In fact, the industry gets trillions of pennies
Sen. Joe Manchin (D-WV), the newest member of the Senate Energy and Natural Resources Committee, claimed today that the coal industry doesn’t receive any government subsidies, unlike every other form of energy. Brad Johnson debunks this absurd claim.
The former governor of coal-state West Virginia, who famously fired a rifle at clean energy legislation in a campaign ad, argued that the Obama administration has “villainized” coal. In a hearing on energy markets, Manchin went on to criticize the Environmental Protection Agency “” which has issued regulations to limit the catastrophic impact of mountaintop removal mining and the existential threat of global warming pollution “” for putting up “roadblocks” on the “greatest source” of energy in the nation:
What I don’t understand is the subsidies. The subsidies of energy, whether it be to oil, gas, wind, solar, biofuels, ethanol. The only energy source “” which is the greatest source that we have so far as we’re dependent on “” is coal. It doesn’t get a penny of subsidies. But it’s been villainized by this administration and so many people and it’s the one we depend on the most. It gives back more than it takes. I can’t figure it out.
We’re trying to use it in so many different forms, in super-critical heating, and things of this sort. We’re running into roadblocks with the EPA from every turn that we go. We’re trying to use it in conjunction with our natural gas productions, and trying to look at the changing the fleet to compressed natural gas, I think that’s very doable. Do you all have a comment on why that one source of energy which is the most dependent upon in this nation has no types of subsidies but the others demand so subsidies?
In reality, the coal industry is heavily subsidized by the federal and state governments, enjoying explicit subsidies of billions of dollars a year, plus the indirect subsidy of free pollution that costs the United States 10,000 lives a year, destroys the land and water of mining communities, and destabilizes our climate. In September 2009, the Environmental Law Institute identified coal industry “subsidies of around $17 billion between 2002 and 2008″³ [amounts in millions of dollars]:
Credit for Production of Nonconventional Fuels ($14.1 billion)- IRC Section 45K. This provision provides a tax credit for the production of certain fuels. Qualifying fuels include: oil from shale, tar sands; gas from geopressurized brine, Devonian shale, coal seams, tight formations, biomass, and coal-based synthetic fuels. This credit has historically primarily benefited coal producers.
Characterizing Coal Royalty Payments as Capital Gains ($986 million) – IRC Section 631(c). Income from the sale of coal under royalty contract may be treated as a capital gain rather than ordinary income for qualifying individuals.
Exclusion of Benefit Payments to Disabled Miners ($438 million) – 30 U.S.C. 922(c). Disability payments out of the Black Lung Disability Trust Fund are not treated as income to the recipients.
Other-Fuel Excess of Percentage over Cost Depletion ($323 million)- IRC Section 613. Taxpayers may deduct 10 percent of gross income from coal production.
Credit for Clean Coal Investment ($186 million)- IRC Sections 48A and 48B. Available for 20 percent of the basis of integrated gasification combined cycle property and 15 percent of the basis for other advanced coal-based generation technologies.
Special Rules for Mining Reclamation Reserves ($159 million) – IRC Section 468. This deduction is available for early payments into reserve trusts, with eligibility determined by the Surface Mining Control and Reclamation Act and the Solid Waste Management Act. The amounts attributable to mines rather than solid-waste facilities are conservatively assumed to be one-half of the total.
84-month Amortization Period for Coal Pollution Control ($102 million) – IRC Section 169(d)(5). Extends the amortization period used in calculating the deduction from the generally applicable 60-month period available for other types of pollution control facilities.
Expensing Advanced Mine Safety Equipment ($32 million) – IRC Section 179E. The costs of qualifying mine safety equipment may be expensed rather than recovered through depreciation.
Black Lung Disability Trust Fund ($1 billion)- As industry excise tax payments did not sufficiently cover early benefits payments, the BLDTF was given “indefinite authority to borrow” from the U.S. General Fund, and bailed out for $6.498 billion, 13 percent of which is relevant to the 2002-2008 period.
In addition, Synapse Energy Economics found that the government subsidizes the coal industry through several other avenues:
Financial support for the World Bank and other international financial institutions that finance fossil fuel use and extraction. Since 1994, these institutions have provided $137 billion in direct and indirect financial support for new coal-fired power plants.
U.S. Treasury Department’s backing of tax-exempt bonds and federally subsidized taxable Build America Bonds for use in the electric sector. $81 billion in tax-exempt debt was issued between 2002 and 2006 for electric power, most for coal plants.
U.S. Department of Agriculture’s Rural Utilities Service provision of loans, loan guarantees, and lien accommodations to public power companies that are investing in new or existing coal plants.
Tax credits, loans, and loan guarantees through the U.S. Department of Energy. In 2009, DOE issued $5.9 billion in loan guarantees for advanced coal projects.
Furthermore, cash-strapped state governments give millions of dollars in subsidies to coal, including $115 million from Kentucky, and $26 million from Virginia. In 2008, then-Gov. Manchin himself offered Appalachian Fuel $200 million in subsidies for a liquid coal plant.
Meanwhile, the health and environmental costs of mining and burning coal are staggering. “What’s been the healthcare cost of 47 tons per year of mercury from burning coal,” the Sierra Club asks, “that put 300,000 fetuses at risk for neurological damage each year?”
The coal industry was responsible for 2,237 megatons of carbon-dioxide-equivalent greenhouse pollution in 2008, 38 percent of the United States footprint. The cost of this “market externality” is between $60 and $600 billion every year, given expert estimates for the cost to human civilization of manmade climate change.
Manchin is correct that coal “doesn’t get a penny of subsidies” “” the industry gets trillions of pennies, borrowed against our children’s future.
–Brad Johnson, via the Wonk Room.