Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 02:30 PM

Mr. Bill Douglas

Vice President, Econo-Power International Corp.

Testimony of William C. Douglas
Senior Vice President Business Development
Econo-Power International Corporation
1502 Augusta Drive, Suite 100
Houston, TX 77057
Submitted to the
Hearing on May 1, 2006
Good morning, Mr. Chairman and members of the Committee. My name is Bill
Douglas. I am the Senior Vice President for Business Development for Econo-
Power International Corporation or EPIC. We also have Mr. John Keller, Vice-
President and Chief Financial Officer. We appreciate the opportunity to testify
this morning.
We are pleased to be here today to share with you our views about the benefits
that Industrial Coal Gasification Systems technology can deliver. ICGS can
produce a synthetic fuel gas at prices below that of Natural Gas by converting
solid fuels, such as coal, which are abundant and economically available in the
US. If ICGS can achieve wide spread adoption in the industrial sector, it will help
the country displace usage of scarce natural gas, put additional US workers to
work mining, transporting and converting coal. Use of economical synthetic fuel
gas will assist industry in meeting environmental goals of reducing NOx, mercury
and other air pollutants, while also advancing sound energy policy goals of
retaining a secure and diverse mix of fuels for industrial process and electric
power generation.
EPIC, The Clean Coal Gasification Company™, builds, owns and operates
industrial coal gasification systems to convert coal to a clean alternative to
natural gas. The use of domestic coal offers a stable-priced, clean alternative to
volatile-pricing for domestic and imported natural gas and LNG.
EPACT 2005 is a major step in providing incentives to bring clean coal initiatives
to the very large industrials and Utility companies. It has a very select impact on
the small to medium size industrial that is evaluating alternative energy such as
Coal Gasification. The major credit available is the ITC. However, these credits
are restricted to certain industries and/or require that the fuel be used for a
specific purpose such as the production of electricity. This eliminates a large
proportion of the US industrial base as potential users of synthetic fuel gas. The
small and medium sized industrials are the companies having the greatest
difficulty in dealing with the high price of natural gas and electricity used in their
facilities. They are rapidly becoming non-competitive with other nations because
of high energy costs. These same companies are also reluctant to change
energy sources from the tried and true natural gas and electricity infrastructure.
For them, a commitment to change to a coal-based syngas will require some
financial incentive. The most effective way to induce a company to change to
Coal Gasification is through economic incentives. The way to provide these
incentives is to modify EPACT to include the smaller industrials with incentives to
use alternative energy sources such as Coal Gasification.

ICGS is a process that converts low value fuels such as coal, biomass, and
municipal wastes into a high value, low Btu, environmentally friendly natural gastype
fuel, also called “synthesis gas” or simply “syngas”. ICGS uses air-blown,
modular gasifiers to accomplish the conversion.
Coal gasification has undergone many evolutions and improvements. The EPIC
system of gasification and sulfur removal is an updated version of a time tested
method to convert coal to a low Btu fuel gas. The EPIC system is covered by US
patents (pending) and is manufactured in the US. There are dozens of similar
systems in operation for many years in other parts of the word that provide fuel
gas for varied industrial processes. The potential US industrial users need some
incentive to allow them to accept the system in the US.
Industrial uses include virtually any natural gas fueled industrial process such as
boilers, kilns, process furnaces, etc. The ICGS can also refuel older coal fired
plants for environmental compliance without adding pollution control systems.
EPIC has also worked with major gas turbine suppliers to gain acceptance of the
fuel gas produced in EPIC’s system. This acceptance opens the Integrated
Gasification Combined Cycle (IGCC) area for even small and medium sized
industrial plants.

ICGS provides some significant environmental advantages. When ICGS is used
to replace direct coal combustion in boilers or kilns, the following benefits are
• Elimination of particulate emissions.
• Reduction of SOx emissions by at least 100 times over unscrubbed coal.
• Reduction of NOx emissions by 90% or more.
• Removal of mercury at greater than 90%.
When ICGS is used to replace natural gas, NOx reductions of at least 50% are
It is important to note that only minimal modifications are required to boilers, kilns
or process furnaces to use ICGS. For most industrial boiler, kiln or furnace
systems, major capital expenditures would be required to achieve compliance
with even current environmental regulations. ICGS allows US industrial
companies to employ capital to improve process efficiency without having to
dilute it for investing non-productive pollution control systems.
In the ICGS process, harmful pollutants are removed from the syngas stream
before combustion, rather than in post combustion flue gas treatment. The
pressurized syngas stream represents less than 1/100 of the volume of the flue
gas from direct coal combustion and the contaminants in syngas are
concentrated. Therefore, IFGS pre-combustion clean-up is far more effective
and much lower cost than the post-combustion clean-up employed in direct
combustion coal steam-boiler plants.
In ICGS, coal ash is converted in the gasifier into a solid, which is similar to
conventional coal fired ash which can be employed in the construction industry
as road fill or as strengthening aggregate for building concrete. ICGS does not
require secure landfill sites for ash storage.
The sulfur is removed from the gas before combustion and is recovered in
elemental, non-hazardous form. This sulfur may have economic in certain
industrial processes and agriculture. Even if sulfur disposal is required, nonhazardous
disposal is easily accomplished.

In the case of retrofit for industrial boilers, kilns, furnaces, etc, the facility is
normally permitted to operate on its present fuel. In general, the facility will
continue to operate at the same production level (at a minimum) as with the
existing fuel.
ICGS should be viewed as merely a fuel change and not a major modification
triggering NSPS standards. Expedited permitting would also help the industrial
user to keep competitive advantages while maintaining domestic fuel sources.
Consideration of ICGS’s environmental benefits should lead to placing ICGS as
PACT (Preferred Available Control Technology) for industrial energy users.
PACT designation would allow industrial customers to more rapidly achieve
energy cost stability and remove this aspect of the perceived permitting risk when
using ICGS.

The EPIC ICGS is inherently “modular” and is easily applicable to most industrial
processes. The number of gasification modules is determined to closely match
the fuel gas needs for each individual user. There is no “one size must fit all”
requirement, as is the case with larger oxygen-blown systems being offered for
large IGCC plants.
Gasification is a steady state chemical process and steady state industrial
processes are the best candidates for its use. With modular ICGS, should the
user’s fuel gas needs expand, the ICGS is normally easily expandable to match
the expanded needs.
Another industrial strategy could be to co-fire ICGS gas with natural gas to obtain
partial benefits. The ICGS system can be expanded in the future for increased
coal gas use. This strategy could allow the user to more rapidly obtain some
ICGS benefits while a larger system is being constructed.
EPIC is working to improve the process and overall efficiency, thereby offering
the user increased benefits from ICGS use.

The nature of ICGS requires a significant capital commitment to build the system.
Past and present incentives have only been available to the gas supplier/coal
converter. ICGS is nominally quite competitive to natural gas. However, the
requirement to commit to a long-term contract for the ICGS system complicates
the decision. If tax incentives for ICGS were available to the user in the form of
credits for Btu’s of syngas used, the economic benefits would be more obvious
and promote more rapid ICGS implementation.
For users that are able to directly combust coal, tax incentives for ICGS use
would expedite the “fuel switch” and offer more rapid environmental clean-up of
these polluting systems while minimizing the economic impact of the additional
“conversion” cost of the coal to ICGS fuel gas.
For the system provider of the ICGS, capital cost is a major issue. Investment
tax credits would help to minimize the “conversion cost”, to the fuel gas user and
therefore, facilitate the acceptance by the financial communities for conventional
project finance.

?? Reduce industrial dependence on natural gas or foreign LNG.
?? Use the 225 year supply of US coal resources for a broad base of
industrial plants.
?? Help US industrial producers keep competitive with foreign competitors
with cheaper synthetic fuel gas.
?? Reduce industrial emissions.
?? Allow industrial producers to stabilize energy prices over the long term
without the high volatility of natural gas prices.
?? Keep and create new US jobs.
?? Broaden the base of industries and applications in which EPACT 2005
and other legislation encourage the use of gasification technologies by
removing restrictions as to the types of industry and ends use of the
syngas produced
?? Incent the ultimate gas user by providing incentives based on the amount
of energy in Btu’s obtained from coal gasification
?? Adopt ICGS as Preferred Allowable Control Technology (PACT) to allow
environmental regulators to more easily issue permits for fuel switching
rather than the full new source reviews that could be required without
PACT designation.
?? ICGS can benefit a broad spectrum of US industries.
?? ICGS can significantly reduce industrial pollution
?? Additional broad based tax incentives available to the fuel user would
expedite implementation of ICGS.
?? ICGS can be a viable means of reducing US dependence on imported
energy (oil and natural gas/LNG).
Thank you for the opportunity to testify before your committee and we would be
happy to provide additional information if required.