Commentary: The Showdown on Coal-to-Liquid Technology

Coal-to-liquid (CTL) technology converts coal to a liquid fuel distributable through the existing petro-infrastructure for use in conventional engines. Since CLT would increase the value of the mineral deposits and preserve the market share against other energy sources, coal companies (and allies in the UMWA and other members of its Coal-to-Liquids Coalition) are aggressively lobbying Congress for subsidies.

MIT scientists completing the omnibus study The Future of Coal warn that the proposed carbon sequestration to keep from releasing manufacturing emissions into the atmosphere remains untested on a large scale, and that even if feasible, would fail to create a "clean coal." According to Environmental Defense, CLT in vehicles would offer no benefit over petroleum in producing greenhouse gases which contribute to global warming. There is also the problem of the large amount of water required for manufacturing and an acceleration of the destruction resulting from mountaintop removal.

The Senate energy bill, the Renewable Fuels, Consumer Protection, and Energy Efficiency Act of 2007, is another version of H.R. 6, the CLEAN Energy Act of 2007. It appears that there is no Coal-to liquid (CLT) component, but there is a carbon sequestration demonstration project that holds out hope to the coal industry.

On February 8, 2007, in a hearing of the House Committee on Science and Technology, "The State of Climate Change Science 2007," House Speaker Nancy Pelosi (CA) announced, "We hope to have legislation that will be a starting point on global warming and energy independence through the committees by July 4th, so that this year, Independence Day is also Energy Independence Day."

What she hadn't counted on was the opposition of her fellow Democrats from coal and auto industry states, as well as those members of the Democratic Blue Dog Coalition who rebelled openly on June 27 in its own energy principles, almost all of which focused on encouraging domestic production of fossil fuels. Said coalition chairman Jim Matheson (UT): "It would be wrong to produce an energy policy that doesn't live up to its billing and creates disruption and chaos. How then will the Blue Dog Coalition vote on an 'energy' bill that produces no new domestic energy whatsoever, increases taxes on domestic producers, and creates new bureaucratic access restrictions? With Speaker Pelosi or with American consumers?"

As the two versions of the bill go to conference, the markups of energy legislation from the House Committee on Energy and Commerce from the Boucher's Subcommittee on Energy and air Quality on June 27, 2007 and June 28, 2007 complicate matters.

Despite Chairman Dingell's request in his opening remarks to not add "motor vehicle fuel economy, coal-to-liquids, and a renewable portfolio standard " to the base text," no amendment was required for the coal industry thanks to bill manager Rick Boucher (D-VA) who had shepherded through a bill clarifying loans that "No appropriation authorized pursuant to this section may exclude any category of eligible project described in section 1703" of the Energy Policy Act of 2005. While the categories include "the advanced nuclear energy facilities" and "hydrogen fuel cell technology" that Bush has been advocating, there are some categories that I can support:

  • renewable energy systems
  • efficient end-use energy technologies
  • production facilities for fuel efficient vehicles (including hybrid and advanced diesel vehicles--although I wonder if this could include those running on CLT).

There are other categories that are definite incentives for Big Coal, Oil and Gas:

  • Advanced fossil energy technology, including coal gasification
  • Carbon capture and sequestration practices and technologies
  • Efficient electrical generation, transmission, and distribution technologies
  • Pollution control equipment
  • Refineries at which crude oil is refined into gasoline.

As for CLT specifically, it's mentioned right here: "Liquefaction project.--Notwithstanding any other provision of law, funds awarded under the clean coal power initiative under subtitle A of title IV for coal-to-oil liquefaction projects may be used to finance the cost of loan guarantees for projects awarded such funds."

According to this information, the loans are mandated. Since the bill omitted any mention of vehicle fuel efficiency standards or mandates for massive biofuels production which are major elements of the Senate bill, negotiating a final bill with the Senate will be challenging. While Dingell says leave the CAFE standards for a fall global warming bill, what are the chances of getting that passed and signed by President Bush?

On June 28, 2007 there was one bright point: in addition to promoting ethanol 85 and biodiesel 20 (only 20% renewable) thanks to Nashville Republican Marsha Blackburn, there is now a provision for biofuel, although it has to be judged "commercially viable" by DOE and EPA. This viability requirement has not likewise been placed on nuclear power or liquid coal.

Dingell and Boucher complained about Pelosi's pressuring them to drop coal-to-liquids and vehicle fuel-efficiency measures from their draft bills, according to Ian Talley of Dow Jones Newswires.

The National Association of Manufacturers were displeased. Meanwhile, despite the mandated loans for the categories they love, President Bush's fellow Texas Republicans claimed that the bill did nothing to promote nuclear power, coal-to-liquids plants or new oil offshore drilling in federal waters, echoing the Blue Dogs. Joe L. Barton denounced "parliamentary tricks" that made it difficult to propose amendments that wouldn't be considered non-germane, and Michael C. Burgess asked, "What do you call an energy bill that doesn't have any energy in it? We could call it a lethargy bill."

Nancy Pelosi's proposed energy package departed from past policies: it would boost efficiency while cutting $16 billion in tax breaks for oil and gas drilling and create incentives to promote renewable fuels, but none to promote CLT. Instead, supportive Republicans and coal-state Democrats, such as the 9th District's Rick Boucher and West Virginia's Nick Rahall, are pressing for a smorgasbord of CLT incentives. These include a 51-cent-per-gallon tax credit, loan guarantees for six to 10 plants likely to cost at least $3 billion each, and authorization for the Air Force to sign a 25-year supply deal for jet fuel. Keith Lieberthal, general counsel of Clinical Advisors, LLC, and a term member of the Council on Foreign Relations posted in a June 21 analysis for The Street that the coalition seeks to combine increased summer gasoline prices, growing frustration with Iraq and heightened tensions over Iran's nuclear program to force the House and Senate Conference Committee for any energy bills to include CTL incentives.

Pelosi's energy agenda first met a challenge regarding CLT on January 10, 2007 from Geoff Davis (R-KY) with his Coal-to-Liquid Fuel Promotion Act of 2007 (H.R. 370), referred to Boucher's House Committee on Commerce and Energy Subcommittee on Energy and Air Quality. Boucher signed on as a co-sponsor, as did Rahall, who is Chairman of the House Committee on Natural Resources. On May 8, 2007 Boucher also introduced, with Rahall co-sponsoring, H.R. 2208 Coal Liquid Fuel Act, to provide for a standby loan program for six CLT projects should the price of petroleum fall below a set level.

Boucher is also among 110 co-sponsors of Majority Leader Steny Hoyer's (D-MD) H.R.1300 Program for Real Energy Security Act, which authorizes the Department of Defense to enter into long-term contracts to procure unconventional fuel, including CLT.

Additional House CLT legislation includes: H.R. 683 Investment in Energy Independence Act of 2006 (sic), H.R. 2354 American Fuels Act of 2007, H.R.2652 Generating Renewable Energy and Encouraging Novel Technologies Act of 2007 and H.R.2656 American Farm Improvement Act of 2007.

In the Senate, on January 4, 2007 Presidential hopeful Barack Obama (IL) introduced S. 133 American Fuels Act of 2007 which includes CLT as an alternative diesel fuel source. He also co-sponsored, along with West Virginia's Robert Byrd, Jim Bunning's (R-KY) S. 154 - Coal-to-Liquid Fuel Energy Act of 2007 and S. 155 - Coal-to-Liquid Fuel Promotion Act of 2007. Other Senate measure including provisions for CLT are S. 1158 Alternative Fuel Standard Act of 2007, S. 1503 Gas Petroleum Refiner Improvement and Community Empowerment Act (PRICE) Act (Introduced in Senate), S. 1601 Energy Infrastructure Tax Reform and Incentives Act of 2007, and S. 1602 Clean, Reliable, Efficient and Secure Energy Act of 2007.

On June 12, 2007 Obama changed his position on CLT when he released an email to environmental advocacy indicating that unless technology can be perfected to make coal "a clean-burning source of energy," he will not "support the development of any coal-to-liquid fuels unless they emit at least 20% less life-cycle carbon than conventional fuels."

Luke Popovich, a spokesman for the National Mining Association called the senator's new statement the result of a "jihad" waged by some environmentalists against the coal industry. "Clearly they are trying to intimidate Obama from doing something sensible."

On June 14, 2007 Obama introduced an amendment 1579 to Senate Majority Leader Harry Reid's (NV) amendment in the nature of a substitute to the House's Energy Bill, H.R. 6. Obama's Low Carbon Fuel Initiative served the same purpose as his S. 1324 National Low-Carbon Fuel Standard Act of 2007, which notably omitted coal as a possible solution to America's dependence on foreign oil; his amendment was not considered before cloture was invoked.

Candidate John Edwards came out strongly against CLT in a July 7, 2007 e-cast from Chapel Hill, NC, saying it is time to cut carbon emissions. "It's time for the President of the United States to ask Americans to be patriotic about something other than war." Earlier he had criticized: "In the energy bill debate two weeks ago, …[those who] actually tried to wrap increased pollution in the flag, saying that investing in more traditional coal-fired plants-or even worse, new fuels made out of liquid coal, which is a terrible idea-is the patriotic thing to do for America because coal is abundant here at home.", a joint project of various environmental groups and public service law firms, has posted more information on the CLT bills and a form to generate a letter to legislators. Pelosi's summary of the house's energy independence package by committee by bill is here.