Sinclair Oil to Market Diesel Fuel from Coal-to-Liquids Facility Planned by Medicine Bow Fuel & Power

Energy Resource, Jan 12, 2007

ENERGY RESOURCE-12 January 2007-Sinclair Oil to Market Diesel Fuel from Coal-to-Liquids Facility Planned by Medicine Bow Fuel & Power(C)2007 JeraOne - http://www.jeraone.com

Medicine Bow Fuel & Power LLC, a subsidiary of DKRW Advanced Fuels LLC, has entered into a long-term contract to sell 100% of the ultra-low-sulfur diesel fuel from its planned coal-to-liquids (CTL) facility in Medicine Bow, Wyoming, to Sinclair Oil Corporation. Sinclair will market the fuel in the Rocky Mountain region.

The planned Medicine Bow project, which includes a coal mine and adjacent CTL facility, will use an indirect liquefaction process to convert coal resources into refined products that meet critical energy needs while reducing the environmental concerns associated with coal combustion, the company said.

The facility will use General Electric Company's coal gasification technology to produce synthetic gas, which will be cleaned through other technology so that "substantially all" of the sulfur and carbon dioxide (CO2) is removed, Medicine Bow said. The resulting syngas will then be liquefied using Fischer-Tropsch technology licensed from Rentech Inc. A further refining process will produce the ultra-low-sulfur diesel product that is expected to exceed current environmental emission standards in the region.

"We believe this agreement for the long-term supply of a Fischer-Tropsch, ultra-low-sulfur diesel product is the first of its kind," said Jon Doyle, DKRW Advanced Fuels' chief operating officer. "This contract is another important milestone in Advanced Fuels' strategy to complete the financing and construction of our flagship project."

"We are pleased to enter into this agreement, which will provide additional high-quality ultra-low-sulfur diesel to our customers," added M. C. "Bud" Blackmore, Sinclair Oil Corporation senior vice president. "This agreement, along with our refinery expansion projects, strategically positions Sinclair as the leader in refined products along the Rocky Mountains."

Construction of the CTL facility is scheduled to start in late 2007, with an expected in-service date in the fourth quarter of 2010. In addition to liquid fuels, primarily diesel and naphtha, a number of byproducts of the liquefaction process, including carbon dioxide and chemicals, are expected to be sold for use in the region.

Carbon dioxide from the coal can be dried, liquefied and shipped via pipeline, and plans are to sell it to the enhanced oil recovery market in Wyoming with an initial target in the Powder River Basin.

"We are pleased to reach another important milestone in the development of the Medicine Bow project," said Bob Kelly, DKRW Advanced Fuels' chairman. "We have already secured options on coal reserves and licenses to key technology. With more than a million barrels per day of refined diesel products imported into the U.S., record prices at the pumps, new air-quality regulations and diesel becoming the fastest-growing transport fuel in the world over the next 20 years, environmental and market forces favor new investment in U.S. diesel production. We believe that we will be well positioned to meet the rising demand."

DKRW Advanced Fuels is a development-stage hydrocarbon conversion company focused on the commercial development, construction, ownership and operation of facilities designed to convert lower-value hydrocarbons into products that traditionally have been produced from crude oil. The company's initial project is a planned coal-to-liquids facility at the mouth of the Saddleback Hills Mine in Carbon County, Wyoming, near the town of Medicine Bow.

DKRW Advanced Fuels is a subsidiary of DKRW Energy LLC. Other shareholders are Arch Coal, the second- largest coal producer in the U.S., and Och-Ziff Capital Management, a New York-based private equity firm.

Sinclair Oil Corporation is a fully integrated energy business owning and operating exploration, production, refining, pipeline, trucking, and terminal and marketing assets. Nearly 3,000 service stations in more than 20 states brand under the Sinclair name.

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