Appropriations bill includes $10 million for liquid coal project

By R. A. Dillon

Published Thursday, September 11, 2008

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WASHINGTON — A Senate subcommittee on Wednesday approved a measure backed by the U.S. Air Force to study putting a coal-to-liquids fuel production facility at Eielson Air Force Base near Fairbanks.

The $10 million in funding was part of a $488 billion draft defense spending bill for fiscal year 2009 passed out of the Senate Appropriation defense subcommittee.

Money for the liquid coal project was placed in the defense bill by Sen. Ted Stevens, R-Alaska, who said it would help the military meet its goal of reducing its dependence on foreign oil.

The measure would spur development of diesel and jet fuel from the coal deposits around Healy that could be used to power the aviation fleet at Eielson and fill the gas tanks of the Stryker Brigade at nearby Fort Wainwright.

The facility as proposed would be capable of producing up to 40,000 barrels of coal-to-liquid fuel per day.

Stevens said the liquid coal would offset some of the $12.5 million the Air Force spent on jet fuel at Eielson last year.

Excess fuel could be sold into the local aviation and transportation market, he added.

At an alternative energy summit in Fairbanks in July, the estimated cost of constructing the facility was between $3.5 billion to $6 billion, depending on its size.

Stevens office said it did not have a cost estimate for the plant, but acknowledged it would be expensive.

The bill must still be reconciled in conference with the House version, which includes the same amount of overall funding, but allocates it differently.

The House appropriations subcommittee is scheduled to meet next week.

“I don’t know if it’s going to survive, but it’s a start,” Stevens said.

It’s uncertain whether Congress will be able to complete work on the spending bill before the end of the pre-election session.

Stevens envisions the liquid coal plant as a joint project involving federal, state and private investment. Under the plan, the Alaska Railroad would transport coal from Healy to Eielson.

The project would eventually require the railroad to lay new track between Healy and Delta Junction, Stevens said.

The facility would be the first commercial-scale operation at a U.S. military base of the Fischer-Tropsch process, developed by German scientists in the 1920s to convert coal to liquid fuel. The process is considered cost prohibitive compared to refining crude oil.

There is renewed support for the process with oil prices hovering around $100 per barrel.

Environmental groups oppose coal-to-liquid production as dirty and contributing to global warming.

There is also opposition in Fairbanks among those who think the project could dampen support for a natural gas pipeline.

Stevens said the plant would include a process to capture the carbon-dioxide and sequester it to reduce environmental concerns.

The project is important to the Interior as a way to protect Eielson Air Force Base and Fort Wainwright from future base consolidation and closure rounds, Stevens said.

“Unless we can guarantee the military that they are going to have an inexpensive supply of fuel, those bases are in danger,” said Stevens, who placed a marker in the bill directing the money specifically to Eielson. “We barely survived the last one, as far as Eielson is concerned.”

The legislation also would double the military’s five-year leasing authority, allowing it to enter into a long-term supply agreement with the Usibelli coal mine.

Stevens put together the defense spending bill with the help of his longtime friend Sen. Daniel Inouye, D-Hawaii.