Creating Gasoline from Coal

South Africa The head of OPEC said Sunday that oil prices aren't likely to fall any time soon. That could accelerate the development of alternatives. ABC News reporter Nick Watt went to South Africa to show why the U.S. isn't using an easy and cheap technology.

It's gasoline, but not as we know it. This fuel isn't refined from crude oil but from coal and one day it could end U.S. reliance on foreign oil.

KBR Senior Analyst Kevin Book said, "We have enough coal to replace substantially all of the hydro-carbons used for transportation in America today."

The world's leader in the field is SASOL, a South African corporation that operates this vast facility outside Johannesburg.

This plant, which covers 10 square miles and sits atop one of the largest coal mines in the world, right now produces 28% of all of South Africa's gasoline, diesel and jet fuel." Invented in the 1920s, the process was developed by pariah states with no oil: Nazi Germany then apartheid South Africa.

How does it differ from the fuel that would come out of an oil refinery? It's a much, much cleaner fuel Cleaner to burn, yes, but not cleaner to produce: Plants like this spew twice as much carbon than oil refineries.

The solution most talked about is pumping CO2 back into the earth, but some environmentalists say it will never work on this scale. Also, these plants are very expensive to build. But with oil now over $145 a barrel: They just might make economic sense.

SASOL engineers believe the greatest potential lies in the US. "The US have got the biggest coal reserves, so the biggest opportunity lies there. They've got more oil stored in the form of coal than there are oil reserves in the Middle East."

A small coal to liquid is planned for Gilberton, Pennsylvania. But there's strong opposition because of the carbon emissions issue. Also, the Air Force plans to convert coal into jet fuel at this base in Montana.

There's enough coal in the US to last an estimated 250 years. And once a plant is built, it's cheap energy. Here in South Africa they produce gasoline from coal for just $25 a barrel.

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