Top Stories -- January 8, 2004

Spring start forecast for coal-to-oil plant

$100M federal grant enables Reading Anthracite to garner additional funds, advance idea

GILBERTON - Groundbreaking for the first coal-to-oil plant in the United States could take place as early as this spring.

"I don't have a date yet," John W. Rich Jr., president of Reading Anthracite Co. and Waste Management & Processors Inc., Pottsville, said Wednesday. "But it could be late spring or early summer. That's our hope."

The proposed $612 million facility will be located in Mahanoy Township, just east of Gilberton Power Co., Rich's co-generation plant.

It's been a year since the federal government committed $100 million to help Rich construct the plant, which will take coal waste and turn it into zero-sulfur "syn gas," a liquid used to make diesel and jet fuel.

Since he was awarded the U.S. Department of Energy grant, Rich said, the endorsement has not only helped him find financing and contractors, but has also indirectly helped him jump-start other future projects.

Rich also is planning to build larger coal-to-oil plants in Logan County, West Virginia, and, tentatively, in Franklin County, Illinois.

"That commitment from the federal government," Rich said, "was a major endorsement for what we're doing. That's really where the value has been in the past year. That had the effect of people making inquiries from all over the place."

In September, at a fundraiser for President George W. Bush's upcoming re-election campaign in Drexel Hill, Rich got the opportunity to brush elbows with Bush.

Rich said the president asked him how the project was going and he replied, "We're getting there. We're moving."

In the past 12 months, Rich said, he has been busy in negotiations with technology providers, contractors and bankers.

Finding $512 million in financing for the country's first coal-to-oil plant, he said, is still a major project.

An underwriter, Morgan Stanley & Co., New York, is helping Rich to borrow the funds from a consortium of banks.

Rich has been busy meeting with bankers, educating them about the project and looking for loan commitments.

"We made a lot of progress," he said. "We had, I don't know how many meetings on Wall Street with different banks, talking about the project and explaining how and where and who's involved and what they require in terms of commitments before they'll fund the project."

Again, he said, the federal government's endorsement helped.

"The thing of getting the banks' attention and having them participate and look into the project, the federal grant helped facilitate that," Rich added. "That's another example of the level of credibility it delivered."

Meanwhile, Rich said, he has reached agreements with technology providers, including Shell Global Solutions, Houston, which will provide the Shell Coal Gasification Process gasifier for the plant.

"They're providing the first part of the plant, where you convert the coal to hydrogen," Rich said. "Sasol is providing the second."

Sasol Technologies Inc. is a coal-to-oil plant in South Africa.

Once the ceremonial shovel is spiked in the dirt in late spring or early summer, an EPC (Engineering, Procure, Construct) contractor, Uhde GmbH, Germany, will begin site preparation.

"It will probably be like a two-tiered site," Rich said.

After a 30-month construction cycle, the plant should be up and running in 2007.

While Rich continues his drive to construct the coal-to-oil plant, some neighbors observe his progress with guarded concern.

Among them is Sharon R. Chiao, Morea, vice chairwoman of the Mahanoy Township supervisors. She lives close to where the new plant will be built.

"If the technology can prove that it's safe for the environment and the residents of our township, I would approve," Chiao said. "But I want to make certain that the health of our residents is put first."

Another township supervisor, Daniel J. Bradbury, had no comment on the project when contacted Wednesday. His brother, supervisors Chairman Timothy W., was unavailable for comment.