BILLINGS, Mont. — To hear Montana Gov. Brian Schweitzer tell it, it's a can't-miss deal.

Picture a plant that could convert coal from the state's rich reserves into cleaner-burning fuels, and do so while creating valuable jobs in rural Montana, but with very little pollution. Not only that, but it could help ease the nation's reliance on foreign oil.

"It's another one of my big ideas," said Schweitzer, the state's popular Democratic governor, who has been working to woo investors to a state that boasts about 120 billion tons of coal.

Whether the idea becomes reality, though, remains to be seen.

While it appeals in theory to a broad range of constituents, from some conservationists to coal industry officials, not everyone believes such a plant is doable -- or even desirable -- in Montana. Concerns have been raised about possible new strip mining, regulatory hurdles and limited infrastructure to transport energy produced, even though a detailed proposal and financial commitment have yet to be made.

There's skepticism, too; some question whether Schweitzer is simply pushing the idea to score popularity points.

"There's no risk for him; it's all upside," said Pete Geddes, executive vice president of the Bozeman-based libertarian Foundation for Research on Economics & the Environment. "He gets portrayed as a great progressive on energy stuff. It won't shock you, but the governor wants to be re-elected."

So-called "clean-coal" projects are not far-fetched. Projects of varying size and purpose are slated to move forward in states like Pennsylvania and Colorado, and there's interest in other states, like Wyoming.

Schweitzer believes the use of clean-coal technology to produce clean energy -- liquid fuels, like diesel, or electricity -- will be key to further diversifying the U.S. energy economy, and he's interested in getting coal-rich Montana in on the action.

The nation's only existing commercial-size coal-to-natural-gas gasification plant is in North Dakota, according to the U.S. Department of Energy and the plant's owner. Two other commercial gasification plants produce electricity, according to the department and an energy expert.

But it's the sizable investment required -- about $1.5 billion to build a minimum 25,000 barrel-per-day plant, by Schweitzer's account -- and the role of oil prices that experts believe will determine whether anyone commits to such an undertaking.

Though the federal government is encouraging synfuels production with incentives including loan guarantees, analysts such as Kevin Book believe that may not be enough to rekindle an industry that hadn't been pushed domestically since the energy crisis of the 1970s.

Because synfuels production will be based upon higher-than-projected crude prices, "a key catalyst will be government intervention to shore up the investment on the downside," said Book, a Virginia-based senior analyst for Friedman, Billings, Ramsey & Co. Inc.

"I think we're one subsidy short of the point where coal-to-liquids becomes a serious proposition," he added.

That's not to say there isn't interest. In fact, some energy experts and industry officials believe the high crude oil prices that sent gas prices soaring last summer, along with growing uncertainty about future production and availability help make the climate more conducive to using coal or natural gas to make diesel or other fuels.

Historically, roller-coaster oil prices precluded much serious thought about -- or investment in -- high-cost synfuels plants, officials say. But higher oil prices -- trading recently at about $68 a barrel, compared to the estimated $35 per barrel-production cost of synfuels -- is making coal-to-liquids a more attractive proposition, officials said.

"I think a lot of people believe this is not a spike in petroleum prices that we're seeing, but probably a floor," said Luke Popovich, a spokesman at the National Mining Association. "That gives an enduring, financial incentive to develop these coal-to-liquid plants. I think we finally have all the circumstances in place."

"It's not pie in the sky, by any means," he added.

The process itself is relatively simple. Coal is heated into a gas from which toxins such as sulfur and mercury are cleaned. The cleaned gas is distilled into a synthetic form of oil that is further refined to create diesel or other liquid fuels that burn cleaner than petroleum-based fuels, according to the state.

The roots of one method, known as Fischer-Tropsch, go back decades, and experts say work continues to make the process more efficient and economical.

But some conservationists, spurred in part by the limited domestic synfuels record, worry the technology is not yet good enough to minimize or prevent environmental problems.

"I can't get very excited about it," said Helen Waller, a conservationist and farmer near Circle, Mont., one of the areas that Schweitzer said has expressed interest in a synfuels plant.

Waller worries about the problems that could come with it, wherever it's placed, including pollution and strip mining.

"Yes, we need energy, but there's a better way to produce it than coal," she said.

Conservationists, interested in greater promotion of wind or biodiesel projects in the state, don't buy that synfuels would help curb the appetite for foreign oil,

Experts and industry officials believe federal subsidies and other incentives, such as state or federal agencies assuring a plant of a fuels market once production begins, will be critical to encouraging development.

The state of Pennsylvania has committed to buying as much as one-third of the 60 million gallons of fuel John Rich plans to produce at his not-yet-built clean-coal plant in that state, he said. The estimated cost of the plant is about $600 million, and Rich hopes to have it financed and ready for construction next year. The hope is to have fuels come on market in 2009, he said.

Rich, president of WMPI Pty. LLC, said he realizes there are skeptics; he's been pushing for this type of project for about a decade. But he said it takes time to build an industry and prove it to be a positive. He expects the plant, which will use waste coal, to create 1,000 construction jobs and, later, 600 permanent jobs.

"With time, you build confidence and credibility, and all that drives this," he said.

Source: Associated Press