A fuel 
cell system with fuel processor for integration with a marine vessel propulsion 
system. The 
system includes an auto thermal reactor that is the fuel processor for producing 
hydrogen from a fuel source. The fuel source is preferably 
ethanol or 
biodiesel or a mixture thereof, but can also be a 
sulfur containing fuel like petrodiesel of JP-8. The system further includes a gas-water shift reactor for further production and concentration of the 
hydrogen from the auto thermal reactor output. The system also includes a 
hydrogen permeable membrane separator for generating suitable quantities of essentially pure hydrogen to the fuel 
cell. The system also includes an 
oxygen permeable membrane separator for concentrating 
oxygen and reducing 
nitrogen to improve the 
partial pressure of hydrogen in subsequent fuel 
processing steps. The system contemplates the use of a 
Polymer Electrolyte Membrane (PEM) fuel 
cell. The system minimizes preheating of catalysts or other components to the extent just needed to initiate the fuel processor. To that end, heat sources and sinks of the system and associated usage systems are matched so as to minimize heat collection, storage and distribution systems. Water is recycled within the system to the extent necessary to maintain a 
water balance in the fuel processor and the fuel cell stack(s). The system includes cooling of the fuel cell stack(s) and integrated heat 
recovery with exothermic and endothermic catalysts. The fuel processor / fuel 
cell system components are configured to conform to and take 
advantage of the available space and limitations, such as the space constraints and opportunities associated with a marine vessel.