In a letter to each Senator, Taxpayers for Common Sense Action urges the Senate to oppose any effort to provide additional subsidies to the fossil fuel, ethanol and nuclear industries.
September 18, 2008
Dear Senator,
As the Senate considers various energy proposals before adjourning, Taxpayers for Common Sense Action urges you to oppose any effort to provide additional subsidies to the fossil fuel, ethanol and nuclear industries. These well-established industries have received billions in generous subsidies for decades and should not receive additional federal handouts in the legislative flurry to enact off-shore drilling legislation.
The New Energy Reform Act, originally proposed by the “Gang of 10”, is one energy package being discussed. The current language included in the bill provides billions in giveaways to the fossil fuel and nuclear industries, among them subsidies for reprocessing facilities, loan guarantees for the nuclear and coal industries; and grants and loan guarantees for coal-to-liquid technologies. The following information describes some of the most egregious taxpayer giveaways included in this proposal:
Department of Energy Loan Guarantees
Current language included in the New Energy Reform Act provides the Department of Energy (DOE) Loan Guarantee Program authority to distribute unlimited loan guarantees by exempting it from the Federal Credit Reform Act. The DOE loan guarantee program, authorized in the Energy Policy Act of 2005, already puts taxpayers at substantial risk by distributing loan guarantees to energy industries, like nuclear power, that cannot obtain private financing on Wall Street. Providing a blank check for DOE to distribute unlimited loan guarantees would eliminate an important taxpayer safeguard and could leave taxpayers holding the tab for billions in defaulted loans.
Coal-to-liquids
The New Energy Reform Act also includes provisions that allow for up to $500 million in grants and $10 billion in loan guarantees for coal-to-liquid projects. Because the success of coal liquids and other synthetic fuels depends heavily on volatile oil prices, subsidizing the coal-to-liquid industry would be very risky for the federal government. The coal-to-liquid industry would be heavily impacted if oil prices drop and taxpayers will be stuck with the bill for the loans and other assistance provided to the industry. When Congress created the Synthetic Fuels Corporation in the 1980’s to fund coal-to-liquid and other synthetic fuel projects, volatile oil prices drove the industry into near bankruptcy, wasting billions of dollars spent on capital. Additionally the construction, operating and carbon capture and sequestration costs for coal-to-liquids projects are predicted to be extremely high, with industry estimates for plant construction alone upwards of $6.5 billion.
Nuclear Reprocessing Facility
Despite the failure of past efforts to reprocess nuclear waste, the New Energy Reform Act provides funds for the development of a nuclear reprocessing facility. The nuclear industry has been wary of investing in reprocessing technology, and DOE estimates a reprocessing facility would cost $1.5 billion. Furthermore, the cost estimates for reprocessing waste from existing reactors in the United States have been as high as $100 billion.
Standby Support for the Nuclear Industry
This provision included in the New Energy Reform Act requires the federal government to provide “risk insurance” for the nuclear industry by providing up to $500 million per nuclear plant to fully cover construction delays for up to 12 projects. If enacted into law taxpayers could be on the hook for $6 billion to the nuclear industry.
Alternative Fuels and Biofuels
New provisions for alternative fuels and biofuels in the New Energy Reform Act will cost $6.8 billion combined in 2009 and 2010. This includes “such sums as are necessary” for researching how to retrofit pipelines for transporting biofuels, including corn-based ethanol; loan guarantees to cover up to 90% of new renewable fuel pipelines; and an expansion of the definition of “qualified fuels” to include oil shale and tar sand refineries as eligible for preferential tax treatment.
Taxpayers for Common Sense Action urges you to oppose any legislation that includes additional subsidies for the heavily-subsidized nuclear, ethanol and fossil fuel industries. At a time of record deficits the country can ill-afford to pass energy policy that continues to subsidize mature energy industries.
Sincerely,
Ryan Alexander
President
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