Oil and Gas

Conoco, Peabody coal-to-gas draft permit issued

HOUSTON, Dec 15 (Reuters) - Kentucky regulators have issued a draft air permit for a proposed coal-to-natural gas facility to be sited near a coal mine in Muhlenberg County, partners ConocoPhillips COP.N and Peabody Energy BTU.N said on Tuesday.

The project, called Kentucky NewGas, would use ConocoPhillips’ E-Gas technology to produce substitute natural gas from coal mined nearby by Peabody, the largest U.S. coal producer.

The plant could produce 60 billion to 70 billion cubic feet of gas a year, enough to supply more than 700,000 homes, the companies said. Kentucky NewGas would produce less than 5 percent of the pollutants emitted by a traditional coal plant and would accommodate equipment to capture and store carbon dioxide (CO2) emissions in the future, according to a release.

Electric utilities have canceled dozens of new coal-fired power plant projects in recent years as public concern increased about CO2, a greenhouse gas blamed for global warming.

Gasification technology “creates a new market for coal,” said Peabody spokeswoman Meg Gallagher. “This allows the nation’s largest energy resource to play a larger role in our energy future.”

During the gasification process, coal is ground into small particles and mixed with water, according to the project’s website.

The mixture is injected into a pressurized vessel along with pure oxygen. Heat inside the gasifier converts the coal, water and oxygen into a synthetic gas comprised primarily of hydrogen and carbon monoxide. After removing sulfur and carbon dioxide, the hydrogen and carbon monoxide react to create methane, or substitute natural gas.

Neither company would disclose an estimated price tag for the project.

Peabody has invested $6 million this year on project development and a test well for CO2 injection, Gallagher said.

The permit process is expected to take another year before the companies review the project and the prospects for the long-term gas market. Construction would take about four years, Gallagher said.

Reporting by Eileen O’Grady; Editing by David Gregorio