Editorial: Tax Credits Should Help Promote Coal-Based Power Generation Technologies

In order to promote coal-based technologies, the U.S. Department of Energy will be assisting the Internal Revenue Service (IRS) in the selection of projects to receive tax credits. According to the DOE’s Office of Fossil Energy, recent legislation has been designed to advance cleaner coal-based power generation and gasification technologies.

The Energy Policy Act of 2005 (EPAct), the first overhaul of America’s energy policy since 1992, was passed by the U.S. Congress on July 29, 2005. On August 8, 2005, President Bush signed it into law. The DOE states that EPAct focuses on clean energy, efficient energy use, energy conservation, and advanced technologies.

When President Bush signed EPAct he said that it launched an energy strategy for the 21st century. The president further claimed that it will allow the U.S. to make cleaner and more productive use of our domestic energy resources, including coal, nuclear power, oil, and natural gas. Included in EPAct is the authorization of tax credits and incentives. These include $1.65 billion in tax credits for advanced clean coal facilities and $350 million in tax credits for advanced gasification projects.

In February 2006, the Treasury Department and the IRS issued guidance for tax credit programs under two separate IRS notices: the Qualifying Advanced Coal Project Program and Qualifying Gasification Project Program. The response, said Assistant Secretary for Fossil Energy Jeffrey Jarrett, has been tremendous. "The number and range of proposed projects demonstrates industry’s willingness to embrace tomorrow’s technologies today. The combination of government incentives and private-sector innovation will harness America’s technological strength to ensure secure, affordable, and reliable energy," Jarrett said.

The DOE’s National Energy Technology Laboratory is now partnering with the IRS to evaluate proposed projects for technical and economic feasibility and for consistency with the country’s energy policy goals. After the DOE reviews the projects, the successful ones will be certified and recommended to the IRS. At that time the IRS will select the projects for receipt of tax credits. To date, the DOE has received 49 applications from 29 states with an estimated project cost of $57.7 billion and $5 billion in tax credits.

Twenty-two of the projects were received under the coal-based program. This represents $27.7 billion in proposed projects and $2.3 billion in tax credits. The majority of the projects (18) requesting credits are for integrated gasification combined cycle power plants; four are for advanced coal-based generation plants. Fuels expected to be used by the projects include bituminous and subbituminous coals and lignite.

According to the DOE, 27 of the applications were received under the gasification technology program. These projects represent $30 billion in proposed projects and $2.7 billion in tax credits. The gasification projects are proposed for 17 states: Arizona, California, Florida, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, New York, Ohio, Oregon, Pennsylvania, Tennessee, Texas, and Washington. The IRS is expected to make its final selection by November 30, 2006.

I agree with President Bush when he says that using these energy resources will reduce the nation’s reliance on energy from foreign countries. The current turmoil in the Middle East and parts of West Africa, where the majority of U.S. energy imports come from, is nothing new. It has been going on since the early 19th century and, in my opinion, will continue for many more years.

What we must not forget is that a percentage of the money we pay for Middle East energy sources is being used by terrorists whose goal is to destroy this country’s way of life. We are also spending many billions of dollars to defend the shipping lanes that are used to deliver this energy.

Unless the U.S. is prepared to utilize all of its own energy resources — coal, nuclear, natural gas, oil, and renewable energy resources — we will continue to be held hostage to regimes that are hostile to the U.S. Even if it means a short-term increase in costs for energy, we must support the use of all types of energy resources. In the long run doing so could help us to reduce the costs of defending the shipping lanes that carry the foreign sources of energy.

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