What is the SynCoal Process?

In the 1970’s and early 1980’s Western Energy Company (WECo), a subsidiary of Montana Power Company, held over a billion tons of undeveloped low rank coal resources and was actively seeking ways to improve their marketability. In 1981 while working with Universal Oil Products on a potential coal slurry project, a WECo consultant, Monroe Greene from the MultiTech division of MSE, Inc. conceptualized a novel coal upgrading process. The process was further developed by WECo through laboratory and 150 lb/hr pilot stage by 1986. In response to the DOE’s Clean Coal Program, WECo submitted a proposal to demonstrate a new process for lowering the moisture and sulfur content and increasing the heating value of low rank coals. The IRS issued a private letter ruling defining SynCoal as a nonconventional solid synthetic fuel qualifying for tax credits in 1987 and US patents were issued for the process and product in 1988 and 1989 respectively. DOE selected the proposed 68 ton per hour (feed rate) demonstration in December 1988 and a cooperative agreement was executed in 1990 after DOE increased the pledged funding and Northern States Power (NSP) committed to participate in the Project. Scoria, Inc., a wholly owned indirect subsidiary of NSP, purchased 50% of the SynCoal technology for cash and a note payable. WSC and Scoria formed the Rosebud SynCoal Partnership (RSCP) to finance the demonstration project and began funding cash calls from the partnership on a 50/50 basis as the partnership needed cash. In return each partner got 50% of the tax credits and net operating losses to consolidate on their parent companies tax returns. In March 1991, the cooperative agreement was transferred to Rosebud SynCoal Partnership, created by WECo, to conduct this project. DOE provided 41 percent of the total project funding of $105.7 million. Test operations of the Advanced Coal Conversion Process (ACCP) unit, which was sited at Colstrip, Montana, adjacent to WECo's Rosebud Mine, commenced in June 1992. The ACCP project, with a design capacity of 68.3 tons of feed coal per hour, operated until May 2001, at which time the plant was shut down.

The ACCP was completed in March 1992 and most startup equipment problems were solved by the middle of 1993. In May of that year, nearly 500 tons of SynCoal was shipped to customers. In June, SynCoal deliveries were initiated to several industrial customers. By August, the State of Montana had evaluated the facility and found it in compliance with the Air Quality Permit. The plant was able to reliably provide product to the market and was placed in service as a SynCoal Production Facility on August 10, 1993. In addition to its improved heating value, test burns of SynCoal at a variety of plants showed superior performance in both power generation (improved efficiency, cleaner burning) and environmental parameters (reduced emissions), thus demonstrating the beneficial qualities unique to SynCoal.

With the initial success of SynCoal trademarks for the engineering services and product were registered with the U.S. Patent and Trademark Office. When Scoria failed to pay the note for the technology half of their 50% technology ownership reverted to WSC in accordance with the conditional patent assignment. In 1997, Scoria withdrew from RSCP. Western SynCoal LLC was formed in 1999 as a wholly owned indirect subsidiary of Montana Power to streamline the SynCoal organizational structure and became the sole surviving entity.

From June 1992 through May 2001, the plant operated for 46,676 hours, processed 2,939,240 tons of coal, resulting in 1,980,279 tons of product shipped and sold. On average, the SynCoal Gen1 plant had an availability of 58.1 percent, a feed rate of 63 tons/hr, and an energy efficiency (percentage of energy input to the plant converted to salable product) of 83.7 percent. In addition to Rosebud coal, the ACCP plant successfully processed Powder River Basin (AMAX) coal from Wyoming, and Center and Knife River lignites from North Dakota during demonstration test runs.

In addition to use as a fuel for power production, SynCoal® has a variety of industrial applications, such as use by cement, lime, and bentonite producers. SynCoal® was delivered to Ash Grove Cement, Wyoming Lime Producers, and Continental Lime. These users found that SynCoal® improved both capacity and product quality in their direct-fired kiln applications, apparently because the steady flame produced by burning SynCoal® allowed tighter process control and improved process operation. Bentonite Corporation used SynCoal® as an additive in green sand molding product for use in the foundry industry.

On April 30, 2001, Westmoreland Coal Company acquired Western Energy Company and its wholly owned entity, Western SynCoal LLC as part of its acquisition of Montana Power’s coal division. The SynCoal plant was immediately shut down and permanently closed shortly thereafter.

On December 4, 2001, US patent 6,325,001 for a “process to improve boiler operations by supplemental firing with thermally beneficiated low rank coal” was issued to Ray W. Sheldon, Director of Development (by then General Manager) on behalf of the Western SynCoal LLC. The claims in the patent are fairly broad and may result in the Company having claims against other competitors using competing coal upgrading technologies. For example claim #11, “a method of improving the combustion properties of coal comprising feeding regular quantities of coal to the combustion chamber and then intermittently supplying quantities of thermally beneficiated low rank coal to the combustion chamber and thereby reducing boiler slag and increasing efficiency.”

EnPro, LLC of Wyoming purchased Western SynCoal LLC and three associated DOE contracts from Westmoreland on January 3, 2003. SynCoal Partners LLC, a Delaware limited liability company, was set up by EnPro LLC and HRC Venture Partners Ltd, an affiliate of Hunter Resource Capital LP, in December of 2005 to hold Western SynCoal LLC and advance the second-generation SynCoal technology. In May of 2006, the Company raised $1.0 million of Series A funding to complete the Phase I work program. SynCoal Partner’s Phase 1 work program was completed by October 2007:

• SGS Physical Beneficiation Testwork proving the reduction of mercury;
• VOC Testwork proving the control of volatile organic compound emissions;
• Filing final patent application for the SynCoal Gen2 Process;
• Filing final patent application for the Thermal Coal Upgrading Processor;
• Thermal Coal Upgrader Capital Cost Estimate was completed;
• Preferred Vendor Agreement was reached with Aeroglide Corp;
• Black & Veatch’s Independent Engineering Audit validated the Gen2 design;
• EVA PRB Coal Utilization Market Data identifies large market segments in the domestic utility industry;
• Letter of Interest was executed with MDU’s Lewis & Clark Station;
• Specific testwork on Lewis & Clark’s lignite demonstrated significant reduction in mercury, sulfur and ash mineral contents; and
• In-house modeling indicated strong potential to increase net generation at Lewis & Clark by nearly 20%.

SynCoal Gen2 Process

The original Rosebud SynCoal Partnership site was located at the Rosebud Coal Mine, adjacent to the Colstrip Power Station and relied on natural gas as a heat source to support the coal upgrading process. Special handling of the SynCoal was required during transport to remote power generating units. In contrast, the new SynCoal Gen2 process would be located at the end use site and utilize waste heat in the flue gas stream of the host power plant to dry the coal.

The Gen2 SynCoal process involves a new and simplified approach to processing and can be summarized by the following concepts:

• process all or a portion of the coal at the point of utilization;
• use waste heat directly from the flue gas (instead of indirectly) to minimize thermal costs in the transformation of the feed coal into SynCoal;
• reduce moisture, ash minerals, mercury and sulfur content passing through the combustion, boiler and heat transfer systems which reduces coal mill, heat transfer, and fan operating and maintenance costs;
• use a simplified processor and cooler designed to reduce energy and maintenance requirements to support the flow of materials through the process; and
• integrate into the host plant’s operating support systems and staff duties to provide host control and minimize operating costs.

The Gen2 process plants will be located on the site of individual power plants. Producing and using the product at the host power plant site eliminates bulk density, moisture reabsorbtion, spontaneous combustion and fugitive dust issues while increasing coal supply and transportation economic arbitrage opportunities.

The Gen2 process reduces moisture content, and where feasible, mineral and pollutant (particularly sulfur and mercury) content. Drying is used as a liberation procedure for the natural mineral matter imbedded within the coal. By processing a larger particle size, cleaning can be significantly more efficient and effective. During the drying process, the high mineral content material is released from the coal. A cleaning process follows the drying process. In addition to reducing ash content, sulfur and mercury content can be reduced to the extent sulfur and mercury is present as separable pyrite in the parent coal. Cleaned coal particles are separated from particles high in ash and pyrite content.

The Gen2 process significantly reduces both capital and operating costs when compared to the Gen1 process. This is accomplished by: 1) selecting a more energy efficient processor, 2) simplifying the coal and gas flow routing, 3) modifying the processor product cooling operation, and 4) selecting a more efficient cleaning system.

The SynCoal Gen2 process can be integrated into existing power plants delivery systems allowing the plant operator to replace a portion of the present parent coal with SynCoal without having to make expensive modifications to the boiler or furnace, with the fuel consisting of a new blend of lower cost lignite or sub-bituminous coal and SynCoal.