Government support critical to nurturing coal-to-liquids industry

Washington (Platts)--17Nov2005

The coal-to-liquids industry will grow, but it will need the support and help
of the government to do so in the early stages of development, according to
Jack Holmes, president and CEO of Syntroleum Corp.

At a Wednesday hearing to discuss transportation fuels of the future, Holmes
told members of the Senate Environment and Public Works Committee that if the
US converted 5% of the estimated 270-bil tons of recoverable coal reserves to
synthesis fuels, it would be the equivalent to the existing 29-bil barrels of
proven oil reserves in the country.

"That's significant because it shows we can be energy independent using a
domestic resource," Holmes said. "The USA will need fossil fuels; hence,
coal-to-liquid plants are necessary."

Tulsa-based Syntroleum developed a process to convert natural gas or synthesis
gas from coal into synthetic liquid hydrocarbons -- a process generally known
as gas-to-liquids technology. The company has two plants in operation -- a
pilot plant in Tulsa, Okla., and one partially funded by the Dept. of Energy
in the Port of Catoosa, Okla. The company is also focusing on developing
ultra-clean fuels using Fischer-Tropsch technology.

Holmes told committee members that the market is suspicious of
coal-to-liquids. "Everyone wants to be the first to build the second plant. We
believe that in the current energy price environment, coal-to-liquids is
competitive and what we need is a little push to get the first plant built and
to demonstrate that competitiveness," he said.

"The Gas Price Act would have fast-tracked the first plants. It would have
been the shot in the arm that the industry needed to get going," Holmes told
Platts Coal Trader after the hearing. The Gas Price Act of 2005 stalled in the
Environment and Public Works Committee in October when it garnered a 9-9 vote.
The bill contained $1.5-bil in loan guarantees for two
coal-to-liquids projects to commercially demonstrate the feasibility and
viability of converting coal and petroleum coke into an ultra-clean fuel.

"The energy bill called for two coal-to-liquid facilities to be built using
Fischer-Tropsch, but it provided no funding. The market needs to see that
first plant go up and work. Then I think you will see more interest in
investing in these plants," Holmes said.

President Bush signed the Energy Policy Act of 2005 in August. Several
analysts including Standard & Poor's, which like Platts is a division of The
McGraw-Hill Cos., said the energy bill was favorable to coal and would spur
investment in new facilities.

He encouraged the committee to rethink passage of the Gas Price Act and to
accelerate proposals in the energy bill that supports research and development
into new energy based technology like coal-to-liquids facilities.

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