Fischer-Tropsch Fuels from Coal, Natural Gas, and Biomass: Background and Policy

Fischer-Tropsch Fuels from Coal, Natural Gas,
and Biomass: Background and Policy
Updated March 27, 2008
Anthony Andrews
Specialist in Energy and Energy Infrastructure Policy
Resources, Science, and Industry Division
Jeffrey Logan
Specialist in Energy Policy
Resources, Science, and Industry Division

Fischer-Tropsch Fuels from Coal, Natural Gas, and
Biomass: Background and Policy
As the price of crude oil sets a record high, liquid transportation fuels
synthesized from coal, natural gas, and biomass are proposed as one solution to
reducing dependency on imported petroleum and strained refinery capacity. The
technology to do so developed from processes that directly and indirectly convert
coal into liquid fuel. Congress now faces decisions on whether, and to what extent,
it should support such a solution.
Lacking domestic petroleum resources, but abundant in coal, Germany built
synthetic fuel plants during World War II that employed the Bergius coal
hydrogenation process (direct liquefaction), and Fischer-Tropsch synthesis (indirect).
The United States attempted to capitalize on the German experience after World War
II. Despite considerable investment in synthetic fuel research and development, the
United States cut support for commercialization when crude oil prices dropped and
supplies stabilized in the mid-1980s. Since then, several synthetic fuels plants have
been constructed around the world that convert coal, natural gas, or biomass to liquid
fuels using the Fischer-Tropsch process. Several private ventures in the United
States are now studying the feasibility of constructing Fischer-Tropsch synthetic fuel
plants based on coal, natural gas, and biomass.
Proposals to expand the use of coal to synthesize transportation fuels have
generated much opposition, particularly because the carbon dioxide (CO2) produced
in the Fischer-Tropsch process is a greenhouse gas associated with global warming.
Also, opponents claim that coal-based synthesis, in particular, is inefficient and thus
prohibitively expensive. Proponents counter that Fischer-Tropsch technology
provides a means of capturing carbon dioxide for geological sequestration (though
a promising solution, sequestration remains unproven on an industrial scale) and that
it appears economically viable in a sustained crude oil price range above $40 to $45
per barrel.
Fischer-Tropsch synthesis is well suited to producing middle-distillate range
fuels like diesel and jet. The diesel produced is superior to conventionally refined
diesel in terms of higher cetane-number and low sulfur content. Overall, middle
distillate fuels represent roughly a quarter of U.S. refinery production, which is
primarily driven by the demand for gasoline. In order for a synthetic fuels industry
(whether coal, natural gas, or biomass based) to begin rivaling or even supplanting
conventional petroleum refining, a major shift in transportation mode toward diesel
engine light-passenger vehicles would have to occur. Coal-to-liquids would also
compete for the same resources needed for electric power generation, and the rail
capacity currently supporting their demand.
Recent energy legislation promotes research on capturing and storing
greenhouse gas emissions and improving vehicle fuel efficiency, among other goals.
Fisher-Tropsch fuels present the paradox of high carbon emissions associated with
production versus lower carbon emissions associated with their use.

In troduction ......................................................1
Synthetic Fuel Technology...........................................2
Bergius Direct Liquefaction......................................3
Fischer-Tropsch Synthesis.......................................3
Comparing Fischer-Tropsch Products to Conventional Petroleum
Distillates ................................................5
Octane ......................................................5
Cetane ......................................................6
Sulfur .......................................................7
Exhaust Emissions.............................................7
Synthetic Fuel Plants...............................................7
Germany’s Synthetic Fuel Program................................7
U.S. Synthetic Fuel Program.....................................8
Sasol Coal-to-Liquids Plants.....................................9
Shell Bintulu Gas-to-Liquids Plant...............................11
Oryx Gas-to-Liquids Plant......................................12
Syntroleum Catoosa Demonstration Facility........................12
U.S. Air Force Coal-to-Liquids Initiative..........................12
China’s Coal-to-Liquids Program................................13
Choren Industries.............................................14
National Energy Technology Laboratory Study......................15
Baard Energy Coal-to-Liquids Plant..............................15
Comparing Efficiencies ........................................15
Greenhouse Gas — CO2 .......................................17
Policy History....................................................19
Authorizations Under the Energy Policy Act........................21
Additional Tax Incentives......................................22
Defense Related Authorizations and Appropriations..................23th
Bills Introduced in the 110 Congress.............................25
Additional Tax Incentives......................................26
Policy Considerations.............................................26
Appendix .......................................................28
List of Figures
Figure 1. Fischer-Tropsch Synthesis...................................4
Figure 2. Conceptual Fischer-Tropsch Plant.............................4
Figure 3. Iso-octane vs N-octane......................................6
Figure 4. Greenhouse Gas Impacts of Expanded Renewable and Alternative Fuels
Use. .......................................................19

Table 1. Comparative Merits and Drawbacks of Fischer-Tropsch............2
Table 2. Comparative Efficiencies of Processes Converting Coal, Gas, and
Biomass to Liquid Fuels.......................................16
Table 3. DOD Synthetic Fuel Projects.................................24
Table A1. Energy Consumed by Refining in 2005.......................30

Fischer-Tropsch Fuels from Coal, Natural
Gas, and Biomass: Background and Policy
Record high crude oil and diesel fuel prices, as well as strained refining
capacity, continue to stimulate congressional and private sector interest in producing
synthetic fuels from alternative resources. Current conditions almost reprise the era
of the 1970s, when energy security concerns generated by oil embargoes stimulated
federal spending in synthetic fuels. Despite considerable investment, federal support
was withdrawn after supply concerns eased in the 1980s. The currently favored
approach to producing synthetic fuels — the Fischer-Tropsch process — uses carbon
monoxide and hydrogen from combustion of fossil or organically derived feedstocks.
The process and has been commercially demonstrated internationally and in pilot
plant demonstration in the United States. Jet fuel from a gas-to-liquids pilot plant
has already been certified for use by the United States Air Force, at least one coal-to-
liquids enterprise is in the planning phase, and others are being studied.
As an abundant resource in the United States, coal has long been exploited as
a solid fossil fuel. As oil and natural gas supplanted coal throughout the last two
centuries, technologies developed to convert coal into other fuels. Proponents of
expanding the use of coal, such as the Coal-to-Liquids Coalition, argue that the
United States should alleviate its dependence on imported petroleum and strained
refinery capacity by converting coal to transportation fuels. Opponents, such as the
Natural Resource Defense Council, argue that “considerable economic, social, and
environmental drawbacks of coal-derived oil preclude it from being a sound option
to move America beyond oil.”1
Fischer-Tropsch synthesis, particularly coal based, poses several challenges. It
is criticized as inefficient and thus costly. The byproduct of synthesis is carbon
dioxide, a greenhouse gas associated with global warming. The use of coal and
natural gas as feedstocks would compete with electric power generation — over 50%
of domestic electricity generation is coal based — and gas is widely used as fuel for
peak generating plants and domestic heating. The fuels produced, primarily diesel
and jet, would not substitute widely for the preferred transportation fuel in the United
States — gasoline. Similarly, using biomass as feedstock would compete with
cellulosic ethanol production, as it is now envisioned.
Some of Fischer-Tropsch technology’s comparative merits and drawbacks are
presented in Table 1.

1 NRDC, Why Liquid Coal Is Not a Viable Option to Move America Beyond Oil, February

2007 [].

Table 1. Comparative Merits and Drawbacks of Fischer-Tropsch
Abundant coal reserves available asøCompetition for coal in electric power
feedstock. generation.
Coal-to-liquids generates significantøCO2 separation during synthesis gas
CO2.production makes capture feasible.
Produces ultra-low sulfur, high cetaneøProduces low-octane gasoline.
Low efficiency in converting coal toøWaste heat available for electricity co-
liquid. generation.
May have lower operating expensesøConceptually more complex than
than direct coal liquefaction approach and higher
in capital investment cost.
Deep geologic sequestration offersøCO2 sequestration not yet
solution for CO2 emissions. demonstrated on a large industrial
Gas-to-liquids offers reduced CO2øCompetition with domestic natural gas
Biomass-to-liquids offers zero carbonøCompetition with biomass for
footprint.cellulosic ethanol production.
This report begins with a review of the synthetic fuels technology, which
evolved from direct and indirect conversion of coal to liquid fuels. Attention is given
to Fischer-Tropsch synthesis, as this represents the currently favored and
commercially demonstrated technology. Past and currently operating synthetic fuel
plants are described with comparisons of their relative efficiency. Finally, policy
history and policy considerations are presented, along with bills recently introduced
in Congress pertaining to coal-to-liquids research and industrial development.
Synthetic Fuel Technology
Synthetic fuels can be traced to the mid-19th century processes of making coal
oil, coal gas, and the later manufacture of town gas. Coal oil was introduced as a
substitute for more costly illuminating fuels, particularly premium whale oil.
Originally sold under the trade name of kerosene, coal oil was in turn replaced by a
similarly named, but cleaner burning, crude oil distillate. Coal gas also served as an
early illuminating fuel, but burned with a yellow flame of poor quality. A process for
improving coal gas was devised by passing it over a water bath. This was improved
on further by passing steam through incandescent beds of charred coal (coke) to
produce “water gas,” a mixture of carbon monoxide (CO) and hydrogen (H2) gases.
Water gas, more commonly known as “town gas,” produced a hotter, cleaner burning
blue flame than coal gas. Town gas illumination eventually gave way to electric
lighting, but it continued as an industrial heating fuel into the 1950s, when natural
gas became more widely available.

Petroleum was considered a scarce commodity in the early 20th century, more
suited to making illuminating fuel. Gasoline was considered too volatile a petroleum
distillate and did not find widespread use until transportation modes shifted from
horse and buggy to the automobile. With the growth of the automobile and aircraft
industries, the demand for gasoline and thus petroleum increased. In Germany,
researchers looked to coal for a petroleum substitute. The carbon monoxide and
hydrogen produced in manufacturing town gas provided an essential first step in
synthesizing liquid fuel from coal. The two processes developed, direct and indirect
coal-to-liquids conversion, provided complementary means of producing a range of
fuels and chemicals. Each offered advantages and disadvantages.
Bergius Direct Liquefaction
In the early 20th century, German researcher Friedrich Bergius developed a
process to directly liquefy coal under high temperature and pressure (coal begins to
dissolve above 250 degrees centigrade), and then “crack” the coal molecules into
smaller molecules using hydrogen.2 Bergius termed the process “coal hydrogenation,”
which was later referred to as “direct liquefaction.” Coal also served as the source of
hydrogen. (In modern refining, hydrogen is manufactured from methane gas (CH4)
decomposed by a process termed “steam reforming.” Modern refineries rely
extensively on hydrogen for hydrocracking and hydrotreating.)
Fischer-Tropsch Synthesis
As Bergius was perfecting direct liquefaction, German scientists Franz Fischer
and Hans Tropsch were developing a means of indirectly converting coal into a liquid
fuel. In 1926, Fischer and Tropsch reported a process to synthesize hydrocarbons
using an iron or cobalt catalyst to react hydrogen (H2) with carbon monoxide (CO)
under lower temperatures and pressures than Bergius’ process.
Essentially, Fischer-Tropsch (F-T) synthesizes straight molecular chains of
carbon and hydrogen, whereas Bergius breaks heavier-weight hydrocarbons into
lighter-weight, shorter-length molecules. Both processes involve hydrogen.
Fischer-Tropsch synthesis, however, relies on carbon monoxide’s potential for
exchanging oxygen with hydrogen in the presence of a catalyst. As in the
manufacture of water gas, coal is burned to produce the carbon monoxide and steam
reacting with hot coal disassociates to produce hydrogen, as shown in the following3
“water gas shift” equations:
C + H2O ÷ CO + H2 and CO + H2O ÷ CO2 + H2
The CO2 byproduct of these reactions can be scrubbed from the “syngas” stream
before it is introduced to the synthesis reactor. This provides the opportunity to
capture CO2 for sequestration as discussed below.

2 A.C. Feldner, Department of Commerce Bureau of Mines, Recent Developments in the
Production of Motor Fuel from Coal, Information Circular No. 6075, 1928.
3 Robert Bernard Anderson, Fischer-Tropsch Synthesis, Academic Press Inc., 1984.

In the following simplification, Fischer-Tropsch synthesis occurs through two
simultaneous reactions promoted by the contact of CO and H2 with a catalyst:

2H2 +CO ÷ -CH2- + H2O and CO + H2O ÷ CO2 + H2

which can be simplified as:

2CO + H2 ÷ -CH2- + CO2.

As shown conceptually in Figure 1, CO and H2 (syngas) react on the catalyst
surface to form -CH2- that links up to build longer-chain hydrocarbons. As discussed
later, these hydrocarbons substitute for conventional middle-distillate fuels.
Figure 1. Fischer-Tropsch Synthesis
A conceptual Fischer-Tropsch plant is shown in Figure 2. The slate of products
synthesized can be adjusted by varying the temperature, pressure, and duration of
reaction. F-T synthesis ideally produces straight-chain hydrocarbons in the paraffin
series (also referred to as alkanes).
Figure 2. Conceptual Fischer-Tropsch Plant

Paraffins are characterized as having carbon atoms attached by single bonds, and
remaining bonds saturated with hydrogen. The paraffin series ranges from the

methane (CH4 — the principle component of natural gas) through the gasoline
boiling range of C5-C10, the middle-distillate range fuels of C11-C18 (kerosene, jet,
and diesel), and longer chain waxes.4
Comparing Fischer-Tropsch Products to Conventional
Petroleum Distillates
Conventionally refined gasoline, diesel, and jet fuels are complex mixtures of
hydrocarbons that include paraffins, naphthenes, and aromatics (which give diesel5
fuel its unique odor). F-T synthesized fuels, by comparison, are composed primarily
of paraffins.
Refining begins in the atmospheric distillation tower, where the “straight-run”
petroleum fractions in the boiling ranges of gasoline, naphtha, kerosene, diesel and
jet fuel condense and separate. Heavier fractions are cracked with catalysts and
hydrogen to produce more gasoline range (C5+) blending stock, and low-octane
paraffins are converted into high-octane aromatics (octane is discussed below).
Other processes such as alkylation produce branched chain hydrocarbons in the
gasoline range. Diesel and jet fuel are formulated by blending straight-run cut
distillates with cracked stock (heavier fractions) to meet standardized specifications
developed by the American Society for Testing and Materials (ASTM International)
and the Environmental Protection Agency (EPA). These include octane and cetane
number, sulfur content, and exhaust emissions.
The fuel specifications most familiar to motorists are “octane” and “cetane”
numbers. In the case of gasoline, the octane-rating refers to the property of resisting
spontaneous ignition. In contrast, diesel fuel is rated by its relative ease of ignition
under compression (a desired property). This may seem a paradox — gasoline
should resist ignition and diesel should ignite easily. As gasoline is more volatile
than diesel, it is desirable that it not ignite before the spark plug fires.
Higher octane-number fuels better resist engine “knock” — the sound caused
by fuel prematurely igniting during compression. In early gasoline research, the least
knock resulted from using iso-octane, which arbitrarily received a rating of 100.6 Iso-
octane refers to a branched “isomer” in the paraffin series having eight carbons
(C8H18).7 The straight-chain isomer in this series, n-octane, has a rating -19. These
isomers of paraffin are shown in Figure 3. Fischer-Tropsch synthesis produces
primarily straight-chain paraffins, thus any gasoline produced is low in octane rating.

4 The length of the carbon chain is abbreviated. For example a paraffin consisting of six
carbons would be written as C6.
5 James H. Gary and Glenn E. Handwerk, Refining Petroleum — Technology and
Economics, 4th Ed., Marcel Dekker, Inc., 2001.
6 John M. Hunt, Petroleum Geochemistry and Geology, W. H. Freeman and Co., 1979. p.

51 .

7 Or more correctly 2,2,4-trimethylpentane.

Figure 3. Iso-octane vs N-octane

Modern formulated gasolines range in octane from 87 to 93, achieved by
blending various petroleum distillates, reforming gasoline-range hydrocarbons, and
adding oxygenates such as MTBE or ethanol to boost octane-number. Branched
paraffin series like iso-octane can not be directly produced in Fischer-Tropsch
synthesis. Consequently, when Fisher-Tropsch synthesis has been used to produce
gasoline, it has been blended with conventionally refined petroleum to achieve the
desired octane-number.
The standard for diesel fuel rates the ease of which auto-ignition occurs during
compression in the engine cylinder, thus eliminating the need for a spark plug. The
number 100 was assigned to “cetane,” the more common name for n-hexadecane.
Cetane’s chemical formula is often written as C16H34 to represent a straight-chain
hydrocarbon in the paraffin series. It consists of 16 carbon atoms with three
hydrogen atoms bonded to the two end carbons, and two hydrogens bonded to each
of the middle carbons. In other words, the benchmark for rating diesel fuel is a
paraffin — the hydrocarbon the Fischer-Tropsch synthesis is best suited to making.
Diesel fuel cetane-numbers range from 40 to 45, and as high as 55 in Europe,
where high-speed diesel engines are prevalent in light-duty passenger vehicles. The
cetane-number for F-T synthesized diesel can be as high as 70. In tests conducted by
the National Renewable Energy Laboratory (NREL) Fischer-Tropsch diesel fuel had
a cetane-number greater than 74.8 The diesel fuel was supplied by Shell Oil
Company’s gas-to-liquids plant in Bintulu, Malaysia.
8 P. Norton, K. Vertin and B. Bailey (NREL); N. N. Clark and D. W. Lyons (West Virginia
Univ.); S. Goguen and J. Eberhardt (U.S. DOE); Emissions from Trucks Using Fischer-
Tropsch Diesel Fuel; Society of Automotive Engineers Technical Paper Series 982526;


As now regulated by the EPA (40 C.F.R. 80.520) diesel fuel must contain less
than 15 parts-per-million (ppm) sulfur — referred to as ultra-low-sulfur diesel
(ULSD). Conventionally refined aviation jet fuel may have a sulfur content as high
as 3,000 ppm. However, as it has been used in blending winter diesel fuel to lower
the gel point, it has had a practical limit of 500 ppm (the previous EPA limit for
diesel). It is uncertain whether EPA may promulgate future rules on jet fuel sulfur
content, thus limiting its use in blending winter ULSD. Fischer-Tropsch diesel fuel
contains virtually no sulfur, as it must be removed before the synthesis reaction to
avoid poisoning the catalysts used in the reactor. Despite its detrimental
environmental effects, sulfur contributes to the “lubricity” of fuel. Under reduced
sulfur, engines wear out sooner. Fuel can be blended with additives to make up for
the loss of sulfur lubricity and engines can be manufactured from tougher materials,
as has been the case in the EPA mandated transition from low-sulfur diesel (500
ppm) to ultra-low-sulfur diesel (15 ppm).
Exhaust Emissions
Diesel engines characteristically emit lower amounts of carbon monoxide (CO)
and carbon dioxide (CO2) than gasoline engines, but they emit higher amounts of
nitrogen oxides (NOx) and particulate matter (PM). NOx is the primary cause of
ground-level ozone pollution (smog) and presents a greater problem, technically, to
reduce in diesel engines than PM. The CO, NOx, and PM emissions for gasoline and
diesel engines are regulated by the 1990 Clean Air Act amendments (42 U.S.C. 7401-
7671q). In emissions testing performed by the National Renewable Energy
Laboratory (NREL), trucks using “neat” Fischer-Tropsch diesel fuel emitted about
12% lower NOx and 24% lower PM compared to trucks using conventionally refined
diesel fuel (meeting California No. 2 diesel standards).9
Synthetic Fuel Plants
The following discussion summarizes industrial progress in synthetic fuels. As
a means of comparing plant efficiencies (where possible), the energy in Btu contained
in the feedstock (coal, gas, biomass) consumed is compared to the energy in the
product produced.10 Greenhouse gas emissions, primarily carbon dioxide, are also
discussed as they may present regulatory challenges for future Fischer-Tropsch
Germany’s Synthetic Fuel Program
As part of continency planning for petroleum supply shortages, Germany built
a number of coal-based synthetic fuel plants, which operated through World War II.

9 P. Norton, et al., op. cit.
10 The energy term Btu refers to British Thermal Unit, which describes the unit of heat
energy required to raise 1 pound of water by 1 degree Fahrenheit.

Germany operated 12 coal hydrogenation plants to produce aviation gasoline
(primarily), motor gasoline, diesel, heating oils, and lubricants. Peak production of
21.5 million barrels was reached in 1944.11 According to the interrogation of a
scientist who had worked on Germany’s synthetic fuel program, roughly 6.7 to 7.7
metric tons of coal were required to produce one metric ton (approximately 7 barrels)
of liquid product — roughly one barrel per ton of coal. 12
Germany also built synthetic fuel plants based on Fischer-Tropsch synthesis
leading up to World War II, and had completed nine by the war’s end. Production
was geared to low-octane motor fuel, diesel, lubricating oil, miscellaneous chemicals,
and soap. Fischer-Tropsch output was low in comparison to hydrogenation at
approximately 450,000 barrels annually, with the best plant capable of producing no
more than 3,000 barrels per day. The plants were also about 20% more costly to
operate than the hydrogenation plants, with 50% of the cost in synthesis gas
production. Low-grade coal (bituminous and lignite) was used as a feedstock. From
7.1 to 8.9 metric tons of coal were required to produce one metric ton of liquid
product — slightly less than one barrel per ton.
U.S. Synthetic Fuel Program
Concerns for oil supplies during World War II also prompted U.S. interest in
synthetic fuels. The U.S. Synthetic Liquid Fuels Act of 1944 authorized construction
and operation of plants producing synthetic liquid fuel from coal, oil shale, and
agricultural and forestry products.13 After WWII, the United States tried to capitalize
on German technology and experience by sponsoring a number of research,
development, and demonstration projects. The Bureau of Mines received funding for
an 11-year demonstration plant program that ended in 1955. Work on Fischer-
Tropsch synthesis was carried out in a pilot-scale plant at the Bureau’s Morgantown,
West Virginia, Laboratory. Research improved on the German fixed-bed synthesis
reactor with the development of a fluidized-bed reactor.
During the 1960s, the Department of the Interior’s Office of Coal Research
sponsored research to directly liquefy Eastern coal, expending approximately $45.7
million (unadjusted for inflation) between 1961 and 1969.14 Under the 1970s era
DOE Synthetic Fuels program, two coal liquefaction projects were planned.
Approximately $1,666 million (unadjusted for inflation) was spent between 1975 and

11 Anthony N. Stranges (Texas A&M University), Germany’s Synthetic Fuel Industry 1927-

1945, AIChE Spring National Meeting, 2003.

12 Synthetic Oil Production in Germany — Interrogation of Dr. Butefisch available through
the Fischer-Tropsch Archive, [].
13 30 U.S.C. Secs. 321 to 325 authorized $30 million over five years for “the construction
and operation of demonstration plants to produce synthetic liquid fuels from coal, oil shales,
agricultural and forestry products, and other substances, in order to aid the prosecution of
the war, to conserve and increase the oil resources of the Nation, and for other purposes.”
14 Linda B. Cohen and Roger C. Noll, “Synthetic Fuels from Coal,” in The Technology Pork
Barrel, The Brookings Institution, 1991.

1984 on research, development, and demonstration.15 Several processes were
evaluated — noncatalytic solvent extraction, catalytic processing, and donor solvent
processing — and various coals were tested.16 In privately sponsored development,
the Gulf Oil Company reported yielding three barrels of low sulfur fuel oil per ton
of Eastern high-sulfur coal using its catalytic coal to liquids process. Exxon
reportedly achieved a comparable yield with its donor solvent process. Accordingly,
Gulf was achieving a 62% thermal conversion efficiency (see Appendix for
Efforts to move coal liquefaction beyond the demonstration phase stalled,
despite federal and private funding commitments. Project cost overruns of several
times the initial $700 million estimate led DOE to cancel work. Several other factors
during in the 1980s also contributed to cancellation. The dramatic drop in crude oil
prices, the development of new oil fields, and reduced consumption from
conservation efforts all contributed to making synthetic fuels economically
uncompetitive. Refineries also began converting heavy heating oil into higher value
transportation fuel.
Though U.S. interest in making coal-based transportation fuel was abandoned
by the mid-1980s, South Africa continued in its efforts to develop Fischer-Tropsch
synthesis on a commercial scale. Several other commercial scale efforts have since
succeeded in adapting Fischer-Tropsch synthesis to natural gas, where abundant
supplies make it economically feasible to do so. Renewed U.S. interest in the
technology includes both coal and natural gas. Consequently, the balance of this
report will focus on Fischer-Tropsch.
Sasol Coal-to-Liquids Plants
The lack of petroleum resources but abundant coal resources led the Republic
of South Africa to investigate establishing an oil-from-coal industry in 1927. After
WWII, South Africa’s government adopted German technology to build a coal-to-
liquid synthetic fuel plant. The South African Coal Oil and Gas Corporation (now
known as Sasol) was founded as a state owned company in 1950 to synthesize fuel
from coal based on German and U.S. developed Fischer-Tropsch technology (see
Bureau of Mines above). Sasol was privatized in 1979.
Sasol One started operation in 1955 at Sasolburg, South Africa. It employed
two technologies. One unit used a fixed-bed catalyst similar to a German process
operated during WWII, provided by the German firm Argbeit-Gemeinshaft Lurgi und
Ruhrchemie (Arge).17 It operated in the temperature range of 220-240EC at a
pressure of 925 bar. Production was optimized for long-chain linear paraffins. A

15 Paul F. Rothberg, CRS Report IB77105, Coal Gasification and Liquefaction, February 1,


16 Martin A. Elliot, Ed., Chemistry of Coal Utilization, 2nd Supplementary Volume, John
Wiley & Sons, 1981.
17 National Academy of Sciences/National Research Council, Chemistry of Coal Utilization,
pp. 2112-2113, John Wiley & Sons, 1981.

second unit used a fluid bed catalyst system developed by the U.S. firm M.W.
Kellogg. Technical difficulties prevented its operation until 1957. Its higher
operating temperature range of 310-340EC made it better suited to producing
gasoline-range hydrocarbons. In 1970, Sasol One produced approximately 297,000
tons of liquid annually (1.9 million barrels of fuel oil equivalent), while consuming
approximately 3.96 million tons of coal. This equated a yield of approximately ½
barrel per ton coal.
A second and third plant were built in Secunda, South Africa. Sasol Two was
completed in 1980 at a cost of $3,200 million and Sasol Three in 1984 at a cost of
$2,520 million.18 (Costs reflect value of U.S. dollar at the time, unadjusted for
inflation.) The Secunda complex is dedicated to producing liquid fuels and
The Secunda complex originally operated 80 Lurgi fixed-bed dry-bottom
gasifiers to make synthesis gas, and 16 circulating fluid bed reactors (rated at 7,500
barrels per day each). These processes gave it a capacity of 120,000 barrels per day.
In 2000, Sasol replaced the fluid-bed reactors with 8 Sasol Advanced Synthol (SAS)
reactors (rated at 20,000 barrels per day). The SAS reactors use a fluidized,
iron-based catalyst that operates in the 300-350EC temperature range.
With the new SAS reactors, the Secunda complex production increased to
150,000 barrels per day of products in the C1-C20 range (automotive fuels and light
olefin used as feedstock for chemical manufacturing).19 In 2001, Secunda also
supplied 14.3 million gigaJoules (135.54 million therms) of methane rich gas to
South Africa’s gas distribution network.20
In 2006, Secunda consumed approximately 41.8 million metric tons of low rank
sub-bituminous coal supplied by Sasol Mining (the equivalent of 126,000 U.S. short
tons per day).21 At that rate of consumption, Secunda yields approximately 1.2
barrels per ton of coal, making it approximately 27% efficient in converting the
coal’s heat content (Btus) to liquid products. (Refer to the Appendix for calculation
of the value). This does not include the heat value of the methane-rich gas that
Secunda also produces, which would increase efficiency.

18 Costs reflect value of U.S. dollar at the time, unadjusted for inflation. Sasol Coal-to-
Liquids Development, presentation to the gasification technologies Council Conference,
October 2005.
19 Thi Chang, Oil & Gas Journal, “South African Company Commercializes New F-T
Process, January 10, 2000.
20 A gigajoule (GJ) is a standard measure used for the heating value of fuel gas supplied to
South African customers. A joule is an international unit of energy defined as the energy9
produced from one watt flowing for one second. Giga denotes a measure of a billion (10).
1 GJ = 0.96 million cubic feet (mcf) of gas, under standard temperature and pressure
conditions. 1 Therm = 100,000 Btu. Department of Minerals and Energy, Republic of
South Africa, Gas Infra-Structure Plan, April 19, 2005, [
energy/ gas/gas_infrastructure_plan.pdf].
21 Platts, Coal-to-Liquids Technology, December 19, 2006 [

Sasol Sasolburg and Secunda, combined, produce 30 million metric tons of CO2
annually. Sasol uses the Benfield process to absorb and capture 90-98% of CO2
produced.22 Sasol reports producing 3.04 metric tons of CO2 per metric ton of overall
product,23 the equivalent of 0.82 metric tons elemental carbon per ton liquid.24 This
is approximately equivalent to emitting 0.48 U.S. tons of CO2 per barrel of product
produced. 25
By the end of 1979, production costs were estimated at approximately $30 per
barrel, while world spot prices for crude oil were $10 per barrel higher.26 Until 2000,
Sasol had been receiving a tariff protection when the world market oil price fell
below $21.40 per barrel.27 Crude oil prices had remained below the tariff protection
level in the years 1986 through 1996, except for a brief period during the 1991
Persian Gulf War. The tariff protection lapsed in 2000. South Africa also put a
sliding price scale in place to make imported refined products more costly than
Sasol’s, up to crude oil prices of $45 per barrel.
Shell Bintulu Gas-to-Liquids Plant
In 1993, Shell International Gas Limited began operating the first-of-its-kind
full-scale commercial gas-to-liquids plant, built alongside its liquefied natural gas
(LNG) plant at Bintulu in Sarawak (Malaysia).28 Shell’s Middle Distillate System
(SMDS) technology was developed using natural gas as a feedstock for Fischer-
Tropsch synthesis to produce middle distillates.
The Bintulu plant produces 12,500 barrels per day of product (50% middle
distillates, and 50% speciality products such as detergent feedstocks and waxes),
while consuming 100-120 million cubic feet per day of natural gas produced from
the South China Sea. This makes it approximately 54% efficient in converting the
energy content of natural gas to liquid products. (Refer to the Appendix for
calculation of the value.)
Shell states that the SMDS fuels produced have virtually no aromatic and sulfur
components, and when blended with conventional diesel give significant reductions

22 The Benfield process uses a hot potassium carbonate solution that is diethanolamine
promoted. A. Engelbrecht, A. Golding, S. Hietkamp, and B. Scholes, The Potential for
Sequestration of Carbon Dioxide in South Africa, March 12, 2004, South Africa Department
of Minerals and Energy.
23 Sasol, Highlights Sasol Sustainable Development Report 2006.
24 To convert CO2 gas to elemental C, multiply CO2 by 12/44. EPA Office of Transportation
and Air Quality, Metrics for Expressing Greenhouse Gas Emissions: Carbon Equivalents
and Carbon Dioxide Equivalents, EPA420-F-05-022, February 2005.
25 1 metric ton product . 7 barrels.
26 Sasol Ltd, Hoovers, [].
27 “S. Africa to cut price protection for synfuel,” Oil & Gas Journal, December 25, 1995.
28 Shell Gas & Power External Affairs, Gas to Liquids: Shell Middle Distillate Synthesis
Process and Products, August 2002.

in regulated emissions (NOx, SOx, HC, CO, and particulates). SMDS diesel can also
be used as a “neat” fuel in diesel engines with minor modifications.
Oryx Gas-to-Liquids Plant
The Oryx Gas-to-Liquids (GTL) plant at Ras Laffan Industrial City, north of the
Qatar capital Doha, represents a joint venture between state-owned Qatar Petroleum
(51%) and Sasol Ltd. (49%).29 Built at a cost of $950 million, operations commenced
in June 2006, after 2½ years of construction. The plant uses Sasol’s Fischer-Tropsch
based Slurry Phase Distillate low temperature process.
Oryx is designed to produce 34,000 barrels per day of liquids (24,000 barrels
diesel, 9,000 barrels naphtha, and 1,000 barrels liquefied petroleum gas). Qatar’s
Persian Gulf North Gas Field is expected to provide approximately 330 million cubic
feet per day of “lean” gas as feedstock. This makes Oryx approximately 52%
efficient. (Refer to the Appendix for calculation of the value.)
Sasol Chevron — the London-based joint venture between Sasol and Chevron
Corporation — will market the Oryx GTL diesel initially in Europe and then
elsewhere. The joint venture plans to expand Oryx plant capacity to about 100,000
barrels per day and is considering plans to build an integrated GTL plant with a
capacity of about 130,000 barrels per day.
Syntroleum Catoosa Demonstration Facility
Syntroleum Corporation (Tulsa, Oklahoma) operates a 3-barrel-per-day Fischer-
Tropsch pilot plant, used primarily to evaluate catalyst systems, and a 70-barrel-per-
day demonstration plant used to produce products and evaluate technology.
Syntroleum has received $31.6 million in federal government contracts since 1998
to evaluate Fischer-Tropsch technology for the Departments of Defense, Energy, and
U.S. Air Force Coal-to-Liquids Initiative
As envisioned by the Office of the Secretary of Defense (OSD), the Assured
Fuels Initiative has the intent of catalyzing commercial industry to produce clean30
fuels for the military from secure domestic resources. Under the initiative, Fischer-
Tropsch technology is under evaluation for converting coal to liquid (mobility) fuel.
In 2006, the U.S. Air Force purchased 100,000 gallons of jet fuel synthesized
from natural gas, and in August 2007 certified the fuel as a blending substitute in
conventionally refined JP-8 for the B52 Stratofortress. In December 2007, a C-17

29 Qatar Petroleum, Oryx GTL Inauguration - A Key Step in Qatar’s Bid to Become the GTL
Capital of the World [

4cebdaa21d0dc4264325718600180400?OpenDocume nt#].

30 William Harrison, OSD Assured Fuels Initiative. [


Globemaster III completed a transcontinental certification test flight using a synthetic
fuel blend. The Air Force hopes to certify F-T fuels for its entire fleet of aircraft by

2011. The U.S. Navy will be evaluating synthetic fuel as a substitute diesel fuel.

The Air Force is now exploring the possibility of leasing property at Malmstrom
Air Force Base, Montana, for construction of a coal-to-liquids plant.31 Under its
Enhanced Use Leasing authority, the Air Force would lease land to a private
developer who would in turn finance and construct a facility capable of producing
25,000 barrels per day of CTL fuel. On January 30, 2008, the Air Force conducted
a CTL Opportunity Community Meeting in Great Falls, Montana, to respond to
community concerns about the initiative. A final request for qualifications (RFQ) for
the proposed plant issued on February 29 requires proposals to be submitted to the
Air Force by May 2008.
China’s Coal-to-Liquids Program
China’s long-term policy on coal-to-liquid deployment remains uncertain,
despite the completion of many small “coal-to-chemical” facilities. While China sees
unique advantages in promoting coal-based alternatives to petroleum, there are key
challenges that will likely result in a period of experimental policy that “crosses the
river by feeling the stones.”
China’s interest in CTL is driven by the country’s growing sense of oil
insecurity. China went from being a net oil exporter in 1993 to relying on imports
for approximately half of total oil demand in 2008. Chinese decision-makers are less
familiar with, and confident in, global petroleum markets than many of their
industrialized country counterparts.32 But unlike petroleum, China has abundant
domestic coal supply.33 For government planners steeped in the central planning
mantra of self-sufficiency, CTL has obvious attractions. For others, its drawbacks
may outweigh its advantages. Still, the technology has become one of the elements
of a multi-pronged Chinese strategy to boost energy security.34
Chinese industry has decades of experience gasifying coal. In recent years, there
has also been a mushrooming of “coal to chemicals” plants that produce methanol,
dimethyl ether (DME), olefin, and other petrochemical feedstocks.35 Experience with
coal liquefaction to produce diesel, liquid petroleum gas (LPG), and naptha is more
limited, but took on greater urgency in the late 1990s when it became irrefutable that
domestic oil production would not be able to keep pace with surging demand.

31 Air Force Real Property Agency, Coal-to-Liquid Fuel Plant Opportunity Fact Sheet.
32 K. Lieberthal and M. Herberg, China’s Search for Energy Security: Implications for U.S.
Policy, National Bureau of Asian Research, 2006.
33 China is ranked 3rd in global coal reserves behind the United States and Russia.
Nevertheless, some question the accuracy of China’s reported coal quantity and quality.
34 Other measures include creation of a strategic petroleum reserve, increased vehicle fuel
economy standards, and expanded investment in overseas oil assets.
35 Wall Street Journal, “Coal Gasification Surging in China,” December 31, 2007.

The National Development and Reform Commission (NDRC) has announced
approval of three major CTL facilities. In 2008, China’s Shenhua Group is scheduled
to open a first-of-a-kind direct liquefaction plant in Inner Mongolia with initial
production capacity of about 1 million tons per year. The two other approved
projects are slated to be larger and use the more tested indirect liquefaction process,
but their deployment remains uncertain. In late 2006, NDRC issued an ambitious
draft plan for coal-based chemicals, calling for 30 million tons of diesel and LPG, 20
million tons DME, and over 60 million tons of methanol output by 2020.36 It also
issued a ban on the construction of small CTL, methanol, and olefin plants that had
been mushrooming without approval or oversight. In mid-2007, China’s ambitious
plan was called into doubt when an NDRC official announced that the country might
halt most CTL projects.37 Like some other countries, China is wary about CTL
!the technology (especially direct liquefaction) is untested and still
!it is capital intensive and prone to “stranded investment” should oil
prices fall;
!coal supply may be insufficient to supply long-term market demand;
!increased greenhouse gas emissions will attract international
concern; and perhaps most importantly,
!water is scarce where coal is plentiful.38
Government planners are carefully evaluating the costs and benefits of CTL
deployment in China. Today they are more likely to use hard-nosed economic
analysis to evaluate CTL’s viability compared to earlier years when self-sufficiency
could trump economic efficiency. Nevertheless, water shortages and other
environmental concerns are likely to moderate China’s support for CTL.
Choren Industries
Choren Industries (a partnership of Daimler AG, Volkswagen, and Shell) is
finishing construction of its Beta biomass-to-liquid plant in Freiberg, Germany. The
initial production goal is 15,000 metric tons (735,000 barrels) per year of diesel.
Choren plans are to expand capacity to 200,000 metric tons (1,400,000 barrels) per
year with its Zeta-plant (equivalent to 3,800 barrels per day). The German Energy
Agency assumes that biomass-to-liquids is 42% efficient in energy conversion.39

China Daily, “Coal Chemical Plans Announced,” December 28, 2006.
37 Xinhua, “China May Halt Coal-to-Liquid Projects,” June 10, 2007.
38 Chinese coal is abundant in the provinces of Shaanxi, Shanxi and Inner Mongolia. The
lack of water resources in northern China is considered one of the greatest development
challenges that the region faces. A general rule of thumb is that five to ten gallons of water
are required for every one gallon of CTL production.
39 Deutsche Energie-Anentur GmbH, Biomass to Liquid - BtL, Implementation Report,
December 2006.

National Energy Technology Laboratory Study
The National Energy Technology Laboratory (NETL) has examined the
technical and economic feasibility of a commercial scale coal-to-liquids facility using
Illinois basin coal.40 With a production goal of 50,000 barrels per day (diesel and
naphtha) and consumption rate of 24,533 tons of coal per day, the plant would yield
slightly more than 2 barrels per ton of coal. This would making it approximately
40.5% efficient. (Refer to the Appendix for calculation of the value.) This efficiency
would not include 125 megawatts of electric power that would be generated from
waste heat.
The plant is expected to produce 560 million cubic feet (32,032 tons) of CO2 per
day, which would equate to 0.64 tons of CO2 per barrel.41
NETL estimated that construction could cost upwards of $4.5 billion.
Baard Energy Coal-to-Liquids Plant
Baard Energy, L.L.C., through its project company Ohio River Clean Fuels,
L.L.C., is planning to build a nominal 50,000 barrel per day coal-to-liquids plant in
Wellsville, Ohio. Baard’s plans call for converting coal and biomass to synthesis gas,
and using Fischer-Tropsch synthesis to produce diesel, jet, and naphtha
hydrocarbons. The plant would also generate 250 to 300 megawatts of electricity
daily. Baard expects that up to 85% of the CO2 produced by the plant could be
captured. Baard cites an Idaho National Laboratory study of the project that
attributes use of Fischer-Tropsch diesel fuel with a 46% reduction in CO2 emissions
over conventionally refined diesel fuel.42
Comparing Efficiencies
For comparison purposes, yield and thermal conversion efficiency of the
various plants discussed above are presented in Table 2. Yield in barrels per ton
pertains to liquid fuels from coal. Thermal conversion efficiency is a term adopted
in this report to compare the heating value of the feedstock to the product. It does not
imply an economic comparison; that is, that one technology requiring lower Btu than
another is necessarily economically superior. An economic comparison would also
weigh the capital cost of construction, operation and maintenance costs, the price of

40 U.S. DOE National Energy Technology Laboratory, Baseline Technical and Economic
Assessment of a Commercial Scale Fischer-Tropsch Liquids Facility (DOE/NETL-

2007/1260), April 9, 2007.

41 1 standard cubic foot (SCF) CO2 = 0.1144 pounds.
42 Richard D. Boardman, Plant Modeling & Emissions Comparative Analysis Approach —
Coal/Biomass Gasification with Fischer-Tropsch Diesel Production, Idaho National
Laboratory, May 2007. A full technical report is scheduled to be delivered by Baard Energy
and the Idaho National Laboratory at the 24th Annual International Pittsburgh Coal
Conference in Johannesburg, South Africa, September 10-14, 2007.

fuel, and the intrinsic value of environment and national security, which is beyond
the scope of this report.
Table 2. Comparative Efficiencies of Processes Converting
Coal, Gas, and Biomass to Liquid Fuels
Sasol Shel l Oryx Choren NETL
Yi e l d 1 1 3 1.2 n.a. n.a. n.a. 2
Thermal a a b
conversion — — 622754524240.5
efficiency %
Note: DL: direct liquefaction; F-T CTL: Fischer-Tropsch coal-to-liquids; F-T GTL: gas to liquids,
F-T BML: biomass-to-liquids.
a. insufficient information on coal heating value to determine thermal conversion efficiency
b. does not credit methane-rich gas production
Comparison might be made with the efficiency of producing other energy
resources, such as petroleum, tar sands, or oil shale. The giant oil fields of North
America, now depleted, produced from 50 to 1,000 barrels per acre-foot (43,560
ft3).43 The NETL study expects to yield approximately 2 barrels per ton of Illinois
bituminous coal — the equivalent of 3,806 barrels per acre-foot.44 In further
comparison, Canada’s mined oil sands yield ½ barrel per ton.45 Oil shales of the
western United States could be expected to produce no more than 2/3 barrel per ton.46
A further comparison might be made to refining oil and generating electricity.
The 5,555.3 million barrels of crude oil refined in 2005 (the equivalent of 32,221.3
trillion Btu)47 consumed approximately 2,862.5 trillion Btu (fuel oil, still gas,

43 American Association of Petroleum Geologists, Geology of Giant Petroleum Fields, 1970.
44 Assumes in place density of 1,903 tons per acre-foot for bituminous coal. From James G.
Speight, The Chemistry and Technology of Coal, Table 9.3 Expressions of the In-Place
Density of Coal, CRC Press, 1994.
45 Government of Alberta, "Oil Sand Facts," [


46 CRS Report RL33359, Oil Shale: History, Incentives, and Policy, by Anthony Andrews.
47 U.S. DOE EIA Petroleum Navigator, Refinery Net Input, [].

petroleum coke, natural gas, coal, purchased electricity and steam).48 (For analysis,
refer to the Appendix.) Thus, on average, U.S. refineries consumed roughly 9% of
the equivalent energy contained in the crude petroleum refined, making them 91%
efficient. (ExxonMobile estimates, however, that its refineries require from 10%-20%
of the energy in a barrel of crude oil to convert the remaining barrel into products.)49
Coal-fired electric power plants, by comparison, average about 33% efficiency.50
It is emphasized that these comparisons are illustrative and do not of themselves
indicate overall economic or environmental advantages.
Greenhouse Gas — CO2
Carbon dioxide sequestration may offer a viable solution if CO2 emissions were
to be regulated. Sequestration depends on the ability to capture CO2 after combustion,
and then pump it into deep underground reservoirs. (See CRS Report RL33801,
Direct Carbon Sequestration: Capturing and Storing CO2.) Though considerable
reservoir capacity exists in the United States, the pipeline infrastructure to facilitate
sequestration would be needed on an industrial scale. (See CRS Report RL33971,
Pipelines for Carbon Sequestration: Emerging Policy Issues.)
Congress is considering various bills aimed at reducing and stabilizing
greenhouse gas emission. The Energy Independence and Security Act of 2007 (P.L.
110-140) amends the Energy Policy Act of 2005 with research and development
programs to demonstrate carbon capture and sequestration, and restricts the federal
government’s procurement of alternative fuels that exceed the lifecycle greenhouse
gas emissions associated with conventional petroleum based fuels. Carbon dioxide
production associated with Fischer-Tropsch coal-to-liquids remains the primary
objection by many in Congress to offering or approving legislation that promotes its
Of 42 states that have conducted greenhouse gas inventories, at least 30 states
have either completed or are in the process of preparing climate change action plans
and 12 states have set statewide greenhouse gas targets. A small, but growing,
number of states have implemented or are creating mandatory emission reduction
programs. (See CRS Report RL33812, Climate Change: Action by States To
Address Greenhouse Gas Emissions.)
A recent U.S. Supreme Court decision compels the EPA to consider regulating
CO2 emissions from mobile sources under the Clean Air Act.51 Whether EPA would

48 U.S. DOE EIA, Petroleum Navigator, Fuel Consumed at Refineries,
[ h t t p : / / www.ei ] .
49 Lori Ryerkerk, Beaumont Refinery Manager, Texas Industrial Energy Management
Forum, April 7, 2005.
50 President’s Council of Advisors on Science and Technology, Report on Energy Efficiency
— Findings and Recommendations, February 20, 2003.
51 Massachusetts et al. v. Environmental Protection Agency et al. Certiorari to the United

be compelled to extend rulemaking to stationary sources, such as coal burning power
plants or coal-to-liquids plants, for example, is uncertain. EPA has estimated the
percentage change in lifecycle greenhouse gas emissions, relative to petroleum-based
fuels that would be displaced by alternative and renewable fuels, including coal-,
gas-, and biomass-to-liquids.52 The analysis is based on work performed by the DOE
Argonne National Laboratory using the Greenhouse Gases, Regulated Emissions,
and Energy Use in Transportation (GREET) model. The fuels are compared on an
energy equivalent basis. The assumptions made about Fischer-Tropsch coal-to-
liquids include a plant efficiency of 52.4%, and that 85% of the carbon (exclusive of
the fuel product) is captured. As shown in Figure 4, the impact on greenhouse gas
emissions (GHG) from coal-to-liquids fuel with carbon capture and sequestration
(CC&S) would represent an increase 3.7% over petroleum-based fuels; without
capture and sequestration a 118.8% increase. Gas-to-liquids would increase
greenhouse gas emissions by 8.6% (EPA does not state whether this factors in
A direct comparison might be made with CO2 emissions from refineries. In

2005, U.S. refineries emitted 277.6 million metric tons (306.11 million U.S. tons) of5354

CO2 to produce 5,686 million barrels of petroleum products in 2005 — or
approximately 0.05 tons CO2 per barrel. Sasol, considered the largest single global5556
source of CO2, emits approximately 0.48 U.S. tons per barrel of product. The
NETL study plant would emit 0.64 tons of CO2 per barrel.

51 (...continued)
States Court of Appeals for the District of Columbia Circuit No. 05-1120. Argued November

29, 2006; decided April 2, 2007.

52 EPA Office of Transportation and Air Quality, Greenhouse Gas Impacts of Expanded
Renewable and Alternative Fuels Use (EPA420-F-07-035), April 2007.
53 Mark Schipper, U.S. DOE EIA, Energy-Related Carbon Dioxide Emissions in U.S.
Manufacturing (DOE/EIA-0573), 2005.
54 U.S. DOE EIA, Refinery Net Production (annual-thousand barrels) [http:// pet/pet_pnp_refp2_dc_nus_mbbl_a.htm] .
55 John Yeld, Cape Argus (Cape Town), South Africa: Sasol Plant Named as Top Culprit
in Emissions [].
56 1 metric ton product . 7 barrels.

Figure 4. Greenhouse Gas Impacts of Expanded Renewable
and Alternative Fuels Use.

Policy History
Congress first promoted synthetic fuel from coal through the U.S. Synthetic
Liquid Fuels Act of 1944.57 Intended to aid the prosecution of World War II and
conserve and increase national oil resources, the act authorized the Secretary of the
Interior to construct, maintain, and operate plants producing synthetic liquid fuel58
from coal, oil shale, and agricultural and forestry products. The Bureau of Mines
received funding for an 11-year demonstration plant program that was largely
completed by 1955.
During the Korean War, Section 303 of the Defense Production Act of 1950
(Ch. 932, 64 Stat. 978) authorized the President to have liquid fuels processed and
refined for government use or resale, and to make improvements to government- or
privately-owned facilities engaged in processing and refining liquid fuels when it59
would aid the national defense. During the 1970s, the Department of Energy
57 30 U.S.C. Secs. 321 to 325.
58 30 U.S.C. Sections 321 to 325 authorized $30 million over five years for the construction
and operation of demonstration plants to produce synthetic liquid fuels from coal, oil shales,
agricultural and forestry products, and other substances.
59 Ch. 932, 64 Stat. 798 (Title III Expansion of Production Capacity and Supply) intended
to develop and maintain whatever military and economic strength necessary to support
collective action through the United Nations. The act authorized the diversion of certain
materials and facilities from civilian to military use when expansion of production facilities

(DOE) directed a synthetic fuels program toward commercializing coal liquefaction,
coal gasification, and oil shale technologies. In 1980, Congress amended Section 305
of the Defense Production Act (P.L. 96-294, Energy Security Act) to authorize the
President’s purchase of synthetic fuels for national defense. President Carter then
directed the Secretary of Defense to determine the quantity and quality of synthetic
fuel needed to meet national defense needs for procurement.60 Congress further
amended the Defense Production Act to financially assist synthetic fuel production
from coal, oil shale, tar sands, and heavy oils by establishing the U.S. Synthetic Fuels
Corporation (P.L. 96-294, the United States Synthetic Fuels Corporation Act of
1980).61 The stated goal of the act was reaching a daily synthetic fuels production
capacity of 500,000 barrels of oil equivalent by 1987, and 2 million by 1992.
Within a few years, the House began considering a bill (H.R. 935, Synthetic
Fuels Fiscal Responsibility Act of 1985) to abolish the Synthetic Fuels Corporation.
The Energy and Commerce Committee debate of the bill (H.Rept. 99-196) linked
abolishing the Corporation to reducing the federal deficit and viewed purchasing oil
for the Strategic Petroleum Reserve as a far more cost effective defense against
another oil embargo than subsidizing synthetic fuels. Congressional criticism also
focused on conflicts of interest among the Corporation board members, high salaries
for staff, lack of interest on the part of private industry, and the possibility of huge
subsidies going to profitable oil companies.62 The minority view noted that as late
as 1983, the Department of Defense had certified that synthetic fuel was needed to
meet national defense needs. Language rescinding most of the Synthetic Fuels
Corporation funding was included in the FY1986 continuing appropriations
resolution (H.J.Res. 465, P.L. 99-190).
Though direct federal support for synthetic fuel ended, production continued to
receive indirect benefits. Section 45K (Credit for Producing Fuel From a
Nonconventional Source) of the Internal Revenue Code defines a qualified fuel for
the purpose of tax credit to include “liquid, gaseous, or solid synthetic fuels produced
from coal (including lignite), including such fuels when used as feedstocks.” The
Energy Information Administration reports on production of “coal synfuels,” but
limits the definition to coal-based solid fuels that have been processed by a coal
synfuel plant and coal-based fuels such as briquettes, pellets, or extrusions, formed
from fresh or recycled coal and binding materials.63

59 (...continued)
beyond the levels needed to meet civilian demand was required.
60 The American Presidency Project, Executive Order 12242 Synthetic Fuels,
[], signed September 30, 1980,
was later revoked by President Reagan’s Executive Order 12346, February 8, 1982.
61 Title I, Part B of the Energy Security Act of 1980.
62 CQ Almanac, “Congress Dismantles Synthetic Fuels Program,” 1985.
63 Energy Information Administration Frequently Asked Questions - Coal
[ asp#coal_synfuel].

Authorizations Under the Energy Policy Act
The Energy Policy Act of 2005 (EPAct 2005 — P.L. 109-58) introduced several
new provisions for promoting alternative fuels derived from unconventional
resources and loan guarantees for facilities using Fischer-Tropsch technology to
produce the fuels.
!Section 369 (Title III — Oil and Gas) amended 10 U.S.C. 141
(Miscellaneous Procurement Provisions) by inserting Section 2398a
for procurement of fuel derived from coal, oil shale, and tar sands.64
This directed the Secretary of Defense to develop a strategy to use
fuel produced from coal (among other strategic unconventional
fuels) to help meet the fuel requirements of the Defense Department
when the Secretary determines that doing so is in the national
interest. The Air Force has begun acting on Section 369 to procure
coal-based fuel and encourage production of coal-based jet fuel as
discussed above, and defense related legislation has gone further to
encourage this procurement (see discussion below).
!Section 417 (Department of Energy Transportation Fuels from
Illinois Basin Coal) directed the Energy Department to evaluate
production of Fischer-Tropsch transportation fuels from Illinois
basin coal (though it remained unfunded by Congress and the
President’s budget request).
!Section 1703 (c) (1)(D) (Eligible Projects) authorized the Energy
Secretary to make loan guarantees to facilities that generate
hydrogen-rich and carbon monoxide-rich product streams from the
gasification of coal or coal waste and use the streams to produce
ultra clean premium fuels through the Fischer- Tropsch process.
!Section 1703(c)(4) (Liquefaction Project) authorized funds awarded
under the clean coal power initiative in subtitle A of Title IV for
coal-to-oil liquefaction projects to finance the cost of loan
guarantees (though guarantees have yet to be awarded).
EPAct 2005 also authorized coal related programs that support research in
solving some technology issues related to synthesizing liquid fuels from coal.
!Title IV (Clean Coal) authorizes the annual appropriation of $200
million in FY2006 through FY2014 for the Clean Coal Power
Initiative. Of the funds made available, 70% ($140 million annually)
are to be used only in funding coal-based gasification technologies
that includes advanced technologies capable of producing

64 Energy Policy Act of 2005, P.L. 109-58, Title III, Subtitle F, Sec. 369. Oil Shale, Tar
Sands, and Other Strategic Unconventional Fuels; (q) Procurement of Unconventional Fuels
by the Department of Defense.

concentrated carbon monoxide (a component of syngas generation
essential to F-T coal-to-liquids).
!Title IX (Research and Development) authorized DOE
approximately $90 million for carbon capture research between
FY2006 and FY2008. Carbon capture research and development has
been expanded and extended under the authorization of the Energy
Independence and Security Act of 2007 (P.L. 110-140), which
authorizes $240 million annually from FY2008 through FY2012.
!Title XVII (42 U.S.C. 16511-16514) authorizes the Secretary of
Energy, after consultation with the Secretary of the Treasury, to
make loan guarantees for projects that (1) avoid, reduce, or sequester
air pollutants or anthropogenic emissions of greenhouse gases; and
(2) employ new or significantly improved technologies as compared
to commercial technologies in service in the United States at the
time. The face value of the debt guaranteed by DOE is limited to no
more than 80% of total project costs. Policies, procedures, and
requirements for the Title XVII loan guarantee program are
promulgated in rules under 10 CFR Part 609 — Loan Guarantees for
Projects That Employ Innovative Technologies.65
Additional Tax Incentives
Coal-based synthetic fuels benefit from certain tax incentives.
As amended by Section 11113 (Title XI) of the Safe Accountable, Flexible,
Efficient Transportation Equity Act (P.L. 109-59), federal tax law imposes a
24.3¢/gallon tax on any liquid fuel (other than ethanol or methanol) derived from
coal.66 However, a 50¢/gallon allowance of credit against the imposed tax is provided
for alternative fuels (which are defined to include any liquid fuel derived from coal
through the Fischer-Tropsch process). The tax credit provisions expire September 30,


The American Jobs Creation Act of 2004 (P.L. 108-357) amends Section 45 of
the 1986 Internal Revenue Code (relating to electricity produced from certain
renewable sources) to include “refined coal,” defined as a fuel which is a liquid,
gaseous, or solid synthetic fuel produced from coal (including lignite) or high carbon
fly ash, including such fuel used as a feedstock.

65 Final rule. Federal Register, Vol. 72, No. 204, October 23, 2007.
66 The Leaking Underground Storage Tank Fund Program established under Title V of the
Superfund Revenue Act of 1986 (P.L. 99-149) imposes an additional 0.1¢/gallon on motor
fuels which is extended to March 2011 under EPAct 2005.

Defense Related Authorizations and Appropriations
In addition to directing a Defense coal-based unconventional fuel strategy under
EPAct 2005, Congress also authorized procurement of the fuel under Defense
Title XXVIII (Military Construction General Provisions)67 of the John Warner
National Defense Authorization Act for FY2007 (P.L. 109-364) reorganizes 10
U.S.C. Section 2865. A new chapter: “Chapter 173 — Energy Security” is inserted,
under which the new section 2914 (Energy Conservation Construction Projects)
authorizes the Secretary of Defense to carry out a military construction project for
energy conservation, not previously authorized, using funds appropriated or
otherwise made available for that purpose, that may include procurement of fuel
derived from coal.
The Joint Explanatory Statement (in H.Rept. 109-676) to the Defense
Appropriations Act, 2007 (H.R. 5631, P.L.109-289)68 notes that at the behest of
Congress, the Air Force initiated research into developing coal-based and natural gas
derivative jet fuel substitutes. The Navy plans to initiate a pilot program to develop
alternative fuels. “Given the high costs of fuel and maintenance, the conferees are
encouraged by these reports and believe that the military services should continue to
pursue alternative fuels research and development. As such, the conferees encourage
the Department to provide sufficient funding in its FY2008 and future budget
requests to continue these important research programs.”
The Energy Independence and Security Act of 2007 (P.L. 110-140), however,
included language discouraging the Defense Department from procuring coal-based
jet fuel. Section 526 introduces a new requirement for federal procurement of
alternative or synthetic fuels. Contracts must specify that the lifecycle greenhouse
gas emissions associated with the production and combustion of the alternative fuel
not exceed emissions from conventionally produced petroleum based fuel. As
explained by the House Oversight and Government Reform Committee Chairman,
the section was included in legislation in response to proposals under consideration
by the Air Force to develop coal-to-liquid fuels, and is intended to ensure that federal
agencies are not spending taxpayer dollars on new fuel sources that will exacerbate
global warming.69
Department of Defense synthetic fuel initiatives, which include CTL, fall under
both Operation and Maintenance (O&M) and Research, Development, Test and
Evaluation (RDT&E) budget activities. These programs are summarized in Table

3 by budget activity, and program description.

67 Division B, Subtitle E — Energy Security.
68 “Alternative Fuels,” Congressional Record, p. H6996.
69 Committee on Oversight and Government Reform, Letter to Senate Energy Committee
Chairman [ /story.asp?ID=1820].

Table 3. DOD Synthetic Fuel Projects
($ million)
Program Element
and TitleProject Number, Title, and DescriptionFY07FY08FY09
Air Force
O&MSynthetic fuel program to test/certify synthetic fuel--26.9
to meet the goal of certifying the entire fleet for
synthetic fuel use by 2011.
RDT&E 0601102F2308 - Propulsion: academic research coal--1.0
Defensetransformation laboratory.
Research2308 - Propulsion: Starting in FY2008, conduct11.113.7
Sciencesbasic research in support of Air Force priority
Energy Conservation - Assured Fuels Initiative” to
identify and develop technologies that enable the
use of domestic fuel sources for military energy
Congressional Add: Coal-based jet fuels -2.8
conducted research to produce coal-based jet fuels,
assess military utility and suitability of this fuel.
RDT&E 0602203F3048 - Fuels and Lubrication: In FY2007,-1.8
Aerospaceinvestigated performance of Fischer-Tropsch and
Propulsionother alternative fuels for aircraft and other field
ha r d wa r e .
Congressional Add: Alternative Energy Research -1.2
In FY2008, perform research on alternative energy,
focusing on alternative hydrocarbon fuels made
from coal, biomass, oil shale. Research includes
fuel property evaluation and enhancement, as well
as component and engine testing of alternative
fue l s.
RDT&E 0603216F2480 - Aerospace Fuels: Assured Fuels Initiative to--2.9
Aerospace characterize and demonstrate the use of alternative
Propulsionhydrocarbon jet fuel to comply with Air Force
and certifications and standards for jet fuels. Funding
Power Tech.redirected in FY2009 due to increased emphasis on
development of alternative hydrocarbon jet fuel.
RDT&E 2223 - Marine Corps ATD: Initiate new mobility---
0603640Mefforts in FY2009 to include Fischer-Tropsch and
USMC Advancedcoal gasification processes for use in military
Tech. Demo.tactical wheeled vehicles.
Source: Department of Defense Budget Fiscal Year 2009.

Bills Introduced in the 110th Congress
A number of bills promoting coal-to-liquid fuels have been introduced the

110th Congress, however non have been enacted. They include:

!H.R. 370, Coal-to-Liquid Fuel Promotion Act of 2007, would
provide loan guarantees, and authorize the Defense Secretary to
enter contracts for long term procurement of CTL fuel.
!H.R. 2208, Coal Liquid Fuels Act, would provide standby loans for
CTL projects.
!H.R. 6, Renewable Fuels, Consumer Protection, and Energy
Efficiency Act of 2007, enacted as P.L. 110-140, would have defined
fuel derived from coal as an industrial source of carbon dioxide (for
the purpose of carbon capture and sequestration). S.Amdt. 1781 (To
Provide for Corporate Average Fuel Economy (CAFE) Standards)
to H.R. 6 would have included a coal-to-liquid fuel direct loan
!S. 133, American Fuels Act of 2007, would define alternative diesel
fuel to include CTL that provides for sequestration of carbon
emissions, and amend 10 U.S.C. Section 2922d to authorize the
Defense Secretary to enter contracts for fuels produced from coal.
!S. 155, Coal-to-Liquid Fuel Promotion Act of 2007, would provide
loan guarantees for large scale CTL facilities, authorize the Defense
Secretary to enter into contracts with companies that operate CTL
facilities near military installations, and provide a tax credit for
investing in qualified CTL projects.
!S. 1443, Clean, Affordable, and Domestic Fuels for Energy Security
Act of 2007, would mandate regulations and emission standards for
coal-derived fuels, provide loan guarantees for coal-derived fuel
!H.R. 2419, Farm Bill Extension Act, includes a tax provision that
would extend an existing 50¢ per gallon fuel excise tax credit for
CTL until 2010 and requires CTL producers to capture and store
50% of carbon dioxide emissions. CTL producers could be required
to capture and store 75% of carbon dioxide emissions should an
independent arbitration panel determine that such a level is
commercially feasible. Without an extension, the tax credit, created
by the Energy Policy Act of 2005, is set to expire in September


Additional Tax Incentives
As amended by Section 11113 (Title XI) of the Safe, Accountable, Flexible,
Efficient Transportation Equity Act (P.L. 109-59), federal tax law imposes a
24.3¢/gallon tax on any liquid fuel (other than ethanol or methanol) derived from
coal.70 However, a 50¢/gallon allowance of credit against the imposed tax is provided
for alternative fuels (which are defined to include any liquid fuel derived from coal
through the Fischer-Tropsch process). The tax credit provisions expire September 30,


The American Jobs Creation Act of 2004 (P.L. 108-357) amends Section 45 of
the 1986 Internal Revenue Code (relating to electricity produced from certain
renewable sources) to include “refined coal,” defined as a fuel which is a liquid,
gaseous, or solid synthetic fuel produced from coal (including lignite) or high carbon
fly ash, including such fuel used as a feedstock.
The Tax Relief and Health Care Act of 2006 (P.L. 109-432) amends Section 48
of the 1986 Internal Revenue Code by extending tax credits through December 31,


Policy Considerations
In the past, the precipitous drop in crude oil price and increased supply played
key roles in suspending federally funded coal-based synthetic fuel programs.71 Direct
coal liquefaction was considered economically unviable and fraught with technical
problems. Critics of refineries charged at that time that they were inefficient,
polluting, and produced dirty fuels — much the same criticism leveled at coal-to-
liquids. Meanwhile, U.S. refineries began an intense period of recapitalization in
response to Clean Air Act amendments and applied much of the same technology
considered too costly for direct liquefaction. For some time afterwards, refineries
remained the loss-leader in vertically integrated petroleum operations. Unprofitable
refining was necessary for petroleum producers in order to maintain their market
Proponents of coal-to-liquids point to Sasol as evidence that the Fischer-
Tropsch technology is viable. However, the South Africa government protected
Sasol while crude oil prices remained low. During that same economic period,
Canada continued to support the development of its oil sands resources. Thus,
criticism that U.S. energy policy decisions were shortsighted in abandoning synthetic
fuel efforts contrast with the reality that the refining industry transformed itself under
the same economic circumstances without government support.

70 The Leaking Underground Storage Tank Fund Program established under Title V of the
Superfund Revenue Act of 1986 (P.L. 99-149) imposes an additional 0.1¢/gallon on motor
fuels which is extended to March 2011 under EPAct 2005.
71 See section on U.S. Synthetic Fuels Program and the Synthetic Fuels Corporation in CRS
Report RL33359, Oil Shale: History, Incentives, and Policy, by Anthony Andrews.

Constructing a first or even second Fischer-Tropsch synthetic facility (regardless
of feedstock is coal, gas or biomass) is likely to encounter permitting as well as
economic barriers. (See CRS Report RL32666, The Gas to Liquids Industry and
Natural Gas Markets.) Advocates of developing a synthetic fuels industry argue for
a variety of incentives they view necessary in helping help bridge barriers to entry;
such as: loan guarantees, streamlined permitting, infrastructure improvements, and
long-term contracts for purchasing coal-, gas-, or biomass- to-liquid fuels. Some
might argue that offering loan guarantees for such an industry would be a misplaced
incentive given the current high prices of crude oil and refined gasoline. Others
might argue that the petroleum industry’s reluctance to increase refining capacity
justifies federal intervention. The Energy Policy Act of 2005 already includes the
provisions of Section 391, Refinery Revitalization, for streamlining the application
and permit process among federal agencies for new refineries, which arguably could
be applied to Fischer-Tropsch plants.
Mandated improvements in average fuel economy standards, as provided in the
Energy Independence and Security Act of 2007 (P.L. 110-140) could have some
stimulus on a fledgling Fischer-Tropsch industry. (See CRS Report RL33831,
Energy Efficiency and Renewable Energy Legislation in the 110th Congress.)
Automobile manufacturers might achieve the proposed standards through increased
production of diesel passenger vehicles, which at the same time consume less fuel
and emit lower CO2 than gasoline engines (partially offsetting the CO2 emitted in
producing such fuels). In that case the demand for diesel fuel might increase. U.S.
refineries would be pressed to adjust their product slate toward more diesel
production, and distributors would be pressed to import more diesel fuel. However,
refineries may be limited to adjusting their product slates to no more than 10% to
20% diesel without making capital investments. The increased U.S. demand for
imported diesel would compete with European demand, where the preference for
diesel vehicles is already increasing. Either case could place upward pressure on
prices and thus stimulate private investment.
Carbon dioxide’s contribution to global warming represents the primary
drawback to Fischer-Tropsch, particularly when using coal feedstock. It also
represents the primary detraction to coal as a fuel in general, as evident in the
cancellation of a number in coal-fired power plant projects (11,000 megawatts in
capacity) in 2007. The Edison Electric Institute attributes the cancellation, in part,
to the uncertainty over the future regulation of carbon.72 Carbon capture and
sequestration offers a promising solution. However, sceptics of the solution may go
unchallenged without an industrial scale demonstration. Private interests may
forestall investment in synthetic fuels over the uncertainty of future carbon emission
regulations, particularly if rules are not applied evenly to existing emission sources.
Policy makers may face few options in contending with the broad issue of reducing
carbon emissions from existing fossil fuel users.

72 Edison Electric Institute, Q3 2007 Financial Update.

Gulf Oil Company Direct Coal Liquefaction Efficiency
Pittsburgh coal @ 14,040 Btu/pound x 2,000 pounds/ton = 28,080,000 Btu per tona
distillate fuel oil = 5,825,000 Btu per barrelb
(3.0 barrels x 5,825,000 Btu/barrel) ÷ 28,080,000 Btu/ton = 62%.
Sources: th
a. Marks’ Standard Handbook for Mechanical Engineers 10 Ed, Sec. 7, “Fuels and
Furnaces,” McGraw Hill, 1996.
b. Energy Information Administration, Monthly Energy Review, Appendix A Thermal
Conversion Factors, 2007.
Sasol Secunda Complex Coal-to-Liquids Efficiency
sub-bituminous coal: 41,800,000 metric tons/yr x 1 year/365 days x 2204 lbs/m-ton
x 11,482 Btu/lba = 2,898,094,549,041 Btu
liquid fuels: 150,000 barrels/day x 42 gal/bbl/ 123,600 Btu/galb = 778,680,000,000
Product (778,680,000,000)/ Feedstock (2,898,094,549,041 = 27%
a. Sasol coal ranges from 10,000 to 11,482 Btu/lb in calorific value, with fixed carbon
ranging from 49.4% to 57.7%. Methane rich gas: 33.9 megaJoules/cubic meter) (91033
Btu/ft) compared to natural gas: 37 to 40 MJ/m3 of (1,027 Btu/ft). Republic of South
Africa, Department: Minerals and Energy, Operating and Developing Coal Mines in
the Republic of South Africa 2005, Table 1, [
b. assumed for diesel, no further information is available. Department of Minerals and
Energy, Republic of South Africa, Gas Infra-Structure Plan, April 19, 2005,
[ /pdfs/energy/gas/gas_infrastructure_plan.pdf].
Shell Bintulu Gas-to-Liquids Efficiency
Feed tsock : 3 3
natural gas: 20,000,000ft/day x 1,027 Btu/ft = 123,240,000,000 Btu
Products: a
middle distillate: 6,250 bbl/day x 42 gal/bbl x 123,600 Btu/gal = 445,000,000 Btu
detergent feedstocks and waxes: b
6,250 bbl/day x 5,537,000 Btu/bbl = 34,606,250,000 Btu
product total = 67,051,250,000 Btu
Product (67,051,250,000)/Feedstock (123,240,000,000) = 54%

a. Norton et al.
b. assumed based on EIA
Oryx Gas-to-Liquids Efficiency
Feed stock : 3 3 a
“lean” gas: 330,000,000 ft /day x 1,027 Btu/ft = 338,910,000,000 Btu
Products: b
diesel: 24,000 bbl/day x 42 gal/bbl x 123,600 Btu/gal = 124,588,800,000 Btu
naphtha: 9,000 bbl/day x 5,248,000 Btu/bbla = 47,232,000,000 Btu
liquified petroleum gas: 1,000 bbl/day x 4,000,000 Btu/bbla = 4,000,000,000 Btu
product total = 175,820,800,000 Btu
Product (175,820,800,000)/ Feedstock (338,910,000,000) = 52%
a. assumed based on EIA
b. Norton et al.
NETL Coal-to-Liquids Efficiency
Illinois No. 6 coal: 24,533 tons/day x 13,126 Btu/lb. x 2000 lb./ton =
644,040,316,000 Btu
diesel: 27,819 bbl/day x 42 gal/bbl/ 123,600 Btu/gal = 144,413,992,800 Btu
naphtha: 22,173 bbl/day x 5,248,000 Btu/bbl = 116,363,904,000 Btu
product total = 260,777,896,800 Btu
Product (260,777,896,800) / Feedstock (644,040,316,000) = 40.5%

Table A1. Energy Consumed by Refining in 2005
Volume by UnitHeat ContentEnergy (million BTU)
ude Oil Refined5,555 million barrels5.825 million Btu/barrel 32,221,264,446
els Consumed
Liquefied Petroleum Gases4.17 million barrels 4.000 million Btu/barrel 16,680,000
Distillate Fuel Oil0.76 million barrels 5.825 million Btu/barrel 4,427,000
iki/CRS-RL34133Residual Fuel Oil2.21 million barrels 6.287 million Btu/barrel 13,894,270
g/wStill Gas238.24 million barrels 6.000 million Btu/barrel 1,429,440,000
s.orPetroleum Coke89.65 million barrels 6.024 million Btu/barrel 540,051,600
Other Petroleum Products5.33 million barrels 5.825 million Btu/barrel 31,047,250
httpNatural Gas682,919 million cubic feet 1,027 Btu/cubic foot 701,357,813
Coal41,000 short tons20.4 million Btu/ton 836,400
Purchased Electricity36,594 million kilowatt hours3,412 Btu/kilowatt-hour 124,858,728
Purchased Steam63,591million pounds1,000 Btu/pound 63,591,000
: U.S. DOE EIA, Petroleum Navigator, Fuel Consumed at [] (Refineriespet_pnp_capfuel_dcu_nus_a.xls); U.S. DOE EIA,
rmal Conversion Factor Source Document [].