Wellington Dec 7 NZPA - Coalminer Solid Energy is putting together a shipment of 500 tonnes of Southland lignite for commercial trials of a United States drying plant it hopes will remove enough water so the low-quality coal can be shipped back to New Zealand as briquettes.

The state-owned company earlier this year announced a joint venture with Colorado-based GTL Energy Ltd to investigate the feasibility of building a briquetting plant in a former paper mill at Mataura, 10km east of its New Vale coal mine.

The plant, the first of its kind in New Zealand, would create about 10 jobs and process an estimated 100,000 tonnes of lignite a year.

Solid Energy mined 240,000 tonnes of lignite from the New Vale mine during the past financial year, and some of that is now being sent to GTL's new drying plant near South Heart, in North Dakota.

It is expected to produce 330 tonnes of briquettes which will burn cleaner and more intensely that the brown coal, according to Brett Gamble, general manager of Solid Energy's new energy arm. About 200 tonnes will be sent back to New Zealand for trials in the boilers of potential clients, and the remainder will be tried out in American boilers which are similar to those used in this country.

Robert French, the chief executive officer of GTL Energy, told Associated Press his company's North Dakota coal-drying plant was due for completion by month's end, and would start drying lignite from North Dakota mines in January, followed by test batches from New Zealand.

He said the idea was to prove the technology in North Dakota before other plants were built in other countries.

In New Zealand, Solid Energy is carrying out technical and economic feasibility studies, completing engineering designs and applying for resource consents and Mr Gamble said a decision on whether to go ahead would be taken after the company had trialled the briquettes in commercial boilers.

He said small amounts of NZ ignite have already gone through a pilot plant in Denver.

The decision to proceed would be partly based on the likely demand from South Island industrial and commercial customers, he said.

The briquetting process partly involves a mechanical process to make moisture in the coal more accessible in evaporative drying.

Upgrading lignite potentially offered an opportunity to use vast and relatively untapped Southland resources, he said.

The company has said it will also look at the potential for trucking briquettes to the closed Ohai Mine, to be bagged for the household market, which Solid Energy has plans to eventually quit.

It has plans to withdraw from supplying coal to the household market by the start of 2013, in line with the national environmental standards for air quality -- but has said that date could change in line with the Government's review of timing on implementation of the standards.

Separately, Solid Energy is investigating a $1.4 billion joint venture with farmer-owned fertiliser company Ravensdown to convert two million tonnes of lignite each year to urea fertiliser.

This plant could create 500 new jobs and produce enough urea to supply a $1 to $2 billion export industry in five years, but it would not be built until after 2014.

Some environmental lobbyists have said such a plant could become the nation's second-biggest emitter of greenhouse gases behind the coal-fired Huntly power station, but it could still qualify for taxpayer subsidies worth more than $500 million over the first 20 years of the plant's life.

The initial investigation into whether the urea plant is economically viable is expected to be completed early next year.