allan in the news again

August 8, 2008 - 7:03am

By MATTHEW BROWN
Associated Press Writer

CROW AGENCY, Mont. (AP) - The Crow Tribe struck a deal Thursday with an Australian company toward building a $7 billion plant to convert coal into liquid fuels, which would be among the first such projects in the nation.

Capping months of negotiations, the Crow Legislature ratified a 50-year development agreement with Australian-American Energy Co., a subsidiary of Australian Energy Co.

The Many Stars coal-to-liquids plant initially would produce 50,000 barrels a day of diesel and other fuels. Construction would begin in several years and coal for the project would come from a mine yet to be developed by the tribe on the reservation, Crow leaders said.

The tribe's chairman, Carl Venne, said the coal-to-liquids project offered an unprecedented chance at improving the lives of the tribe's 12,000 members. The agreement calls for the Crow to receive up to 50 percent of profits from the plant after investors in the project recoup their costs.

"It means we will become self sufficient as a tribe," Venne said. "I won't need no more federal dollars. I won't need no more state dollars."

Total proceeds to the tribe could eventually top $1 billion annually _ a breathtaking sum that dwarfs the Crow's current annual budget of about $26 million.

Representatives of the company and the tribe plan a public unveiling of the project at a news conference Friday. Expected to attend is Gov. Brian Schweitzer, who declined comment Thursday.

The Crow reservation sits atop some of the nation's largest coal reserves _ an estimated 9 billion tons of recoverable resources. Yet only limited mining has occurred, and the tribe's economy remains hobbled by high rates of poverty and unemployment.

The development agreement comes as the coal industry faces rising criticism over its role as one of the largest sources of greenhouse gases blamed for global warming.

Hoping to defuse opposition, tribal leaders said the Many Stars plant would be built to capture 95 percent of the carbon dioxide it produces. That gas would be stored in underground geologic formations or sold to the oil industry, which pumps carbon dioxide into aging oil wells to squeeze additional production out of them.

Still, the fuel produced by such plants release carbon dioxide when burned, putting it roughly on par with conventional petroleum in terms of overall emissions, industry experts and government scientists have said.

Venne predicted environmental groups and other "outsiders" would line up to oppose the tribe's plant proposal. But he added they would have a hard time arguing against economic development on the reservation.

"People have to realize, this is one of the poorest counties in the whole nation," he said referring to Big Horn County, which includes most of the reservation.

No large-scale coal-to-liquids plants have been built in the United States, although several are proposed or on the drawing boards in Wyoming, Ohio, West Virginia and elsewhere. Soaring construction costs and other hurdles have derailed some projects _ including one in Montana, near Roundup.

But Crow leaders said they are confident high oil prices will spur increased interest in synthetic alternatives such as coal-derived diesel. Future expansions of the Many Stars plant could eventually bump up production to as much as 125,000 barrels of fuel a day.

Approximately one ton of coal would be needed for every barrel of fuel produced by the plant.

"With the vast reserves we've got, there's no sense in us not being a major player," said Crow legislator Conrad Stewart.

Australian Energy's Chief Executive Allan Blood has started two similar projects in Australia, including a $2 billion plant announced in June that would convert coal into liquid fertilizer. The second project recently was sold to Shell and Anglo American for $5 billion, according to Australian news reports.

Neither is yet producing fuel.

Several Australian-American Energy executives were on the Crow reservation Thursday in anticipation of the tribal legislature's action. They said they were pleased with the agreement but declined further comment pending Friday's official announcement.

South Africa is home to the only existing commercial-scale coal-to-liquids plants, built during the apartheid era after oil imports into the country were blocked by international political sanctions.