Senators Obama and Bunning Introduce Legislation to Expand Coal Use
Wednesday, June 7, 2006
Printable FormatFOR IMMEDIATE RELEASE
Obama Contact: Tommy Vietor or Robert Gibbs, (202) 228-5511
Bunning Contact: Mike Reynard, (202) 224-1156
Date: June 7, 2006
Senators Obama and Bunning Introduce Legislation to Expand Coal Use
WASHINGTON, D.C. -- U.S. Senators Jim Bunning (R-KY) and Barack Obama (D-IL) today announced that they have introduced S.3325, the "Coal-To-Liquid Fuel Promotion Act of 2006." Joining this bipartisan legislation as original co-sponsors are Senators Conrad Burns (R-MT); Richard Lugar (R-IN); Mark Pryor (D-AR); and Lisa Murkowski (R-AK). This comprehensive piece of legislation creates tax incentives for coal-to-liquids (CTL) technology and the construction of CTL plants. If passed, this legislation will help create the infrastructure needed to make CTL a viable energy resource throughout America.
In the CTL process, coal is gasified, the gas is run through the Fischer-Tropsch process, and the resulting fuel is refined into diesel. The final diesel product is cleaner than conventional diesel because most of the sulfur and nitrogen is removed during the Fischer-Tropsch process. Currently, all the vehicles in South Africa run on fuels produced by Fischer-Tropsch.
Bunning said, "The bipartisan legislation I introduced with Senator Obama will help create the infrastructure needed to get coal-to-liquids technology off the ground. CTL technology offers America the chance to capitalize on an abundant domestic resource that is found in eastern and western Kentucky. With a heavy investment into CTL, America will wean itself off of foreign sources of energy, and at the same time create jobs for working families back home. CTL is a viable, environmentally friendly energy resource, and will help cure America's addiction to oil."
Obama said, "The people I meet in town hall meetings back home would rather fill their cars with fuel made from coal reserves in Southern Illinois than with fuel made from crude reserves in Saudi Arabia. We already have the technology to do this in a way that's both clean and efficient. What we've been lacking is the political will. This common sense, bipartisan legislation will greatly increase investment in coal-to-liquid fuel technology, which will create jobs and lessen our dependence on foreign oil. Illinois Basin Coal has more untapped energy potential than the oil reserves of Saudi Arabia and Kuwait combined. Instead of enriching the Saudis, we can use these reserves to bring a renaissance for Illinois coal."
The Coal-to-Liquid Fuel Promotion Act of 2006 is a three-part, comprehensive effort to create a vibrant domestic CTL fuel market. First, this bill enables the Department of Energy to provide loan guarantees for construction and loans for the necessary planning of CTL plants. Loan guarantees will encourage private investment and planning loans will help companies prepare a plant for construction. Second, this legislation will expand investment tax credits and expensing provisions to include coal-to-liquids plants and extend the Fuel Excise Tax credit. These tax incentives build on the loans and loan guarantees by offering tax breaks during the multiple-year construction phase and during initial production at the plant. Third, this bill provides the Department of Defense the funding to purchase, test, and integrate these fuels into the Strategic Petroleum Reserve.
Coal-to-Liquid Fuel Promotion Act of 2006
On April 24th, Senator Jim Bunning (R-KY) chaired an Energy Committee hearing on coal-to-liquids fuels. The committee heard testimony from the Department of Energy on the implementation of provisions of the Energy Policy Act of 2005 and the committee discussed what additional authorizations may be needed. Bunning spoke with the Southern States Energy Board, individual companies engaging CTL technology, the National Mining Association, leading scientists including researchers at the University of Kentucky, and members of the environmental community. As a result of these discussions, Senators Bunning and Obama have composed a comprehensive piece of legislation that will create a backbone of CTL infrastructure in the United States.
1. DOE Facilitation of Construction
- Loan Guarantees - Authorizes DOE to administer loan guarantees for the first CTL plants. These plants must have a minimum production of 10,000 barrels a day and the loan guarantee program would expire once ten large-scale plants are built or commercial production reaches 100,000 barrels of CTL fuel daily.
- Planning Loans - Provides DOE authority to issue matching loans to groups engaging permitting and planning of a large-scale CTL plant. The loans are capped at $20 million, must be matched dollar-for-dollar by non-Federal money, and must be repaid after the plant is financed (within 5 years).
- Expanded Plant Siting - Authorizes DOE, DOD, and other agencies to promulgate regulations to allow BRAC sites, military bases and DOE current and former facilities to be considered as sites for commercial CTL plants.
2. Tax Incentives for Investment and Production
- Investment Tax Credit and Expensing - Expands 20% tax credit for CTL plants (including the infrastructure needed to capture, transport and sequester carbon) capped at $200 million a plant and limited to 10 plants. Provides a similar provision for expensing these investments, but does not allow double dipping.
- Fuel Excise Tax Extension for CTL - Extends the fuel tax credit for CTL products from 2009 (From SAFETEA-LU) until January 1, 2020.
3. National Security and Defense
- Strategic Petroleum Reserve - Requires a DOD report on CTL fuel storage and inclusion in the SPR, authorizes the construction of SPR storage facilities for CTL fuel to be located outside of the Gulf States and authorizes that the SPR to hold up to 20% of the reserve in the form of CTL finished fuels.
- DOD Research and Development - Authorizes funding for the Air Force CTL R&D and testing program.
- DOD Multi-year contracting - Authorizes DOD contract authority for up to 25 years