Dems push coal to gas projects while trying to restrict use of coal

NY Times:

Even as Congressional leaders draft legislation to reduce greenhouse gases linked to global warming, a powerful roster of Democrats and Republicans is pushing to subsidize coal as the king of alternative fuels.

Prodded by intense lobbying from the coal industry, lawmakers from coal states are proposing that taxpayers guarantee billions of dollars in construction loans for coal-to-liquid production plants, guarantee minimum prices for the new fuel, and guarantee big government purchases for the next 25 years.

With both House and Senate Democrats hoping to pass “energy independence” bills by mid-July, coal supporters argue that coal-based fuels are more American than gasoline and potentially greener than ethanol.

“For so many, filthy coal is a dirty four-letter word,” said Representative Nick V. Rahall, Democrat of West Virginia and chairman of the House Natural Resources Committee. “These individuals, I tell you, have their heads buried in the sand.”

Environmental groups are adamantly opposed, warning that coal-based diesel fuels would at best do little to slow global warming and at worst would produce almost twice as much of the greenhouse gases tied to global warming as petroleum.

Coal companies are hardly alone in asking taxpayers to underwrite alternative fuels in the name of energy independence and reduced global warming. But the scale of proposed subsidies for coal could exceed those for any alternative fuel, including corn-based ethanol.

Among the proposed inducements winding through House and Senate committees: loan guarantees for six to 10 major coal-to-liquid plants, each likely to cost at least $3 billion; a tax credit of 51 cents for every gallon of coal-based fuel sold through 2020; automatic subsidies if oil prices drop below $40 a barrel; and permission for the Air Force to sign 25-year contracts for almost a billion gallons a year of coal-based jet fuel.

Coal companies have spent millions of dollars lobbying on the issue, and have marshaled allies in organized labor, the Air Force and fuel-burning industries like the airlines....

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One of the reasons AlGore lost West Virginian and thus the election in 2000 was his opposition to the use of coal. It was right up their with guns as a reason to vote against him. Pelosi and Barbara Boxer would also likely lose if they were in a national contest seeking votes in West Virginian, but the state still sends Democrats to Congress to empower those who oppose its interest. If $50 a barrel is the break even point on the process, then it would appear that above that point no subsidy is needed. With oil hovering around the $70 a barrel price, it appears that it would be a profitable way to go and would not cost the government anything other than the guarantees against the down side if the price declines for oil.