August 8, 2008Coal-to-liquid plant gets $200 million in tax...

August 8, 2008

Coal-to-liquid plant gets $200 million in tax breaks

By Ken Ward Jr.
Staff writer

CHARLESTON, W.Va. -- The Manchin administration has agreed to give nearly $200 million in tax breaks and other incentives to developers of a coal-to-liquids plant proposed for Marshall County.

That's about $3.3 million in government incentives for each of the 60 jobs the facility would provide.

Commerce Secretary Kelley Goes signed the agreement in her role as executive director of the West Virginia Development Office.

Goes had previously refused to release the agreement, and continued to insist Thursday that the document was exempt from disclosure under the state's public records law.

The $196 million in incentives outlined in the four-page, July 11 letter from Goes to project general manager Paul A. Spurgeon were:

Up to $160 million in Economic Opportunity Tax Credits. The credit is 20 percent of the total project investment, and can be applied against corporate net income and business franchise taxes over a 10-year period. The eventual amount of credit claimed will be based on the project's actual West Virginia tax liability.

Tax increment financing of up to $35 million. Those so-called TIF plans allow companies to fund infrastructure improvements for their projects with the difference between pre- and post-project property taxes.

Based on the 60-job estimate, $120,000 in funding for employee training from the Governor's Guaranteed Workforce Program.

Up to $800,000 over a two-year period "it becomes necessary" to further improve the access road to the facility."

CONSOL Energy Inc. and a Houston-based company called Synthesis Energy Systems Inc. formed a joint venture called Appalachian Fuel LLC to develop the $800 million coal-to-liquids facility. They hope to build the plant in an industrial park south of Wheeling.

Under plans announced last week, the project would convert coal to gas using a Synthesis proprietary technology called U-Gas. Developers said that "it is expected" that this gas will be used to produce methanol for the chemical industry. In addition, they said, the plant would "be capable" of converting methanol production to about 100 million gallons a year of 87-octane gasoline.

Pittsburgh-based CONSOL would provide about 1 million tons of coal and several hundred thousand tons of fine coal waste from its nearby Shoemaker Mine, officials said. Developers hope to have the plant up and running by early 2012.

The project fits perfectly into Gov. Joe Manchin's energy plan, which calls for creation of a series of liquid coal plants around West Virginia. Manchin believes liquid coal can replace gasoline and reduce the state's dependence on foreign oil.

But many scientific and environmental organizations oppose liquid coal projects. Even if greenhouse gas emissions from the fuel plants are captured and pumped underground, liquid coal fuels still generate more carbon dioxide emissions than traditional transportation fuels.

When the CONSOL project was announced July 28, news releases indicated that the companies, the state and the Regional Economic Development Partnership had "signed a memorandum of understanding" outlining financing and tax incentives for the project.

After the announcement, Goes refused to release a copy of that memorandum of understanding. She said she would have to check with the developers and regional economic development officials first.

On Thursday, Goes released a copy of the agreement.

In a letter, Goes said that "The West Virginia Development Office is exempt from the [Freedom of Information] statute." She cited a portion of state law that exempts "any documentary material, data, or other writing made or received by the West Virginia Development Office or other public body, whose primary responsibility is economic development, for the purpose of furnishing assistance to a new or existing business."

But Goes left out the rest of the sentence, which says that "any agreement entered into or signed by the development office or public body which obligates public funds shall be subject to inspection and copying."

That law was passed a decade ago to overturn a state Supreme Court ruling that forced the development office, in a case brought by The Charleston Gazette, to release details of its negotiations with developers of a pulp mill proposed for Mason County. At the time, lawmakers said that they intended to protect from disclosure negotiations with businesses, but provide the public with details of deals once projects were announced.

Goes said that "it is significant to note that all of the incentives are existing programs designed to promote development in West Virginia and are available to any and all similar projects in the State of West Virginia."

She also said, "It is important to remember that all of the incentives outlined below are non-binding and subject to definitive agreements."

However, the agreement specifies in several places the "the State of West Virginia will" provide the outlined incentives.