ConocoPhillips, Peabody Energy Will Convert Coal-to-Gas (COP, BTU)

Turning coal into natural gas is not brand-new technology, but it is rarely done because natural gas is, or has been, relatively cheap. Not as cheap as coal, but cleaner to burn for electricity generation.

ConocoPhillips Corporation (NYSE:COP) and Peabody Energy Corporation (NYSE:BTU) plan to build a "mine-mouth" coal gasification plant in Muhlenberg County, Kentucky. The companies have filed for an air permit, which is the latest in a number of steps that need to be completed before construction begins.

The proposed plant would add about $100 million annually to the region’s economy, including 500 long-term jobs.

According to the announcement, the new plant will emit less than 5% ofthe carbon dioxide as a traditional coal-fired power plant. The plantwill include a carbon capture and storage component that could beimplemented once carbon sequestration issues are ironed out.

This kind of operation is what the energy industry means by "cleancoal." Unfortunately, it’s not an exclusive definition. Sometimes,clean coal means that that coal has been sprayed with water to wash ofthe dust. That actually does lower CO2 emissions, but hardly to theextent that this coal gasification plant would.

Not all clean coal projects are created equal. But this looks like one of the good ones.

Paul Ausick
December 16, 2008