Thursday, October 13, 2005

Coal Liquefaction Promising Concept, but State Must Watch Its Dollars, Avoid Potential Boondoggle

From MetroNews:

Governor Joe Manchin says West Virginia is uniquely positioned to help decrease the nation's dependence on foreign oil. Manchin unveiled the state's Coal Conversion Initiative during a Thursday morning news conference at the state capitol.

Manchin says the goal of the initiative is to take the state's coal reserves and convert them into several different kinds of liquid fuels. The conversion would take place at a plant to be built somewhere near those coal reserves. Governor Manchin says the plant would provide good jobs and alternate fuel sources.

The governor says many states are working on alternative fuel plans, but West Virginia's effort will be unique. He says the state and private sectors will join together on the planning for the plant, allowing it to come on line much faster than a plant starting alone in the private sector.

Manchin says, "How many times have you heard (from private interests) that we'd like to do something, but we can't get through the permitting process?" The governor says the Coal Conversion Initiative is different. "We've got everybody committed to making sure this is a priority for West Virginia and the nation."

The plan currently has few specifics and apparently few private investors, but it does have Manchin's enthusiasm. He says he would like to have a site chosen and ground broken sometime next year. "We have committed all of our resources. If it can happen we can make it happen quicker because we have the raw products to make it happen."

Governor Manchin says it's important to build a plant that can turn coal into several different kinds of synthetic fuel, including natural gas, diesel and jet fuel. He says places like China and other countries are demanding more energy and the U.S. needs to start now to be less dependent on foreign oil.

Coal liquefaction has been discussed intermittently for over 60 years. During World War II, the Germans used liquefied coal to fuel their aircraft. It can be done on a broad basis only if it's economical. To make coal gas economical, oil would have to retain its current cost for the long term and be forecasted to remain at such levels.

As a West Virginian and someone whose fortunes are tied to the coal industry, I hope coal gas can be made feasible. However, given our state's history, I also worry we may needlessly pour taxpayers' dollars into yet another boondoggle sold as the state's economic salvation. If Governor Manchin's primary intent is to cut the red tape and eliminate obstacles for the free market to work in this area, I wish him the very best. However, we should not subsidize coal gas production.

As is the case in almost every other area of the economy, the best thing any government can do is create an environment conducive to the private sector producing the good and services people want, need, and desire, and for which they are willing to pay. So let's ensure we remove the obstacles to private enterprise--excessive regulations, inequities in the legal system, and a bad tax structure--and avoid the temptation to fall into a boondoggle should the coal gas dream not capture the imagination of the private sector like it captures those of our politicians.