Coal-to-Oil Could Possibly Yield $35 a Barrel Oil?

Researchers at the University of Texas Arlington have succeeded in producing Texas intermediate-quality crude oil from lignite, an abundant and cheap variety of coal. Their discovery, which was reported in Sunday’s Dallas Morning News, is a major step toward converting the country’s enormous coal reserves into a transportation fuel and reducing the country’s dependence on foreign oil.

By using relatively inexpensive microrefineries that cost $5 million a piece (versus the $800 million to $6 billion cost for a traditional refinery), the researchers’ believe they can generate two barrels of oil from each ton of lignite. With lignite forecast to cost $12 to $14 a ton, this equates to $35 a barrel oil.

According to the Department of Energy’s Energy Information Administration, the United States has the world’s largest known coal reserves, about 263.8 billion short tons. This is enough coal to last approximately 225 years at today’s level of use. In 2006, the amount of coal produced at U.S. coal mines reached an all-time high. Coal is mined in 27 states. Wyoming mines the most, followed by West Virginia, Kentucky, Pennsylvania, and Texas. The largest lignite deposits can be found in Texas and the Dakotas.