Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 115
6
Major Conclusions and
Recommendations for R&D on
Liquid Transportation Fuels
OVERVIEW
World oil resources are large enough that low-cost production of oil is
expected well into the 21st century, although cartel action will likely keep
international oil prices substantially above cartel production costs. While
the United States has plentiful fossil fuel resources, production costs for
transportation fuels derived from most of these resources are currently greater
than those from most imported petroleum. The level of oil prices of recent
years, combined with the expectation of continued price volatility, has sub-
stantially decreased private investment in exploration, development, and
research on domestic resources. In time, however, imported oil prices may
increase to the point where a large portion of U.S. domestic resources are
again attractive, especially if the cost from domestic resources can be low-
ered.
A continued decline in private investment in domestic oil and gas pro-
duction is expected over the near term, however. Without government
assistance this decline will result in continually decreasing domestic pro-
duction. Government assistance can take two forms: (1) improved finan-
cial incentives for investment in domestic production and (2) support of
research, development, and demonstration of technologies for lower-cost
production from domestic resources.
The first form of assistance would be needed if the United States chose
to slow the near-term decline in oil and gas production and to stimulate the
use of advanced techniques for increasing resource recovery. Over the
longer term, support of continuous R&D in advanced oil and gas recovery
and in pioneering coal liquids and shale oil developments would accelerate
the use of these resources.
115
OCR for page 116
116
FUELS TO DRIVE OUR Fl1TURE
This study focuses on the second of these approaches. Emphasis is
placed on production of carbon-containing liquid transportation fuels and
the use of fossil combustion heat to drive the processes. Under Scenario V
(controls on greenhouse gas emissions), presented in Chapter 1, energy
alternatives other than fossil fuels would need to be considered. These are
being addressed in a concurrent study by the National Academy of Sci-
ences, Committee on Alternative Energy R&D Strategies. Reduction of
carbon dioxide emissions for processes considered in the present report
could be accomplished by using nonfossil sources of energy for process
heat and hydrogen production. These are discussed briefly later, but the
committee was not able, because of time constraints, to investigate these
processes in technical detail.
Federal R&D at the U.S. Department of Energy (DOE) is an important
factor in advancing technology to decrease the costs and environmental
impacts of producing liquid transportation fuels from domestic resources.
Several issues must be considered in establishing the nature and size of a
DOE R&D program for producing such fuels:
· expected timing of commercial application;
potential size of the application;
potential for cost reduction, improvements in reliability; and dimin-
ished environmental impacts; and
the need for DOE participation.
R&D Issues
Timing of Commercial Applications
The timing of commercial application of new technology depends criti-
cally on production costs and environmental impacts. These costs depend
on the technology but are also strongly influenced by environmental consid-
erations and by state and federal taxes and tax credits. The scenarios for
the future presented in Chapter 1 were developed to provide a framework
for the committee's recommendations. The scenarios cover a range of pos-
sibilities, whose relative probabilities are inevitably matters of judgment.
For research planning the committee judged the most probable economic
scenario to be that future oil prices would be between $20 and $30/barrel
(in 1988 dollars) within 20 years from now (Scenario II). However, the
likelihood that prices would either remain under $20Abarrel or exceed $30/
barrel appears high enough to necessitate program recommendations that
are reasonable given any of the three scenarios presented in Chapter 1.
OCR for page 117
CONCLUSIONS ED RECOMMENDATIONS
Potential Size of the Applications
Potential size of the applications depends on the size and geographical
distribution of the resource. A geographically dispersed resource offers
more widespread commercial and employment opportunities and is less
vulnerable to local disruption, regulations, and restrictions.
117
Potential for Cost Reduction
The potential for cost reduction is generally least for mature and techni-
cally advanced operations. However, for very large scale activities, such as
oil and gas production, even small percentage improvements can justify
extensive research.
Need for DOE Participation
U.S. R&D in transportation fuels production is the sum of industry-
supported and government-supported activities. The role of DOE is to help
ensure that the major national needs for technology are met and that poten-
tial benefits of domestic production, not the subject of R&D by private
firms, are pursued where justified by the above criteria and can be realized.
Where there is substantial and continuing industrial involvement, the role of
DOE is generally to support long-range and relevant basic research and in
some cases to participate in large demonstration programs, such as the Clean
Coal Program. In areas where commercial projects are far in the future but
where continued technological advances are in the national interest, it is
logical for DOE to take a lead role.
RESOURCES
Petroleum, Heavy Oils, and Tar
Projections of the availability of petroleum, heavy oils, and tar from
domestic resources, summarized in Table 6-1, show that, for an oil price of
roughly $25/barrel, current production rates could be maintained for some
decades. Even lower but stable prices from $20 to $24/barrel would en-
courage production from resources that are still substantial. A higher oil
price ($40 to $50/barrel) would make possible the more extensive develop-
ment and use of advanced oil recovery techniques.
Scenario I (with future oil prices less than or equal to about $20/barrel)
would result in a continued decline in U.S. oil production, while in Scenario
II (prices reach $30/barrel within 20 years) or Scenario III (prices reach
OCR for page 118
118
FUEI~; TO DRIVE OUR FI7TURE
TABLE 6-1 Estimated Remaining Economically Producible Crude Oil
Resourcesa
Current Technology
$24-$25 $40-$50
Advanced Technology
"L"
$24-$25V $40-$50°
Billion barrels oil
Ratio of resource base
to annual production
75-76 95-140
25 3247
105-129 140-247
35-43 47-82
aSee also Chapter 2.
bOil price ($tbarrel).
$40/barrel within 20 years), U.S. oil production decline could be reduced
for at least the 20-year period of the scenario.
Scenario IV (imposition of more stringent environmental controls) seems
quite probable. In general, greater environmental controls will increase the
costs of exploration and production and will delay the application of ad-
vanced oil recovery techniques. Closing frontier areas for exploration and
production also reduces the amount of oil available at a given price and
shortens the time over which domestic oil could supply a major fraction of
U.S. transportation fuels. These trends would increase the need for imports.
Energy efficiency improvements can be very important and can help reduce
imports. Scenario V (greater greenhouse gas controls) would tend to miti-
gate against thermal enhanced oil recovery and CO2 enhanced oil recovery
using fossil CO2.
For Scenario VI (no government encouragement of domestic oil produc-
tion), U.S. oil production decline will continue for oil prices below $20/
barrel. Even under the price increases of Scenario II and Scenario III, the
stabilization of production would require years. Thus, if the U.S. govern-
ment wanted to retard domestic oil production declines, some form of gov-
ernment encouragement would be required.
Not only is U.S. petroleum production declining, but industry emphasis
is changing. The major oil companies are increasingly investing abroad
where costs are lower, the potential for successful large oil fields is higher,
and where developing countries are offering special incentives to encourage
development of their petroleum resources. In addition, the number and
financial health of small independent companies and individuals has de-
creased.
While the traditional form of industry encouragement is through tax in-
centives, improved technology and its transfer through cooperative efforts
will be of increasing importance, especially for the independent operators
who, in general, do not have significant R&D programs. To the extent that
licensing of technology and use of expert consultants do not facilitate tech-
OCR for page 119
CONCLUSIONS AlID RECOMMENDATIONS
119
nology transfer to the independent sector, significant advice may be neces-
sary to develop and make available advanced technology to this segment of
the domestic oil-producing industry.
Oil cannot be produced to exhaustion at a constant rate but generally
declines slowly over time. Even if constant fuel consumption could be
maintained, it seems reasonable to expect that significant supplemental
sources (either domestic or imported) of transportation fuels will be needed
20 to 30 years from now. At this time it is expected that R&D on fuels
from coal and oil shale would reduce the costs to the level where they could
compete with petroleum-based fuels.
Natural Gas and Synthesis Gas
Economically producible resources of natural gas for two price levels
and different levels of technologies are summarized in Table 6-2. An ex-
pansion in the resource base of more than 100 percent is projected at the
high price, given use of advanced technology. Significant amounts of gas
could therefore be made available as an alternative source of transportation
fuels. There are several approaches to exploit this resource:
.
use compressed gas directly for transportation fuel;
· displace fuel oil from power generation and industrial fuel use, mak-
ing it available for conversion to transportation fuels;
· manufacture hydrogen and carbon monoxide for production of trans-
poration fuels; and
· possibly use advanced, low-cost processes for direct conversion to
liquid transportation fuels.
Compressed natural gas vehicles, while not expected to be a significant
part of the market because of short vehicle range and onboard storage con-
stra~nts, have recently attracted much interest as a relatively low polluting
alternative for urban fleet use.
TABLE 6-2 Estimated Remaining Economically Producible Natural
Gas Resources
Current Technology Advanced Technology
$3a $sa
$3a $sa
Tcf Gas (Bbbl oil equivalent)
Ratio of Resource Base to
Current Production
595 (107) 770 (140) 880 (160) 1,420 (256)
33 43 50 80
aWellhead gas price ($/Mcf).
OCR for page 120
120
FUELS TO DRIVE OUR FUTURE
A rise in oil price to the range of $25 to $40/barrel would make conver-
sion of heavy fuel oil and heavy oil to transportation fuels more economi-
cally attractive. This use is expected to grow. Tar sands bitumen could
also be upgraded. Natural gas could be used as the hydrogen source for
hydroconversion (which increases liquid yields) of these heavy fuels. Natu-
ral gas consumption would also increase from the replacement of the heavy
fuel oil that might otherwise be used in power generation and industrial
boilers and heaters.
Coal liquefaction and methanol and Fischer-Tropsch (F-T) liquid synthe-
sis from coal are also potentially very large consumers of hydrogen or
synthesis gas. For example, the production of the equivalent of 1 billion
bbVyear (2.74 MMbbl/day) of crude oil (30 percent of current production)
would require about 40 percent of the gas now produced. Such an increase
could come from domestic resources, but it would require greatly acceler-
ated exploration and production and would increase the cost of natural gas.
Methane would likely be used for hydrogen in the initial stages of fuels
manufacture from coal and shale because gas price increases will probably
lag oil price increases, and gas prices may be initially lower than those of
the base case used in the economic studies. For the longer term, however,
coal gasification may be more economical than use of natural gas to supply
hydrogen for coal and shale liquefaction.
Estimated costs for alternative conversion processes to make transporta-
tion fuels are shown in Table 6-3. Table 6-3 also illustrates the extreme
sensitivity of methanol costs to natural gas costs. In the process of produc-
ing methanol, coal or natural gas is first converted to synthesis gas. The
conversion of coal to syngas is a major cost; high natural gas prices also
make natural gas conversion to syngas expensive. Methanol synthesis con-
sumes more synthesis gas than coal liquefaction and tends to be more ex-
pensive for equal synthesis gas costs. The natural gas price of $4.89/Mcf,
corresponds to the historical domestic relationship between gas and fuel oil
prices and to a price where coal gasification is expected to be competitive
as a methanol source. For the lower price of $3.00/Mcf, gasoline from
heavy oils is competitive. At still lower prices, corresponding to low value
remote gas, imported methanol would be less expensive than methanol pro-
duced domestically from higher priced gas indicating that, unless assisted
by legislative action based on environmental and energy security considera-
tion, fuel methanol will be imported.
For the longer term, when natural gas will be expensive, advances in the
manufacture of synthesis gas from coal could reduce methanol costs, and a
DOE program in syngas manufacture from coal for use with coal liquefac-
tion could then make a major contribution if it becomes desirable to pro-
duce methanol domestically.
OCR for page 121
CO~CWSIONS AND RECOMMENDATIONS
TABLE 6-3 Equivalent Crude Oil Cost of Alternative Fuels
(in 1988 dollars/barrel, at 10 percent discounted cash flow)
Process
Current
Cost
Estimatesa
Cost Targets
for Improved
Technology
Heavy Oil Conversion
Coal Liquefaction
CoaVMTG
Western Shale Oil
Methanol
Coal gasificationb
Natural gas atC
$4.89/Mcf
$3.00/Mcf
$1.00/Mcf
25
38
62
43
53
45
37
24
30
30
aThe processes on which these numbers are based are in various
stages of R&D (see Chapter 3~.
See Table Data. New estimated reduced capital and operating
expenses for entrained-flow coal gasification could lead to coal-to-
methanol costs of about $401barrel.
CSee Table D-7.
Coal and Oil Shale Conversion
121
Direct coal liquefaction is shown in Table 6-3 to have a lower estimated
cost than oil from western shale. In the past the estimated costs for conver-
sion of oil shale were somewhat lower than for coal liquefaction. This
change in relative costs reflects the progress from steady DOE R&D on coal
liquefaction in recent years. The committee believes that vigorous R&D
and optimizing these processes has the potential to bring the cost of both
down to about $30/barrel or lower. A substantial effort is required to
accomplish this reduction, and, with the reduced industry effort, govern-
ment encouragement through DOE participation and leadership is essential.
The price assumption for Scenario II ($30/barrel) allows approximately 20
years to demonstrate coal or oil shale processes that can compete with $30/
barrel oil. This scenario is consistent with an R&D program organized
around a $30/barrel goal and a large pilot plant and demonstration programs
arranged when pathways to reaching this goal have been established.
The coal liquefaction program has a good start in this direction; how-
ever, since achieving this cost reduction is aided by improvement of and
OCR for page 122
122
FUEL; TO DRWE OUR FUTURE
integration with the coal gasification process, some strengthening of coal
gasification research is indicated if the potential for sizeable cost reductions
can be realized.
The shale program has recently received much less attention than coal
liquefaction. While the size of the shale resource is comparable to that of
coal, the active industry and geographical dispersions of coal resources are
consistent with giving a somewhat higher priority to coal. An increase in
the shale oil program, however, is needed to bring the two programs into
better balance.
ENVIRONMENTAL CONSIDERATIONS
The manufacture and use of transportation fuels raise many environ-
mental issues. For fuel production, air and water pollution can generally be
controlled to meet emission standards with available technology, although
lower-cost technologies are needed. Special problems include the preven-
tion of significant deterioration of air quality in some regions and the recov-
ery of solvent in tar sands extraction. Issues related to land use and visual
impacts are beyond the scope of the current study and must be addressed in
the political and regulatory arena. R&D efforts must change with social
priorities.
The contribution of gasoline vehicle emissions to urban air pollution has
generated increased interest in alternative-fueled vehicles using, for example,
natural gas or methanol. An alternative may be reformulating gasoline to
facilitate redesign of improved vehicle emission control systems. Future
vehicle emissions constraints may well affect fuel composition and there-
fore the choice of conversion processes and related research programs.
Although environmental restrictions may influence automotive fuel com-
position, the economic, environmental, and health effects of fuel compo-
nents (paraffins, aromatics, methanol, formaldehyde, and other oxygenates)
and optimal control technologies and engine designs are far from well es-
tablished. The DOE should participate in quantifying these effects and
variables to help ensure that production technologies for liquid transporta-
tion fuels from domestic resources are properly developed to meet future
regulations on vehicle emissions. This area requires more detailed study.
The greenhouse effect is of increasing concern, and the production and
use of transportation fuels could be an increasing source of CO2 and other
greenhouse gases. Table 5-1 shows estimates of relative greenhouse gas
emissions for the manufacture and use of transportation fuels from several
sources.
Because of coal's low hydrogen content and impurities, the manufacture
and use of liquid fuels from coal produce almost twice the CO2 as use of
gasoline from petroleum (see Table 5-1~. Manufacture and use of liquid
OCR for page 123
CONCLUSIONS AND RECOMMENDATIONS
123
fuels such as methanol or F-T gasoline from methane, however, produce an
amount of CO2 approximately equal to that from petroleum-based gasoline.
Gasoline from oil shale produces less CO2, the amount depending on the
amount of decomposition of carbonates during retorting. CO2 emissions
can be reduced in all cases by increasing end-use efficiency and by reduc-
ing process heat requirements.
The heat necessary to drive processes is conventionally derived from
combustion of fossil fuel, with liberation of CO2. In addition, hydrogen
needed for processing is derived from water, where oxygen is eliminated by
CO2 generation. This is also a major CO2 source beyond the CO2 generated
by fuel end-use. Nuclear or solar energy and biomass are alternative sources
of heat and hydrogen. Water splitting by heat, electrolysis, or photolysis
using noncombustion sources of energy is substantially more expensive than
use of carbon as an oxygen acceptor (NBC, 1979~. However, a long-range
exploratory and basic research program on water splitting is justified.
Use of biomass to supply heat and hydrogen to fossil fuel processes (if
use of fossil fuels in biomass production and processing is minimized) can
eliminate or reduce these sources of CO2. Comparison of the use of bio-
mass-generated methanol via synthesis gas to the conversion of this synthe-
sis gas to hydrogen and its use for coal liquefaction indicates that, for a
limited supply of biomass, a greater reduction of fossil carbon-generated
CO2 is obtained by combining biomass gasification with coal liquefaction.
System studies research relevant to this combination are recommended.
MAJOR CONCLUSIONS AND RECOMMENDATIONS
A federally funded R&D program on liquid transportation fuels can pro-
vide future options for domestic uncertainities in oil prices and investment
decisions by the private sector. The current funding for liquid fuels R&D is
only about 29 percent of the total fossil energy budget (see Table 6-4~. A
diverse approach to different resources and technologies expands these op-
tions in recognition that there may be failure of some technologies and
resources may fail to meet expectations.
The DOE program should contain a continuing effort by unbiased and
capable groups to evaluate the economic and commercial potential of the
technologies in the program. The most promising technologies should be
moved forward from the research laboratory to field test units and eventu-
ally to larger facilities for demonstration on small commercial equipment.
The government-sponsored program should include industrial participation
at all phases, particularly in development and demonstration to facilitate
technology transfer and ensure that the latest practical industrial concepts
are incorporated into the program. A properly balanced program should
OCR for page 124
124
FUELS TO DRIVE OUR FUTURE
TABLE 6-4 DOE,s Office of Fossil Energy R&D Program Budget (current
dollars in millions)
FY 1990
FY 1988 FY 1989
Appro- Appro- Senate
priations priations Request House Panel
Coal Budget
Control technology and
coal preparation $43.62 $48.93 $32.26 $60.10 $53.13
Advanced technology R&D 24.94 25.56 25.54 26.18 29.32
Coal liquefaction 27.13 32.39 9.66 37.68 33.26
Combustion systems 25.17 26.70 15.77 35.27 30.17
Fuel cells 34.20 27.53 6.50 38.40 29.80
Heat engines 17.95 22.83 8.92 20.02 21.22
Underground
gasification 2.78 1.37 0.43 0.43 0.83
Magnetohydrodynamics 35.00 37.00 0 42.90 37.00
Surface gasification 22.99 21.56 8.74 19.64 29.88
Total coal $233.78 $243.87 $107.82 $280.62 $264.61
Petroleum Budget
Enhanced recovery $16.54 $23.58 $18.24 $27.59 $28.46
Advanced process
technology 3.43 4.20 4.62 3.60 3.60
Oil shale 9.50 10.53 1.68 8.18 10.88
Total oil $29.47 $38.31 $24.54 $39.37 $42.94
Gas Budget
Unconventional gas $10.53 $11.38 $4.07 $13.17 $15.82
Cooperative R&D Ventures $0 $0 $0 $4.80 $4.80
Total gas $10.53 $11.38 $4.07 $17.97 $20.62
Miscellaneousa $53.22 $88.03 $26.15 $84.72 $81.17
Total fossil R&D $327.00 $381.59 $162.58 $422.68 $409.34
aIncludes plant and capital equipment, program direction, environmental restora-
tion, fuels conversion, and past year's offsets. Numbers may not add due to round-
~ng.
SOURCE: July 31, 1989, Clean-CoaVSynfuels Letter.
OCR for page 125
CONCLUSIONS ED RECOMMENDATIONS
125
achieve a key objective of providing an understanding of how U.S. re-
sources can best be used to produce transportation fuels.
Since industry participation is essential to an effective program, DOE
must provide the appropriate leadership to achieve such participation. The
DOE can encourage industrial participation by proper structuring of the
program. In addition, industrial participation will be more readily achieved
if the DOE R&D program is viewed as a key element of a national energy
policy.
A steady program is essential for success in a long-range R&D program.
To ensure such a program there must be a long-term funding commitment,
and the elements of the program should be primarily decided by DOE tech-
nical and administrative professionals based on technical and economic merit.
Furthermore, a well-balanced program should include demonstration of
state-of-the-art technology on small-scale commercial equipment as well as
continued search for new technology that may eventually make the demon-
strated technology obsolete. In this way the program will continually be
updating information on the best way to use domestic resources for trans-
portation fuels. Technology that is selected for demonstration must meet
strict economic and environmental criteria. Thus, the portion of the pro-
gram devoted to demonstration is determined largely by opportunities gen-
erated by the research program and further developed in pilot facilities.
The program should develop specific objectives within the next 5 years
regarding demonstration of the best technologies.
The recommended directions for the DOE program for the next 5 years
are listed below in three funding categories. The listing within each cate-
gory is not in priority order. All areas listed are of potential importance
and there should be continuing related programs of fundamental and ex-
ploratory research. The need for the more costly process R&D depends on
the need for DOE participation during the next 5 years and varies consid-
erably.
Under Scenario II the premise that oil prices will reach $30/barrel within
10 to 20 years conforms with a target of $30/barrel for coal and oil shale
through pilot projects and studies over the next 5 years. Under Scenario I
the pace of the program could be slowed, whereas Scenario III would call
for a more rapid pace. Increased emphasis on curtailing greenhouse gas
emissions would result in techniques for reducing such gases, whereas greater
environmental constraints would lead to emphasis on environmental research.
The recommended areas of R&D as proposed are diverse and provide op-
tions in the face of the uncertainty these scenarios encompass.
Major Funding Areas
With regard to use of domestic resources, the high funding areas are oil
and gas, coal, and oil shale. These represent large domestic resources with
OCR for page 126
126
Fuels TO DRIVE OUR FUTURE
oil R&D also providing a means to significant U.S. production over a pe-
riod of time when coal and oil shale technologies can be further developed.
The committee has not made a detailed analysis of required federal funding
for R&D activity for these resources. However, they are all of major im-
portance, and this should be reflected in their relative funding levels.
There is less need for DOE funding of R&D on conventional gas produc-
tion since there is much private sector activity but DOE should continue its
work on unconventional gas recovery. Significant funding and attention is
also recommended for R&D related to fuel composition and its environ-
mental and end-use consequences.
1. Participation in R&D and Technology Transfer for Oil and Gas Pro-
duction. In recent years the DOE research program in oil and natural gas
has been substantially reduced. Industry activity in R&D for domestic oil is
also declining Important opportunities for both cost reduction and im-
proved resource utilization exist, and DOE participation should be in bal-
ance with other energy research areas. The program should focus on those
parts of the resource base whose exploitation depends on more comprehen-
sive understanding of geologically complex reservoirs and on technologies
yet to be fully developed. The program should be pursued in coordination
with industry (both independent oil producers and major oil companies),
preferably with direct industry participation. Finally, an effective program
of information and technology dissemination is needed.
2. Production from Coal and Western Oil Shales. Coal and western oil
shales both represent very large resources compared to domestic petroleum
and natural gas. Estimated costs with current technology require oil prices
greater than $36 to $43/barrel, but recent advances suggest that their costs
may be reduced to the equivalent crude oil price of around $30/barrel or
less. Because the cost of producing domestic oil may rise to this level in
the next several decades and this is also the time frame required to bring
new technology to commercial status, DOE should establish the goal of
reducing the cost of these alternatives to below $30/barrel. The DOE should
also take the lead in establishing a demonstration program when pilot plant
and engineering studies indicate that this goal can be achieved. Important
components of such a program are the following:
.
a vigorous basic and exploratory research program;
a pilot plant program capable of supplying the information needed for
commercial-scale designs;
continuing systems studies aimed at optimization;
a new thrust aimed at integration of hydrogen production from both
biomass and coal; and
· a high level of industrial involvement.
Over the next 5 years, exploratory research on coal should stress new
OCR for page 127
CONCLUSIONS AND RECOMMENDATIONS
127
catalysts and processes based on fundamental coal science understanding.
The opportunity to reduce costs by integrating hydrogen manufacture should
be explored. The program should be guided partly by economic and techni-
cal evaluations by engineering firms, petroleum industry operating compa-
nies, and qualified consultants. The program should have a 5-year objec-
tive to reduce the cost of direct liquefaction to $30/barrel or less. If this
objective is achieved, preparations for a larger pilot plant (500 to 1000 bbl/
day) would begin.
In the judgment of the committee, the current shale oil program is too
small compared to the coal liquefaction program and should be increased.
Over the next 5 years a field pilot facility with a capacity of about 100 bbl/
day should be built to further develop surface retorting technologies. These
technologies must clearly have the potential for meeting anticipated envi-
ronmental requirements and for production costs of $30/barrel or less.
Because manufacture of transportation fuels from both of these resources
produces more CO2 by-product than processes based on oil, gas, or bio-
mass, a special effort should be made to identify and pursue opportunities
for reduction in emissions of this greenhouse gas from these resources.
Study of nonfossil fuel sources of heat and hydrogen should be included.
3. Environmental and End-Use Considerations. There are a number of
uncertainties about the health, safety, and air quality implications of alter-
native fuels use. With other federal agencies, such as the U.S. Environ-
mental Protection Agency and the National Institutes of Health, DOE should
continue R&D to develop a better data base on these potential impacts. In
particular, health effects and also different fuel-engine- emission controls
combinations should be investigated to identify the safest and most cost-
effective combinations and to provide guidance on fuel composition effects
for use in the DOE R&D programs. This will help ensure that future
regulations are balanced and on a firm technical basis and that the technolo-
gies for liquid transportation fuels production are properly developed to
meet these regulations.
Medium Funding Areas
4. Coal-Oil Coprocessing. Coprocessing of heavy oils or residuum with
coal may permit the introduction of coal as a refinery feedstock. It is
expected to have rather limited application unless important synergism be-
tween oil and coal occurs. Funding of basic bench-scale research should be
continued over the next 5 years to define the extent of synergy between coal
and oil for coprocessing coal-residuum combinations, followed by a thor-
ough economic analysis of its impact. If favorable, the results should be
confirmed in the Wilsonville test facility to define optimal processing con-
ditions.
OCR for page 128
128
FUELS TO DRIVE OUR FUTURE
5. Tar Sands. The domestic tar sands resource is small relative to those
of coal and oil shale. However, it is significant relative to proven domestic
crude oil reserves, and much of it is owned by the federal government.
Liquid fuels can potentially be produced from some U.S. tar sands at about
$25 to $30/barrel equivalent crude oil price with a hydrocarbon solvent
extraction process. Furthermore, there is little industry activity in this area.
Therefore, a modest DOE R&D program on tar sands is appropriate if there
are sufficient leads toward cost reduction or if costs are low enough to
justify development and demonstration of the best technology.
Over ache next 5 years all potential processes and mining techniques ap-
plicable to U.S. tar sands should be evaluated both technically and eco-
nomically. The DOE should sponsor preliminary evaluations by engineer-
ing firms, petroleum operating companies, and qualified consultants. The
best process should be selected for further development and demonstration
in a field pilot plant with a capacity of 50 to 100 bbVday. Based on Cana-
dian experience, this size should be suitable for scale-up to a commercial
plant. A field pilot operation is justified only if the technology is judged to
be sound, all environmental requirements are projected to be met, and costs
are sufficiently low (probably about $25/barrel) to attract industry partici-
pation.
6. Petroleum-Residaum, Heavy Oil, and Tar Conversion Processes.
Conversion processes for petroleum residuum, heavy oils, and tar have been
under intensive development in both domestic and foreign petroleum indus-
tries. Increasing crude oil prices will tend to favor hydroconversion proc-
esses over carbon rejection processes because of the higher liquid product
yield from hydroconversion. This continuing industrial process develop-
ment should be supplemented by basic research on the molecular structures
of metals, sulfur, and nitrogen-binding sites and coke precursor species in
heavy oil feeds and upgraded products. Results of this research would help
the private sector improve existing carbon removal and hydrogen addition
processes. The DOE should involve the private sector in the design of this
research program to ensure good technology transfer. This R&D area is
considered medium priority because there is considerable activity in the
private sector. Because of industrial efforts, DOE work on catalyst and
process development is not recommended at this time.
7. Biomass Utilization. Use of some biomass resources for the produc-
tion of liquid transportation fuels is one pathway that can result in less net
release of greenhouse gases. Biomass supply constraints and costs will
probably require continued use of fossil fuel resources. Use of biomass to
produce liquid fuels directly is of continuing interest; however, by integra-
tion of processing of biomass and fossil resources (e.g., by generating proc-
ess hydrogen from biomass instead of coal), a greater reduction in CO:
from the combined processes may be achievable. There is little industry
OCR for page 129
CONCLUSIONS AND RECOMMENDATIONS
129
activity in this area. Hence, it is recommended that research and systems
studies be conducted on the optimum integration of biomass with fossil fuel
conversion processes as well as for stand-alone biomass conversion.
8. Coal Pyrolysis. The current DOE program is aimed at production of
pyrolysis liquids and metallurgical coke and does not have a high priority
for liquid transportation fuels.
There is little privately funded R&D in this area. The chemistry and
mechanisms of pyrolysis are not well understood, and therefore DOE should
place medium priority on a program of basic pyrolysis research, including
research in catalytic hydropyrolysis. Systems studies should be carried out
over the next 5 years to evaluate integrating pyrolysis with direct coal
liquefaction as well as with gasification or combustion.
Modest Funding Areas
9. Processes for Producing Methanol, Methanol-derived Fuels, or Fisher-
Tropsch (F-T) Liquids from Synthesis Gas. Industry is vigorously studying
the production of methanol and F-T Liquids. While they may find applica-
tion in the United States, production is expected primarily outside the United
States where low-cost natural gas is available. These factors discourage
DOE work in this area beyond fundamental and exploratory research.
10. Direct Methane Conversion. Direct methane conversion to liquid
hydrocarbons or methanol is being studied at the bench scale by various
companies, government agencies, and universities. These processes theo-
retically have the potential for being more energy efficient and less expen-
sive than indirect conversion since they bypass the formation of syngas, an
energy-intensive and expensive step. However, potentially significant cost
reductions have not yet been achieved.
Even if direct conversion of natural gas to liquid fuels becomes economi-
cally viable, the sources would be predominately low-cost natural gas in
foreign locations. U.S. government-sponsored research on direct methane
conversion technology should be limited to continuing fundamental and
exploratory research.
11. Eastern Oil Shale. Although widespread, most eastern oil shale is
low grade, occurs in thin seams, and has a high stripping ratio for mining.
Its processing is also inherently more expensive than that of western shale
because of its low grade and low hydrogen and high sulfur content. These
disadvantages are expected to outweigh the infrastructure advantages of the
eastern location. This resource will be economical only after exploitation
of coal or western oil shale. No development is recommended at this time.
OCR for page 130
Representative terms from entire chapter:
natural gas
