E&E News PM  [Printer-friendly version]
December 17, 2007


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

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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