Synthetic Coal

Synthetic coal, or synfuel, plants have recently assumed a larger share of the industry picture. The birth of the synfuel industry resulted from the enactment of Section 29 of the U.S. Internal Revenue Code of 1986 [14-18]. This legislation was enacted as a result of the upheaval in U.S. energy markets by the Arab oil embargo in 1973. Section 29 provides an income tax credit for fuels produced from nonconventional energy sources until 2007, when the credit is scheduled to end. In 2002, nearly 83 million tons of coal waste and run-of-mine coal were produced at more than 40 coal synfuel plants for the utility and industrial markets [12]. This volume is higher than early predictions, and it is projected that the quantity of synfuel produced will continue to increase even more, although these credits remain controversial [19-22]. The original intent of the legislation, with respect to coal, was to utilize waste coal and produce a nonconventional fuel such as a pellet. Many syn-fuel operators, however, are processing run-of-mine coal by simply spraying it with petroleum mixtures or emulsions, thus qualifying for the tax credit [19]. The ensuing controversy is centered on allegations of unfair competition with coal producers; consequently, while some form of tax credit program encouraging the development of alternative fuels will likely be instituted after 2007, standards for qualifying for the tax credit are expected to be more rigorous than the current ones [18].

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