A coal liquefaction plant that had been strongly opposed in southwestern Ohio has taken on new life after the developer agreed to use natural gas from the nearby Marcellus and Utica shales instead of coal in the production process.

The Ohio River Clean Fuels project in Wellsburg, OH, originally was proposed by Vancouver, WA-based producer Baard Energy LLC as a diesel and naphtha transportation fuels facility that would be fueled using Ohio’s abundant coal. At its inception four years ago coal appeared to be a better bet than higher-priced gas. However, with Utica and Marcellus shale development in Ohio, the developers now have more options — and less opposition.

Under a preliminary design proposed by Planck Trading LLC, the revamped plant would use 500 MMcf/d of gas to produce the same amount of liquid fuels in Baard’s original plan. Baard’s design would have used 20,000-25,000 tons of coal daily to produce about 50,000 b/d of fuel.

The restart of the project appears to have taken some litigious heat off developers. Environmental groups had challenged the coal-to-liquids development in 2008, accusing the Ohio Environmental Protection Agency and the U.S. Army of Engineers of failing to adequately assess the environmental impact of the proposed plant. The opposition forced Baard to rescind its funding request through the U.S. Department of Energy’s loan guarantee program.

Last year Baard turned to Planck, based in Boca Raton, FL, to help with funding. Planck took over control of the project and began to consider whether shale gas could be used instead of coal. A preliminary engineering study followed, indicating that the plant design could be converted from coal to gas.

Last Friday Planck and the opposition groups, which include the Sierra Club and the Natural Resources Defense Council (NRDC), agreed to jointly request that the Ohio Environmental Review Appeals Commission vacate deliberations on the court challenges. The commission’s agreement would allow Planck to modify the building permits and proceed with development.

Baard CEO John Baardson said the agreement would give the developers a better chance to finance the project.

“The business case for natural gas is compelling…and there is a fair amount of interest from financial people,” said Baardson. “We should be in construction by 2012.”

In addition to the expected environmental gains from using gas versus coal in the plant processes, the revamped plant also is expected to cost less than half of the $6 billion planned for the original facility.

The NRDC and the Sierra Club agreed to stay their legal challenges until the building permits are modified and reviewed. If the modified permits meet their approval, they plan to dismiss their appeals.

“Coal to liquids technology has always been dirty and expensive, and [the] announcement makes it clear that it remains a bad bet,” said NRDC senior attorney Shannon Fisk. “Four years into this mess, the Baard facility has not been able to sort out its pollution permits or financing because making liquid fuel out of coal simply doesn’t work economically or environmentally.”

Sierra Club spokesman Nachy Kanfer said, “While we do not support the new refinery plan and believe it is unnecessary no matter what feedstock it uses, this is a giant blow to coal in Ohio and the nation…We will continue to take on dirty coal plants in the Buckeye state and around the country.”

Even though it has stepped back from its involvement in the Ohio River Clean Fuels project, Baard, which also explores for shale oil in Utah, isn’t leaving the region. CEO John Baardson said the company is in early stages of permitting to develop gas liquefaction plants in West Virginia and Pennsylvania, which would have projected output similar to that of the Ohio facility.

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