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First things first

Experience has shown, and a true philosophy will always show, that a vast, perhaps the larger portion of the truth arises from the seemingly irrelevant.
     —Edgar Allan Poe

On March 19th, 2008, the Air Force successfully completed another in a series of tests designed to switch their planes over to synthetic fuel blends made partly from a  Fisher-Tropsch (F-T) coal-to-liquids (CTL) process. In 2006 the Air Force successfully flew a B-52 using the new fuel mix. The latest demonstration involved a B-1B Lancer, which flew at supersonic speeds over Texas and New Mexico using a blend of F-T and JP-8 jet fuel.

"The goal is to have every aircraft [certified for] synthetic fuel blends by 2011," said Maj. Don Rhymer, assigned to the Air Force Alternative Fuels Certification Office. "By 2016 we hope at least 50 percent of this fuel will be produced domestically."

Will the Air Force's scheme be implemented? Coal-to-liquids conversion emits lots of carbon dioxide but produces a viable substitute for diesel and jet fuel made by refining crude oil. An epic battle is shaping up between those concerned about climate change and those seeking to lower their transportation fuel costs and enhance their energy security. But is this the right battle for Americans to fight?

The Air Force Pushes For Coal-to-Liquids

Although the Air Force program is currently purchasing gas-to-liquids synfuel purchased overseas, they are pushing for a CTL facility to be built in Montana. While coal is plentiful in the American West, natural gas is far too precious in the North American market to be used as the input for F-T conversion. McClatchy's Air Force leads push to liquefied coal fuel  (March 30, 2008) tells the story—

Jet_fuel With every $10 rise in the price of a barrel of oil costing the Air Force $600 million, the service is converting its entire 6,000-plane fleet to run on a synthetic fuel mixture. Tentative plans call for construction of a coal-to-liquid fuel plant at a Montana air base...

Air Force officials have been testing synthetic fuels based on coal or natural gas. They plan to certify the fleet of nearly 6,000 aircraft to fly on a 50-50 blend of synthetic fuel and traditional petroleum-based jet fuel by 2011.

Assistant Air Force Secretary Bill Anderson said the search for affordable, cleaner-burning alternative fuels was driven by economic and national-security concerns.

Let's state the obvious up front—the Air Force is surely "peak oil aware." Branches of the military and the intelligence services do scenarios planning. "The United States would be all but powerless to protect the American economy in the face of a catastrophic disruption of oil markets, high-level participants in [Oil Shockwave] concluded yesterday."

Even without a large oil shock like those of the 1970s, relentless price increases and the possibility of declining global liquids output leading to supply shortfalls in the U.S within the next decade has led the Air Force to the coal-to-liquids solution. If the Air Force thought we were going to be swimming in oil by 2016, their target implementation date, they would not be proposing using F-T to meet their jet fuel needs.

Many obstacles stand in the way of the Air Force's plan. The climate change lobby is not going to roll over on the issue, which creates a bad precedent and provides momentum for carbon-intensive F-T operations in the United States. "I think across the board there is going to be opposition from the environmental movement," said John Topping, the president of the Climate Institute in Washington. "I'd say it's going to be almost universal because of the climate concerns" (McClatchy). The Congress will probably have a Democrat majority after the fall elections. This likely means tough sledding for the Air Force.

As awareness of the climate problem grows in the United States, the economic squeeze brought on by higher oil prices creates pressure to implement supply-side solutions to alleviate soaring diesel fuel costs.

More Diesel Fuel For Truckers?

On April 1st, truckers staged a slowdown to protest high diesel prices. Truckers Protest Fuel Costs tells the story (Associated Press).

Tons of freight idled across the country Tuesday as independent truckers pulled their rigs off the road while others slowed to a crawl on major highways in a loosely organized protest of high fuel prices.

Using CB radios and trucking Web sites, some truckers called for a strike Tuesday to protest the high cost of diesel fuel, hoping the action might pressure President Bush to stabilize prices by using the nation's oil reserves.

"The gas prices are too high," said Lamont Newberne, a trucker from Wilmington, N.C., who along with 200 drivers protested at a New Jersey Turnpike service area. "We don't make enough money to pay our bills and take care of our family." [emphasis added]

Last week's A Recipe For Disaster touched on the record-high average price for diesel fuel in the United States, which now stands at $4.025/gallon according to AAA's Daily Fuel Gage Report. The big rigs get only 5 or 6 miles to the gallon, so long-haul truckers' profit margins are now disappearing. Trucker Lamont Newberne told the AP that "a typical run carrying produce from Lakeland, Fla., to the Hunt's Point Market in The Bronx, N.Y., had cost $600 to $700 a year ago. It now runs $1,000".

Diesel_fuel_bill_2007 According to data compiled by the ATA and the Air Transport Association, the 2007 fuel bill for all U.S. passenger and cargo airlines was $41.2 billion, but the diesel tab for moving goods by truck was $112.6 billion (graph left). Trucking fuel consumption far surpasses use for air travel.

Clayton Boyce, a spokesman for the American Trucking Association (ATA), says his group "is pushing for a number of measures to keep the prices down or to otherwise help truckers, including allowing exploration of oil-rich areas of the U.S. that are now off limits...." It would take years and years to get any diesel fuel from the outer continental shelves, presuming there are commercial oil reserves out there. Where is the diesel supply going to come from? The Air Force's Anderson has it all figured out—

With the Air Force paving the way, Anderson said the private sector would follow — from commercial air fleets to long-haul trucking companies.

"Because of our size, we can move the market along," he said. "Whether it's (coal-based) diesel that goes into Wal-Mart trucks or jet fuel that goes into our fighters, all that will reduce our dependence on foreign oil, which is the endgame."

A beleaguered trucking industry will seize the opportunity initiated by the Air Force to push for coal-to-liquids. It won't matter politically that such production, like drilling on the outer continental shelves, is many years away, thus providing little tangible relief for truckers. It won't matter that the quantities of diesel fuel produced will be relatively small, or that coal-to-liquids conversion using an F-T process is exorbitantly expensive, or that building an F-T plant presents difficult engineering hurdles that must be overcome, despite the success of South Africa's SASOL, which operates the only CTL plant running anywhere in the world today,

Between A Rock and A Hard Place

Overall_ctl_balanceA heavyweight bout is coming soon between the climate lobby, who are trying to reduce carbon dioxide emissions, and the transport industry, which wants cheaper liquid fuels. The latest issue of the Oil & Gas Journal contains a comprehensive special report GTL, CTL finding roles in global energy supply that sheds light on the conflict (by Iraj Isaac Rahmim, March 24, 2008). The coal-to-liquids data (chart left) buttresses the positions of both the climate and transportation antagonists. The data comes from a National Energy Technology Laboratory (NETL) study for the Air Force.

A 50,000 barrel-per-day CTL plant configured as NETL specified will produce 27,819 barrels of diesel and 22,173 barrels of naphtha, which is a principle component of jet fuels like the Jet-B used in the Air Force's certification tests. The F-T process also produces small amounts of lubes and waxes, which can be hyrdrocracked to make more diesel or naphtha. The naphtha itself "[can] be steam-cracked to syngas and recycled back to the F-T reactor to increase production of high quality diesel" according the Oil & Gas Journal report. These numbers will appeal to the transportation industry.

The NETL data also shows that the envisioned F-T plant will produce 32,481 tons of carbon dioxide every day running at full capacity, a ratio of 1.32 tons of CO2 to every ton of coal burned. Without carbon capture, compression and sequestration (CCS) technology, CTL is viewed as a disaster from the climate perspective. This CTL plant would emit 11.8 million tons of carbon dioxide operating at full capacity over a year's time.

Let's put this in perspective. Carbon dioxide emissions in the U.S. declined by 1.3 percent in 2006 to 5,877 million metric tons according to the EIA (Science Daily, May 24, 2007). The 50,000 barrel-per-day CTL plant would add 0.2% to the U.S. 2006 emissions. On the other hand, the U.S. consumed an average of 5.818 million barrels of (kerosene-type) jet fuel and (middle) distillate fuel oil (mostly diesel) in the 4 weeks ending March 28th, 2008 according to the EIA's latest Weekly Petroleum Status Report. The CTL plant's output would be 0.8% of this total.

Us_ctl_projects A number of CTL projects are on the drawing board in the United States (chart left from the Oil & Gas Journal). Rentech and Peabody have formed a partnership to look into the feasibility of two 10-30 thousand barrel-per day projects, one in Montana and another somewhere in the Midwest. Only one of the projects listed is larger than the CTL specification used in the NETL study.

None of the projects are anywhere close to implementation because of two main factors mentioned by the Oil & Gas Journal: 1) uncertainty about future carbon policy and the CCS option and 2) CTL unit CAPEX costs running between $70,000 and $100,000 per barrel of capacity.

First Things First

The coming battle between climate activists and those in the transportation industry is oddly disconnected from peak oil concerns. We want to reduce carbon dioxide emissions, right? We want the transportation segment of the economy to function, right? This debate misses some salient points. First, global middle distillate (diesel) production has been flat for some time now and won't increase much, if at all, in the near future. The further out in time one goes, the more likely declines in global diesel production become. Second, substitutes such as diesel from coal-to-liquids will not become available in a timely fashion to produce significant enough quantities to relieve supply-side shortfalls in the next decade. And there are insufficient railroads to replace long-haul trucking or air freight in the United States.

Looking out a decade from now, carbon emissions from diesel in the U.S. are likely to decrease because overall middle distillate consumption is likely to decrease due to price escalation and constrained world supply. Any carbon emissions coming from CTL are not likely to replace what will be lost from decreased consumption, which is a good thing from the climate perspective. It is a disaster if you want a functioning economy. In the meantime, higher fuel costs will eventually be passed through to consumers, spurring destructive inflation. We will require a functioning economy to fix all of our other problems, including anthropogenic climate change.

Here we are, seemingly between A Rock (climate) and A Hard Place (CTL substitutes for oil). But do these two diametrically opposed positions really form the horns of our dilemma? No. Peak oil is "the third eye" gateway to higher consciousness in this debate.

The peak oil issues will be at most a sideshow in the forthcoming debate over coal-to-liquids here in "the Saudi Arabia of Coal."  The Air Force clearly knows about peak oil, but does not frame the problem in those terms. It seems that only a few people are able to bend their minds around the idea—publicly— that we've got bigger fish to fry in the upcoming decade than either side is willing to admit. "I think the principle of 'first things first' does apply,’ said Al Gore, "and has to be followed if we are to have any chance of success." One can only agree, but he wasn't taking about peak oil.

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