**United States senate Committee on**

**energy & Natural resources**

**coal gasification: opportunities and challenges**

May 24, 2007

Written Statement of

David Denton

Director of Business Development,

Eastman Gasification Services Company

Mr. Chairman, members of the committee, I am David Denton, Business
Development Director for Eastman Gasification Services Company, a
wholly-owned subsidiary of Eastman Chemical Company. I am a chemical
engineer and registered professional engineer. I am a Technology Fellow
within Eastman. In my present position, I identify and develop customers
and project opportunities for Eastman's gasification business, and
coordinate with public policy and technology initiatives. Over my 32
years experience with Eastman Chemical Company I have worked in a number
of technical and management positions within Eastman\'s Research and
Technology organizations.

**Introduction to Eastman**

Eastman Chemical Company manufactures and markets chemicals, fibers and
plastics worldwide. It provides key differentiated coatings, and
adhesives and specialty products; is the world\'s largest producer of
PET polymers for packaging; and is a major supplier of cellulose acetate
fibers. Founded in 1920 and headquartered in Kingsport, Tennessee,
Eastman is a FORTUNE 500 company with 2006 sales of \$7.5 billion and
approximately 11,000 employees. Approximately 7,000 of those are
employed in Senator Corker's state and another 2,600 are located
elsewhere in the United States. For more information about Eastman, and
its products, visit [www.eastman.com](http://www.eastman.com/).

**Eastman and Gasification**

Eastman was a pioneer in commercializing the first U.S. chemicals from
coal facility in 1983. Eastman received Chemical Engineering magazine\'s
Kirkpatrick Award for Engineering Excellence for recognition of its
\"chemicals from coal\" facility in Kingsport, Tennessee, and the
facility has been designated an American Chemical Society National
Historic Chemical Landmark.

Eastman's coal gasification operating performance is industry-leading
and is highly regarded world wide. The first full year of operation
(1984), Eastman's forced outage rate was between 8% and 9% and has
averaged less than 2% ever since. Forced outage rate for the past full
three year maintenance cycle was 1.06%, and the gasification facility
was on-stream over 98% of the time.

Eastman has a strong commitment to process improvement and has
continually improved and optimized its gasification operations over
time. Today, Eastman operates its coal gasifiers at the highest syngas
output per unit gasifier volume of any GE Energy designed solids-fed
gasifier in the world. In addition, Eastman has built a tremendous
support infrastructure for gasification during the past two decades.
Some examples of that support infrastructure include:

-   A large data base of equipment reliability data and root cause
    failure analyses

-   Gasification modeling and simulation

-   Advanced process control systems

-   Process instrumentation and analysis (including on-line analyses)

-   Refractory design, inspection, and installation services

-   Reliability-based predictive maintenance systems

-   Coal, petcoke, and slag chemistry and characterization

-   Optimized standard operating procedures

-   Rapid gasifier start-up and switch-over procedures

-   Multiple gasifier operation and integration experience

-   Specialized materials science and metallurgy

-   A large code-rated machine shop for critical parts fabrication and
    repair

-   Proven environmental and safety systems and procedures

Eastman\'s technical, operations, and support staff have over 600 years
of combined experience in coal gasification, an experience base which is
unrivaled in the chemical industry. In addition to experience with
Eastman\'s gasifiers, Eastman has made selective hires of gasification
experts with broad experience at other companies and facilities. Eastman
engineers have had direct experience with start-up, trouble-shooting,
and/or operations at over 20 gasification facilities around the world,
including a number of petcoke and coal-fed gasifiers.

In addition to gasification expertise, Eastman and its subsidiaries have
over 80 years of experience in managing large integrated manufacturing
sites. Eastman owns and operates a number of large integrated plant
sites in the U.S. and overseas. Eastman\'s largest site in Kingsport,
Tennessee, has over 7,000 employees and manufactures hundreds of
products.

Eastman has also developed an extensive and respected expertise in the
management, execution, and commissioning of major capital projects. In
external benchmarking studies, Eastman was recognized for top quintile
performance in overall capital cost, schedule performance, and overall
capital effectiveness, as well as being ranked best-in-class in several
areas.

**OPPORTUNITIES**

My testimony today will focus on technology "opportunities and
challenges" of gasification, particularly industrial gasification, and
on technical and institutional issues related to the potential for
carbon capture and geologic sequestration (CCGS).

As we begin to talk about "gasification," I want to emphasis that this
is a very general term. Gasification is not a single technology; there
are as many different gasifiers and gasification concepts as there are
members of this Committee, actually more. The choice of gasifiers and
technical systems approach for a given project depends on many factors,
principal of which are the intended product and the intended feedstock.

There are fundamental differences between gasification technology and
systems suitable for industrial processes and gasifiers that are
designed for Integrated Gasification Combined Cycle (IGCC) power
generation applications. These differences have significant implications
for total system efficiencies and for readiness to separate carbon from
other constituents in the synthesis gas stream.

Industrial-based gasification systems, such as Eastman Chemical
Company\'s facility in Kingsport, Tennessee, are inherently designed to
capture carbon and are more thermally efficient than stand-alone
coal-fueled IGCC power generation facilities. This is also true of
existing, or planned, industrial polygeneration gasification facilities
that co-produce chemicals, fuels or fertilizers, in addition to electric
power, or some other baseload product.

Unique characteristics of industrial gasification processes that enable
or advantage high levels of carbon capture include:

-   **Shift Reaction** - Most industrial gasification products
    (chemicals, fertilizers, transportation fuels, or hydrogen) require
    the syngas (the initial gaseous product from the gasifier, composed
    primarily of carbon monoxide and hydrogen) to be \"shifted,\" or
    enriched in hydrogen. To \"shift\" the syngas, water is reacted with
    carbon monoxide in the syngas to create additional hydrogen and
    carbon dioxide. This \"shift\" step is not utilized in the
    non-capture IGCC systems.

-   **Quench Gasifier** - The water \"shift\" reaction is accomplished
    with a \"quench-type\" gasifier. Hot syngas from the gasifier is
    quenched in water, saturating the syngas with water for the
    subsequent \"shift\" reaction. For reasons that are explained below
    under "Capture Required" most industrial gasification plants will be
    designed with gasifiers that are optimized for carbon capture.

-   **High Pressure Efficiencies** - Downstream chemical conversion
    processes require most industrial or polygeneration gasification
    plants to operate at high pressures, higher than those typically
    required for stand-alone electric power generation. Fortunately,
    this same high pressure required for chemical processing also makes
    most carbon dioxide capture technologies operate more efficiently,
    further enhancing the synergies between industrial gasification and
    carbon capture systems.

-   **Capture Required** - In order to use \"shifted\" syngas for its
    industrial purpose(s), the carbon dioxide formed must typically be
    captured, and removed to low levels prior to any subsequent chemical
    conversion of the syngas. (To the contrary, in the IGCC case
    presented in the MIT study *The Future of Coal,* carbon capture is a
    parasitic cost and is undesirable absent a regulatory requirement.)
    Most residual carbon in the industrial-use syngas is destined for
    ultimate chemical conversion and is thus incorporated (or
    sequestered) into the final desired industrial product, rather than
    vented. A few examples of durable industrial products made from
    chemicals in which carbon is routinely sequestered include plastic
    handles on screwdrivers and toothbrushes, tape, and automobile
    paint, among many others. (Note: the carbon capture rate is normally
    zero for IGCC, but can be 90+% if so designed, or added later).
    Industrial gasification capture rates can vary widely based on
    products, and split of products/coproducts. Typically, industrial
    gasification projects would initially capture 50-90% of feedstock
    carbon as CO2 or final products, but can be expanded to 90+%
    relatively easily compared to a stand-alone IGCC.

-   **Thermal Efficiency** -- Industrial polygeneration has the
    additional advantage of inherently greater thermal efficiency than
    IGCC systems. Thermal efficiencies can vary widely, but would
    typically be \~40% for stand-alone IGCC, and \~50-75% for industrial
    gasification.

These differences are indicated in the two illustrations that appear in
the Appendix (pp. 7-8).

In addition to these technology distinctions, much of America's chemical
industry infrastructure is located in or near geographic regions where
carbon sequestration may present a win-win opportunity with enhanced oil
recovery.

So, Industrial Gasification systems present opportunities with respect
to carbon capture and geologic sequestration. At the risk of using an
overworked phrase, Industrial Gasification represents the "low hanging
fruit" as the Congress and the Administration consider a program to test
and develop CCGS technologies, protocols regulations and financing
issues in a commercial setting as Drs. Deutch and Moniz of MIT
recommended to the Committee on March 22^nd^.

Industrial gasification opportunities represent the logical economic and
technological path forward to achieve four policy objectives that I
believe are key to America's economic and environmental health. Those
are:

1.  cost-effective environmental protection;

2.  energy security through reliance on domestic fuel resources;

3.  reduction of natural gas prices and price volatility to all
    consumers; and

4.  global competitiveness and millions of high technology jobs in
    America's industrial sector.

**Challenges**

As promising as Industrial Gasification is for the policy objectives
noted above, deployment of commercial gasification plants will not occur
and the "proving ground" for CCGS will not be available unless federal
and state governments provide the necessary incentives and framework to
attract "first adopter" projects.

Contrary to arguments made in the MIT study *The Future of Coal*,
gasification technology is not \"commercial\" today. We at Eastman have
the country's most experienced and successful practitioners of
industrial gasification. But our experience of more than 20 years at
Kingsport is, by itself, inadequate to persuade A&E firms and financiers
to reduce the risk premiums they are currently charging for
first-of-a-kind gasification projects in the US. This premium is
currently about twenty percent higher than the cost of such plants is
expected to be after the first dozen or so are successfully deployed and
operated in commercial service.

Incentives, such as Section 48A and 48B tax credits, are necessary to
encourage commercialization of gasification projects. The use of
gasification will cause the substitution of coal, petcoke and other
materials for natural gas, thus resulting in decreases in demand (and
presumably prices) for natural gas. The benefits to all Americans from
lower and stable natural gas prices will pay for the expense of the
Section 48A & B tax credit programs in short order. The other benefits
previously noted make these tax programs even more compelling. However,
none of these benefits accrue directly to the first adopters of
gasification technology. In fact, first adopters of industrial
gasification technology, operating in a globally competitive market,
would be taking on more cost and risk than their competitors absent the
Section 48B incentives. Financiers will be more likely to lend money to
such ventures if there are external incentives to "buy down" the risk
and cost for a novel project.

As the MIT study correctly points out, in Eastman's view, the same
incentives should apply to carbon capture and geologic sequestration.
With the exception of conventional EOR projects, where sequestration may
or may not occur, there is no practical reason why a company would spend
hundreds of millions of dollars to separate, transport and store carbon
underground. However, doing so now could have significant informative
benefits for the entire nation if carbon management is a policy
objective in the future.

Federal incentives necessary to stimulate experience in carbon capture
and long-term geologic sequestration and the subsequent development of
protocols will be expensive. Twelve projects, based on different
technologies and geologic circumstances will likely cost up to \$10
billion just for the carbon capture, transportation and storage aspects
of the projects. Incentives for gasification technology deployment would
be a few billion additional dollars. However, the cost of imposing
greenhouse gas reduction regulations in the future without a program of
technology development and commercial scale deployment would certainly
lead to inefficient choices, much greater expense to the country and
serious loss of productivity for our economy.

Thank you for the opportunity to share Eastman's views on the
opportunities and challenges associated with Industrial Gasification.

Appended Background Material

**Industrial Gasification & Carbon Sequestration**

Gasification is an extremely versatile and clean process for converting
a wide variety of carbon-containing feedstocks into a synthesis gas, or
\"syngas\", composed primarily of carbon monoxide and hydrogen. This
syngas is a valuable raw material for conversion into energy or a
multitude of products such as chemicals, fertilizers, transportation
fuels, synthetic natural gas, and hydrogen.

![](media/image1.jpeg){width="6.5in" height="4.875in"}

![](media/image2.jpeg){width="6.629861111111111in"
height="4.972222222222222in"}

![](media/image3.jpeg){width="6.25in" height="4.6875in"}

Common feedstocks for gasification include coal, petroleum coke and
other petroleum residues, heavy oils, biomass, natural gas, and recycled
secondary materials. These feedstocks are co-fed to a gasifier along
with water and oxygen (or air) in a reducing atmosphere at high
pressures (up to 1200 psig) and high temperatures (up to 2600 F) to
produce the desired syngas. Because the resulting syngas stream is
concentrated and compressed to high pressure, removal of pollutants and
other contaminants to very low levels is readily achievable prior to any
use of the syngas. If desired, the carbon monoxide in the syngas can
also be reacted with additional water and converted or shifted into
carbon dioxide and hydrogen.  The carbon dioxide can be separated and
captured as a relatively pure stream and then sequestered or used in
productive applications such as enhanced oil recovery, leaving only a
very pure hydrogen product in the syngas.

![](media/image4.png){width="1.875in" height="0.3138888888888889in"}

**A Commitment to Incentives is Needed to get from Here to There on a
Glide Path**

The 48B ITCs were vastly oversubscribed by a factor of nearly 8 to 1.
Only three industrial projects were supported in the first round.
Additional 48B rounds need to be supported.

For both the Industrial Tax Credits and Federal Loan Guarantees to be
effective, they need to address global market risks and support
commercial scale projects. While there is a separate need for
demonstration projects to validate key technologies, the real difference
for America now is to assure that [these]{.underline} incentives support
investment in commercial scale industrial gasification projects that are
calculated to meet global competition and are ready to deploy. The same
set of projects supported by these incentives are a target pool for
demonstration at scale of carbon capture and sequestration technologies.

The Federal Industrial Gasification Tax Incentives and the self-pay
Federal Loan Guarantees in the Energy Policy Act are huge steps in the
right direction. However, serious concerns continue with respect to
implementation. These concerns are as follows.

[First]{.underline}, it is imperative that the process for implementing
the 48B tax credits be more transparent and meritorious than we have
seen so far. The primary objective should be to assure that these early
projects be technically, financially, and commercially solid projects,
with experienced and capable owner/operators. Industrial Tax Credit
application guidance did not outline measurable selection criteria that
allow applicants to have confidence that this crucial objective would be
met. Additionally, if Congress wants to attract more gasification
projects and demonstrate CCS, incentives will have to cover the CCS
investment and operational costs. Perhaps a dozen or so demonstrations
of geologic CCS in the range of 5 million tons per year with and without
EOR will be needed before mandatory GHG reductions take effect. Time and
monetary commitment is of the essence.

Industry raised many important questions that were either politely
dismissed or have gone wholly unanswered. Under the June 30 application
deadline for the second round, the same questions remain unanswered. The
program is under-authorized and needs realignment with serious and
familiar DOE role. The Senate Energy and Natural Resources Committee
along with the Senate Finance Committee ask IRS and DOE to seriously
address questions submitted by a wide cross section of industrials and
delay the future rounds until answers are provided.

[Second]{.underline}, we are concerned that the Federal Loan Guarantee
process itself is dangerously bogged down. Pre-applications were taken
and a NOPR was issued. The Congress has seen fit to raise the
Administration\'s target level for FY2007 from \$2 billion to \$4
billion. However, the FY 2008 request for a level of \$7 billion does
not include \"non-power\" gasification. This non-power exclusion is
short-sighted, as there is no higher value and direct technological
response to natural gas crisis and mandatory GHG proposals than
commercial scale industrial and SNG gasification projects.

[Third]{.underline}, the focus for these incentives needs to be squarely
aimed at domestic industries that are suffering under the burden of high
natural gas prices. We anticipate that the availability of these
incentives will attract a number of project developers who will try to
claim qualification even though they are not in the intended group of
recipients.