Coal to diesel fuel loans proposed

NY Times:

As the Senate began debate Tuesday on a sprawling bill to reduce oil consumption, top Democrats were circulating a proposal to provide $10 billion in loans for plants that make diesel fuel from coal.

The proposal highlights the horse-trading involving powerful industry groups as Democratic leaders push for legislation that would require higher mileage in cars and a huge increase in the production of renewable fuels made from plants like switch grass.

But many environmental groups are flatly opposed. “We don’t think the federal government should be subsidizing liquid coal,” said Erich Pica of Friends of the Earth. “From a global warming and an environmental position, liquid coal is an unacceptable source of energy.”

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The individual loans would be allowed to cover up to half the total cost of a new plant, and the plants would have to be capable of capturing and storing the carbon dioxide emitted during production.

Numerous companies have proposed coal-to-liquid projects, and industry supporters have said that a plant producing 50,000 barrels of fuel a day would cost at least $3 billion and probably more than $4 billion.

Coal industry supporters say coal-based liquids could replace millions of gallons of gasoline a day, reducing the country’s dependence on imported oil from the Middle East and other troubled areas.

Coal-state lawmakers are pushing for a wide array of government assistance to jump-start the industry. In the House, Representative Rick Boucher, Democrat of Virginia, has drafted a bill that would insulate coal-to-liquid plants from gyrations in energy prices by providing loans if oil prices dropped too low to make coal-based liquids profitable.

Other lawmakers have proposed letting the Air Force sign 20-year contracts to buy vast amounts of coal-based jet fuel at fixed prices. Still others have proposed including coal-based liquids in a government mandate to greatly expand production of alternative fuels.

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From a strategic standpoint the projects probably make sense. That is also why the environmentalist wackos oppose them. They are against energy production period. Whether it is bio fuels, wind or whatever, environmentalist will find a reason to oppose the production of energy. With the abundance of coal in the US and the use of the CO2 to enhance oil production by injecting it back into the ground, I think this idea has merit.