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Back in 1949, the Bureau of the Mines in Louisville, Missouri  put together a
demonstration plant to produce gasoline from coal.  Raw coal was first crushed to about 3/4 inch size and then pulverized in a ball-mill  to less than 60 mesh, then dried to 1 or 2 percent moisture content.  This is mixed with a small quantity of catalyst, such as iron oxide or tin oxalate, and with a heavy oil into a paste containing about 47 percent solids.  Steam-driven pumps at 10,000 psi force this paste into a radiant-type heater in which the high pressure tubing is protected by a superheated jacket.
  The plant was designed to work at 700 atmospheres or over 10,000 lb. pressure, in two major steps.  This liquefies the coal and produces gasoline and its by-products.  The output of the plant was from 300 barrels of gasoline  per day depending on the coal used and the catalyst used.  Taken from
ENCARTA 2004 by Microsoft.
 

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In the 1970's, Ashland Oil Company built a coal liquifaction demonstration plant in Ashland KY, just downriver from the Ashland (now Marathon-owned) refinery. They proved the commercial viability of converting coal to a liquid, not unlike gasoline, and to a gas not unlike natural gas. Unfortunately the cost per gallon to produce it at that time was well above the cost of gasoline.

Given that the cost of gasoline today is actually on par with the inflation-adjusted price from 1980, I have to assume that coal liquifaction still doesn't make economic sense.

[MinimizeGovernment]

There is a well-done discussion of liquifaction and gasification on Wikipedia, here

The article claims that the break-even cost is when oil reaches $35/bbl; however, it does not indicate what year that statement was made, so inflation could have an impact. Given that oil is currently nearing twice that level, the subject is certainly worth revisiting. Unfortunately coal liqifaction and gasification releases large quantities of CO2--don't tell Algore.

The long term solution to our fossil fuel and CO2 problem has to be electrical separation of hydrogen from water, powered by nuclear. We need to be producing gasoline from ANWR and the Eastern Gulf in the near term while we make a maximum effort to bring nuclear/hydrogen on-line. Our nation's future depends on it. All we need to do now is to convince the Democrats.