Leaders confident CTL plants offer significant growth for coal

Washington (Platts)--12Sep2006

If coal-to-liquids plants are built, they could be a "game changer," said
Steven Leer, chairman and CEO of Arch Coal, while Consol Energy's Chief
Financial Officer William Lyons expects CTL plants to be built with eastern
coal to supply them.

Consol Energy sees itself as a strong contender to supply coal for
non-conventional projects. With its own private research and development
branch, the company has set aside reserves for CTL development, Lyons said.
Both men spoke at the Lehman Brothers Energy Conference Thursday.

Consol controls reserves of 1 billion short tons, and it could put in a mining
complex for CTL feedstock near several transportation options, allowing
alternatives for shipping the product to market, he said. Central Appalachia
could have an increase of 6 million short tons to 8 million st/year for a
large CTL plant.

Utilities are interested in integrated gasification combined-cycle plants, but
if CTL complexes are built, they could be competitors for the same fuel
source, Leer said. If CTL plants are built, they would be a new group of
potential customers for eastern coal producers. While CAPP production
continues to decline, Northern Appalachian production will increase, generally
offsetting each other, he said.

As an example of a possible future user of CTL fuels, the Air Force is testing
CTL fuels in a bomber now, Lyons said, and the service expects to complete
certification of the fuel by 2008. Showing the potential of the market, the
Air Force uses about 3 billion gallons of fuel/year, he said.

Many companies developing CTL fuels now are small entrepreneurs, Lyons said.
For CTL plants to be economical, they need economies of scale. Lyons said he
believes CTL fuels plants will be built, they will need feedstock and he is
"confident" of Consol's position.

For Arch, the Carbon Basin is designated for a CTL project with DKRW, said
Leer. He foresees multiple plants eventually.

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