Coal liquefaction, the conversion of coal to a clean-burning, low-sulfur-content fuel, is a technology that can augment petroleum-derived products such as gasoline and boiler fuels and help meet the requirement for large supplies of liquid fuel. Direct liquefaction produces liquids through the interaction of coal and hydrogen at high temperature and pressure. Indirect liquefaction involves the gasification of coal to a synthesis gas (hydrogen and carbon monoxide mixture) and the subsequent production of a liquid from that gas through the introduction of a catalyst. There are no commercial coal liquefaction plants operating or under construction in the United States. The Department of Energy (DOE) does, however, have an extensive program in liquefaction which includes research, development, demonstration, and commercialization activities. In conjunction with private industry, DOE is developing four direct liquefaction processes. Two large pilot plants have recently begun operating. Several technical, environmental, and health issues have to be resolved before the processes can be commercialized. Three indirect processes are commercially available and may contribute to the U.S. energy supply in the near term. Further research, development, and demonstration can substantially improve these processes and DOE efforts to commercialize them can assist in industry adoption of the technologies. DOE research, development, and demonstration work on indirect liquefaction focuses on two major parts of the technology, production of synthesis gas and production of liquids from that gas. This includes the development and demonstration of new gasifiers which, unlike those now on the market, can process eastern coals. The Energy Securities Act has established a Synthetic Fuels Corporation to provide financial incentives for the development of domestic substitutes for imported oil. The United States is faced with a choice between building potentially less efficient, more costly indirect plants now or waiting for the direct processes to be developed. This would contribute to present energy, supply and information gained would reduce the incertainties involved in building future synthetic fuels plants.

Because the basic technology for all four direct liquefaction processes is similar, sharing of information and experience could benefit development of each of the processes. If the plants operate successfully and information is shared, a commercial plant using any of the four processes could be constructed. Further research and development in direct liquefaction processes is needed. It is unlikely that any commercial direct liquefaction plants will be operating in the 1980's. The bulk of the production is likely to come from indirect liquefaction processes, which are commercially available. Successful operations in larger-scale plants are needed to reduce technical, health and environmental uncertainty before commercialization is viable. Potential problems of direct liquefaction, such as disposal of hazardous wastes and carcinogenic and toxic material, may also apply to the indirect processes. It is too early to tell how the incentives of the Energy Security Act will affect coal liquefaction. Even though indirect processes are technically proven, DOE has done little to promote their commercialization because they are less efficient than the direct processes under development, they are more costly than the direct processes, and the commercially available gasifiers needed for the indirect processes can only operate on certain coals. Private industry, however, is willing to accept the shortcomings and, if given financial assistance, is ready to build commercial-size indirect plants.

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