Doubts Raised Over Promise of Liquid Coal

By STEPHEN POWER

WASHINGTON -- Encouraging greater production of transportation fuel made from liquefied coal and Canadian oil sands could help reduce oil prices but also undermine U.S. efforts to fight global warming, according to a report to be released Wednesday by the Rand Corp.
The study by Rand, a nonprofit research institute in Santa Monica, Calif., illustrates the tensions between fighting global warming and reducing U.S. dependence on Middle East oil. It buttresses some criticisms leveled by environmental groups that certain alternative sources of fossil fuel result in higher levels of carbon-dioxide emissions than conventional motor fuel, when all of their emissions -- from production through development and consumption -- are measured.
The study's authors note that carbon-dioxide emissions from the production and use of oil sands are roughly 20% higher than conventional petroleum, and that emissions from the production and use of liquid fuel from coal are about twice the emissions of conventional fuels. At the same time, the authors say, greater production of fuel from oil sands and liquid coal could help expand global fuel supplies and work to slow the rise in oil prices.
The Rand study was funded by the National Commission on Energy Policy, a Washington-based group that advises government officials on energy matters.
Tax legislation passed by Congress and signed into law by President George W. Bush last week contains a provision that makes alternative jet fuel made from liquefied coal eligible for the first time for a 50-cents-a-gallon tax credit.
A spokesman for the National Mining Association, Corey Henry, acknowledged that fuel made from liquefied coal produces high carbon-dioxide emissions, but said delaying production of it would exacerbate U.S. dependence on foreign oil.
Write to Stephen Power at stephen.power@wsj.com