New York (Platts)--12Sep2008

Leaders of the Senate Finance Committee unveiled tax legislation on Thursday
that would extend financial incentives for renewable energy projects as well
as provide up to $2.5 billion in new tax credits for the coal industry.

Chairman of the committee Max Baucus, Democrat-Montana and the senior
Republican Charles Grassley of Iowa said they would like the legislation to be
included in the energy policy legislation that is expected to go before the
full Senate next week. Congress will adjourn in late September.

Under Baucus and Grassley's tax plan, $2 billion would be awarded to advanced
coal-fired electricity projects and $500 million for coal gasification
projects. Advanced coal projects would have to capture and sequester at least
65% of the facilities CO2 emissions and coal gasification projects at least
75% to be awarded the tax incentive. If projects fail to continue that
reduction target they would lose the tax credits.

The proposal would provide a $10 credit/metric ton for the first 75 million
metric tons of CO2 captured and transported from an industrial source for use
in enhanced oil recovery and a $20 credit/mt for CO2 captured, transported and
stored in a geologic formation. Qualifying facilities must capture at least
500,000 mt of CO2 per year. The credit only applies to US projects.

The bill includes a provision aimed at getting the Black Lung Disability Trust
Fund out of debt by extending the current excise tax rate beyond 2013. Coal
mine operators currently pay an excise tax of $1.10/short ton on coal from
underground mines and 55?/st on surface-mined coal. After 2013, the excise tax
rates drop to 55?/st for underground mines and 25?/st for surface mines.

Receipts from the tax are deposited into the trust fund, which is permitted to
borrow from the Treasury's general fund to make expenditures if tax receipts
don't provide enough funding.

A provision in the bill would refund certain coal excise taxes collected from
exporters. Under the provision, a new procedure would be set whereby certain
coal producers and exporters may claim a refund of these excise taxes that
were imposed on coal exported from the US on or after October 1, 1990, and
ending on or before the date of enactment of this bill.

The tax bill also would direct the Secretary of the Treasury to request that
the National Academy of Sciences do a comprehensive review of the tax code to
identify the types of specific tax provisions that have the largest effects on
carbon and other greenhouse gas emissions and to estimate the magnitude of
those effects.

Senate leaders offered a similar bill last year that totaled $21.3 billion.
The White House, however, threatened to veto the bill because repealed oil and
gas tax breaks.