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$47 million in tax incentives targeted for coal-to-oil plant
Groundbreaking in fall 2000, 1,000 construction jobs seen
The Pottsville (PA.) Republican & Evening Herald
Wednesday, May 12, 1999
HARRISBURG - Construction of a $312-million coal-to-oil plant-America's first-may begin by fall 2000 after the General Assembly approved $47 million in tax incentives Tuesday.John W. Rich Jr., president of Waste Management Processors Inc.,gave that tentative starting date after a 15 percent tax credit for gasification/liquefaction,as the process is called, was included in a tax reduction bill that passed the state House of Representatives Tuesday by a vote of 198-6.Gov. Tom Ridge must still sign the legislation, but is expected to do so, perhaps today. Both caucuses in the House and Senate unanimously supported the legislation."It's a total win-win," said state Rep. Bob Allen, R-125, noting the gasification plant will provide 1,000 union construction jobs, 150 $18- an-hour full-benefit permanent jobs ($37,500 per year ), and continue leveling culm banks and stripping pits.State Sen. James J. Rhoades, R-29, who hosted a briefing in his state Capitol office after the legislation passed, said it signals "the renaissance of coal in Pennsylvania". "Coal's History," Rich said, because of its negative environmental impacts.
But the technology he is pioneering finds a clean use for the abundant resource, he added. Tuesday's legislation, when signed by Ridge, will only create a tax credit for gasification/liquefaction; an application to take advantage of it must now be submitted by July 1, and anyone may apply. However, only the combination that Rich assembled-it includes Waste Management Processor; Sasol Ltd., the South African oil behemoth; Bechtel, the international construction giant; and Texaco-is poised to act by that deadline.The incentive will allow investors to take money owed in state taxes up to 15 percent of the cost of the project-actually, $46.8 million on $312 million-and redirect it to Waste Management Processors and its partners building the gasification/liquefaction plant.Rich said his companies-they include Reading Anthracite Co., Gilberton Coal Co., Schuylkill Energy Products Inc. and a fuel distributorship-have approximately 500 vendors that pay Pennsylvania taxes they might redirect in this way. In return, the Rich combination, if its application is approved as expected, would be required to accomplish three things:
*One, match the $47 million from another source, either in federal tax incentives-U.S. Rep. T. Holden, D-6, is trying to move an equivalent tax incentive through Congress-federal grants, or through money raised through private financing.
*Two, show new tax revenues more than cover the $47 million. This could come from sales tax on materials bought to build the plant or income tax from the new jobs, for example.
*Three, accomplish $55 million worth of stripping pit reclamation over the next 20 years with the high-quality ash that is a by-product of the process.
The plan is structured so that taxpayers, in the end, come out ahead."This is not a tax; this is not a loan," said Allen. "Not one member of either delegation had anything negative today about this tax credit," the legislator from Pottsville said. The plant is targeted for a 30 acre site just east of the Gilberton Power Co.'s John B. Rich Generating Station, the Rich family's co-generation plant on the Morea Road in West Mahanoy Township.The gasification/liquefaction plants raw material would be a coal-and-water slurry that results from the co-generation process and has been filling ponds along Route 54 down the hill from the existing co-gen. The result would be a clear, pure, sulfur-free petroleum liquid that could be blended with other gasoline and fuel-oil stocks to reduce emissions, something that will be increasing important when tougher U.S. Environmental Protection Agency standards go into force in 2008.
More than 700,000 tons of waste coal would be processed through the plant per year, according to Rich, producing the equivalent of 5,000 barrels a day. Texaco is committed to buying everything the plant produces. While Waste Management still must come up with $265 million, Rich expressed confidence that will now happen.The Commonwealth of Pennsylvania and Ridge Administration commitment to the project-evident in the new legislation and expressed during a trade mission to South Africa last year-will cause the pieces to fall into place, he said.The co-gen industry was characterized Tuesday as a training run for this new round of development. Rich harkened back to 15 years ago, when he secured $49.2 million in low- interest, tax-free bonds to build his $130.7 million Morea Road generating station.
Here's how the new partnership is intended to play out:
*Waste Management Processors, which is a sister company to Rich family concerns that include Reading Anthracite and Gilberton Coal, provides the raw material: "carbonaceous feedstock"-culm and anthracite.
*Bechtel Development Co., San Francisco, a partner in the original co-gen, will build the plant.
*Texaco will provide the gasification technology that mixes coal with high-pressures stem to produce synthetic gas (syngas) .Almost all impurities, including 99 percent of the sulfur, is removed from the coal during that process.
*Sasol then provides the so-called Fischer-Tropp technology, developed by oil-poor, coal-rich Germany during World War II and refined in South Africa when Apartheid limited its access to oil. It turns the gas into a clear petroleum liquid, purer than any pumped from the ground.
*Texaco then buys the finished product. A long-term, fixed-price contract between Rich's company and Texaco would help bring down the cost to a level that competes with OPEC sources.
A $70 billion military presence in the Persian Gulf-paid for by American taxpayers-and necessary in order to keep oil supply lines from the Mid-East open, Rich said, skews the price of gas at pumps here."I'm saying that what the American consumer pays for gas and diesel isn't the true cost," he added in a follow- up this morning.If federal taxes weren't used to fund the Gulf force, Rich said, the cost for those troops would have to be reflected at the gas pumps.While his plant will initially produce a small amount of fuel compared to OPEC supplies, Rich said, in the long run, opening up this new source of domestic alternative fuel production will drive down fuel costs.
"When they see we're displaying new technologies for displacing them," Rich said of the oil-rich countries, "they'll be begging for the business. Then we can buy on our own terms, not on theirs." It was unclear today what the status of the federal legislation may be. Holden was unavailable for comment Tuesday night or this morning. However, Allen said, "They're going to be very surprised down in Washington." The Federal Energy Technology Center, Pittsburgh, is offering a $10-12 million dollar grant for a gasification/liquefaction pilot project, and it will be sought for the local effort.