Permits issued for first U.S. coal-to-liquids plant

HOUSTON (Reuters) - The final permits needed to build the first U.S. coal-to-liquids plant in eastern Ohio have been issued, Baard Energy announced Friday.

The permits came Thursday from the Ohio Environmental Protection Agency and the U.S. Army Corps of Engineers, Vancouver, Washington-based Baard said in a news release.

Baard plans to build a $6 billion, 53,000-barrel-per-day (bpd) plant converting coal to diesel, jet fuel and naphtha. The plant site is on the Ohio River at Wellsville, Ohio.

Plans call for construction in three phases, with the first, a 17,000 bpd facility, targeted for start-up in 2012. The final phase is expected to become operational in 2015.

"With these permits, we can now complete the initial financing to finish the engineering and proceed with construction," said Baard CEO John Baardson.

"I look at it as the end of the beginning for the project," said Tracy Drake, CEO of the Columbiana County Port Authority, which provided the site.

The troubled credit markets are not a problem at this point as financing will not be sought until "sometime in the middle to latter part of next year," Drake said.

Initial funding is coming through private placement, Drake said. Expectations are that when the project is ready for financing, credit markets will have improved, he said.

Falling oil prices are not a problem either. The long-term expectation is that oil is in diminishing supply, so the United States will need alternatives, Drake said.

"When they envisioned the project, I think oil was trading at $45 to $50 a barrel, and the project was viable at that time," Drake said.

The proposal calls for blending coal and biomass and then gasifying this feedstock to produce a pure stream of carbon monoxide and hydrogen, the company said.

This synthesis gas will then be put through a Fischer-Tropsch process to make ultra-clean diesel and jet fuel as well as naphtha, a chemical feedstock, the company said.

The technology for converting coal to liquid fuel has been around since World War II, when the Germans perfected it. South Africa currently produces liquid fuel from coal.

The U.S. Air Force has expressed an interest in freeing itself from dependence on oil and has been testing coal-to-liquid fuels in its aircraft.

(Reporting by Bruce Nichols; Editing by Christian Wiessner)