http://cnews.canoe.ca/CNEWS/Environment/2010/02/22/12980701-ap.html

It could be a boon for the Canadian prairies.

Researchers in Texas say they have found a way of cutting the cost of producing gasoline by two thirds, taking advantage of the lowest grade of coal available - one that is abundant beneath the Canadian prairies.

A new refining process being perfected at the University of Texas at Arlington can turn the low-cost lignite coal, also known as brown coal, into oil at a fraction of the cost of importing crude oil from abroad.

“We're improving the cost every day,” Rick Billo, the school's dean of engineering, told a local television station.

“We started off some time ago at an uneconomical $17,000 a barrel. Today, we're at a cost of $28.84 a barrel.”

As the price of crude oil continues to skyrocket – now overing near $80/barrel - being able to produce a barrel of oil at less than half of that price is an attractive proposition, especially for Canadian producers.

According to the Coal Association of Canada, there are major deposits of lignite coal in Southern Saskatchewan, Alberta and Manitoba, though only the Saskatchewan deposits are currently being mined.

Lignite was the source of up to 70% of Saskatchewan's electricity last year.

The University of Texas hopes to license their technology in the next few months and start building the first micro-refineries to produce the cheaper oil in the next year.

Germany, Russia and the U.S. are currently the world's leading producers of lignite coal.