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'Getting more from less': Arq wants to turn coal waste into oil products

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Arq is constructing the Corbin Project on a former U.S. Steel site adjacent to the town of Corbin, Ky. Its first phase, already fully funded, will produce just over 1 million tonnes over 12 years of its new fuel product made from coal. A second phase of the project is expected to produce a further 7 million tonnes of the product.
Source: Arq

A company turning coal waste into liquid fuel sees itself as a significant part of a broad transformation of the U.S. coal industry to take place in the next few years.

Arq says it is "getting more from less" with its process that breaks down coal waste into "micronized, high-performing and high-value energy sources." The company is marketing one product designed to be blended into fuel oil for the utility market and another to be mixed with bunker fuel for the marine market. Arq is also developing a product for blending with crude oil and advertises a refined pellet process for blending with metallurgical and thermal coals.

"We're taking the waste streams and we're breaking it down into a microparticle size and separating the individual parts of that to remove the impurities and create a highly concentrated, very pure form of hydrocarbon," Arq President Bill West told S&P Global Market Intelligence. "Our goal is to take advantage of the arbitrage between the cost of hydrocarbon in coal and the cost of the hydrocarbon in fuel."

Alternative uses of coal and coal wastes are attracting interest as domestic demand from electricity generators has declined. Ramaco Carbon LLC, for example, is developing a business based on using coal as a feedstock for carbon fiber it hopes to use for assorted products.

Arq's process begins with reclaiming coal waste from slurry lakes or other sources, which can be found in abundance in U.S. coalfields. The company estimates the coal industry creates more than one billion tons of coal waste every year — the energy equivalent, Arq said, of over five million barrels of oil daily.

Because the waste stream already exists, Arq is focused on creating energy from a cheap, readily available source that does not require any new mining or drilling. West said Arq's production cost is less than $10/barrel.

"That's the thing that attracts us the most," West said. "We do not see a market in oil, really at any point in our lifetime, that's going to drop below where we can be competitive."

Arq puts the waste coal through a series of milling techniques to liberate hydrocarbons from mineral matter and then isolates those hydrocarbons using a chemical process. Once the moisture is removed from the hydrocarbon product, it is ready for blending or pelletizing.

In a white paper produced by the company, it is estimated only a few hundred thousand barrels a day of oil products are currently produced from coal. The hope is that with its process, Arq has unlocked the secret to getting over capital and operational cost hurdles that have kept others from more widely tapping higher value from a coal feedstock.

Arq noted in its white paper that unlike other new or unconventional fuels taken to market, Arq's product does not require changes to the supply chain or to engines and other equipment that would use the fuel.

West said the mostly mechanical process Arq employs also costs a fraction of other alternative coal projects, such as gasification projects that can cost billions in capital to get off the ground.

"For a full-scale plant, we're looking at $150 million to $200 million range per plant," he said. "The economics are hugely different."

While the company is building a facility near Corbin, Ky., it is also evaluating new sites to add to a portfolio of other sites it owns and controls. The company boasts expansion plans underway in Australia, Europe, South Africa and India.

Arq COO Paul Groves said the company has been talking to major traders and has seen a lot of interest in the product. He sees an opportunity for Arq's high-energy density blending project as oil becomes more difficult and expensive to extract.

"The cost by traditional means for getting 10,000 barrels of oil equivalent a day is in the range of 2 billion to 4 billion dollars," Groves said. "With our process, we can do same for around 150 million bucks."

Arq's process could also solve two major issues for the communities where it operates. While cleaning up coal refuse left behind, the company can offer employment and investment in areas hit hard by coal job losses.

C.K. Lane, the manager of Arq's U.S. operations, said he has worked and lived in the coalfields, and the most exciting aspect of the project for him is providing opportunities there. He estimated the Corbin project will create 50 to 75 jobs in the region.