King Coal’s Last Gasp?

Ever since colonial blacksmiths ditched British coal in favor of Pennsylvania anthracite, America’s coalbeds have been crucial to her dream of energy independence. Now, though, King Coal’s grip may finally be weakening: At Senate hearings last week, lawmakers from both sides dealt a serious blow to the black stuff’s credibility as a 21st-century energy source.

At stake was the future of coal-to-liquid (CTL) technology, a process whereby coal is rendered into vehicle-grade fuel oil. The technology is nothing new - it was developed by the Nazis to keep the Luftwaffe airborne - but with fuel prices soaring, it’s gained new traction in some circles as a potential alternative to oil.

CTL’s advantages are clear: Coal is cheap, abundant, and a hundred percent homegrown. If the industry took off, the Pentagon could lessen its airplanes' and battleships’ reliance on foreign oil; the White House could thumb its nose more freely at Middle Eastern petro-states; and coal-state lawmakers could send even more federal pork home to their constituencies.

Unfortunately, there’s a catch: Coal is dirty, and it doesn’t get any cleaner when you juice it. According to the EPA, liquified coal releases twice as much carbon as regular oil. Even if most of the emissions from its production were captured using some as-yet-undeveloped technology, it would still remain dirtier at the tailpipe than conventional gasoline. 

Environmental concerns have helped slow, though not halt, the rise of America’s CTL sector. Increasingly, former Big Coal fanboys like Barack Obama are finding it politically expedient to distance themselves from the industry. At last week’s hearings, though, lawmakers heard new evidence that may finally help nail down King Coal’s creaking coffin lid.

The crux of the matter is this: The economic viability of CTL - already vulnerable to fluctuations in oil prices - would be seriously endangered if, as looks likely, the US eventually signs up to a carbon-trading system. According to recent government studies, putting even a very low price on carbon emissions would make coal-oil production exorbitantly expensive, making it near-impossible for CTL to gain a foothold in the US marketplace.

Coal-state lawmakers and Pentagon planners are still pushing for billions of dollars to be poured into the sector, but at last week’s hearings most lawmakers came to their senses, lambasting CTL as an expensive and ill-conceived pipe-dream. Wall Street realized this long ago, with private investors fleeing CTL projects in droves. It’s time for Washington to do the same, and allow this dangerous boondoggle to die a natural death.