Two and a half years after announcing that they would explore development of a commercial-scale coal-to-substitute natural gas facility (see NGI, July 30, 2007), ConocoPhillips and Peabody Energy said last week the Commonwealth of Kentucky has issued a draft air permit for the Kentucky NewGas project, which would be sited near Central City in Muhlenberg County, KY.

The companies, which previously had said they planned to build the $3 billion synthetic natural gas facility somewhere within the state, settled on the Muhlenberg location and filed for an air permit almost exactly a year ago (see NGI, Dec.22, 2008; Nov. 5, 2007).

The mine-mouth project would have very low emissions and would be capable of producing 60 to 70 Bcf of pipeline-quality natural gas each year, enough energy for nearly three-quarters of a million Midwest homes, according to the companies.

The project would use coal gasification to turn Kentucky coal into natural gas. During the gasification process, coal is ground into small particles and mixed with water. This mixture is injected into a pressurized vessel along with a controlled amount of pure oxygen. The heat inside the gasifier converts the coal, water and oxygen into a synthetic gas comprised primarily of hydrogen and carbon monoxide. After the removal of any sulfur and carbon dioxide from the synthetic gas, the hydrogen and carbon monoxide react to create methane, or substitute natural gas.

Kentucky NewGas would use ConocoPhillips' proprietary E-Gas technology to produce substitute natural gas that is virtually free of impurities. The project would achieve regulatory standards to protect the environment, including adoption of low emissions design criteria. The companies noted that the plant would produce less than 5% of the emissions of a comparably sized traditional coal plant and would be carbon storage ready.

"Achieving energy, economic and environmental goals are major priorities for society, and Kentucky NewGas delivers at all levels," said Fredrick D. Palmer, senior vice president of Government Relations for Peabody Energy. "The project enjoys tremendous support because it would build energy security, create a clean energy model and new jobs using abundant Kentucky coal."

Peabody Energy, which bills itself as "the world's largest private-sector coal company," said its coal products fuel approximately 10% of all U.S. electricity generation and 2% of worldwide electricity.

"This is a significant step forward in progressing this project, and we will continue to work with the Commonwealth throughout the permitting process," said Greg Goff, senior vice president, Commercial for ConocoPhillips.

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