Before passing its colossal energy bill last week, the Senate rejected coal-to-liquid fuel subsidies. But don't expect coal breaks to stay buried for long.
A majority of 69 senators, including presidential candidate Barack Obama, D-Ill., actually voted for at least one of the two pro-coal amendments offered during last week's debate--one by Sen. Jim Bunning, R-Ky., and one by Sen. Jon Tester, D-Mont.
Moreover, powerful interests, including the Air Force and the rail industry, are pushing for coal.
The Air Force? Yep, it's thirsty for alternative sources of transportation fuel. It uses an estimated 2.6 billion gallons of jet fuel a year, and that could increase if future military conflicts require more flying sorties (North Korea, Iran) and fewer ground troops (Iraq).
In fact, the Air Force has already begun testing a program to certify coal-based synthetic fuels for the B-52 bomber, a process that may lead to synthetic fuel use in all of its planes. Gassing up the C-17 cargo plane with a coal-based synthetic fuel could begin soon, according to an Air Force representative. An amendment to the 2008 Defense Authorization Act would give the Air Force $10 million to accelerate testing jet fuel made from coal. That would help cover the as-of-yet unfunded $38 million the service plans to spend on synthetic fuel research in fiscal 2008.
The rail lobby is another powerful friend of coal-to-liquid fuels. Last year, coal filled 7.5 million railcars. That's 42% of all nonintermodal carloadings on major railroads, according to the Association for American Railroads.
Coal traffic is down 2% through the first five months of 2007 amid a general slump of freight traffic. Mining more coal for shipment to coal-to-liquid processing plants and fuel customers would reverse the slide, potentially welcome news for shareholders of Burlington Northern, Norfolk Southern (nyse: NSC - news - people ) and other rail companies.
Of course the coal industry can also rely on support from representatives of coal producing states and, to a lesser extent, those representing the 20 states that generate at least 49% of their electric power from coal. Six months ago, for example, Obama co-sponsored the Coal-To-Liquid Fuel Promotion Act of 2007, the Bunning effort that would have provided subsidies and tax credits worth as much as $8 billion for the development of coal-to-liquid fuels.
Back in 2005, he attached a provision to that year's energy bill for $85 million over five years to test using Illinois coal to produce transportation fuel.
Sure, in a nod to environmentalists, this spring Obama said he'd support coal-to-liquid subsidies only if the fuel could be created with 20% lower carbon dioxide emissions than petroleum-based fuels. (The greens complain that coal-based fuel and the process that makes it produce twice as much carbon dioxide as conventional fuel.) But he still voted for Tester's amendment, which included the 20% emissions requirement, but wasn't fully supported by the Democratic leadership.
Besides direct subsidies, tax breaks for coal shouldn't be declared dead yet either. The Senate declined to include a $32 billion energy tax package pushed by the Finance Committee in its energy bill. But that package, which includes $6.1 billion for coal gasification and coal-based alternative fuel credits, is likely to see light again.
At least one specialty mining company, Silverado Green Fuel, has already assured its investors that several congressmen and senators will bring up the coal-to-liquids as a separate issue and give it a "full and fair debate."
