NCPA - National Center for Policy Analysis


May 1, 2009

First developed by Germany during World War II, the Fischer-Tropsch (FT) process offers America a chance to utilize its vast domestic coal supply, increase refining capacity, and produce a cost-efficient and clean fuel, say Nicholas Ducote, the Wyly junior fellow, and H. Sterling Burnett, a senior fellow, both with the National Center for Policy Analysis.

The process can be used to transform natural gas, biomass or coal into liquid fuels; but for America, coal is the most viable feedstock.  The coal-to-liquids (CTLs) process changes coal into a synthetic gas which is then converted into combustible liquid fuels.  Diesel and kerosene (jet fuel) are the final products. 

Since CTLs are less polluting than traditional fossil fuels, one benefit is cleaner energy, say Ducote and Burnett.  The University of Kentucky found that compared to ultra-low sulfur diesel as a transportation fuel, liquefied coal emits:

  • 60 percent fewer hydrocarbons per gallon.
  • 10 percent less nitrous oxides.
  • 55 percent less particulate matter.

In short, increased CTL use can reduce the health effects and premature mortality from air pollution and help reduce smog in big cities, say Ducote and Burnett.

A second benefit is more stable energy prices.  Rentech, a primary U.S. patent-holder of the technology, produces CTL fuel in Colorado at a cost of $45 per barrel.  Though this cost is comparable to the current price of crude oil, the price of American coal is less volatile.  Price stability makes CTL a valuable option for certain transportation needs, say Ducote and Burnett. 

According to a 2001 Energy Department study:

  • The price of coal-derived diesel at the pump would be about $1.24 per gallon before taxes.
  • If every gallon of diesel currently consumed were CTL, users would spend an average of $30 million a day less on fuel.
  • At that price, every American who switched to CTL-fueled diesel cars and trucks would save $1,082 per year in fuel costs, on average.

The Energy Department should recognize CTL as an alternative energy source.  Coal-to-liquids will not move America completely away from fossil fuels, but it offers greater energy security now while nonfossil-based transportation fuels and technologies are developed for the future, say Ducote and Burnett.

Source: Nicholas Ducote and H. Sterling Burnett, "Turning Coal into Liquid Fuel," National Center for Policy Analysis, Brief Analysis No. 656, May 1, 2009.

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