Lowering the Cost and Environmental Impact of Direct Coal Liquefaction through Wave Liquefaction Technology ABSTRACT

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1 Lowering the Cost and Environmental Impact of Direct Coal Liquefaction through Wave Liquefaction Technology James J. Strohm a*, Mark D. Bearden a, Benjamin Q. Roberts a, Tricia D. Smurthwaite a, Alan A. Johnson b, George Skoptsov b a Pacific Northwest National Laboratory, 902 Battelle Boulevard MSIN K2-44, Richland WA b H Quest, LLC, 1444 N. Euclid Ave., Pittsburgh PA * Corresponding author; ph ; james.strohm@pnnl.gov ABSTRACT Conventional coal-to-liquids (CTL) technologies require the use of relatively high temperatures (> 425 C), residence times (minutes), and pressures (> 100 atm) to rupture chemical bonds within the coal and overcome mass transfer limitations associated with hydrogenation of the coal and coal liquids. The correspondingly large CTL reactors, operating at high temperatures and pressures, lead to significant capital and operating costs, along with high water consumption and carbon dioxide emissions. To overcome the inherent challenges of conventional liquefaction, Battelle, Pacific Northwest Division and H Quest, LLC, have developed a novel CTL technology, named Wave Liquefaction. This new technology utilizes focused microwave/radio-frequency energies to activate and facilitate coal and natural gas conversions directly to liquid oils. Consequently, the working pressures can be reduced to as low as 1 atmosphere, bulk process temperature less than 200 C, and residence times less than 0.1 seconds. The Wave Liquefaction process has also been shown to be able to directly process natural gas with coal, thus potentially eliminating the need for separate hydrogen generation facilities, further reducing costs and the environmental impact of producing liquid products from coal. Continuous bench-scale studies of the Wave Liquefaction technology have been performed on a variety of coals including subbituminous, high-volatile bituminous and low-volatile bituminous coals. The projected oil yields from these tests were 2 to 4 barrels per ton, with evidence of higher API gravity, lower viscosity, and reduced asphaltene and aromatic content compared to conventional direct liquefaction processes. Current predictions for Wave Liquefaction suggest early nth plant installed plant costs under $36K per barrel of daily oil production and $30 to $41 per barrel for production costs (with 12%IRR and no by-product credit), which is substantially lower than the costs of competing technologies. 1.0 INTRODUCTION Coal to liquids (CTL) technologies can be broken down into two main classifications, indirect liquefaction and direct liquefaction. For indirect coal liquefaction (ICL) the coal is first gasified into synthesis gas (predominately CO and H 2 ) followed by Fischer-Tropsch synthesis to generate various chemicals and fuels. ICL processes typically operate under severe operating conditions (temperatures of ~1400 C and pressures between bar), resulting in high capital and operating costs. Furthermore ICL has the largest environmental footprint of CTL technologies due to high water consumption and high CO 2 generation (~ kg CO 2 per barrel of product)[1]. Direct liquefaction generally has a lower environmental impact and has improved thermal efficiencies for production of fuels and chemicals from coal. Direct coal liquefaction (DCL) technologies span a wide-range of thermal processing technologies including: 1.) pyrolysis methods similar to processes developed by Bergius in the 1920s; 2.) hydropyrolysis methods similar to Occidental; and 3.) solventbased processes including solvent extraction, solvent refining, and solvent donor processes developed by numerous institutions including, but not limited to, Chevron, Gulf Oil, C-E Lummus, Exxon, Hydrocarbon Research (now Hydrocarbon Technologies), Nippon, and Shenhua. Generally DCL

2 processes utilize thermal energies (with or without hydrogen, catalysts, solvents, and/or hydrogen donors) to cleave weaker bonds within the coal to generate various liquid, solid and gaseous products. Of the DCL technologies developed, variations of donor solvent processes have been advanced further and show improved economics over other processes. The current state of the art DCL technology can be considered to be catalytic multi-stage liquefaction (CMSL) developed by Hydrocarbon Technologies and the variations of this technology currently being commercialized by Shenhua. The process blends coal with a low-cost catalytic material (typically Fe-based) and hydrotreated recycle oil and is fed through two liquefaction stages that operate in the temperature range of C and a pressure of ~170 bar. Although numerous factors affect the economics of capital and operating costs associated with CMSL, the two-stage liquefaction reactor units typically have the highest plant costs followed by hydrogen production units. Operational costs for CMSL are increased due to the liquefaction reactors operating at high pressures, relatively high temperature, relatively long residence times and the need for high pressure/high purity hydrogen. Over the last few decades significant progress has been made in improving the overall oil yields, coal conversion, and costs associated with CMSL. However, high capital costs (CAPEX) and operating costs (OPEX) along with environmental considerations have prevented DCL technologies from being fully realized in the United States. To specifically address these challenges, Pacific Northwest National Laboratory along with H Quest, LLC have been actively engaged in the development of an alternative to conventional DCL, the Wave Liquefaction technology. Wave Liquefaction (WL ) technology has the potential to overcome many challenges inherent to conventional CTL technologies. WL process uses a unique reactor system to directly convert coal and natural gas to liquid products using microwave/radio-frequency energies at atmospheric pressure with a short residence time (less than 0.1 seconds). By eliminating the need for operating under severe process conditions with high throughput, WL CAPEX and OPEX are anticipated to be significantly less than current state-of-the-art. In addition, a WL system is able to process natural gas and coal directly. This would eliminate the need to separately generate hydrogen, and thus eliminates the CAPEX, water consumption, and carbon dioxide (CO 2 ) emissions associated with a hydrogen plant. The focus of this paper is to summarize experimental results and preliminary process and economic analysis performed on two baseline coals (a sub-bituminous and a high volatile bituminous) at a production rate of 75,000 barrels per day (bpd) liquid product. Experimental results demonstrate relatively high yields for an un-optimized, single-pass system and, importantly, low gas make, indicating reduction in secondary cracking reactions. To determine the economic feasibility of a WL process, a preliminary process and economic analysis was performed to compare WL technology to the state of the art CMSL baseline DCL technology based on two studies done for the Department of Energy that contained significant information on process configuration and individual plant block flow components [2-4]. 2.0 METHODOLOGY 2.1 Experimental Two coal samples were evaluated as part of the current study. The first coal (HQ#1) was a highvolatile bituminous coal provided by H Quest. The second coal (HQ#2) was a sub-bituminous coal obtained from the Penn State Coal Sample Bank (DECS-26, Wyodak). Ultimate and proximate analyses were performed on HQ#1 and HQ#2 by independent laboratories and the raw coal properties are presented in Table 1, along with Illinois#6 and Black Thunder coals as reported by the baseline studies. WL testing was performed using a bench-scale continuous flow reactor developed at PNNL for each coal under a variety of conditions. The bench-scale WL system utilizes microwave and/or radiofrequency electromagnetic energies to directly convert coal and natural gas (methane) to liquid products. Further details on the experimental testing and results are subjects of future publications, but a summary of the operational features of WL process are as follows:

3 As-received coal is physically mixed with an iron-based catalyst and fed to the reactor along with reactive gases (hydrogen and/or methane) with no additional coal drying or pretreatment The coal mix and gases are swept through a feed tube into a main reaction zone at atmospheric pressure and room temperature, were microwave energy is introduced using conventional microwave generators and components that are widely available Coal feed rates vary with given properties of a coal, but are typically in the range of grams per hour. With typical oil yields (pentane soluble liquids) >60 wt% on a dry ash free (daf) basis. Low gas yields <5wt% (daf) are observed even for low rank coals. Methane can be directly fed and converted along with the coal in the reactor system, with average methane conversion >50%. Table 1. Ultimate and Proximate Analysis of the Coals used in the Current Study Ultimate and Proximate HQ#1 Illinois #6 a HQ#2 Black Thunder b Analyses (wt%) (as-received) (as-received) (as-received) (as-received) Carbon Hydrogen Nitrogen Sulfur Oxygen (by difference) Ash Moisture Total 100% 100% 100% 100% Volatile matter Fixed carbon BTU/lb lower heating value 13,277 8,951 a as reported by Bechtel [2, 3] b as reported by SRI [4] 2.2 Basis for Techno-Economic Analysis To analyze the WL process and develop CAPEX estimates for a full scale WL process, an overall mass flow was developed using experimental results for liquid yields and gas compositions from bench-scale testing. Process flows were used as input to AspenPlus for modeling of unit operations for a full-scale WL process with a daily liquid production rate of 75,000 barrels per day (bpd). CMSL process was selected as a baseline technology for economic comparisons. Studies by Bechtel on a hv-bituminous (Illinois#6) coal [2, 3] and by SRI on a sub-bituminous (Black Thunder) coal [4] provide some of the most definitive economics and process analysis for DCL of representative United State coals. These studies served as a basis for comparison of WL process applied to HQ#1 and HQ#2 coals, respectively. Besides evaluating CMSL as applied to two different coal ranks, other differences in the two studies were the final products obtained from the overall CTL process and the methods of hydrogen production. Bechtel s analysis [2, 3] included raw liquefaction product upgrading using distillation and distillate hydrotreaters to produce a finished fuel product; while SRI s analysis [4] produced a synthetic crude as a final product. Hydrogen production units used within Bechtel s study were based on natural gas steam reforming, while SRI s study generated hydrogen from coal gasification. These differences can lead to drastically different CAPEX and OPEX requirements and final decisions on process configurations largely depend on site locations and feedstock prices. To obtain a best representation of the economic feasibility during the early stages of WL technology development and to avoid complications in the current study, direct comparisons for each coal were made to the baseline report for that particular coal rank. For HQ#1 the final product produced was a hydrotreated finished fuel using the same process configuration used in the Bechtel report. While for HQ#2 the final product was synthetic crude using the same process configuration in the SRI report. It should be noted that PNNL and

4 H Quest are currently evaluating process configurations producing both synthetic oil and finished products from each coal type. This full techno-economic evaluation with sensitivity analysis should be performed to determine the most applicable process configuration for any given coal and site location. 3.0 RESULTS AND DISCUSSION 3.1 Process Description Figure 1 shows a block flow diagram of the conceived WL process. To the degree possible, process elements similar to CMSL or well understood process elements were utilized. CAPEX was estimated using a combination of process modeling; literature values; parametric estimates; and, in the case of the WL reactors themselves, a process plant concept. The WL process flow shown in Figure 1 includes color shading to identify the basis of design and cost estimate for the individual plant areas. Unit operations shaded tan are unit operations in proposed WL process that are the same units used in the CMSL reports. CAPEX estimates for these factored unit operations were made using a scaling exponent of 0.8 to adjust equipment costs for the changed capacities for WL versus CMSL processing of each coal. Additional details for each additional unit operation with different estimating basis are discussed in section Coal Natural Gas Recovered Lt Gas Gas Purge Gas Recycle Compression / LPG Separation To combustion Sulfur Recovery Acid Gas Removal / H2 purification H2S Process Water Sulfur Ammonia Recovery Ammonia LPG Coal Prep Wave Liquefaction Solids / Tar Removal Liquid Quench Recovered Hydrogen Lean Oil Extract Recycle Spray Quench Solid Liquid Extraction (ROSE SR) Resid & Fines Atm / Vac Distillation Naptha Hydrotreating Gas Oil Hydrotreating Naphtha Light DIstillate Heavy Distillate Gas Oil Power Generation Slurry to power generation Conceptual ASPEN Simulation Literature ASPEN & IECM Factored Figure 1 Overall Wave Liquefaction process flow diagram for HQ#1 with product upgrading For the WL process, the coal preparation section includes grinding of the as-received coal, but not cleaning or drying. Coal cleaning is not necessary because the process is compatible with incoming fines and debris as verified during experimental testing. Coal and natural gas are fed into the reactor with a gas recycle stream consisting of light hydrocarbons (C1-C2), hydrogen, and acid gases. A purge stream from

5 this recycle removes sufficient gas to provide hydrogen to the hydrotreaters and remove acid gases. A heavy oil recycle stream is also fed to the reactor as a mechanism to recycle residuum to extinction. Products from the liquefaction reactor are sent to a spray-quench tower where solids and heavier tar ( 850) are removed. The solid/tar bottoms are sent to a critical solvent deashing plant, where heavy oil is extracted, used as a quench spray, and the net heavy oil is recycled to the WL reactor. The gas product from the quench tower goes to a pre-flash tower where light hydrocarbons (C1-C4) along with hydrogen and acid gases, are separated from the main liquid product. The liquid product is sent to atmospheric and vacuum distillation where the major liquid products are separated. The gases from the pre-flash tower are compressed and liquefied propane and butane products removed. The remaining uncondensed gases are recycled back to the reactor or sent via a purge stream to a gas-treatment system where carbon oxides, ammonia, and sulfur-containing gases are removed and hydrogen is recovered. Recovered hydrogen is sent to the hydrotreaters, while ammonia and sulfur-containing gases are sent to a Claus plant for sulfur recovery. 3.2 WL Process Analysis of HQ #1 (hv-bituminous Coal) CMSL Baseline Adjustment for HQ#1 Due to compositional difference between HQ#1 and Illinois #6 coals (shown in Table 1), adjustment of CMSL CAPEX and OPEX estimates were made based on differences in sulfur, hydrogen, and ash content. These adjustments were made assuming that the process would achieve the same heteroatom removal and product carbon to hydrogen ratio as for the coal used in the original study (Illinois #6). Total liquid product production was kept constant and coal feed rates adjusted accordingly. The equipment was scaled to account for the feed rate changes resulting from the different coal. Economic parameters were also adjusted to bring cost to a year 2010$ basis using the Chemical Engineering Plant Cost Indices (CEPCI). Table 2 shows the CAPEX for the major process components both from the original study (1991$) [2, 3] and CAPEX adjusted in this study to reflect 2010$. Additional adjustments for HQ#1 coal were made using a scaling exponent of 0.8 to estimate equipment costs for changed capacities due to compositional differences between HQ#1 and Illinois coal. Table 2 Major Unit Operation CAPEX as Reported by Bechtel [2, 3] for Illinois #6 Coal and Adjustments to 2010$ Made in this Study for Illinois#6 and for HQ#1 Coals WL Process Material Balance for HQ#1 A mass balance was developed for HQ#1 using experimental data for the product yields and gas make. The mass flow was then adjusted as follows:

6 An elemental mass balance was developed to match feed and product carbon, hydrogen, sulfur, nitrogen, oxygen, and ash. Product rates and carbon-hydrogen ratios were assumed to match CMSL ratios as provided in Bechtel s CMSL study [2, 3]. Experimental work, to be reported in future publications, have demonstrated that WL produces an oil composition with improved properties compared to CMSL which could further favor WL material balances and economics. Heteroatom distribution was assumed to match CMSL A recycle methane-hydrogen stream was added with an assumed 50 percent conversion of the methane to product, hydrogen, and char (experimentally derived average methane conversion) The resulting mass balance was then used for modeling to predict WL process power requirements and unit operation scaling factors. The final, overall mass balance is shown in Table 3. This includes an adjustment for hydrotreating the C5+ liquid product, with changes in liquid yield and gas make. Table 3 Estimated Mass Balance and Process Flows HQ# Power Estimation Possibly the most significant factor for the economic viability of the WL process is the process power requirement. The largest contributors to the process power demand are expected to be microwave power used in the WL reactor. Complex reaction chemistry and phase behavior for a large number of chemical compounds in the reactor preclude direct heat of reaction and phase equilibrium determination. Fortunately, a reasonable estimate can be made by using AspenPlus.

7 For this analysis, 1) the feed components, temperature, and pressure conditions were specified; 2) the product distributions, temperature, and pressure were specified; and then 3) the enthalpy difference between the reactants in and products out were calculated by AspenPlus. Because enthalpy is a state function, the resulting enthalpy difference is a reasonable analog for enthalpy changes induced by the WL process. The specified feeds (i.e., methane [natural gas], hydrogen, and coal) were delivered to a reactor at low pressure and temperature. Specified products (i.e., unconverted methane [natural gas], hydrogen, carbon oxides, water, light hydrocarbons, hydrocarbon liquids in the vapor state including single and multi-ring aromatics, paraffins, and naphthenes) were produced by the reactor at a temperature of 1000 F (637 C). The exact product hydrocarbon compounds were not fully resolved, but were assumed to be hydrocarbon liquids with a boiling range represented by 39 hypothetical components with properties, including heat of formation calculated by AspenPlus. A Microsoft Excel input calculation block was used to introduce the feed coal properties, gas quantities, and output conditions into an RYield reactor block that calculated the enthalpy difference between the inlet and outlet streams. This enthalpy difference between the feed and products in MMBtu/hr was then converted to electric power input to the process. This power requirement did not include heat loss, radiation loss, or conversion efficiency of electricity to microwaves or acoustics. The power estimate to produce 75,000 BSPD in this manner is 450 MW. A net power for the process is initially estimated at 600 MW to account for electrical conversion efficiency to microwaves, including the power factor and additional process power requirements CAPEX Estimating The CAPEX for the major elements of the process block flows were developed using various approaches depending on the degree to which the process was known, or similar to the CMSL. Unit operations considered to be similar to CMSL and scaled appropriately were: Product hydrotreating, ammonia recovery, and sulfur recovery CAPEX were assumed to be identical to CMSL and scaled based on mass flow rate using a scale exponent of 0.8 Hydrogen purification, solvent deashing, and gas plant were assumed to scale with mass flow rate, with a scale exponent of 0.8 Off sites with the exception of power generation were assumed identical to the CMSL Coal preparation from CMSL was used with elements of drying and cleaning removed Unit operations estimated based on other methods are outlined and described as follows: 1. WL Reactors The WL reactors were assumed to be fabricated from simple steel pipe acting as a waveguide with microwaves, recycled gases, and catalyst directed down the axis. Coal is introduced into the pipe a short distance from the microwave entrance. A maximum of 5 MW was assumed for the microwave reactor. There are assumed to be 6 trains with 20 reactors, 1 hot quench vessel, and 1 cold quench vessel for each train. Two gas swept pulverizers are fed from two crushed coal silos. 2. Quench Towers The quench towers were assumed to consist of six hot quench towers and six cold quench towers with corresponding pumps and exchangers. The quench tower simulation results from AspenPlus (providing quench tower size, heat exchanger area, and pump size) were passed to Aspen Process Economic Analyzer that produced an installed cost for this equipment. In the model, the WL products enter the bottom of a large vessel and are contacted by a countercurrent stream of liquid flowing from the top of the vessel through various arrangements of grid decks, trays, or tower packing used to promote good gas-liquid contact. Some of the WL product vapors condense and are removed from the partially cooled gas stream by gravity. Coal solids are also largely removed from the gas into the falling liquid. Then, the hot liquid and solid slurry at the bottom of the column

8 are pumped through heat exchangers for cooling. Next, the cooled liquid flows, under pressure, to the top of the tower where the cycle repeats. Heat from the circulating oil generates medium pressure steam in the heat exchangers. A second quench tower reduces the gas temperature to about 105 F and condenses additional liquid components from the gas by transferring the heat to cooling water. Gas is delivered to the gas plant for further treatment to remove heteroatoms. The optimum energy recovery and tower overhead temperatures were believed to be near optimal; however, no optimization was performed. 3. Atmospheric and Vacuum Liquid Separation Distillation Columns Atmospheric and vacuum liquid separation distillation columns were estimated from Gary et al. [5]. Costs in 2010$ were $82.9 million per atmospheric crude unit of 75,000 BPSD and $40.3 million for a vacuum unit of 15,000 BPSD. 4. Power Plant A commercial-scale power plant was assumed to provide power to the WL CTL plant. The power plant size was set at 600 MW to provide power for the WL reactors, gas compression, pumps, other electrically powered systems, and steam for process distillation and plant auxiliaries. The power plant was estimated as a full green field power plant using the Carnegie Mellon/DOE Integrated Environmental Control model [6]. This model includes a substantial amount of equipment (e.g., coal pulverizers, cooling tower, electrical distribution, water treatment, buildings, and site preparation) that supports the WL plant as a whole. In this estimate, the entire power plant cost is maintained and adjustments made to other OSBL costs to prevent redundancy. The fuel for the power plant was assumed to be the liquefaction char. This char has high ash content and therefore, a circulating fluidized bed (CFB) system was selected as the most appropriate system. A CFB can burn high-ash, low-volatile fuels. The 2010$ estimated overnight CAPEX for a net 600 MWe green field power plant (632 MW gross) was $1,138 million. The plant included a CFB boiler with bed limestone addition, a baghouse, and a natural draft cooling tower. Table 4 HQ#1 CMSL and WL CAPEX CAPEX Comparison HQ#1 Table 4 provides a comparison between the CAPEX for CMSL and WL processes for HQ#1 coal. Because of the conceptual nature of WL technology, a contingency of 30% was added to the WL

9 associated equipment. Even with this addition, WL CAPEX is estimated to be about 40 percent less than the CMSL CAPEX. The major difference is due to the significantly lower cost of the WL reactor system itself. This is primarily a result of differences in pressure and residence time for the two processes. CMSL operates at ~3200 psia and a residence time of minutes, versus near atmospheric pressure and a residence time of seconds for WL process. The CMSL reactors are therefore significantly larger and more costly. Another major difference is the cost of hydrogen production and hydrogen purification associated with CMSL. Finally, it appears that WL process does not require coal to be cleaned or dried, although it may be economically desirable to do so. 3.3 WL Process Analysis of HQ#2 (Sub-Bituminous coal) The comparison baseline for HQ#2 was derived from SRI evaluation of CMSL technology applied to a sub-bituminous coal (Black Thunder) [4], which is very similar to the Wyodak coal used for the HQ#2 studies (mined from the Black Thunder Mine within the Powder River Basin). With the exception of bringing costs to a 2010$ basis, no adjustments were made to the CMSL parameters based on coal properties WL Material Balance for HQ#1 Similar to the approach to HQ#1, a process mass balance was developed for HQ#2 based on experimentally derived product balances from testing of as-received coal mixes (with ~26wt% moisture). Experiments performed on both as-received and dried HQ#2 coal generally resulted in similar product yield distributions indicating the advantage of WL process being able to handle lower rank / high moisture coals and lignites. Table 5 Mass Balance and Process Flow Estimates for HQ#2 Coal First, an elemental mass balance was developed to match feed and product carbon, hydrogen, sulfur, nitrogen, oxygen, and ash. A conversion of 60 percent was selected as an average oil production. Methane consumption was assumed to approximate experimental results and adjusted to match hydrogen

10 elemental balance. Heteroatom disposition was assumed to match CMSL. No product hydrotreating was included. The resulting mass balance is shown in Table 5. The CAPEX estimates for HQ#2 were more simplified and used factored estimates from HQ#1 for WL process power and equipment requirements. As with HQ#1, CMSL CAPEX was adjusted to 2010$ and byproduct recovery was assumed the same for CMSL and WL. The major process configuration differences between the analysis for HQ#2 and HQ#1 is that for HQ#2, the CMSL plant produces hydrogen from coal gasification and no product hydrotreating is included. Coal gasification to produce hydrogen is inherently more capital intensive than natural-gas reforming, however, this was the approach taken by the study because of feedstock price differences [4]. Analyzing alternate configurations for CMSL was beyond the scope of this effort, thus product hydrotreating was not included for CMSL of Blank Thunder coal and therefore not included for WL estimates for HQ#2. Table 6 shows the CAPEX comparison between CMSL and WL processing of HQ#2 coal. Similar to HQ#1 the main CAPEX difference between the two processes is the reduction in the liquefaction reactors due to the ability of WL to operate under mild conditions, even with 30% contingency added. Furthermore the costly gasification plant for CMSL can be eliminated due to hydrogen production within the WL reactors. Lastly WL technology has the ability to process high moisture coals with little to no negative impact on the oil product yields, resulting in additional CAPEX savings compared to CMSL technologies where some degree of coal drying is necessary. Table 6 CAPEX Estimates for CMSL and WL of HQ#2 3.4 Economic Evaluation A simple economic assessment was performed, based on achieving a 12 percent IRR on equity using the assumptions given in Table 7. This approach was used to establish a comparison basis between CMSL and WL to eliminate capital financing or other economic assumptions as a source of variability. Additional estimating bases included: Operating variable and fixed costs were assumed to be a function of CAPEX. Coal and natural-gas feedstock prices were derived from Energy Information Administration values for coal prices per BTU as delivered and natural gas Henry Hub spot price. No value was provided for byproduct production (note that in the case of CMSL, a significant amount of C3 and C4 is generated and in the case of WL, a byproduct ash concentrate).

11 Table 7 Economic Parameter Assumptions Financial Parameters Escalation during construction 3.60% % debt 50% % equity 50% % interest on debt 4.50% Years of loan 15 Income taxes 38% Economic life, yrs 20 Years, construction 5 Distribution during construction 10%, 30%, 25%, 20%, 15% Depreciation 20 year 150% declining balance Equity IRR 12% Other factors Variable costs, % CAPEX 1.5% Fixed costs, % CAPEX 3.5% Escalation for fuel and expenses 3% Catalyst cost, $/ton $100 Catalyst, % coal feed 5% Capacity factor 85% Annual operating hours 7446 The results of from the simple economic analysis for WL and CMSL are shown in Table 8. As a result of WL operating at lower pressures and temperatures than CMSL, the impact on the final estimated product value is reduced for both HQ#1 and HQ#2 coals. For HQ#1 it is estimated that hydrotreated finished fuel products are valued at ~$41/bbl to achieve a 12% IRR, which represents a cost reduction of ~21% for similar products produced via CMSL. WL processing of HQ#2 is estimated to yield synthetic crude valued ~43% lower than CMSL to achieve the same desired 12% IRR. The increase in the estimate cost savings for HQ#2 over HQ#1 is primarily due to the increased difference in CAPEX required for HQ#2. It is noted that the estimated cost savings between HQ#1 and HQ#2 cannot be directly compared since the final products produced in each estimate are different. Evaluation of alternative products and process configurations are necessary to realize the full potential of WL technology for the production of high-valued fuels and chemicals from various coals. However, based on preliminary analysis, WL process is a technically and economically viable route for direct coal liquefaction. Table 8 Summary of the Economic Analysis for WL Compared to CMSL 4.0 CONCLUSIONS Preliminary process and economic feasibility studies of a novel direct coal liquefaction technology, Wave Liquefaction, demonstrate the potential of using alternative technologies for producing fuels and chemicals from coal. Based on experimentally derived product yields, preliminary process material

12 balances were developed for a 75,000 bpd WL process. CAPEX and OPEX estimates for WL process were developed and directly compared to the existing state-of-the-art CMSL. Due to the unique application of microwave and radio-frequency energies WL enables high conversion of coal to oil products (>60wt%, daf) at mild operating conditions results in substantial CAPEX savings. Through the ability to directly co-process coal and methane within a WL process, additional CAPEX savings are possible by eliminating the need for separate hydrogen production units. The preliminary technoeconomic analysis performed in this study demonstrates the economic feasibility of WL processes for the direct coal liquefaction of coal. Production of liquid fuel products is estimated to have daily production costs between $30 and $41 per barrel of liquid product at 12% IRR and no by-product credit. 5.0 ACKNOWLEDGEMENTS Wave Liquefaction technology development performed at Pacific Northwest National Laboratory is supported by H Quest, LLC under contract numbers and H Quest, LLC, the general partner of H Quest Partners, LP, is a privately held technology company, based in Pittsburgh, Pennsylvania, focused on the development and commercialization of novel hydrocarbon conversion technologies. 6.0 REFERENCES [1] Headwaters Inc and Axens form Direct Coal Liquefaction Alliance. Green Car Congress. [2] Amoco, Bechtel. Direct Coal Liquefaction Baseline Design and System Analysis Contract No. DEAC22 90PC89857, Quarterly Report July - September Pittsburg, Pennsylvania1992. [3] Amoco, Bechtel. Direct Coal Liquefaction Baseline Design and System Analysis Contract No. DEAC22 90PC89857, Quarterly Report October - December Pittsburgh, Pennsylvania1992. [4] SRI. Highly Dispersed Catalysts for Coal Liquefaction, Phase 1 Final Report 22 March 1995, Contract No. DE-AC22-91PC Menlo Park, California: SRI International; [5] Gary JH, Handwerk GE, Kaiser MJ. Petroleum Refining: Technology and Economics. Fifth ed: CRC Press; [6] Carnegie Mellon University s Integrated Environmental Control Model (IECM).