reactor). Treating the coal with high pressure and high temperatures pushes water out of the tiny coal particles. Tars and oils, however, remain behind to seal the coal, preventing moisture from reentering and keeping the coal highly combustible while preserving its energy value.

Centrifugal force then separates the water from the coal particles in a cyclone, leaving a fine-grained black sediment. Adding clean water to the particles creates the low-rank coal-water fuel, which has a consistency similar to heavy fuel oil.

"The coal-water fuel effort goes back 20 years," says John Sibert, executive director of the Alaska Science and Technology Foundation (ASTF). "The Department of Energy has spent hundreds of millions of dollars by now on coal-water fuel development, most of it done on bituminous coals."

In recent years, in response to soaring oil prices, coal-water fuel (CWF) made from high-rank bituminous coals was developed and tested in most industrial nations. Today, despite low oil prices, countries with few indigenous energy sources, like Italy, Japan and Korea, and those with scarce hard currency, like China and Russia, are involved in commercial CWF ventures.

Alaska's CWF project would be the first to use low-rank or subbituminous coals. Low-rank coal contains differences from its high-rank cousin -- differences that the Alaska project hopes to capitalize on.

Bituminous coal typically has lower moisture, higher heating value and sulfur, and burns slower. It is also usually more expensive than low-rank coal and requires the use of costly additives to be made into a CWF. In North America, fuel oil is currently cheap, making bituminous CWF hardly a bargain. In Pacific Rim countries like Japan, however, where high fuel prices are a way of life, CWF based on nearby resources of bituminous coal has become an attractive energy alternative.

But other energy advantages lie in low-rank coals, such as those found in southcentral Alaska, including the Beluga coal fields. Back in the late 1980s, a pilot study on the HWD technology was conducted on low-rank coals at the EERC in North Dakota, cosponsored by ASTF and the U.S. Department of Energy.

Test results from the study showed that low-rank coals make a better CWF than bituminous coal. Compared to bituminous CWF, LRCWF has a lower fuel ratio, typically produces lower amounts of ash and sulfur dioxide, displays a more complete carbon burnout, and requires no costly additives.

Dr. Warrack Wilson, senior research advisor at EERC, states, "I have seen no cases where a bituminous CWF tested under identical conditions performed as well as a LRCWF."

Developing the technology for producing fuel from low-rank coal was only the first step. The second step: The technology "has to be commercially demonstrated in the same way that you had to commercially demonstrate coal-water fuel for bituminous coals," says Bill Irwin, president of International Coal Preparation Consultants Ltd., a Calgary, Alberta, firm that is also a member of the group behind Alaska's LRCWF demonstration project.

Proving Profitability

Why Alaska for a LRCWF demonstration project?

Alaska probably has the world's largest deposits of low-sulphur coal near tidewater in its Cook Inlet-Susitna coal field, which includes the Beluga deposits. This coal is mostly subbituminous, a low-rank coal with extremely low sulfur content -- excellent for producing a high-quality liquid fuel. Better yet, these reserves lie close to year-round ports or the Alaska Railroad, which lowers transportation costs for moving the coal to market or to a production facility.

From Alaska, the environmentally-benign LRCWF could be transported via tankers primarily to Pacific Rim markets, where it could replace imported oil in oil-fired industrial or utility boilers.

In a single year (1990), oil-fired utilities in Japan, Taiwan and Korea burned 200 million barrels of heavy oil. Replacing that oil would require 80 million tons of low-rank coal-water fuel a year. The consortium estimates that satisfying a small fraction of that market would be lucrative enough to justify building a LRCWF facility -- if it can be proven commercially viable.

That's the purpose of the Anchorage commercial demonstration facility, which calls for an investment of $25,265,000 over a three-year period. Funding tentatively includes 43.6 percent or $11,035,000 from the consortium members, 40.6 percent or $10,245,000 from the federal government, and $3,985,000 from the Alaska Science and Technology Foundation.

The consortium wants to construct the production facility at the dormant Knik Arm Power Plant located in the Anchorage port area. The power plant, originally coal-fired, still contains coal-handling facilities and is ideally suited to receive test coal from Alaska and around the world.

In a three-year time span, the consortium hopes to modify equipment at the plant to perform extensive combustion tests, produce test quantities of LRCWF for potential end users, and establish the commercial value of the project. If the project shows that LRCWF is commercially viable, there's enough coal in the fields of southcentral Alaska to sustain several LRCWF plants for many years, says John Sims.

Once funding issues are settled, the big question remains: Is there a market for this fuel?

Going to Market

"Market questions have always been the primary ones," says John Sibert. "It's the question of who's going to buy it and how much. That's still the question."

Looking at the estimated 80 million tons of LRCWF that could be used today in Japan, Korea and Taiwan, John Sims of Usibelli says, "If we can secure 10 percent of that potential market, we'd have a significant and rapid buildup in the utilization of Alaskan subbituminous coal."

But launching a new fuel into the volatile world energy market can parallel jump-starting your car at 50 degrees below zero.

"Your customers are conservative folks," says Bob Stiles, president of D&R Ventures, an Anchorage-based contract management firm. "They know about oil and how it performs. This (LRCWF) is not going to perform exactly like oil ... The only way that you can prove market acceptance of a new fuel like this is to get it into the market, where people have a chance to use it."

"We have to go out and sell it," admits Bill Irwin. One advantage, he adds, is that "coal-water fuels up to now have not been of high-ranked bituminous coals and low-rank coal has the possibility of bringing the costs down."

To decide which is the most cost-efficient fuel to use, you have to look at the price per Btus (British thermal units). Bituminous coal-water fuels currently made in China are sold for around $3.26 per million Btus in Japan. Oil used in Japanese utilities can run as high as $4.60 per million Btus. The estimated price of Alaska's LRCWF, from digging it out of the mine at Beluga to transporting it as a fuel to Japan, run between $2.48 and $3.54 per million Btus -- competitive against oil priced at $20 a barrel.

Another market question to answer is: With increasing environmental awareness, does oil or coal of any kind have a future? Clean-burning natural gas is becoming more popular in the energy mix worldwide, while the growth of coal and oil has slowed in some countries. Though non-polluting when spilled, LRCWF still produces high carbon dioxide levels when burned.

"Anything that produces carbon dioxide is not environmentally clean," says Chris Flavin, vice president of Worldwatch Institute, an independent research firm in Washington, D.C.

"Every advocate for every different technology and fuel source believes that theirs is the magic bullet that will solve all problems," says John Sibert. "What we have to deal with is a whole mix of solutions. These are going to be driven by economics, by site-specific requirements of one kind or another, and by availability of resources. There's no single solution to all our problems."

The consortium sees Alaska's LRCWF as one facet of the world's complex energy mix. The demonstration project has the potential to spark the state's declining oil-revenue economy. If a full-scale production plant comes on-line someday, it could bring Alaska millions of dollars and hundreds of jobs.

"As far as an economically viable production environment, you don't want all of your economic development to be huge elephants," says Bob Stiles of D&R Ventures. "You want a bunch of little elephants, little in a world-class sense."

"That's what the low-rank coal-water fuel project potential offers," he adds. "It might be a real dandy little industrial economic development project that creates jobs -- and that's a very important deal in a diverse economic structure."
COPYRIGHT 1993 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:New coal upgrading technique
Author:Woodring, Jeannie
Publication:Alaska Business Monthly
Date:Sep 1, 1993
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