OWENSBORO, Ky. (AP) - Officials in a western Kentucky county are
willing to chip in $625,000 to help build a plant to convert to coal into diesel fuel.

Muhlenberg County will give the money to Fuel Frontiers Inc. of Washington and Kentucky Fuel Associates of Louisville.

The two companies have paired up to build a plant in Muhlenberg County that would produce 70 million gallons of diesel fuel a year by late 2011.

Muhlenberg County Judge-Executive Rick Newman called the project "a start" toward revitalizing the coal industry.

"I think we can build on this," Newman said. "It's definitely a shot in the arm."

Construction is scheduled to begin next year and should require up to 300 workers to complete the facility, which will employ about 80 workers when it begins commercial production of diesel fuel in late 2011.

Over time, the plant could be expanded to nearly triple its production and employ up to 200 people, said Jack Young, president of Fuel Frontiers.

Young would not say how much the plant will cost to build because of shifting costs and designs. However, according to previous reports, the plant could cost about $400 million when it is expanded to three production lines.

Rep. Brent Yonts, D-Greenville, has been working with Kentucky Fuel Associates during the past year to help it navigate the state grant process and generate support for the project. A next step will be to tap into state funds made available under a comprehensive energy plan designed to spur alternative energy production.

The state energy plan provides perks to companies that develop energy sources.

Young said the partnership has identified three possible sites in Muhlenberg County for the plant, which will require access to a rail network and water. When it begins operating, the plant will use about 10,000 gallons of water, likely from the Green River, each hour.

The process will gassify the coal at high temperatures, clarify the gas and then convert the gas to diesel, Young said.

The plant will use 2,000 tons of coal a day, with each ton of coal producing between 2.2 and 2.5 barrels of diesel fuel, said David Maland with Fuel Frontiers.

The increase in how much fuel can be squeezed from each ton of fuel and the price of oil, which has risen above $120 a barrel, has made the conversion process more economical and has driven up interest, Young said.

The price of oil could be cut in half and the process would still be profitable, Young said.

The "ultra-clean" diesel that is produces has less particulate matter and sulfur than typical diesel fuel, and the conversion process has few harmful emissions, Young said.

"There is no problem in the emissions from this plant," he said. "This is going to be cleaner than ... a 7-11 store."
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Information from: Owensboro Messenger-Inquirer,
http://www.messenger-inquirer.com

(Copyright 2008 by The Associated Press. All Rights Reserved.)

AP-NY-05-17-08 1010EDT