Synfuel pilot projects sprout, but technology risks high

Exxon Company USA operates the nation's largest oil refinery here -- a major US source of gasoline and other fuels. But next door sits a small pilot plant, built by Exxon and several other partners, that may prove more important to America's energy future.

It is a facility for making liquid fuels from coal -- one of many projects around the United States testing to see what technologies are best for producing significant quantities of synthetic fuels. These new fuels are necessary to meet the Carter administration's goal of cutting oil imports in half by 1990.

With Congress shaping legislation that will offer financial incentives to synthetic fuels development, and private industry showing more interest, some experts say they believe a coherent national program for synthetic fuels is slowing taking shape.

The synthetic fuels getting the most attention are oil derived from coal and shale rock, and gas from coal.

"Things seem to be finally happening with synthetic fuels after years of talk. Congress has made some commitment to speeding up the permit process and giving [financial] incentives," assessed energy consultant Harry Perry of National Economic Research Associates in Washington.

Congress is completing work on several pieces of legislation that will shape the future of synthetic fuels. House- Senate conference committees are separately considering legislation to create an energy security corporation that would spend some $20 billion over the next five years to spur production of synthetic fuels, and to set up an energy mobilization board to reduce permit delays for new energy facilities.

A $227.3 billion windfall profits tax on the oil industry has been approved by members of a House-Senate conference committee. The tax would provide the funds for the synthetic fuels development program.

Nonetheless, synthetic fuels depend on "high risk, unproven technologies," asserts W. W. Finley, a vice- president of Gulf Oil Corporation. They will take many years to fully develop into a reliable energy source. At present, no synthetic fuels are in commercial production in the United States.

Although synthetic fuels have been around for years -- they were produced in substantial quantity by the Germans during World War II -- those applications "bear no resemblance to the US today" because of different economic and social condiations, Mr. Finley says. For example, the environmental impact of major synthetic fuel development, not a concern during the German war effort, is a prominent consideration in the US today, he points out.

The Baytown, Tex., facility is scheduled to begin producing liquid fuels from coal in May. The $340 million project is receiving half its funds from the US Department of Energy and the rest from Exxon and seven other US and foreign participants.

The goal of the pilot plant is to develop the Exxon Donor Solvent process (turning coal directly into liquids) into a commercially viable process. The Baytown plant will produce naptha, a component of gasoline, and middle distillates. Operating through 1982, the facility will test coals from Illinois and Wyoming, and possibly, lignite (soft coal) from Texas.

A number of other synthetic fuels plants are being developed or are in the planning stages in around the country. They include:

* A $1 billion demonstration plant, being built by Gulf Oil Corporation with federal help. The Morgantown, W.VA., facility will convert coal to liquid fuels beginning next year and will have a capacity of 6,000 tons of coal a day.

* Air Products and Chemicals Inc. of Pennsylvania will participate in the building of a coal liquefaction plant in Newman, Ky., next year.

* Ashland Synthetic Fuels Inc. will begin operating later this year a pilot plant for coal liquefaction in Catlettsburg, Ky. The Energy Department is financing the cost of running the facility.

* Occidental Oil Shale Corporation, the Geokinetics Oil Shale Group, and Equity Oil Company are all involved in separate demonstration projects in Colorado and Utah to recover oil from shale rock while it is in place underground.

The DOE is also negotiating wiht three other companies for the design of a surface facility for extracting oil from shale.

* American Natural Resources Company, along with some partners, is planning to build a large commercial coal gasification plant in Beulah, N.D. The plant is to convert coal to a gas that can be transported to pipelines.

* The Energy Department announced recently it will help fund a small coal gasification plant with the city of Memphis to begin operation in 1984.

All but one of these projects are designed to test and develop technology.

A commercial application of these technologies is to be encouraged with federal price guarantees, purchase agreements, loans, and loan guarantees that would be administered by the proposed energy security corporation.

"The big question that remains is the transition from demonstrations [of synthetic fuels technologies] to commercial ventures," says Dr. James Batchelor of the Energy Department's Office of Coal Processing. He believes the pace of commercial development will hinge principally on the authority and scope of the energy security corporation now being considered by Congress.

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