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Sun Ready to Set on Breaks for Coal-Based Liquid Fuels

September 26, 2013

(Washington, DC) — A new study from the Environmental Law Institute (ELI) finds that the federal government provided approximately $25.425 billion in financial support for coal production, transport, use, or waste disposal during the period 2002-2010. The majority of these dollars — $16.214 billion — are attributable to tax benefits. Of these tax benefits, the single largest category was the nonconventional fuels tax credit, providing $12.22 billion to coal. This credit is no longer available to producers of most coal-derived fuels and is set to sunset for all nonconventional fuels from coal by 2014, decreasing total coal support by 47 percent.

Coal is the most significant source of energy in the United States and has been for years. Like most other energy sources, coal has received support from the federal government. The ELI report quantifies the amount the federal government spent to support coal during the period from 2002 to 2010. This report also identifies and, where possible, quantifies spending that benefited, but did not specifically target, coal.

This report focuses on federal government support for coal through direct spending and its equivalent in foregone revenue collection. This spending includes any action by the U.S. government that results in a cost to government and an identified benefit to coal production, transport, use, or waste disposal. According to report co-author John Pendergrass, “The vast majority of federal direct spending on coal — which totaled $9.211 billion during the period 2002-2010 — was managed through the Department of Energy’s Office of Fossil Energy, which received $8.843 billion in spending authority from Congress during this nine-year period.” Almost 39% of the Office’s funding was spent on carbon capture and sequestration (CCS) initiatives, with nearly all CCS funding coming from the 2009 stimulus bill, the American Reinvestment and Recovery Act.

The second major category of support for coal is spending that benefits, but is not targeted at, coal. An example of this category is the Army Corps of Engineers operation and maintenance budget for harbors and inland waterways, which provides the most significant support for coal transportation, although Congress appropriates these funds without the specific intention of promoting coal. From 2002-2010, the government spent at least $3.79 billion on programs such as these that were not specifically intended to benefit coal The other significant contributor to this non-targeted spending was the Low-Income Home Energy Assistance Program.

The study identifies financial support in aggregate fiscal terms but does not seek to determine how this spending affects coal production or consumption, or whether it ultimately benefits consumers or industry. That type of assessment would require significantly more data and considerably more complex level of analysis, one that exceeds the scope of this study.

The study also does not offer normative judgments about the subject of the spending. That is, the identification of coal-specific spending and foregone revenue collection does not constitute a recommendation that these expenditures be changed, but is simply intended to show how federal tax dollars support coal production and use.