Gilbert entrepreneur sees future in coal conversion

By Ed Taylor, Tribune
April 18, 2006
With crude oil prices hitting $70 a barrel Monday, a Gilbert-based alternative energy company said it will bet $5 million on a new technology that may efficiently convert coal into cleanburning synthetic gas and liquid fuels.

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David Thompson, chief executive of Dive rsified Energy Corp., 2020 W. Guadalupe Road, Gilbert, said his company will join Carefreebased Alchemix Corp. to build a plant that will demonstrate the viability of a new process called HydroMax to produce gasoline, diesel and other liquid fuels from coal at competitive prices. Synthetic gas, or syngas, produced by the process could also be used to generate electricity, he said.

“The era of cheap oil is over,” he said. “We will have to make the change to another fuel.”

Thompson, a Gilbert entrepreneur who built the Spectrum Astro company into a major producer of space satellites before selling the firm to General Dynamics in 2004, said he has studied all of the alternative energy technologies that promise to reduce the nation’s dependence on foreign oil and concluded that converting coal, which is abundant in the United States, offers the best means to deliver large amounts of energy in usable forms in a relatively short time.

“All of the others are either capacity limited, too expensive or not available in time,” he said. “The best alternative is clean coal.”

He called coal conversion “a chemical pathway to energy independence.”

Under the terms of the agreement between the two companies, Diversified Energy will receive Alchemix stock, a technology license and management/development rights for the demonstration plant.

Alchemix still needs to raise another $25 million to build the plant, said chairman Robert Horton. He said the federal government and major oil companies have shown interest.

Coal gasification plants already exist, but the new system developed by Alchemix Corp. appears to be more efficient, reducing gasification capital costs by 50 percent, Thompson said.

A plant using HydroMax technology would convert coal into pure hydrogen and syngas, which is a combination of carbon monoxide and a small amount of hydrogen. The clean-burning syngas could be used as a substitute for natural gas to generate electricity. Or the syngas could be combined with the pure hydrogen using a process that has been around since World World II called Fischer Tropsch to make liquid fuels.

The process produces carbon dioxide, a greenhouse gas, as a byproduct, but it’s in a form that allows it to be “sequestered,” or stored underground, where it would not contribute to global warming, Thompson said.

The patented HydroMax technology was developed by Dr. Kelly Kindig, a minerals engineer whose research was supported by Alchemix.

“The technology to liquefy fuels is well known,” Kindig said. “What is lacking is how to make syngas inexpensively. That is where we made a breakthrough.”

Alchemix has tested Hydro-Max on a small scale in Pennsylvania and Australia, Horton said. The company, which has already invested $20 million in the process, has reached the point where it needs to build a larger demonstration plant to prove it will work on a commercial scale, he said.

A demonstration plant would take about two years to complete, he said, while a commercial plant would take another 2 1 /2 to three years. Gasoline produced at such a facility would be sold at going market prices, but such a plant would contribute to stabilizing the price by adding to the supply, he said.

No site has been selected for the demonstration plant, but it could be built near an oil refinery or a commercial lab, Horton said.

Ed Fox, vice president of communications, environment and safety for Arizona Public Service, said it’s too soon to know if HydroMax will make a major contribution to the nation’s energy supply. But, he added, “we know coal gasification works. It will be one of the things we will have to do.”

Conversion possibilities

The potential impact of HydroMax coal conversion technology:

• One plant could produce 242 million gallons of liquid fuels per year, enough to run 240,000 autos.

• One plant could produce 500 megawatts of electric power, about half the output of one Palo Verde nuclear reactor.

• HydroMax could produce liquid fuels at a cost equivalent to oil at $30 a barrel.

• The U.S. has a 275-year supply of coal at the existing production rate. Doubling coal production for gasification could eliminate oil imports while leaving the U.S. with a coal supply that would still last for more than 100 years.