Baard Energy Plans to Buy 9 Million Tons of Coal a Year for Its Coal-To-Liquid Plant

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Baard Energy plans to buy 9 million tons of coal a year for its coal-to-liquid plant. Will it come from mountaintop removal coal companies?

Paul Ryder, Organizing Director

Ohio Citizen Action

January 25, 2010

Baard Energy wants to burn 9 million tons of coal a year in its proposed coal-to-liquid plant in Wellsville, Ohio. Where would it come from? Here’s what the company says in its September 2007 “Project Summary” which remains the most recent account on the Baard Energy website:

“The Project expects to use a combination of eastern bituminous coal and biomass to produce fuels including ultra low sulfur FT diesel, jet fuel and naphtha, all with a lower emissions profile than traditional petroleum based products.”

There are three main types of coal:

Lignite, called “brown coal”: softer, duller and more crumbly than other coal, easy to mine, low in sulfur, and cheap; produces much less energy/ton than other coal. Found in the West, esp. Powder River Basin in Wyoming.

Anthracite, called “hard coal”: shiny, produces a lot of energy, but tougher to mine. Primarily in eastern Pennsylvania.

Bituminous, called “black coal”: medium-hard, jet black, and produces a lot energy. Mostly from Pennsylvania to northern Alabama, with the heaviest concentrations in West Virginia and Eastern Kentucky; also in the Midwest, Colorado and Utah.

That’s a very large area, centered on the region where mountaintop removal is underway.

Now back to the Baard Energy summary, where its overview seems to suggest that they have picked a particular place to get the coal:

Below is a basic overview of the inputs and outputs of the Project both for Phase I and fully developed: . . . .Coal type (Phase 1): Pitt #8, (Fully developed): Pitt #8

The Pittsburgh #8 seam coalfields are entirely within Ohio, in some or all of Belmont, Harrison, Jefferson and Monroe counties. Despite its name, it does not extend into Pennsylvania or West Virginia. The coalfields on the east side of the Ohio River are the Panhandle, Beaver, Mercer, Pittsburgh (not #8), and Klondike.

It is not so clear, however, because Baard Energy then backtracks and says that not only is it also open to buying coal from West Virginia and Pennsylvania, but also Kentucky, Illinois and Indiana:

The Company is currently in discussion with existing area coal companies to supply the entire plant’s feedstock need pursuant to 10 year agreements that will match the volumes needed to fulfill the Project’s contractual offtake commitments. . .The Project is located in Wellsville, OH, near the border of West Virginia, Pennsylvania, and Ohio. This location is the heart of the coal corridor in the Midwest United States. These three states have combined recoverable reserves of over 1,285 million tons, which is sufficient to satisfy the Project’s coal needs for the life of the plant. The Project’s rail and river access facilitates coal procurement from various sources. . . . Due to its advantageous location, the Project can also access cost-competitive coal supplies from neighboring coal producing states such as Pennsylvania, West Virginia, Kentucky, Illinois and Indiana.

In other words, Baard Energy is not saying where it will get its coal.

Other documents underscore the company’s vagueness.

Another project summary July 10, 2007, makes a straightforward assertion:

To date, we have . . . . negotiated feedstock and offtake agreements.

“Feedstock” is another term for raw materials in an industrial process, in this case coal and, maybe, biomass. In this document Baard Energy makes no further comment on the feedstock agreement. It does provide details about the “offtake” agreements, however.

First, the definition of “offtake agreement” is as follows:

An agreement between a producer of a resource and a buyer of a resource to purchase/sell portions of the producer's future production. An offtake agreement is normally negotiated prior to the construction of a facility such as a mine in order to secure a market for the future output of the facility. If lenders can see the company will have a purchaser of its production,it makes it easier to obtain financing to construct a facility. (http://www.investopedia.com/terms/o/offtake-agreement.asp)

After saying that it has negotiated offtake agreements, Baard Energy elaborates:

The Company has been in negotiations with [the U.S. Department of Defense] for the sale of up to half of the Project's output. The Defense Energy supply Center has received significant information on the Project as the [Department of Defense] has continued its internal development to utilize synthetic fuels.

The Company is also exploring transitional commercial offtake agreements as well . . . The Company has discussed off-take strategies with several large petroleum-based businesses who have expressed interest in acquiring significant volumes of synthetic fuels under long term agreement. . . Furthermore, the Company has received contingent commitments from several large commodity trading firms which have indicate willingness to enter into an off-take agreement for the synthetic fuels produced by the Project. (http://www.ohiocitizen.org/campaigns/coal/baard/Baard-FundingSources.pdf)

This description makes it clear that Baard Energy, in fact, has no off-take agreements at all, contrary to their original statement.

Given this, and without elaboration about the “feedstock agreement” that Baard Energy said it has negotiated, there is no reason to assume this claim is any more credible than the other one.

On November 17, 2008, Baard Energy Vice President Steve Dopuch emailed Ohio State Rep. Linda Bolon, writing –

Baard has already executed an option agreement for a long term coal supply agreement covering Phase 1 (3 million tons [of] coal per year) with an existing Ohio coal producer. (http://www.ohiocitizen.org/campaigns/coal/baard/baard%20response%20gov%27s%20questions.PDF)

What does this mean? The formal definition of “option agreement” is “An agreement between two parties that provides one of the parties with the right but not the obligation to buy, sell orobtaina specific asset at an agreed upon price at some time in the future.” (http://www.investopedia.com/terms/o/optionagreement.asp)

In practice, an option agreement means nothing more than that someone expressed an interest. The potential buyer, as explained above, has no obligation to buy, and the potential seller, Baard Energy, could nix the agreement by changing any one of the conditions in the agreement. There is no commitment on either side.

Judging by the documents, then, Baard does not want to pin itself down to saying where it plans to buy coal from, other than that it be bituminous.

This could be because they do not plan to buy Ohio coal, and don’t want to admit that to Ohio officials, who want them to buy Ohio coal. This could be because they plan to buy mountaintop removal coal, and don’t want to admit it because of strong public revulsion to mountaintop removal coal mining. Baard Energy won’t say.