Kentucky Natural Gas Plant from Coal

NEW YORK -(Dow Jones)- ConocoPhillips (COP) and Peabody Energy Corp. (BTU) said Tuesday that the companies have filed an air permit to build a plant in Kentucky that would convert coal to natural gas.

The project could be the first in a build-out of coal-to-natural-gas facilities by ConocoPhillips and Peabody in the U.S., said Vic Svec, a spokesman for St. Louis-based Peabody. The companies are still conducting a feasibility study to determine whether they'll go forward with the Kentucky plant, however.

"We'd certainly like to view this project as a scaleable technology," Svec said.

Svec declined to estimate the cost of the Kentucky plant. Houston-based ConocoPhillips and Peabody won't have a clear idea of the cost until they complete the feasibility study and assess fluctuating commodities prices, he said.

The companies expect the permitting process in Kentucky to take one to two years, he added.

The plant would use ConocoPhillips' proprietary technology to gasify coal, transforming into pipeline-quality natural gas. Unlike Integrated Gasification Combined Cycle technology, which produces a synthetic gas that can be used only in power plants, gas created at the ConocoPhillips-Peabody facility could be sent to consumers as heating fuel, Svec said.

The companies also are evaluating the possibility of storing or transporting the carbon dioxide emissions from the plant, which are expected to be 5% of those generated by a traditional coal plant of comparable size. ConocoPhillips and Peabody are funding research on carbon storage in western Kentucky through a test well project led by the Kentucky Geological Survey.

ConocoPhillips and Peabody are evaluating the coal-to-gas project despite economic uncertainty because plants would have "very long lifespans," Svec said.

"We like to look past near-term economic conditions into a time frame when these plants would be operating," he said.

-By Christine Buurma, Dow Jones Newswires; 201-938-2061; christine.buurma@ dowjones.com