Government officials to discuss CO2 content of alt fuels

By Chris Baltimore

WASHINGTON (Reuters) - Officials from across the U.S. government will meet this week to interpret an obscure item tucked into 2007 energy legislation that bars big federal fuel buyers from using fuel derived from coal if it contains more carbon than products made from crude oil.

Section 526 of the Energy Independence and Security Act has complicated plans by federal agencies like the Air Force to embrace nonpetroleum fuel sources as a hedge against soaring crude oil costs.

The section, authored by Democratic Rep. Henry Waxman of California, bars federal agencies from signing contracts to buy alternative fuels unless their lifecycle emissions of heat-trapping carbon dioxide weighs in below traditional products derived from crude oil.

On Friday, representatives from across the U.S. government -- from every branch of the military to NASA to the Forestry Service and even the State Department -- will meet with officials from the Environmental Protection Agency, said an Air Force official who heads an interagency fuel task force.

Officials will discuss how and if new alternative fuels can comply with the law, said Paul Bollinger, the outgoing special assistant to the assistant secretary of the Air Force who has spearheaded the service's alternative fuels push.

Complicating the issue is a lack of usable data on just how much carbon dioxide is emitted from alternative fuels, Bollinger said.

"There are no benchmarks," Bollinger said. "There has to be an agreement on the standard that you have to use."

Canadian officials have also expressed alarm at Waxman's interpretation that the law would bar the government from using fuel derived from their plentiful heavy tar sands.

At stake is a nascent industry to convert America's bountiful coal supplies into liquid fuels like gasoline and jet fuel. Such an effort could cut U.S. reliance on imported crude oil, which accounts for about 60 percent of daily consumption of about 20 million barrels per day.

But environmentalists have objected to tapping America's 250-year supply of coal to meet soaring demand for transportation fuels, citing studies showing that coal-derived fuel has twice the carbon content as conventional supply.

"We're talking about launching a whole new industry that could pose a real threat in terms of carbon and the climate," said Deron Lovaas, vehicle campaign director for the Natural Resources Defense Council, an environmental group.

Instead of embracing coal, Lovaas said, the Air Force should emulate Virgin Atlantic which last month flew a jumbo jet from London to Amsterdam powered partly by biofuel - the world's first such commercial flight.

According to Bollinger, the Air Force is looking at looking at all crude oil alternatives, from biofuels to animal fat to coal-derived fuels. "There is not one silver bullet," he said.

Where the Air Force goes on fuel procurement, commercial airlines will likely follow. In 2007 the branch burned about 2.6 billion gallons of fuel at a cost of about $5.8 billion.

Meanwhile, the two sides cite dueling studies on the "lifecycle" amount of carbon dioxide in coal-derived fuel, the amount of the gas released from mining the coal, turning it into gasoline and burning it in an internal combustion engine - known as minemouth-to-tailpipe emissions. So parsing the data and agreeing on benchmarks could carry high stakes.

According to a study by the Energy Department's National Energy Technology Lab and the Air Force in 2007, mixing coal with about 15 percent biomass like switchgrass or corn stover could cut the carbon load to 20 percent below conventional fuel, the study found.

The NRDC cites a 2007 study from the Argonne National Laboratory that even if carbon dioxide from coal-to-liquid plants was separated and socked away in underground reservoirs, the carbon content in the fuel would still be 19 percent higher than conventional diesel fuel.

(Editing by Christian Wiessner)