Synthetic fuel: A perfect energy fix?

(Business 2.0 Magazine) -- In the search for clean-burning alternatives to gas, many fuels have had their moment in the sun: ethanol, diesel, hydrogen.

Now add to the list synthetic fuel, made from carbon-based products like natural gas and coal in a process that dates back to the 1920s. In December the Air Force successfully tested synthetic jet fuel in a B-52 bomber; it plans to test the fuel's cold-weather performance early this year.

ENERGY SAVER: Syntroleum turns coal into liquid fuel that burns cleaner and more efficiently than gas. Any diesel vehicle can use it.

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That's a boon for Syntroleum, the Tulsa, Okla., company that manufactures the fuel. "The technology is ready," says Ken Agee, founder and CEO of the 22-year-old company. With the United States holding 27 percent of the world's coal reserves, he adds, "it's exciting to think we could control our energy destiny."

Better yet, the fuel will work in any vehicle powered by a diesel engine without any retooling. And the price is right: Coal-to-liquid fuel should cost about $45 a barrel. A government tax credit would then kick back $21 a barrel to Syntroleum, making the fuel very competitive anytime oil prices are above $30 a barrel.

Only one snag: scale. Agee says it would take at least $1 billion to build a plant capable of producing 10,000 barrels per day.

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