E&E News PM, December 17, 2007

ENVIRO GROUPS ASSAIL COAL-TO-LIQUIDS BACKING IN SPENDING PLAN

By Ben Geman, E&ENews PM senior reporter

Major environmental groups are attacking congressional Democrats' new catchall spending plan because it could allow federal loan guarantees for projects to make diesel fuels from coal.

Democrats late last night unveiled a massive omnibus spending bill to fund most federal agencies in fiscal 2008 and hope to approve the measure this week.

The Energy Department section authorizes $38.5 billion worth of loan guarantees over two years for building nuclear reactors, coal projects that capture carbon dioxide, renewable energy projects and other technologies.

The bill allocates $8 billion to various types of coal power and gasification projects. Environmentalists say this could allow coal-to- liquids plants to receive the federal backing, because these plants would gasify coal before turning it into a liquid fuel. They also oppose federal backing for new nuclear reactors, which would be eligible for $18.5 billion worth of loan guarantees under the bill.

"If passed, almost $30 billion would go to subsidizing dangerous, costly, and polluting industries, like nuclear power and coal," states a letter to lawmakers today from more than two dozen groups such as the Sierra Club, Natural Resources Defense Council and Earthjustice. The letter says Congress should "reject this proposal and keep its promise to forge a clean energy future."

Several developers are hoping to build multibillion dollar coal-to- liquids plants. But some proponents say the industry will move slowly at best without federal backing such as loan guarantees and long-term military contracts to buy the fuels.

The coal industry and other supporters of the fuels say they can help increase energy security by using large domestic coal reserves to displace some oil imports. Corey Henry, a spokesman for the Coal-to- Liquids Coalition, said the group supports the bill but cautioned that applying for loan guarantees is a company-specific decision.

"The bill rightly makes the federal government an important partner in critical efforts to accelerate the development and deployment of carbon capture and storage technologies," Henry said. "These technologies will enable the country to enjoy affordable, domestic coal-based electricity and diesel transportation fuels, while achieving key carbon dioxide emission goals."

But critics say coal-to-liquids does nothing to help lower greenhouse gas emissions and could make the problem worse. They also fault the plants' water use.

Coal-to-liquids fuels -- if produced without capturing and storing greenhouse gases -- are estimated to release twice as much carbon dioxide as refining and using of conventional fuels. Adding carbon sequestration makes CTL emissions roughly comparable with other fuels, experts say.

Under the loan guarantee program, the federal government agrees to back up loans that project developers receive from banks. They are designed to help alternative energy and nuclear projects win Wall Street support. The program guarantees up to 80 percent of projects' construction costs.

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