Cleaner Coal Technologies

Theo L.K. LeeHydrocarbon Technologies, Inc.

(A Wholly Owned Subsidy ofHeadwaters Corporation)

June 10, 2003Woodrow Wilson International Center

Headwaters Corporation

• Utah based alternate fuels company

• NASDAQ: symbol “HDWR”; – 28 million shares @ $19.50/share

• Subsidies:– Covol Fuel: alternate fuels

– ISG: bottom and fly ash

– Headwaters Technology Innovation Group• Hydrocarbon Technologies, Inc.: energy

• Headwaters NanoKinetix: nano-catalysis

R &D Directions

• Improving chemical synthesis/reactions via nano-catalysis

• Developing cost effect technologies for processing low grade feedstocks, for example– coal

– Petroleum residuum (bottom of the barrel)

Nano-catalysis

• Nano-dispersion and atomic alignment techniques

• Significant saving in precious metals usage

• Breakthrough applications

• Much simplified and energy efficient process

• Examples:– Highly selective catalyst for direct synthesis of H2O2

– Efficient & stable catalysts for fuel cells (DMFC), catalytic converters, etc..

Crystal Phase Controlled Catalyst

• Nano-scale deposition technology:– Aligning, spacing and adhering precious metal atoms on support materials.

• Controlled spacing between lines of Pd atoms to consistently expose the preferred crystal face (110).

• Nearly 100% selectivity for H2O2 ; no byproduct (H2O)

H/O = 1/1 3/1 4/1

(110) Face

H

O

O

H

(100) Face

H

H

H

H

H

H

O

O H

H

O

O

H

H

H H

H H

(111) Face

Alignment of Pd Particles

• Princeton University Materials Institute high resolution transmission electron microscope image.

• Illustrates highly organized and efficient structure of HTI nano-catalyst.

• Parallel lines are rows of palladium atoms on support material.

• Verifies consistent exposure of (110) crystal face and spacing between lines

of atoms necessary to achieve 100% selectivity for H2O2.

3 nm

World Proved Recoverable Coal Reserves World Energy Council (Jan 2001) – million short tons

Region Anthracite &

Bituminous

Lignite &

Sub-bituminous

Total

North America

(USA)

131,579

(96.2%)

150,866

(97.3%)

282,444

(96.9%)

Central & South America

8,530 15,448 23,977

Western Europe 27,650 73,693 101,343

Easter Europe/ former USSR

132,046 158,138 290,183

Middle East 1,885 0 1,885

Africa 60,816 216 61,032

Asia/ Oceania 208,719 113,675 322,394

World Total

(USA)

571,224

(22.1%)

512,035

(28.7%)

1,083,259

(25.2%)

Coal to Liquids

• Direct Coal Liquefaction (DCL) products:– Higher diesel to gasoline ratio than petroleum derived

– Use existing refining techniques

– Meet all current & projected specifications for sulfur and aromatics required

• Indirect Coal Liquefaction (IDCL) products:– Less energy efficient

– Ultra clean diesels with no sulfur or nitrogen

– No aromatic; high cetane number ( over 75)

• Integrated DCL and IDCL plant

Direct Coal Liquefaction

• A clean coal technology

• US DOE funded development between mid-70s & late 90s.

• Japanese DCL program completed in late 90s

• Significant technology improvements and cost reduction

• China is constructing a pioneer commercial plant in Inner Mongolia; utilizing HTI’s COAL PROCESS

• Feasibility study for an India client

• Other potential sites under consideration:– Indonesia, Yunnan & Shaanxi (China), Australia, etc..

The Shenhua Project (Inner Mongolia)

• China imported 500 million barrels of crude oils in 2001.• Energy security and self sufficiency• Huge coal resources ; Shenhua coalfield (236 billion

metric tons proven reserves)• Estimated 10 plants to be constructed in the next 20 years

in China• Shenhua’s Pioneer Plant:

– Direct Coal Liquefaction technology– 60,000 BPD or 20 million BPY (15,000 TPD or 4.5 million

tons/y)– Investment cost: US$2.0 to 2.2 billion– ROI of 12 to 15%– 1st Q 2006 Startup

Concluding Remarks

• U.S. recoverable coal reserve is 273 billion short tons

• 90 billion tons minable by surface mining

• Coal conversion technologies are matured for commercial consideration

• Coal liquefaction technologies produce clean fuels– Low or no S, N, & aromatics; no ash

• Carbon dioxide can be effectively recovered at the coal conversion facilities

• Lesser reliance on foreign oils and addressing energy security issue.