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Cheaper Natural Gas from Coal

Great Point says that its catalytic process could put coal back in your basement.
January 30, 2007

In the second half of the 20th century, oil- and natural gas-burning furnaces drove coal out of the home-heating business across North America. But if Great Point Energy–a Boston-area startup with a low-cost process for converting coal into pipeline-grade natural gas–has its way, coal may start keeping us toasty again before long.

Great Point Energy uses its proprietary catalysts to produce 13,000 to 14,000 cubic meters of natural gas per day from coal at this Des Plaines, IL, gasification pilot plant.

Great Point Energy of Cambridge, MA, says its process is cheaper and more reliable than drilling for new natural gas or importing liquefied natural gas from the same unstable regions. “We can take coal out of the ground and put it in a natural-gas pipeline for less than the cost of new natural-gas drilling and exploration activities,” says CEO Andrew Perlman.

Traditional coal-to-methane plants like the 1970s-era Dakota Gasification plant in Beulah, ND, and new plants envisioned by General Electric (GE) and ConocoPhillips are costly because they require a series of chemical plants operating at a wide range of conditions. In these plants, cryogenic equipment operating just a few degrees above absolute zero feeds pure oxygen to the gasifier, where coal baked to up to 2,500 ºF breaks down into a mixture of carbon monoxide and hydrogen called syngas. From there, the syngas is subsequently catalytically transformed into high-grade methane in a separate reactor.

In contrast, Great Point compresses the process into one single, efficient reactor by moving the catalysts into the gasifier itself. The key is a proprietary, recyclable catalyst developed in house with help from gasification and catalysis experts at Southern Illinois University, the University of Toronto, and the University of Tennessee, among others. The catalyst (which Perlman cagily describes as “a formulation of abundant low-cost metals”) lowers the amount of heat required to gasify coal and simultaneously transforms the gasified coal into methane. In fact, the heat released in the syngas-to-methane step is sufficient to sustain the gasification, eliminating the need to fire up the reactions with purified oxygen. “It’s perfectly heat balanced,” says Perlman.

On the strength of lab-scale demonstrations with its catalyst, Perlman and his partners have picked up $37 million from venture-capital firms Draper Fisher Jurvetson, Kleiner Perkins Caufield & Byers, and Advanced Technology Ventures to test their catalyst in a pilot plant. Rather than building a pilot plant from scratch, Great Point accelerated the process by leasing one from the utility-supported Gas Technology Institute at Des Plaines, IL. Perlman says Great Point ran the plant’s 14-inch-in-diameter, 60-foot-high gasifier for a week in November with the firm’s proprietary catalyst, converting Illinois Powder River Basin low-sulfur coal into between 13,000 and 14,000 cubic feet of natural gas per day. He anticipates that a second run this spring will give him and his partners the data they need to take the next step: designing a larger but still precommercial plant that he expects to have operating by 2009. Subsequent testing at Des Plaines will evaluate the catalysts with dirtier yet more energetic petroleum coke, a byproduct that the average refinery generates at the rate of 5,000 to 10,000 tons per day–more than enough to fuel a commercial-scale synthetic-gas plant.

Meanwhile, Perlman says he is searching for a coal mine or refinery in the western United States to site Great Point’s first plants. The idea is to produce natural gas close to oil producers who need the synthetic-gas plant’s largest byproduct: carbon dioxide. Dakota Gasification has blazed this trail. Its synthetic-gas plant converts 18,000 tons of lignite coal into 170 million cubic feet of synthetic natural gas per day–enough to heat 2,500 homes for a year. But it also sells its CO2 to the aging oil fields of southeastern Saskatchewan, in the process burying more CO2 in a year than 100,000 cars release in their operational lifetime. (See “Carbon Dioxide for Sale.”) “Our CO2, instead of being a liability, is actually a saleable byproduct,” says Perlman, who estimates that oil producers in the west are willing to pay $20 to $40 per ton of CO2. That said, Perlman has not factored revenue from CO2 into his business plan. What is clear is the potential for coal. “The U.S. has 3 percent of the world’s natural gas but 26 percent of the coal,” he says. “Wyoming’s coal could supply U.S. natural-gas needs for 100 years.”

And natural-gas distributors are eager for the gas. Evansville, IN-based utility Vectren, which supplies gas and power to more than one million customers in Indiana and Ohio, has signed a 30-year deal to pay roughly $5 to $6 per million BTUs for synthetic gas from the $1.5 billion plant that GE hopes to build in Indiana. Vectren spokesman Mike Roeder acknowledges that there is a risk that the gas price could fall in the future, but he says the security of supply is worth it. “Reasonably priced gas has not been an option for our customers for at least the past five years,” he says. “So we have a very strong interest in the project moving forward.”

The attraction is clear: gasification of coal offers a fixed-price alternative to the volatility of natural-gas markets. Indiana officials note that natural gas from GE’s plant at $5 to $6 per million BTUs would be well below the current price of $7.50 to $8.50 per million BTUs. Projecting that natural-gas prices will remain high, the officials estimate that GE’s plant would save consumers more than $3.7 billion over the next 30 years. Therein lies the challenge in financing these plants: no one wants to be left on the hook if the natural-gas price crashes, as it did in the 1980s and ’90s. Great Point Energy’s simpler conversion process offers a safer bet, says Perlman, because it should deliver pipeline-quality gas from coal for less than $3 per million BTUs.

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