New York Times  [Printer-friendly version]
June 13, 2007


By Edmund L. Andrews

WASHINGTON, June 12 -- 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."

The bill is being circulated by Senator Jeff Bingaman, Democrat of New
Mexico, chairman of the Senate Energy Committee and the energy bill's
lead author. Until this week, Mr. Bingaman had opposed big subsidies
for coal-based fuels, saying that each new production plant would cost
billions of dollars and that the economic uncertainties posed risks
for taxpayers.

But in what could be an effort to fend off demands from coal-state
lawmakers for bigger subsidies, Mr. Bingaman's draft proposal would
offer up to $10 billion in direct government loans for coal-to-liquid

Bill Wicker, a spokesman for Mr. Bingaman, said that the draft
proposal was "not a Bingaman amendment per se," but that coal-based
fuel was of interest to many lawmakers.

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.

"A group of us is working on it," said Senator Byron L. Dorgan,
Democrat of North Dakota and a strong supporter of liquefied-coal
fuel. But Mr. Dorgan cautioned that Mr. Bingaman's bill was "still a
work in progress" and that Democratic leaders had yet to agree on what
incentives to include in the measure.

Corey Henry, a spokesman for the Coal to Liquid Coalition, an industry
lobbying group, said he was optimistic that the Senate would include
some kind of support.

"You can definitely see that there's a bipartisan effort to achieve a
workable coal-to-liquid provision," Mr. Henry said.

Copyright 2007 The New York Times Company