Last update: 10/3/2008 4:10:18 PM
By Martin Vaughan
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--Congress gave a huge boost to solar, wind and clean energy projects in tax legislation passed Friday, but an unlikely industry is also quietly cashing in on the tax breaks: coal.
The bill makes alternative jet fuel made from liquefied coal for the first time eligible for a 50-cents per gallon tax credit. It creates a new tax credit for waste coal that is recovered and re-used in the manufacture of coke, a key ingredient in steel.
President Bush signed the bill into law Friday.
Backers of the energy tax incentives touted them as crucial to reducing emissions by pushing U.S. energy use toward non-conventional sources like wind, solar and geothermal energy.
Coal-specific tax incentives in the bill total only about $1.5 billion, out of a total $17 billion package. But influential lawmakers wanted to be sure that coal secured at least a portion of the federal largesse, and tucked in the jet fuel and waste coal provisions late in September Senate negotiations on the package.
The expansion of the tax credit to coal-based jet fuel would potentially benefit firms like Consol Energy Inc. (CNX) and Rentech Inc. (RTK), which are moving ahead with projects to convert coal into transportation fuels.
The tax credit would not deliver benefits immediately, as the legislation sunsets it at the end of 2009, and no large-scale liquefied coal facilities will be producing before 2011 at the earliest.
But the addition of jet fuels is important because military jets are slated to be the first significant users of fuel made from liquefied coal. Aviation fuel is the "leading edge" of coal-based transportation fuels in the U.S., said Corey Henry, a spokesman for the National Mining Association.
Besides the jet fuel provision, the bill would make sure that liquefied coal plants can also benefit from $250 million in tax credits for projects to develop methods of carbon capture and storage.
The waste coal tax credit was sought by coke producers and by Headwaters Inc. (HW), a waste coal processor based in South Jordan, Utah.
Facetiously dubbed "renewable steel" by Senate staff, it was included in the bill at the behest of Sens. John "Jay" Rockefeller, D-W. Va., Arlen Specter, D-Pa., and Orrin Hatch, R-Utah.
The credit, worth $2 per barrel-equivalent of oil, would be available for waste coal that is recovered from ponds or lagoons and used in coke manufacture.
Environmentalists blasted the addition of the liquid coal provisions, arguing that the tax breaks would perpetuate a technology that they say worsens global warming. They argue that over the life-cycle of the liquid coal - including extraction and processing the coal into liquid - the fuel emits more greenhouse gases than conventional gasoline.
"This will enable that industry to get a toe-hold, and presents untold problems in trying to counter global warming pollution," said Jim Presswood of the Natural Resources Defense Council.
The NMA's Henry said that argument does not take into account the emissions from petroleum exploration and shipping. Besides, he said, burning liquid coal emits fewer non-greenhouse gas pollutants, like nitrous oxide and carbon monoxide, than gasoline.
Environmentalists also raised an outcry over a provision in the bill that gives a tax benefit to refineries that process oil shale and tar sands into transportation fuel.
Ultimately, at least one environmental group decided the benefits of the renewable energy credits outweighed its objections over fossil fuel provisions, and joined the effort to help push the bill through the House.
"While we regret the addition of these environmentally harmful provisions to the package, we nevertheless urge members of Congress to support the overall package and therefore renew the urgently needed extensions of tax incentives to support clean energy and energy efficiency technologies," Sierra Club executive director Carl Pope wrote in an Oct. 2 letter to House Speaker Nancy Pelosi.
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