KFx Inc., a Denver-based company hoping to develop a coal processing plant in the Beluga coal fields on the west side of Cook Inlet, says it will have its first commercial-scale plant using a new coal-drying process operating in Gillette, Wyo., next summer.
The plant is now under construction in the Fort Union coal mine in Gillette, near a pilot plant that has been testing the process for several years, according to John Venners, managing director of Kanturk Partners LLC. Kanturk is hoping to develop the Beluga project with the KFx technology.
Venners was in Anchorage Dec. 16, meeting with potential contractors and environmental consulting firms who could help the company plan a possible coal-drying plant in Alaska. Kanturk recently signed a $7.5 million deal with KFx for the rights to use its technology in Alaska.
The coal found in the Beluga fields is essentially 25 percent water due to its moisture content, currently making it less attractive to mine than higher quality deposits.
KFx has been in the news in Alaska recently after disclosures that state Attorney General Gregg Renkes owned shares of stock in the company while working on a coal deal between the state and Taiwan. The deal promoted KFx's technology in upgrading the quality of the coal.
KFx, however, is not involved in any official dealings with the state.
Venners said a plant at Beluga would actually be built by a consortium led by Kanturk, a Washington, D.C.-based merchant bank owned by investors from the United States and several nations in Asia. Kanturk specializes in developing projects involving the United States, Taiwan and China, Venners said.
KFx developed the drying process that it calls "K-Fuels," and although its technology may be used here, KFx will not develop an Alaska project itself, Venners said.
The company's Wyoming plant will have a capability of processing 750,000 tons per year of upgraded coal and is being built to ultimately be expanded to produce 8 million tons per year. Lower 48 utilities are watching progress with the Wyoming plant because the process also allows mercury to be removed from coal more effectively than with current methods.
The U.S. Environmental Protection Agency has ordered restrictions on the amount of mercury in emissions from coal-burning power plants.
Meanwhile, coal producers in Wyoming's Powder River Basin are eager to sell more coal and to find ways to improve the quality of their subbituminous coal, which is similar to Alaska's, Venners said.
Some grades of Wyoming subbituminous coal are selling for as low as $4.50 per ton. Eastern U.S. electric utilities, meanwhile, are paying as much as $50 per ton for higher-grade bituminous coal, Venners said. Steve Borell, executive director of the Alaska Miners Association, said recent prices for Australian coal used for power generation are in the same range.
Venners said that by removing moisture from the subbituminous coal, the K-Fuels process upgrades its heating value to where it is competitive with bituminous coal. Venners said the process can improve heat values from 7,000 British thermal units (Btus) per pound to above 11,000 Btus per pound.
Heat and pressure key to process
The process works through a combination of heat and pressure. Heating the coal essentially bakes the moisture out of the coal. The pressure acts to change the physical structure of the coal so that it will not reabsorb moisture, Venners said.
A problem that has plagued previous efforts at removing moisture from coal is that if heat alone is used the coal will reabsorb moisture, defeating the purpose of the effort, he said.
The inventor of the K-Fuels process, the late Ted Koppleman, has said that the technology essentially mimics what happens in nature when coal deposits are buried deeply and subjected simultaneously to thermal heat from the earth and pressure from the rock overburden. In that case, nature effectively upgrades low-rank coals to higher-rank coals with more energy content.
Koppleman and other scientists at Stanford Research Institute developed the basic K-Fuels process more than 20 years ago. The patents were acquired by Venners and his brother, Ted Venners, who formed KFx to further develop the process. Ted Venners is now the president of KFx.
The problem that has plagued the company over the almost two decades that it has been working on the technology is its high cost. Two years ago, the company achieved a breakthrough when it reached an agreement with Sasol-Lurgi, a South African and German manufacturer, to use the company's Mark IV gasifier in the K-Fuels process. A gasifier transforms solid coal to a gaseous state. In the KFx application the coal would be put through part of the gasification process, heating it but not converting the coal to a gas. It would remain a solid.
The Sasol-Lurgi gasifier has allowed KFx to dramatically reduce costs, Venners said. Previously the process required separate batches of coal to be treated with heat and pressure, essentially one batch at a time. That meant the chamber containing the coal had to be heated and pressurized for each application.
The Sasol-Lurgi gasifier, however, allowed the company to modify the system in a way that allows batches to be treated in a more continuous process, with several batches being treated at the same time.
The redesigned process will effectively reduce the cost of treating high-moisture coal by half, to between $5 to $7 per ton, Venners said. That, combined with a new $4.50 per ton federal tax credit for coal produced with clean coal technology, makes the K-Fuels technology economically viable, he said. The $4.50 per ton tax credit is adjusted annually for inflation. It is more than $5 per ton today, Venners said.
Beluga is an attractive but expensive prospect
KFx has always had its eye on Beluga as a possible location for a large-scale application of the K-Fuels process, but the challenge has always been the high cost of developing a coal mine in Alaska, Venners said.
However, with about 2 billion tons of proven and probable coal resources, Beluga is still the world's largest undeveloped subbituminous coal deposit located at tidewater. This is why TaiPower, Taiwan's major power utility, is interested in the deposit.
Several years ago KFx obtained samples of Beluga coals for testing, and plans to do work in 2005 to obtain new core samples from the deposit, Venners said.
Venners said his firm has met with leaseowners at Beluga. Starkey Wilson, one of the owners of Beluga coal leases, was an early investor in KFx and has continued to be interested in the company's technology.
The Miners Association's Borell said Taiwanese firms are very interested in Alaska coal because China will soon restrict coal exports because of its own growing domestic needs. China now supplies the island nation with about 5 million tons of coal per year, a significant portion of the approximately 30 million tons a year that Taiwan needs.
The stumbling block in terms of selling more Alaska coal to Asia is the low energy content of most Alaska coal, said John Wood, a project manager at the Alaska Industrial Development and Export Authority.
"We have many inquiries about our coal from Asia, but they need coal with 10,000 Btus per pound or higher," Wood said. Most Alaska coal, because of its high moisture, has a much lower energy content.
Venners said Taiwanese firms will not buy Alaska coal unless its energy content is more than 10,000 Btus per pound.
