Could this 'clean coal’ plant proposal be answer to Indiana’s 17 billion tons of reserves?

When it comes to coal, the United States is what the Middle East is for oil. 

That fact is not lost on an industry competing for relevancy at a time when it's undersold by natural gas and renewable energy. It's not lost on the coal-producing towns in the nation that have long relied on the mineral for jobs and economic development.

And it's certainly not lost on Greg Merle, whose company is pitching what he hopes — what he believes — might just be the answer for a declining industry desperate to remain viable.

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Merle is the president of Riverview Energy Corporation, which is proposing to build a "clean coal" diesel plant in Spencer County. It would be the first such plant in the U.S., quite possibly pushing Indiana to the forefront of the nation's often contentious and political debate over clean coal.

"We firmly believe this is an important project," Merle said, "not just for us and the state of Indiana, but for the U.S. and the world and the energy industry as a whole.

"For the near term, we are at least going to slow down taking a lump of coal and lighting it on fire, but that doesn't mean we don't need fuels." 

But as energy companies, local development corporations and mining communities cling to the promise of "innovative" technologies to keep coal relevant, skeptics are asking whether the risk of such projects — which often involve cost overruns, produce an expensive product and emit significant pollutants — is worth the reward.

"We need to talk about this as an experiment," said John Blair, president of an Indiana environmental and public health advocacy group, "which is what this actually is." 

On that idea, there is agreement. What Merle is proposing in Southern Indiana is nothing short of a living laboratory to test an unconventional technology — an experiment that could either give new life to the nation's most abundant and derided energy source or drive yet another nail into coal's coffin.

'This process likes coal'

Just within Indiana, this project is a big first: The first new coal facility to be applied for in the state in several years. In that time, many of the state's current coal plants have closed, shrunk or transitioned operations to other fuel sources.

The Riverview plant won't burn or gasify coal for electricity. In a process known as direct coal-hydrogenation, the plant would combine the carbon from coal and hydrogen from the natural gas at high heat and pressure to produce diesel fuel and naphtha, a flammable liquid mixture that is often used as a solvent or diluent.

More specifically, Riverview Energy proposes to use 1.6 million tons of coal to produce 4.8 million barrels of what it calls clean diesel and 2.5 million barrels of naphtha on an annual basis — all without burning or gasifying the mineral, its proponents emphasize.

That coal will come directly from Indiana's reserves, of which 17 billion tons are readily recoverable with today's technologies, according to Indiana University's Geological and Water Survey for the state. That could last more than 500 years at current production rates.

"The beauty of it to me, the icing on the cake for this project, is that it wants to buy its raw materials right here in Indiana," said Tom Utter, executive director for the Lincolnland Economic Development Corporation focused on advancing Spencer County's economy.

Utter and the LEDC have been integral in recruiting the plant to the town of Dale after the state's economic development group informed him the project and Riverview Energy were looking for a home.

Merle said he found it in Spencer County.

"This process likes coal, Illinois basin coal, that is abundant in that area, so it's strategically located," Merle told IndyStar. "And Indiana itself is a very pro-business state and enjoys development projects like this one, so that's an obvious reason to locate there." 

Although proclaiming the ingenuity of this technology and its introduction to the country, Merle, in the same breath, made sure to stress the reliability of the process. The technology, in fact, is over a century old and won the Nobel Prize in 1931.

"It's an established technology," the six-generation coal industry executive said. "It works and is a process that does work and has worked in the past."

It most notably has worked in South Africa during the apartheid in the mid-20th century and in Germany during World War II — in other words, during times and in places when access to liquid fuels was scarce and those countries were then forced to create them out of coal.

But those circumstances also fuel skepticism.

"I don't think we are desperate for liquid fuels in the U.S. right now considering we are exporting them," said Blair, director of Valley Watch, a nonprofit focused on protecting the public health and environment in areas facing polluting industry.

"This is an exercise in futility," he told IndyStar. "I just don't understand how this project is where it is, except some folks have been naïve enough to buy the pitch, and that has made the project take off."

Can coal compete?

That pitch has centered largely around the economics of the project — which Riverview Energy calls a $2.5 billion investment in Indiana and energy independence — and its potential for the area.

It's a pitch Spencer County has heard before, from companies such as AK Steel and AEP, who also have plants in the area. Riverview's pitch comes with the promise of significant revenue for local business as well as jobs, for which the company said it is committed to hiring locally. There could be more than 2,000 construction jobs to build the plant and as many as 225 permanent, high-skilled jobs to operate the facility once complete, not to mention the coal mining jobs that would be bolstered by the plant's operation.

"I like jobs that pay high-skilled wages and benefits," Utter said. "And I like technologies that are emerging applications and things coming over the horizon because my young people here are looking for those kinds of jobs."

Longtime Dale resident Mary Hess would disagree.

She said she has seen these promises made for jobs and economic growth in the area around these plants, similar to when AK Steel's facility opened in the late 1990s. Then she watched as many of the jobs went across the Ohio River to folks from larger Kentucky cities, she said, and the town the factory calls home is still just as, if not more so, sleepy.

Hess, along with several other town residents, put together a petition with more than 200 signatures that they delivered in November to the Dale Town Council, asking them to reconsider the proposed project. The council, in April of 2017, had already voted to annex 512 acres for the plant just a mile from Dale's main street.

"Economically our area is looking for something, so people think they can get something in on us," said Hess, adding that some were excited about the potential but many were apprehensive. "I don't begrudge anyone getting a job, but I think we can do better in what we bring here."

City officials did not return requests for comment, but have said in meetings that they don't know much about the project, but know it's good, according to residents in attendance. The council did not say much when presented with the petition, according to Hess, but used the opportunity to introduce Utter of the LEDC.  

"I'm looking to raise the economic standard of living and am looking for emerging technologies that use our resources," Utter told the Star. "Coal is a perfect fit, and this process is an innovative Nobel Prize-winning process that has a strong market in our fuel-hungry society."

While there is a healthy demand for fuels in today's society, some industry experts mention that there also is a strong stream of supply with prices remaining relatively low — low enough that fuels produced from the proposed Dale plant would be noncompetitive, those experts say.

"In terms of the engineering process," said Jay Gore, director of Purdue University's Energy Center in Discovery Park, "it is a very expensive process and it can't compete with natural [fuels] at the moment and or any time in the near future."

Cost projections for the project are roughly $2.5 billion, according to Riverview Energy. Thus far, everything has been privately funded, Merle said, with plans to continue financing that way for the immediate future. Still, the company "probably eventually" will explore all options — including any available incentives and funding from the local area or state, for example, or a U.S. Department of Energy grant.

The founder of CoalSwarm, a project to monitor and address the impacts of coal and move to cleaner energy sources, argues that a big capital project of this scale just is not viable. As oil prices fall, renewable energy becomes cheaper and quicker to implement and electric cars grow more prevalent, Ted Nace said, this proposal becomes outdated.

"The dinosaur giant projects like this are a relic of the past," he told IndyStar. "A plant like this takes so long to develop, so you are trying to guess what oil prices will be a decade from now when it's hard to guess what oil prices will be in just two to three years."

'Fair to remain wary'

Because Riverview's plant would be the first of its kind in the United States, it's difficult to look at the track records of economic viability for such projects. Even the few existing plants using this technology, located in places with less democratic regimes, are hard to track. According to Merle, the only other plants of this kind are located in China and Russia.

"With China and Russia, who knows what it costs?" said David Schlissel, an industry expert at the Institute for Energy Economics and Financial Analysis. "The government is actually paying, so you can’t really tell what it costs."

Schlissel is unfamiliar with the practicalities of coal-to-liquid technology, being more familiar with plants that have tried to gasify coal to burn for electricity. He was a vocal opponent of Duke Energy's Edwardsport plant in Indiana and a similar project in Mississippi, which both carry a legacy of cost overruns and expensive electricity.

Merle acknowledges that similar coal-to-fuel projects and attempts in the past have not been economically feasible. 

But he draws a clear distinction between his hydrogenation process and that of gasification, saying the latter is more energy intensive. Diesel from the Dale plant wouldn't be competing with natural gas in the same way coal gasification does, and in this case ratepayers are not taking on the risk. 

Still, there are many questions about whether this kind of project will bear fruit. The complex technology behind the plant is licensed by KBR, a global energy and logistics firm. The company provides a wide variety of services, but where coal-to-fuel projects are concerned, the results have been mixed.

In its 2017 SEC filing, KBR called its coal gasification technology "revolutionary and innovative," announcing that it had been successfully deployed at the Kemper County plant in Mississippi. But the project, developed in partnership with the U.S. Department of Energy and Southern Company, was billions of dollars over budget. After about a year of gasifying coal, the plant was ordered to switch to natural gas because the electricity it coal gasification produced was too expensive.

Another KBR coal-to-liquids project — also billed as the first-of-its-kind in the United States  —  was proposed in Medicine Bow, Wyo., but never completed. More locally, KBR technology was licensed for the Ohio Valley Resources ammonia fertilizer plant in Rockport, Ind. — a project that was announced in 2012 but still hasn't gained any traction and was ultimately halted.

When asked about these other projects, KBR said through a public relations representative that the process that would be used at the Dale plant is not the same as the ones used in these other projects. Their response also pointed to the difference between direct coal hydrogenation and coal gasification, adding that "comparing the two is like comparing an apple to an orange."

However, multiple sources who work in energy research told IndyStar that the processes were comparable in their complexity, expense and risk.

Other plants across the country have suffered a similar fate. And that's without considering the company's more controversial past as a former subsidiary of Halliburton.

Although the company has since restructured, KBR has been plagued by controversy from its days under the company. Notably, KBR recently wrapped up a lawsuit brought by over a dozen Indiana National Guardsmen who alleged that KBR knowingly exposed them to hexavalent chromium in Iraq during Operation Restore Iraqi Oil. The chemical is a potent carcinogen best known from the film Erin Brockovich. KBR's former CEO was also convicted and sentenced to prison for accepting bribes from Nigerian officials.

Since its more controversial days, KBR has restructured, hired new leadership, and enhanced its compliance program, according to the company's website. Asked whether KBR's decade-old past should count against them today, Karen Woody said that that people should recognize efforts to change a company's culture, but it's fair to remain wary.

"I think citizens should be skeptical," said Woody, an assistant professor of Business Law and Ethics at Indiana University who has worked on white collar criminal defense. 

"I think everyone should be aware of keeping people honest on these things," she added.

It's unclear how much involvement KBR would have in the Dale project. But even Merle has had trouble bringing this plant to fruition in the past. Known then as Clean Coal Refining Corporation, Merle's company previously attempted the same project in Vermillion County along Indiana's Eastern border. Initial talks began in 2010 and serious negotiations followed in 2012 before the proposal fizzled in 2016.

At first the area seemed to be a good fit for the facility, according to the current executive director for the Vermillion Rise Mega Park, with proximity to robust water and natural gas resources as well as being fairly remote. But things were taking a long time to develop and energy markets changed dramatically since talks began, said Bob Grewe, who was not on the board during this time but has learned of the situation.

"This is a very capital intensive program and I got the impression that financing became a challenge," he told the Star. "That coupled with the changing energy markets all kind of came into the field of vision, and so we kind of decided to move on."

Merle said the departure from Vermillion County was a business decision, and that Spencer County is a better fit with enhanced proximity to the resources his plant needs. And what stalled projects before, he now sees as the right time to light the fire. 

"Changing energy economics has been the major driver for making the direct coal-hydrogenation process viable at this time," Merle said. "We've done our homework — we've been in the energy market since 1843, so we have some experience in gauging markets."

Utter said he became aware of the Vermillion County attempt during his efforts to recruit Riverview to Spencer County. He said he asked enough questions to satisfy that the project did not halt for environmental reasons, but did not investigate further.

"I have no concerns about the economics of this project or the financing," he said. "I just am doing the very best I can to make a home for the project, and whatever reason caused them not to go somewhere else is just my good fortune."

'Clean coal' or just cleaner

Though Utter's concerns may have been placated, many area residents and environmentalists still have serious environmental and public health concerns about the proposed Dale plant.

Merle, in his discussions of the plant, continues to emphasize that coal hydrogenation does not burn or gasify coal and thus will have a lower carbon footprint and not produce waste or "leftovers" to be shipped to a landfill.

"Yes, I would consider this a clean coal project and would definitely consider this a cleaner coal technology than burning the coal," he said. "Especially when much of the diesel that comes out is much cleaner than the petroleum diesel that currently is produced from oil."

That's true, at least in theory, because much of the sulfur from coal will be removed during the process. 

Utter, in his support, lauds what he views as the environmental responsibility of the plant — though he wouldn't necessarily call it a "clean coal" project.

"I've never considered coal to be a dirty thing," said the southern Indiana resident and Kentucky native who often keeps a piece of coal on his office desk. "It's another commodity, like digging up dirt."

All industrial projects that Utter and the LEDC recruit must go through a permitting process with the state's environment management agency, and Utter said he is "very comfortable" with any project that passes the screenings and is awarded a permit by those government entities that monitor and regulate such facilities.

Some of those other projects that Utter has brought to Spencer County include the AK Steel facility and the Rockport coal-fired power plant, as well as Indiana Gasification and an Ohio Valley Resources ammonia fertilizer plant, both of which were ultimately not successful.

Still, the very permit that Riverview applied for with IDEM illustrates its potential emissions. The submitted application is for a Title V permit that, according to the department's own Citizens' Guide, is "typically issued for very large, complex processes that have a high level of potential emissions."

Although not burning coal, carbon dioxide would still be released through burning natural gas for the process — as much as 2.2 million tons of the greenhouse gas per year, the application says. Merle has said he does not currently have plans to capture the carbon dioxide being released from the plant. According to the application documents, the plant could also emit nearly 750 tons a year of pollutants such as nitrogen and sulfur dioxides in addition to hazardous air pollutants, which are substances known to cause cancer or ill health effects. 

"This plant isn't clean by any means," said Neil Carman, the clean air director for Sierra Club's Texas chapter who has worked in this field for nearly four decades.

Many plants today are coming in under 1,000 tons of pollutants emitted annually, the chemist said, in comparison to those from decades ago that would each release more than 10,000 tons into the air every year.

"But the argument is that's still not good enough with all the other technologies we have possible," Carman added. "So with about 740 tons, maybe it's lower polluting than a lot of coal plants out there, but that still is putting these pollutants in the air when we have other sources of fuel and energy with no emissions."

Especially because the potential Dale plant emissions would contribute to an already very strong contamination cocktail, according to Norma Kreilein, a Southern Indiana board certified pediatrician.

The Daviess County doctor — who treats many children and is called in for resuscitation of sick newborns from Spencer County — has been studying for years the connection between pollution and infant mortality. With nearly a handful of super polluters already calling the region and county home, Kreilein says she can't fathom adding another to the already burdened area.

"Pollution causes direct damage to tissue, that's why it's regulated," she said. "This coal to diesel plant is just the tip of an iceberg, and would be built literally in the shadow of the super polluters we already have."

"Despite the clear health problems that I and many others in my field see, they just keep bringing more," Kreilein continued. "There is no reason to propose and build such a thing here."

Looming questions & future plans

Gore, with Purdue's Energy Center, said that when evaluating the project it matters whether one is taking a purely local or global view of the proposal and its larger goals. Regardless of whether Indiana or the U.S. decide to use coal, the professor and engineer said countries such as India and China will use it and in greater quantities because of their population.

"So if we take a global view and say we recognize those countries have no choice but to use coal, then do we want to be able to export and sell them cleaner technologies?" he asked. "But from a local view, asking if we want to invest in coal technology right now and right here, then the answer to that may be possibly not, because we have other sources supplying us sufficiently and efficiently."

Merle is taking a bit more of the global view, saying that the world often looks to the U.S. for the development of these types of projects and technologies. Riverview's intent is to build the nation's first plant in Spencer county, but the company aims to build more if successful.

"We are unlikely to see new coal-fired power plants in the U.S. with where things are today," Merle said. "So I do view this as a much cleaner use of such an abundant resource."

Blair of Valley Watch and Nace of CoalSwarm ask if we need to use it at all. Both argue that the cleanest and most valuable way to use coal is to leave it in the ground.

"I think we are making a mistake in 2018 to pursue this method instead of saving it for the future if we need it," Blair said. "When we run out of oil, then we can talk about this."

Both also worry that despite what they feel are serious economic and environmental concerns — concerns that have prevented many similar projects from moving forward in the past — that this proposal could inch closer to the reality of construction and operation. 

They also are well aware of President Trump's promise to bring back the coal industry.

"With things politically and the current push behind coal and clean coal," Nace said, "there certainly could be some more noise now for a project like this than it has in the past decade."

The ball is in IDEM's court, at the moment, as they review the permit application and analyze its calculations and projections. The next step would have the agency write a preliminary draft permit to be available for public review and comment and consideration by the federal Environmental Protection Agency.

Officials have not said where they are in the process, but IDEM has 270 days to issue a final decision on this permit application. Although waiting on that decision, Merle said Riverview is estimating a three year time frame to operations. 

Sarah Bowman and Emily Hopkins cover the environment for the star. Contact Emily at (317) 444-6409 or emily.hopkins@indystar.com. Follow them on Twitter: @_thetextfiles. Call Sarah at (317) 444-6129 and follow her on Twitter and Facebook: @IndyStarSarah.

IndyStar's environmental reporting project is made possible through the generous support of the nonprofit Nina Mason Pulliam Charitable Trust.