OPEC Preventing Coal Conversion in Pennsylvania

While Pennsylvania continues to develop green energy, some of its traditional energy programs are stalled. Converting coal into liquid fuels is a program that has an enormous potential to develop jobs, produce great wealth and contribute to energy independence. The stakes are great, and so is the opposition.

A local businessman wants to develop jobs and contribute to energy independence, by turning coal into diesel fuel. He wants to build a $1 billion coal conversion plant. Jack Rich estimates that his plant would develop 1,000 construction jobs and 660 jobs for truck drivers and workers.

The international environment is making it impossible for him to succeed. Our old nemeses from the 1970s, the Organization of Petroleum Exporting Countries (OPEC) is preventing this from happening.

OPEC's Power

Jack Rich claims he can produce diesel fuel from coal for less than $3 a gallon, but OPEC manipulates the market and makes it impossible to compete economically. Rich claims that although we compete in a competitive global economy, OPEC actually fixes prices. Variability of prices set by OPEC discouraged bankers from investing in the coal conversion plant for an entire decade.

The Economics of Coal Conversion

Rich believes his coal conversion plant could lock in a price of $3 a gallon for sulfur-free diesel fuel for 10 years. That is well below last week's national averages of $3.07 a gallon for gasoline and $3.33 for diesel. Rich is not seeking government money to complete his project. The businessman believes that the banks are reluctant to invest, as OPEC could simply reduce prices as soon as the plant opens.

America spends approximately $1 billion a day on imported oil. His plant and others like it could keep a lot of that money in the country by producing 5,000 barrels a day or more of diesel fuel and naptha, a fuel that can be used by refineries. Rich's plant could also convert natural gas into diesel fuel. The plant would use natural gas mined from the Marcellus Shale formation in Pennsylvania.

Congressman Lou Barletta

Rich met with local lawmakers to get their support. U.S. Congressman Lou Barletta, a Republican from Hazelton, said America will always need some liquid fuels even while alternative sources of producing electricity grows. Additionally, the project will bring jobs to Pennsylvania, especially as production increases in the Marcellus Shale fields.

A Self-Defeating Policy

It appears that Rich is pursuing a self-defeating policy. He wants to turn coal into sulfur free diesel fuel and sell it in a competitive free market. As Rich himself points out, there is no free market as OPEC is manipulating the energy market. Rich probably needs government assistance to counteract OPEC's influence and get this beneficial project off the ground. It remains to be seen what Congressman Barletta will do about the situation.

Source: Kent Jackson, Entrepreneur wants to build $1 billion coal conversion plant, The Citizens' Voice, January 11, 2011.