Rising petroleum prices have once again prompted interest in using coal to manufacture liquid fuels that can displace petroleum-derived gasoline and diesel fuels. Coal is abundant in the United States and throughout the world. Coal-to-liquids (CTL) technology is ready for initial commercial applications in the United States, and production appears to be economically feasible at recent crude oil prices, which during 2008 were well over $100 per barrel for West Texas Intermediate crude oil. These considerations suggest that using coal to produce liquid fuels can stanch the large transfers of wealth from oil consumers to oil producers, thus providing significant...

Of the major fossil fuels, coal is the most abundant. Global, proven recoverable reserves are estimated at one trillion tons (World Energy Council, 2004), nearly triple the energy of the world’s proven reserves of petroleum.

As compared to oil or gas resources, coal reserves are often characterized as widely dispersed. On the one hand, this is an accurate characterization, because major portions of the global reserve base are spread among the continents. On the other hand, the eight nations listed in Table 1.1 hold 88 percent of reported proven recoverable reserves. Leading this list is the United States, with proven...

This chapter provides an overview of the principal technical approaches for producing liquid fuels from coal and describes the fuels produced. It also examines the current status, and prospects for, commercial CTL operations and discusses methods of controlling greenhouse-gas emissions. Finally, the chapter reviews production costs and establishes a minimum timeline for the buildup of liquid-fuel production from a commercial industry.

Current interest in coal-derived liquid fuels has, for the most part, concentrated on approaches that begin with coal gasification and fall into a technical category known asindirect liquefaction.The best-known of these indirect methods is Fischer-Tropsch (FT) liquefaction. The...

Presently, petroleum demand in the United States stands at between 20 million and 21 million bpd. Imports meet 60 percent of this demand: ten million bpd of imported crude oil and 2.5 million bpd of imported petroleum products. Analyses of U.S. energy requirements for the next 20 to 25 years generally show slightly growing demand for liquid fuels and continued high dependence on imported petroleum. Looking at global trends, we anticipate that rapidly growing energy demand from large developing nations, such as China and India, will raise global petroleum consumption by 20 to 50 percent beyond current levels by 2030.¹...

This chapter examines the strategic significance to the United States of developing a CTL industry. The research we report here builds on a previous RAND study (Bartis et al., 2005) that examined the related question of how oil shale development might contribute to achieving U.S. goals at home and abroad. For CTL development, this is an important issue because Congress is currently considering a number of legislative proposals to provide subsidies to promote the construction and operation of commercial CTL plants. Our analysis provides a context in which to evaluate the potential national benefits of such subsidies.

For the purpose...

Based on our research and interviews with major energy producers, market and technical uncertainties affecting the overall commercial viability of CTL production appear to be the primary reason for delayed investment in CTL plants. Absent some bounding of these uncertainties, development of a strategically significant CTL industry in the United States is unlikely to proceed. Consequently, over the next five to ten years, the prospects for CTL development in the United States depend largely on the extent to which the federal government will provide incentives or disincentives for private investment in early commercial CTL production facilities.

Another class of uncertainties...

What is the best way for the government to encourage private investors to pursue early CTL production experience? A variety of government financial instruments have been introduced and discussed for the purpose of promoting early commercial development of advanced energy technologies, including CTL. For purposes of policy analysis, each of these government incentives can be viewed as falling into one of the following five categories:

1. A purchase guarantee with a preset purchase quantity and fixed price for CTL fuel (e.g., the government could contractually agree to purchase all or a portion of the fuel from a CTL plant at a...

The prospects for developing an economically viable CTL industry in the United States are promising, though important uncertainties persist. FT and MTG CTL technologies are ready for initial commercial applications in the United States, production costs appear competitive at world oil prices that have prevailed over the past two years, and proven coal reserves are adequate to support a large CTL industry operating over the next 100 years.

The most important factor presently impeding private-sector investment in CTL production is uncertainty regarding the future course of world oil prices. Our best estimate is that coal-derived liquids are competitive when crude...