Kentucky Gov. Ernie Fletcher and Peabody Energy's Rick Bowen last week said that Peabody subsidiary Kentucky Syngas LLC will build its $3 billion synthetic natural gas facility somewhere in Kentucky.

The search for a site for the project, planned to be one of the largest commercial coal-to-natural gas facilities in the United States, has been narrowed to a five-county region in western Kentucky encompassing Henderson, Union, Ohio, Webster and Muhlenberg counties. The final location will be determined following completion of a feasibility study expected next year. The company reportedly had been considering locations in Indiana and Illinois in addition to sites in Kentucky.

The announcement follows the Kentucky Economic Development Finance Authority's recent preliminary approval of Kentucky Syngas for up to $250 million in inducements under the state's new Incentives for Energy Independence Act. The legislation, passed earlier this year by the Kentucky General Assembly, gives energy companies an incentive to build plants in Kentucky that will convert coal, corn and other products into clean fuels.

Kentucky Syngas plans to convert coal and petroleum coke into substitute natural gas, annually producing approximately 50-70 bcf of pipeline-quality synthetic natural gas from more than 2.5 million tons of Kentucky-sourced coal. The project will use proprietary ConocoPhillips E-GAS technology and will be developed with the capability to capture and store carbon dioxide.

Gasification has been used by the refining, chemical and power industries for more than 50 years. E-GAS technology converts coal or petroleum coke into a clean synthesis gas, allowing virtually all impurities to be removed, the company said.

Peabody and ConocoPhillips announced in July that they would explore development of a commercial scale coal-to-substitute natural gas facility (see NGI, July 30). The preliminary design and economic assessment of that mine-mouth facility is expected to be complete in early 2008.

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