Bush, Energy and Nanotechnology

George W. Bush, who runs an administration firmly associated with the oil industry, wants to break us of our addiction to oil. In his State of the Union Address on January 31, he said:

So tonight, I announce the Advanced Energy Initiative -- a 22-percent increase in clean-energy research -- at the Department of Energy, to push for breakthroughs in two vital areas. To change how we power our homes and offices, we will invest more in zero-emission coal-fired plants, revolutionary solar and wind technologies, and clean, safe nuclear energy.

We must also change how we power our automobiles. We will increase our research in better batteries for hybrid and electric cars, and in pollution-free cars that run on hydrogen. We'll also fund additional research in cutting-edge methods of producing ethanol, not just from corn, but from wood chips and stalks, or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years.

You would think we had elected Al Gore, after all.

Well, maybe. According to a New York Times report, the Energy Department will soon begin laying off workers at the National Renewable Energy Laboratory because of cuts to its budget. The jobs lost, apparently, will be in wind energy and biomass to ethanol research, two of the technologies that Bush specifically cited in his energy initiative.

Maybe then, we shouldn’t get too excited about another Bush promise:

First, I propose to double the federal commitment to the most critical basic research programs in the physical sciences over the next 10 years. This funding will support the work of America's most creative minds as they explore promising areas such as nanotechnology, supercomputing, and alternative energy sources.

Still, the dual mention of coal-fired plants and then later nanotechnology by our leader put me in mind of a company that combines the two: Headwaters, Inc. [NYSE--HW]. The company started as an alternative energy concern to improve coal combustion. Today, it also has interests in coal by-products and construction materials. But its future lies in the use of nanoscale catalysts to improve the refining of coal and heavy oil.

A Headwaters division called the Technology Innovation Group consists of two entities: Nanokinetix, which develops catalytic nanoparticles of precious metal that are around 10 nm in diameter; and Hydrocarbon Technologies, which commercializes catalysts and technologies to create clean alternative fuels. One nanotcatalyst developed by Nanokinetix boosts the octane level of gasoline during the refining process.

Hydrocarbon Technologies has an agreement with Shenhua Group Corp., China’s largest coal company, to provide a process design package for a direct coal to fuel factory. The coal-to-fuel production process uses a Headwaters’ proprietary nanoscale iron-based catalyst. The $2 billion facility is being built in Inner Mongolia, and eventually will have a capacity of 50,000 barrels per day of low-sulfur diesel fuel and gasoline. The first reactor should begin production in 2007. Shenhua eventually hopes to build three more such facilities.

Headwaters has been awarded a contract to study the feasibility of using its coal to liquid fuel process by Oil India Limited, a government owned company. Oil India wants to convert the abundant coal reserves around in the Assam region of India into gasoline, diesel fuel, jet fuel, and fuel oil.
Headwaters also did a feasibility study for the Philippine Department of Energy to develop coal liquefaction projects. The study concluded that it would be both technically and economically feasible to locate liquefaction projects in the Philippines. The first proposed project is slated to produce up to 60,000 barrels per day of clean burning fuel at an estimated capital cost of $2.8 billion.

Headwaters has begun commercial scale test of its (HC)3 technology which uses a catalyst to convert residual oil feedstocks into higher value distillates, which can then be converted to gasoline or diesel fuel. Benson said that Headwaters expects to record revenues from this technology in 2006. Longer term, the (HC)3 could be the principal hydrocracking technology for heavy crudes, including Canada’s tar sands, which represent a large part of the world’s oil reserves. Estimated at 174 billion barrels, these oil sands are largely untouched because of the expense of converting it usable hydrocarbons. Headwaters is working with Northwest Upgrading, Inc., which intends to build a heavy oil hydrocracker that will employ (HC)3 technology in Sturgeon County, Alberta. The unit is expected to come online in 2010.

Another Headwaters energy initiative is the construction and management of a facility that will produce 50 million gallons of ethanol per year, located adjacent to the Coal Creek power plant run by Green River Energy in North Dakota.

So can nanotech come to the rescue and get the monkey of Middle East oil off our back? Probably not until the economy shakes with delirium tremens. But better late than never.