Coal-to-Liquids and the Path to Independence Jim Roberts Chairman, President & CEO Foundation Coal Corporation

2 U.S. Import Dependency 65% 26%

3 U.S. Import Dependency 75%

4 We’re Right to Be Concerned U.S. energy challenge – it’s real requires an immediate response, but a long-term strategy need to address environmental concerns and energy needs simultaneously

5 The Specter of Energy Dependency despite good intentions & strong rhetoric …. our dependency grows U.S. imports rising to 75% by 2030 we use 25% of world’s oil – hold only 3% dangers of dependency are growing

6 Dangers of Energy Dependency reliance on imports rises… as reliability of supply falls geopolitical turmoil unfriendly or hostile regimes competition for energy from growing economies peaking world oil supply? rising global demand for a dwindling supply

7 The Coal Boom Coal is a resurgent industry … coal fuels over half of U.S. electric generation today U.S. electricity demand – up 50% by 2030 domestic coal production will continue to grow from a record 1.1 billion tons in 2005 to a new record in 2006 and coming years

8 Natural Gas It’s Affordable … Oil Coal Behind Coal’s Resurgence

9 It’s abundant … U.S. has the world’s largest reserves 240-year domestic supply highly diversified … reserves in 26 states

10 The Energy of Coal States Top 10 coal states have energy reserves totaling … 4,577 quads On an energy equivalent basis, this compares to … U.S. oil reserves 131 quads Saudi Arabia’s oil reserves1,566 quads Middle East oil reserves4,104 quads

11 Behind Coal’s Resurgence Secure Within Our Borders

12 U.S. coal reserves… are known – no need to explore or search aren’t subject to foreign disruption can’t be nationalized by foreign governments don’t have oceans to cross Secure Within Our Borders

13 Southern States Energy Board “American Energy Security” Coal to the Rescue study by 16 governors and state legislatures bold plan for U.S. energy independence coal-to-liquids (CTL) is biggest single component of overall plan

14 Coal-to-Liquids (CTL) producing premium transportation fuels from coal using existing technology the path to independence – key to reducing U.S. energy imports 5% per year over 20 years a proven track record – meeting 30% of South Africa total fuel needs today diversify fuel production away from the Gulf Coast

15 Behind Coal’s Resurgence Secure Within Our Borders

16 Growing Interest in CTL U.S. Department of Defense commercial airline industry trucking and railroad industries China – $10 billion CTL commitment

17 Advantages of CTL Development To states and the nation… high-wage jobs ultra-clean fuels greater energy security

18 Challenges to CTL Development biggest impediment – volatility of global energy prices price uncertainty makes lenders skittish on multi-billion-dollar CTL investments.

19 Oil Price Volatility Energy independence will remain elusive if our commitment waxes and wanes with the rise and fall of global oil prices.

20 What States Can Do States can advantage themselves and attract CTL investment by offering… long-term purchase agreements tax incentives non-recourse loans on matching basis streamlined regulatory process

21 Coal – A Necessary Ingredient without more coal production… CTL incentives are meaningless 10,000 bbl/day plant = 2 million tons of coal increased coal production will require… faster, more certain permit process better inter-modal transportation system new generation of young miners

22 An Effective Energy Policy what we have: piecemeal, short-term policies energy supply issues & environmental concerns considered in isolation policy driven by news cycle What we need: long-term, comprehensive policies Integrated energy & environmental policies policy driven by strategic needs and $$$ to match

23 The Integration of Energy & Environmental Policy Climate Change – an example of what’s broken Enhance domestic supply or ration coal use? Use more coal … but not mine it? Limit U.S. coal use … but ignore China?

24 The China Syndrome Unilateral action in the U.S. will not appreciably improve global environment … not while China: builds a new coal-fired power plant every 5 days in 20 years, will add twice the amount of GHG emissions as would be reduced by Kyoto Protocol in 20 years, will emit more GHGs than the U.S.

25 Technology – The Path Forward Carbon Sequestration the technological path to … using our most abundant domestic fuel capturing and storing CO2 addressing climate change in rapidly growing economies through export of technology while minimizing the impact on U.S. economy

26 Asia-Pacific Partnership AP6: a model technology program multi-lateral agreement to develop and share GHG reduction technologies participating nations are Australia, China, India, Japan, Korea, and the U.S. – among the world’s leading coal producers and consumers Caterpillar-China agreement on methane-capture technology – producing GHG emission reductions equal to 1% of total Kyoto reductions

27 Technology – A Better Approach 10 years ago, no one would have thought … Yahoo would have 380 million users daily China would be on track to produce 10% of its energy needs from CTL skeptics overlook the power of technological solutions around us

28 Benefits of Better Energy Policy coal’s potential is unrivalled can help free us from our dangerous dependence on foreign energy states can benefit from coal’s new growth and the development of CTL