$9 Billion Loophole for Synthetic Fuel

Rondrin writes "CNN has an article detailing a $9 billion loophole in the tax code to spur synthetic fuel development. Unfortunately, spraying coal with pine tar qualifies. From the article: 'The wording is so bland and buried so deep within a 324-page budget document that almost no one would notice that a multibillion-dollar scam is going on. Not the members of Congress voting for it and certainly not the taxpayers who will get fleeced by it. And that is exactly the idea.'"

Comments

Um

[Alex P Keaton in da]

Does anyone think congress reads any of these bills?
And if something sneaks by, everyone (the public) gets riled up for a few days, and then forgets about it. Short attention spans of the public are great for politicians...

Re:Um

[Rei]

My uncle was in congress when Clinton was president. He found out about the missile strikes on Afghanistan when he saw it on CNN.

It's amazing how uninformed members of congress can be.

Re:Um

[samkass]

That's probably a slight exaggeration, but in the first Gulf War, CNN seemed to have better information than either side's military. I had the opportunity to call in two scuds to the Navy from my house in CT when I was in High School based on CNN's information. I happened to be on the phone to my father who was in the Navy operations and planning center in Bahrain, and told him that CNN was reporting two incoming scuds on Dharan, Saudi Arabia. He told me not to worry, it wasn't happening. I told him that CNN seemed pretty adamant and they were donning gas masks. He started to tell me that it really wasn't happ... then said "um, I'll call you back *click*". I heard later that our satellites were getting "red out" on their IR sensors and that multiple scuds launched in sequence on the same trajectory wouldn't show them all unless they used radar pings, which they hadn't been doing consistently. The CNN report was accurate, and the Navy missile sensors were not.

After that they put a 10 minute delay on CNN, installed CNN in the Navy HQ, started using radar pings a lot more, and generally started reviewing what information was being released by the media. Anyway, the US military has come a long way since the first Gulf War.

Meanwhile...

[misfit815]

My diesel automobile could easily run biodiesel refined from old fry grease from the McDonald's down the street if only Uncle Sam would shove Big Oil out of the way and let it be refined. Nevermind that the process could easily be done for under $1.00 a gallon. Nevermind that it doesn't depend at all on the Middle East. Nevermind that it burns cleaner than either regular diesel or gasoline. Bah.

Re:Meanwhile...

[drinkypoo]

My diesel automobile could easily run biodiesel refined from old fry grease from the McDonald's down the street if only Uncle Sam would shove Big Oil out of the way and let it be refined.

Never mind that you (yes, you!) can get a permit for small-scale biodiesel production.

Also, you don't even have to refine it! Get a $795 kit from greasecar, a $1200 kit from greasel (bad idea) or a $1100 kit from Elsbett (best idea, if you have the money) and you can run on vegetable oil. You only need [bio]diesel for startup and shutdown, and if you get the Elsbett kit, you can put whatever fuel including WVO into the same tank and start up on it, too.

Biodiesel costs about $0.25/gallon if you make it yourself. Deacidifying and dewatering average fryer oil costs about $0.05/gallon. WVO has about 85% the energy of biodiesel, so you will get less power/mileage on oil, but it's cheaper, and easier. You can, however, build a biodiesel processor for around $600.

I have a 1981 Mercedes 300SD and plan to get the Elsbett kit, which is spoken of very highly everywhere I've seen a reference.

Re:Meanwhile...

[drinkypoo]

Isn't it the case though that the energy required to produce bio diesel is more than the energy you get out of it? If this is the case then how is this a solution? It would seem to make the problem worse....

No.

Longer answer: Even ethanol is energy-positive now.

Longest answer: http://www.mda.state.mn.us/ethanol/balance.html.

Simple technical solution to many such scams

[straponego]

Often sleazy little tibits like these are inserted at the last minute into a bill hundreds or thousands of pages long. When the votes are taken, nobody is even aware of the changes. Congress critters complain about having voted for something they didnt know about, but none of them seems to want to address the problem.

So, why doesn't Congress use a revision control system? When the day comes to vote on a bill, you check for changes since the last time you read it. If there are changes, you know who made them and when. Your basic audit trail.

I suspect that one of the reasons something like this hasn't been implemented yet is that most politicians are habitual defectors rather than cooperators; they may not want their enemies to be able to use dirty tricks, but they'd like to be able to do it themselves.

Ah, besides. Can you imagine Congressional debate on whether to use CVS, svn, or... what am I thinking? Free software wouldn't even be on the table.

Re:Simple technical solution to many such scams

[ffflala]

Congress does have a version control system and it is very well-established. It is part of any legislative history to pull all versions of a bill --which shows the chronological development of a bill as a submitted bill is amended in the legislative process. The main problem is, no one bothers to read even the current version, let alone all prior versions. Laziness aside, there is simply more legislative paperwork put out in a single term of Congress than one person can read. There is on the order of tens of thousands of pages of statutory material published PER YEAR. Not to forgive our representatives their lack -- this is their job, if they can't handle it they are responsible for organizing a team structure that CAN cover this material. But it'd be different if it were interesting reading, but imagine how closely you'd pay attention to Tax Code Revisions after the first 2000 pages.

Re:Those clowns in congress are at it again...

[RingDev]

Wouldn't it be nice to have a page limit too? I mean, who is going to read through a 300+ page document and agree/disagree with the whole thing? Break it into smaller chunks that can be digested by regular Americans, and voted on in a straight forward manor. Instead of this tax breaks for the rich on troop funding bills crap.

I'm glad there are at least a few senators out there like Feingold who actually take the time to look into some of these bills and to vote against them, even if it is just symbolic. At least it sheds light on the issues.

-Rick

Government screwups

[Slappytron]

This is not news. This was in Time a few years ago. Apparently there are several Pennsylvania and West Virginia coal mining companies that paid little to no taxes for 5 years by rigging up some tar spraying system over their coal cars.

This is another example of why you cannot rely on the government to "solve" these fuel problems. They end up making bad situations worse. Take the oil crisis of the mid 70's. The government tries to solve the problem by implementing price controls instead of letting market forces take hold and lowering demand. They end up running half the stations out of business for a time and creating huge lines at the ones that do manage to stay open. I'm not a Bush fan, but he should be praised for leaving things alone after Katrina. Gas prices worked themselves out because people became concious of their consumption. Demand fell, prices fell. The Market worked.

Re:Government screwups

[danpsmith]

The market is cyclical, yes. It does tend to favor large corporations (which benefits you with convienence and lower prices) to a point - but there has historically been a tipping point where these conglomerates stagnate and smaller, innovative companies rise to provide new or better products or services, and even create entire new markets. The market provides incentive to do this - you have to beat the big boys, so you have to innovate.

Doesn't matter how innovative it is if the innovation is kept out by barriers. The most you can hope for in this model is that the big corporation takes notice and incorporates the little guy's changes into it's products.

Yes, again, incentive. If everyone is guaranteed the same things, why would we ever work hard to advance ourselves in life? The failure of communism and the economoic stagnation of socialist countries should illustrate this point. Meanwhile, those embracing capitalism thrive (India, China to an increasing extent, South Korea)

Certain rights everyone deserves. The phrase voting with your dollar poses a problem. It's taking issues that should be political and making them monetary. It's not about socialism, it's about when a corporate entity infringes upon my rights, the only recourse in which I can pursue them is monetary, making whether or not they want to trample on my rights a cost/benefit decision. I'm not saying give everyone the same products, that's fine, people who work harder can get more stuff. I'm saying give us the same rights.

The problem with government research is that too often it is politically motivated, which benefits nobody but the politician. Corporate research is generally intended to make profit - by providing new and better products and services.

The problem with this type of thinking is that new and better products and services aren't the only way to make profit. You can profit off of wars, and off of disasters. Their concern isn't with the betterment of the national good, their concern is with the betterment of the profit and the two don't always agree with each other.

Obviously, arguing about political viewpoints is a no-win situation. You slant towards socialistic thinking, me towards liberatarian thinking.

I am advocating for democratically executed control over the marketplace. This isn't socialist, it's democratic. There is a difference folks... I'm saying if you have a problem company, put it to a vote on whether or not to revoke their charter maybe. There's a hypothetical for you.

Read the Fine Article

[Valdrax]

Actually, if you'll read the article, you'll see that they're not even necessarily making oil. That's the outrage.

The coal can look and burn like regular coal. The IRS rule for transforming coal into synfuel--and getting the tax credit--requires only that the substance be chemically altered in some way. The alchemy that satisfies the IRS is a simple process: some plants spray newly mined coal with diesel fuel, pine-tar resin, limestone, acid or other substances--a practice that industry critics call "spray and pray." Other operators mix coal-mining waste with chemicals, coat it with latex and blend it with untreated coal to form briquettes. (For an earlier story on the scheme, see "The Great Energy Scam," TIME, Oct. 13, 2003.)

Once a few pioneers started reaping the tax credits, it wasn't long before plants using various techniques sprouted next to coal-burning power plants, which buy the so-called synfuel and use it as they would any other coal. Those synfuel operations were a far cry from the state-of-the-art plants that Congress had envisioned as performing a more radical transformation. Instead, they were flimsy facilities that could be easily dismantled and moved to other locations.

It's huge tax scam, and language buried in a budget bill has changed the rules to prevent the credit from expiring now that oil prices have risen to where it would theoretically be competitive.

Oh SNAP!

[Anonymous Coward]

Posting AC for obvious reasons.

The council is directed by one of Washington's premier tax lobbyists, Kenneth J. Kies, managing director of the Clark Consulting Federal Policy Group.

I am familiar with Clark Consulting. Their tagline: "Helping You Keep Your Best People." Best people = executives and salespeople only (usually the same; with all the title creep, everyone in sales was a VP). CEO, Chairman of the Board, majority shareholder - all the same guy. They sell insurance to businesses, primarily, used to be Corporate Owned Life Insurance (COLI), where key employees (executives) would be insured. In case they met a tragedy, the company would collect. There was also a pretty good tax benefit to this kind of thing - until tax laws were changed, after some companies started taking out these kinds of policies on random employees without their knowledge (janitor's insurance). I have no knowledge that Clark Consulting ever did that kind of thing, but the change in tax law pretty much wrecked COLI.

So now there's Bank Owned Life Insurance (BOLI), which I'm presuming is pretty much the same thing, except for banks, and with the tax benefits. Clark acquired Long, Miller and Assoc - who was their big competitor for BOLI. Clark also acquired Federal Policy Group, a lobbying group headed by Ken Kies, presumably to lobby in favor of keeping the tax benefits of BOLI, among other things.

All this is publicly available information. What I see of this, from a "I'm not a finance or sales or insurance person" -- they develop insurance products that hinge on tax benefits (without tax benefits, there wouldn't be a market), then sell those products to businesses. It's just another way to shelter businesses from taxes, thereby shifting the tax burden more to people and companies that don't earn enough to build tax shelters. And take a cut off the top for the shareholder(s).

Yes!

[Valdrax]

I have long been a proponent of this idea, but it needs to expand beyond each bill and its amendments. If you've ever read a huge bill like the Patriot Act, you know that a lot of any bill is modifications to existing law.

We need to be able to see diffs on existing law in addition to diffs on the bill being passed. In addition, any amendments should show what was changed in the bill and existing law. The main problem with this idea is that it would rely on either natural language processing or interns (which could screw up or deliberately not flag certain changes).

I want this desperately, and if I ever win the lottery or something, I'm going to fund its creation.