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Last September, cleantech venture capitalist Vinod Khosla said of clean coal startup Ciris Energy: “One I wish I’d invested in.”

Well, now he has.

Khosla Ventures announced today it has led the company’s second round of equity financing, which included existing investors Braemar Energy Ventures, Rho Ventures and GE Energy Financial Services. In an SEC document first pointed out by CNET, the company reported last week it had raised $23.9 million out of a planned $39.7 million, with $15.8 million remaining to be sold.

Ciris Energy makes technologies that allow for the conversion of coal to methane and claims it is more economical and efficient than traditional natural gas development and gasification processes. It also claims to be able to harvest the methane without mining the coal, meaning it can do so while the coal is still underground.

Like Rive Technologies, which raised $25 million in a round led by the Blackstone Group last month, Ciris seems to be a business going after making the development of fossil fuels more efficient. In Rive’s case, it makes oil refining more efficient, which could presumably lead to less carbon emitted and cut down on the amount of oil used or mined — Ciris’s pitch is similar, but for coal beds. While natural gases like methane are still fossil fuels, they are less harmful to the environment than burning coal.

“Ciris has the potential to transform and extend the coal resource base in a number of distinct geographies,” Khosla said in a statement this morning. “This may be the cleanest and cheapest form of clean coal.”

Khosla’s bet seems in line with the forecast rise in use of natural gas, which VentureBeat covered last year. Consulting firm Black & Veatch reports that coal market share will be cut in half in the next 25 years because companies will retire coal-fired equipment rather than face the cost of complying with pending air quality regulations in 2015 and beyond. The ebbing tide of coal will be made up for by a doubling in natural gas, which is expected to rise from 21 percent of U.S. energy use in 2011 to 40 percent in 2035. Oil companies like Exxon and Chevron have made moves to purchase natural gas developers. And a recent Ernst & Young report found that low natural gas prices in the U.S. have made it tougher for solar and wind projects to win financing.

GE energy financial services managing director Kevin Skillern talked about the company’s investment in Ciris at a panel at TechCrunch Disrupt in September, saying of the company:

“They basically accelerate what’s already happening naturally by order of magnitude,” Skillern said, referring to the process of coals becoming natural gas.

At the same event, Khosla lauded the company’s approach.

“This is how you should think nonlinearly. If you’re a coal miner your biggest enemy is methane (which naturally occurs in coal beds). It causes explosions,” Khosla said. Khosla’s point: Ciris can harvest the methane from coal beds while it is still underground, which would theoretically reduce risk for coal mine workers, helping out the coal miners, while also producing natural gas.

[Image via Wikipedia Commons]

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