Senators introduce legislation that would provide CTL incentives

Senators introduce legislation that would provide CTL incentives

Washington (Platts)--7Jun2006

The interest in using fuel made from coal continued to grow in Washington on
Tuesday as Republican Senator Jim Bunning of Kentucky and Democratic Senator
Barack Obama of Illinois announced legislation to help boost coal-to-liquids
infrastructure.

In a press briefing with reporters on Tuesday, Bunning said the Coal-to-Liquid
Fuel Promotion Act of 2006 (S. 3325) that was introduced before the Senate
break would provide the right combination of incentives to promote CTL
infrastructure.

"I believe coal-to-liquid technology offers America the chance to capitalize
on a domestic resource that will provide the energy for economic growth and
the energy security required in today's world," Bunning told reporters. "The
incentives in our bill will tackle the hurdles that are preventing large scale
implementation of coal to liquids technology."

The bill creates a loan program that would provide up to $20 million in
matching funds to pay for planning, permitting and engineering a CTL facility.
It also calls for expanding the loan guarantees in the Energy Policy Act of
2006 to CTL facilities. The bill creates a separate investment tax credit for
CTL technology to help investors with the $1 billion to $2 billion cost of a
large-scale CTL plant. The legislation would also extend the excise fuel tax
credit for CTL fuels until 2020.

The bill permits funding for more testing and evaluation of CTL fuels by the
military.

"The bill authorizes the Air Force to transfer $10 million from
research-development-test-evaluation funding it received in fiscal year 2006,"
Mike Renard, a Bunning spokesman, told Platts. "Funding for fiscal year 2007
has not been determined yet."

The bill would give the military long-term contracting authority to use the
new fuels. The bill authorizes the departments of Energy and Defense to
evaluate CTL fuels for storage in the Strategic Petroleum Reserve and calls on
the government to use CTL fuels for filling the reserve.

"The combination of these incentives and authorizations will be the one-two
punch needed to jump start investment in this marketplace," Bunning said. "It
will foster a domestic marketplace for coal-to-liquid fuels, bring down
gasoline costs and provide our military with a secure domestic fuel source."

"I hope [the Senate] can work quickly to move this bill into legislation or to
vote on the Senate floor," Bunning said.

This is the second CTL legislation to be offered in a month. In May, Illinois
Representative John Shimkus and Virginia Representative Rick Boucher
introduced a bill extending the excise tax credit for fuels derived from coal.
H.R. 5453 extends the 50?/gallon alternative fuel tax credit from 2009 to 2020
(PCT 5/24).

-- Regina Johnson, regina_johnson@platts.com

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