The recently passed federal energy bill has provisions that would aid two proposed Alaska projects to make liquid fuels from coal.

One would make a coal-water fuel, a mixture of fine coal particles suspended in water that is combustible. It could be used in industrial or utility steam boilers, in place of heavy fuel oils.

Silverado Green Fuels Inc., an affiliate of mining company Silverado Gold, has been working for several years to secure funding to build a small, 300-barrel-per-day demonstration plant near Fairbanks. The plant would use a former gold stamp mill owned by Silverado.

The second project would be much larger. It would be a fullblown alternative fuels plant built in Healy, using coal from the mine owned and operated by Usibelli Mine Inc., to make an ultra-clean diesel fuel. Naphtha and some heavy oils, useful for lubricants, would also be produced.

This project is proposed by Syntroleum Corp., based on Tulsa, Okla., which has been working for years oil using FischerTropsch technology to make liquid fuels from natural gas.

The process can also use coal or biomass as a feedstock.

Syntroleum is working on the project with Integrated Concepts Research Corp., of Washington, D.C., a subsidiary of Alaskabased Koniag Inc. Integrated Concepts does fuels testing and research for the military. Usibelli Mines could also be involved in the project, at minimum as a supplier of coal.

As envisioned, the plant would produce 18,000 barrels per day to 22,000 barrels per day of diesel fuel and other products, shipping the fuel to market on the Alaska Railroad.

The prime customer for the fuel would most likely be the military, which wants the Fischer-Tropsch fuel, although the clean diesel would also be commercially marketed in Alaska, according to Jon Warzel, Syntroleum's vice president for business development.

Clean diesel could be supplied by rail to Southcentral and Interior Alaska markets by rail from Healy. The fuel could also be shipped to Yukon River communities, now served bytugs and barges operating from Nenana, which is between Healy and Fairbanks.

Syntroleum and ICRC have been working with the military and the U.S. Department of Energy for several years on testing of the new fuels, including vehicle testing last year at Denali National Park and in Fairbanks. Syntroleum operates a 70barrel-per-day Fischer- Tropsch demonstration plant in Tulsa.

The key advantage of synthetic diesel and other fuels made through the Fischer-Tropsch process is the superior performance of the fuels, which is why the military is interested. The fuels also exhibit superior environmental qualities. The fuels have no sulfur and aromatics.

The big drawback is cost. Capital costs for building FischerTropsch plants to produce refined products are still much higher than conventional crude oil refineries. Costs are coming down, however, as major oil companies and small technology firms like Syntroleum continue to make improvements.

While the recently passed federal energy bill authorizes federal funds to assist the project, Syntroleum, ICRC and Usibelli are hoping to secure an appropriation for a feasibility study of the project in the federal defense appropriations bill, Warzel said.

Jim Lexo, president of ICRC, said the project is still in the discussion stage. No engineering or economic studies have been conducted, he said.

The federal government is interested in diversifying the nation's sources of energy, and there is keen interest in technologies that make liquid fuels from coal. "America is the Saudi Arabia of coal reserves, and Alaska has tremendous coal resources," Lexo said.

The coal-water fuel project being worked on by Silverado has been under development since the early 1990s, when the basic technology was developed, and lab-tested at the University of North Dakota. The coal tested was subbitiminous coal, similar to that mined in Alaska, said Warrack Willson, a retired DOE scientist who helped developed the process and who now works with Silverado.

The process that has been developed dries the coal through hydrothermal treatment, a process sometimes called hot-water drying, Willson said.

Hydrothermal treatment is an advanced technology, featuring moderate temperature and pressure and non-evaporative drying, which removes much of the inherent moisture from lowrank coals. Through the process the coal does not reabsorb moisture, which has been a problem with other coal-drying techniques, Willson said. After treatment, the energy content equals that of higher-rank bituminous coal.

The key advantage of coal-water fuel is its possible low cost. Studies indicate the process can compete with conventional oil fuel products down to about $13 per barrel crude oil prices. The disadvantage of the fuel is that its energy content per unit of volume is about half that of conventional fuel. That means twice as much coal-water fuel would have to be used to get the same energy as conventional oil.

Those problems can be overcome, but it means that coalwater fuel would likely fit only niche applications, where storage and transportation costs are not big economic factors.

A commercial-scale, coal-water fuel plant would probably best be located at the Beluga coal fields, 50 miles west of Anchorage, which are near tidewater and access to lowcost ocean transport, Willson said.