A Denver-based company that hopes to apply a new coal-drying technology in Alaska has gotten press in the Star recently because of shares in the company owned by state Attorney General Gregg Renkes. Renkes said he will sell his shares in KFx Inc. to avoid the appearance of conflicts of interest if the state assists the company's efforts to help develop the Beluga coal fields west of Anchorage.

But KFx and the process it has developed are just one of several efforts underway by different companies to improve the marketability of Alaska's subbituminous coal at Beluga and elsewhere in the state.

There are at least 2 billion tons of coal resources at Beluga and at least another 1 billion tons or more near Healy, in Interior Alaska, where Usibelli Coal Mine Inc. has a producing coal mine.

A key problem facing development of these fields is a 25 percent moisture content in the coal, which means that when a cargo is shipped, essentially a fourth of the shipment is water.

If the water could be removed, the result would be to effectively upgrade the quality of the coal. KFx believes its technology has been improved to the point that a plant using its process would upgrade Beluga coal from lower-quality subbituminous coal to a rank equal to high-quality bituminous coal. Beluga coal now has a heating value of 7,800 British Thermal Units (Btus) per pound. If the water is removed through the Kfx process, the heating value would be increased to 11,500 Btus per pound.

If that could happen, the coal could be sold for higher prices and development of the coal resources at Beluga might become economic.

Other firms are taking a different approach, proposing technologies that would convert the low-rank Alaska coals into liquid fuel products that might compete with traditional petroleum-based fuels.

Silverado Mines, a Vancouver, B.C.-based company that mines gold in northern Alaska, is working on a process that would make a coal-water fuel. The fuel would be a combustible liquid of fine coal particles suspended in water, which could be used as a substitute for heavy fuel oil in industrial boilers or in large diesel engines.

Another company, Choren Industries of Germany, has a new version of a technology first developed in the 1920s that would convert coal to liquid fuels through a chemical conversion.

Choren is interested in building a demonstration plant on the Kenai Peninsula that would use biomass as a feedstock for synthetic fuel production, and eventually shift to coal if it became available from a mine at Beluga.

Less water means more energy

The KFx technology was originally developed at the Stanford Research Institute in California, and has been under development for over two decades, according to company president Ted Venners.

In the early 1990s, the company built a small demonstration plant in the Powder River Basin of Wyoming to test the process, making improvements over the years. Powder River coal is subbituminous and similar to the coals at Beluga and Healy.

A commercial-scale Kfx plant is now under construction in Gillete, Wyo., that will have two process vessels, each with the capability of upgrading 375,000 tons of coal per year, Venners said.

Fabrication of plant equipment is now underway, and the process modules will be delivered to the site in December. Foundation work for the plant will be finished by the end of October, Venners said.

The Gillete plant will cost about $40 million. Venners said the optimal size of the plant would have 20 vessels that would share the plant infrastructure, processing 8 million tons per year. A full-scale plant such as this is what the company hopes to build at Beluga, near Anchorage, he said. It would require an investment of about $300 million.

The basic Kfx process works like a pressure cooker, putting the coal under heat and pressure to essentially squeeze the water out of the coal, Venners explained.

Many processes have been developed to dry coal, mostly through heating it to evaporate the water. The problem with these is that with just heat, the coal particles expand as they dry, leaving the pores open. They're like popcorn, Venners said. When this happens the coal easily reabsorbs moisture.

What's different about the Kfx approach is that pressure is applied along with heat. Instead of expanding, the coal shrinks by about 20 percent, he said. The reabsorption problem is avoided because the pores aren't as exposed.

Taiwanese companies interested in diversifying their sources of coal are interested in development of Beluga coal. The state of Alaska recently signed an agreement with the government of Taiwan to help facilitate the process.

Venners said Taiwanese delegations have made two trips to Wyoming to visit the Kfx demonstration plant and the site of the first commercial plant.

A plant at Beluga could be built in stages as a coal mine is developed, but an initial investment of $125 million to $200 million would be needed to get the necessary infrastructure in place.

Additional investments would be needed to build the mine itself along with a conveyor system to carry coal several miles from the mine to a port on Cook Inlet, which would also have to be built.

The costs of the mine, conveyor and port would be in addition to the $300 million to $350 million needed for the plant, Venners said.

The state of Alaska could assist in financing construction of the port and possibly the conveyor system or other infrastructure. The Legislature has previously authorized $50 million in revenue bonds for upper Cook Inlet port infrastructure related to resource development. Those bonds could be issued by the Alaska Industrial Development and Export Authority, according to Ron Miller, AIDEA's executive director.

The financing could be modeled on AIDEA's ownership of the Red Dog Mine road and port facilities in Northwest Alaska, where Cominco Alaska Inc., the mine operator, pays AIDEA fees to use the facilities. Those fees are used to repay the Red Dog road and port bonds.

Alaska coal would work well for liquid fuel

While the Kfx process upgrades the quality of Alaska coal, it still leaves a product that must compete in international coal markets. Another approach being explored is to convert the coal into liquid fuel products that compete against petroleum-based fuels.

Silverado Mines, a gold mining company, has been working with such a process for several years. Its "Coal-Water Fuel," a mixture of fine coal particles suspended in water, would compete against heavy fuel oil used in industrial boilers. The fuel could also be used in large diesel engines in place of conventional diesel fuel, although more testing of this is needed, Silverado says.

The basic process was developed at the University of North Dakota for subbituminous coals found in that state. One of the scientists who helped developed the original process, Warrack Willson, now lives in Fairbanks and has been working with the University of Alaska Fairbanks and Silverado to use the process in Alaska.

The Coal-Water Fuel process involves grinding the coal to very fine particles and then heating it. In the process, water in the coal is released. The resulting product is a liquid of fine coal particles suspended in water, which is combustible, Willson explained.

Using subbituminous coal is an advantage in making Coal-Water Fuel, because with higher-grade bituminous coals, the fine coal particles settle out of the liquid and do not remain suspended, Willson said. Expensive additives are needed to keep the coal particles in suspension. Because of certain chemical properties, the subbituminous coal particles remain suspended, however, and no additives are needed.

Although the subbituminous Coal-Water Fuel technology was tested in a pilot plant in North Dakota, a demonstration plant is needed to test the process on a scale where production data can be used to analyze large commercial-scale plants.

The U.S. Department of Energy awarded a grant to the University of Alaska Fairbanks to build the demonstration plant, but UAF was unable to finish the project. Silverado has proposed using a gold stamp mill the company owns at Esther, west of Fairbanks.

Much of the equipment in the mill can be used in the Coal Water Fuel process, which would lower the cost of building the demonstration plant. Silverado is now seeking grants to do the conversion and complete the project started at UAF.

If the Coal Water Fuel process using subbituminous coal is shown to be economic, an ideal site for a commercial plant would be at Beluga, Willson said.

One market for the liquid fuel could be power plants in Hawaii which now burn heavy fuel oil, he said. Oil-fueled power plants in Asia could also use the fuel.

Willson said studies he has done indicates the process could compete with fuel oil made from crude oil at prices of $14 per barrel.

Coal could be converted to run cars, jets

Another possibility for Alaska subbituminous coal is to build a plant using the Fischer-Tropsch process to chemically convert the coal into liquid fuels like diesel, gasoline or even jet fuel.

Sasol, the South Africa-based energy company, has operated coal-to-liquids plants in that country for decades, making the nation self-sufficient in fuels. Today, passenger jet aircraft in Johannesburg, South Africa are refueled with jet fuel made from coal.

Choren Industries, a German Company, has developed its own variation of the Fischer-Tropsch technology and is building plants in Europe that make liquid fuels from biomass. Choren's process works well with coal too, and the company will eventually use coal as a feedstock in its plants.

Choren is interested in building a plant in Alaska that could demonstrate its process in the United States. Initially the company would use waste wood from beetle-killed timber on the Kenai Peninsula and west side of Cook Inlet, but at a second stage, coal from Beluga could also be used, according to Richard Peterson of Alaska Natural Gas-to-Liquids. Peterson's company is working with Choren.

The advantage Choren could bring to Alaska coal is manufacturing a liquid fuel that, like Coal-Water Fuel, sells in an international liquid fuels market rather than international coal markets.

But where Coal-Water Fuel would compete against heavy fuel oil or diesel in some circumstances, a Fischer-Tropsch liquid fuel would fully compete in the transportation fuels markets, particularly diesel, Peterson said. It would actually sell at a premium price because of its environmental advantages.