Oil at $15 a barrel?

blog Silverado Green Fuel will try to run machines and even car on a liquid fuel that's sort of like a coal latte.

Tech Culture

Garry Anselmo is completely serious when he says that his company, Silverado Green Fuel, can produce a liquid fuel for industrial boilers that will cost about the same as oil, if oil sold for $15 a barrel.

For cars, he says the company's processes can be used to produce barrels of "oil" for car fuel that will cost about half of what conventional oil costs today, which is around $50.

What's the secret? , a word that makes most people's flesh crawl. Silverado takes low-grade coal, pulverizes it and cooks it under pressure with water until it develops a waxy coating. The waxy coal particles are then reunited with carbon-infused water removed at an earlier part of the process to make a liquid fuel. So think of it as a coal latte.

The key to the process is that almost no one wants low-grade brown coal, which is about half water. Instead, coal miners and consumers concentrate on anthracite coal, which contains only about 3 percent water.

And there is a lot of coal out there. In the U.S. alone, the existing coal reserves hold enough coal to produce liquid fuel that would be the equivalent of 800 billion barrels of oil, according to a report earlier this year from Dave Edwards at ThinkEquity Partners. The U.S. right now consumes , so that's a potentially large cushion. (Edwards, though, also notes that coal-to-liquid companies face high capital costs, legislative regulations and other issues. Most of these projects only make sense if oil stays above $40 a barrel for an extended period.)

Silverado will soon break ground on a $26 million plant in Mississippi that will be capable of producing about the equivalent of 111,000 barrels of its Green Fuel a year. (Roughly 2.5 barrels of Green Fuel equal a barrel of oil, but each barrel will cost about $6, which is where the $15 comparison comes in.) The Department of Energy is working with the company and the Department of Defense has agreed to buy some of the output--about 1,000 gallons--from the plant, which will become operational in about 1.5 years.

The company, which is a subsidiary of a gold mining company, will also take measures to protect the environment, Anselmo added, including carbon dioxide capture and sequestration at the plant. The fuel also burns fairly cleanly. Nonetheless, he realizes that it will take a massive effort, and proven results, to win over the public.

"Coal is 200 years of dirty. The proof will be in the pudding," he said. "You're not going to get away from that.

Anselmo, though, says he has time. "They've been fighting wars over oil for 300 years. A few more won't make a difference," he said.

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