Schweitzer pursues coal-to-oil conversion
By CHARLES S. JOHNSON
Gazette State Bureau
HELENA - Using an updated version of the technology the Nazis used to manufacture diesel fuel from coal during World War II, Gov. Brian Schweitzer believes Montana could produce oil and other petroleum products from the millions of tons of coal reserves it owns in southeastern Montana.
When he was in Washington, D.C., earlier this month, Schweitzer met with a top Pentagon official, Theodore Barna, assistant deputy undersecretary of defense, to discuss the federal government's plan to encourage the manufacturing of petroleum fuels by using various clean-coal technologies.
The Defense Department is pushing the idea to develop a single American-manufactured fuel that it can buy, but wants it developed privately, Schweitzer said.
Fired up by the idea, Schweitzer intends to devote much of his time in the coming months exploring the possibility of having one and possibly more of these plants built in Montana by private industry.
"We're not talking about one plant here," Schweitzer said. "I want to get the first one off and going, and it could look like this all over Montana."
Schweitzer envisions a plant where the state-owned Otter Creek coal reserves are located in Powder River County. It would cost $2.5 billion to build a private project over two years with 5,000 construction workers, he said, citing Pentagon estimates. About 1,000 people would operate the plant permanently, not counting those working to mine the coal to fuel the plant. Such a plant would produce 30,000 barrels of fuel daily.
"I'm going to spend a great deal of energy and time meeting with potential investors, potential partners like oil and gas companies, pipeline companies, construction companies, coal companies and financiers to see if we can't put the resources together to build the first plant on Otter Creek," he said.
Montana owns 600 million tons of coal, co-located with 600 million tons owned by Great Northern Properties and 1.2 billion tons owned by the Northern Cheyenne Tribe, he said.
The coal-conversion process produces no air pollution, uses no water and creates electricity as a byproduct. The petroleum fuels produced could be shipped out of state by pipeline.
"It sounds too good to be true, doesn't it?" Schweitzer said in an interview Friday. "This is a physicist at the Department of Defense saying we're getting serious about this, and we'll buy all you produce."
At the heart of the plan is using an updated version of the Fischer-Tropsch technology, developed by two German scientists in 1923 to convert coal into petroleum products. Hitler used the process to power German tanks and other vehicles during World War II when the country was short of oil. More recently, when much of the world wouldn't trade with South Africa during apartheid, that country used the same technology to produce oil.
"What you do first is the coal gasification process," Schweitzer said. "You crush the coal up, heat it and get your gas. From there, it's a chemical reaction. You have a big tank and use either cobalt or iron as the catalyst. What you get out of that is the building blocks to make fuel. You get carbon monoxide and you get hydrogen. With those two, you can make any fuel you would like to make - diesel, gasoline, heating fuel, plastics, fertilizer or pure hydrogen."
So why hasn't anyone been using Fischer-Tropsch technology in the United States?
"It's kind of been left on the shelf because this process costs more than oil's been worth," the governor said.
The answer, Barna told Schweitzer, is that break-even point with Fischer-Tropsch technology is when oil is $35 a barrel. When oil costs more than $35 a barrel, it's cheaper to make these fuels from coal through this technology.
Pentagon officials "are interested in this obviously for national defense, where they find that 50 percent of their fuel to run the military is coming from countries we're likely to be fighting, and that is not a very good position to be in," Schweitzer said.
Sen. Keith Bales, R-Otter, who lives near the state-owned coal reserves, applauded the idea.
"If the technology is there, I think it is a great thing to do," he said in a phone interview Friday. "It could be a very big boon for Montana."
What's more, Bales said, such a development would generate a huge amount of money in royalties for the state school trust.
Bales, however, was pragmatic, saying, "It's tough to get anything new going on in this state." He cited environmental permitting, Land Board issues and other concerns, including likely lawsuits, that could delay such a project.
"Powder River County has been hoping something would get started," Bales said.
Schweitzer said Montana has a huge advantage over other states because it owns the Otter Creek reserves, which the federal government traded to it after President Clinton halted a proposed gold mine near Yellowstone National Park.
"So, clearly, we can move mountains in terms of bringing private resources to bear here," Schweitzer said. "The state can help in training people to run it, siting pipeline and bringing financial instruments to bear."
Schweitzer said this Fischer-Tropsch technology will be a major focus of his state energy summit set for Bozeman on Oct. 19 and 20.
"I'm not going to be shooting from the hip here," he said. "I'm going to bring in the best there is to be our advisers."
Barna could not be reached for comment Friday.
