Word: coaling
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Dates: during 2000-2009
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Another company that licenses its technology, Headwaters Inc. of Salt Lake City, Utah, was the only company willing to discuss the business in general terms with TIME. So exactly what kind of synthetic fuel is produced? The kind that meets the IRS definition of changing coal's chemical composition. "The tax code does not require you to show a change in the coal's performance," says Headwaters spokesman John Ward, whose company's processes are in use in 20 synfuel operations in nine states. "For the tax credit, you just need to show there has been a substantial chemical change...
Whenever there's a billion dollars to hand out to special interests, influential members of Congress--Democrats and Republicans--are always lurking in the background. After the IRS decided in June to take a closer look at the coal that is being called synthetic fuel, the synfuels industry turned to its old friends on Capitol Hill. In a rare public display of congressional meddling in a tax investigation, industry supporters persuaded a House Appropriations subcommittee to introduce a bill to call off the industrywide audit. It failed to pass in an 8-to-8 vote. Since then, the campaign...
That's what WPS Resources did in 2001. WPS bought a synfuel facility near Tuscaloosa, Ala., and moved it near a coal mine in Hopkins County, Ky. Naturally, the plant lost money. But it generated such bountiful tax breaks that before long, WPS could no longer take full advantage of the credit because it lacked sufficient income. In 2001 and 2002, for example, WPS claimed a total of $45 million in credits...
...course, just that. Congress's idea of a synthetic-fuel industry is unlike any other business model: it doesn't make a profit and never will. The cost of treating the coal makes synfuel more expensive than conventional coal. Thus this new generation of synfuel plants makes no economic sense. Their only allure is the tax credit. To be sure, those who benefit from the tax credit dispute the notion that it is a windfall. They claim that it has increased the supply of low-cost coal, lowered electricity prices, improved the efficiency of coal-fired generators and been environmentally...
Beyond the drain on the treasury, the credit has destabilized coal markets because synfuel producers periodically undercut conventional coal producers in this country and abroad, which they can afford to do because of their tax credits. Coal associations in Canada and Australia have complained that the tax credit is nothing less than a government subsidy interfering with the free market...