Although tax breaks may entice developers of coal-gasification technologies to set up shop in Wyoming, they may also create a false sense of commercial viability for the industry.

Rep. Debbie Hammons, D-Worland, said legislators need to consider the long-term implications of several tax breaks being proposed to entice future coal-based power development in the state.

"When is it an incentive and when is it a subsidy?" Hammons asked.

Hammons' comments came Monday during a hearing of the Joint Minerals, Business and Economic Development Interim Committee in Casper. The committee advanced several new tax break proposals, including a 22-year severance tax holiday on all Wyoming coal used in power plants using integrated gasification combined cycle technology, should they be located in the state.

Steve Waddington, executive director of the Wyoming Infrastructure Authority, said eliminating the state's 5.5 percent severance tax on coal for a 500-megawatt IGCC plant, for example, would amount to an annual $2.2 million tax break.

"This would be a significant incentive for those considering an IGCC plant to build it in Wyoming," Waddington said in his testimony before the committee.

At same time, however, Waddington said the cost of coal is not a "driving factor" when considering where to build such "clean coal" plants, but the gesture of a tax holiday might give Wyoming the edge it needs in a highly competitive bid for the technology.

In a conventional power plant, coal is pulverized and burned in a boiler to produce electricity. Emissions are caught and filtered at the back end of the process. IGCC technology converts coal to a gas that is burned in a turbine to produce electricity. Pollutants are removed before the fuel is burned.

Dan Neal, executive director of the Equality State Policy Center, argued against a severance tax holiday for IGCC coal. He said if Wyoming approves the severance tax holiday, "Wyoming will be sacrificing substantial coal severance tax revenues, to no purpose.

"The whole point of encouraging IGCC development is to sustain Wyoming coal markets and therefore coal revenues," Neal continued. "If we don't collect the taxes, then we squander our assets."

With continued pressure to clean up emissions from fossil fuels, IGCC is the presumed future of the U.S. coal market because it has nearly zero air emissions if the associated carbon dioxide is captured and stored underground. But before investors back the first fleet of these new types of coal plants, they want to see the technology demonstrated to be economically viable.

Investors are shopping all over the United States for the best proving grounds. That means Wyoming is in serious competition to prove that not only can its Powder River Basin coal be a commercially viable fuel for the new technology, but that IGCC can be a commercially viable operation in Wyoming. In recent years, the state has focused on boosting its electrical exports to complement its already thriving commodity export businesses.

Hammons said that if the state truly wants to prove the commercial viability of IGCC, then it ought to consider proving the technology on a level playing field with other industrial businesses here. Other states competing for IGCC have taxes that Wyoming doesn't, such as a personal income tax.

"What if we create a false sense of commercialization?" Hammons asked.

The Wyoming Infrastructure Authority recently solicited partners for an IGCC demonstration project, and will soon select one candidate from a pool of about a dozen applicants.

Waddington said the question is not whether the technology will work at Wyoming's relatively high altitude and with Wyoming's high-moisture coal. Those are matters of cost. The question, Waddington said, is whether it is economically viable to overcome those altitude and moisture aspects of doing IGCC in Wyoming. But at the same time, the state must come up with a competitive incentives package.

"If IGCC becomes the standard, we stand the risk of losing market share in the long-term," Waddington said, adding that "federal incentives will be the biggest driver for IGCC."

Because coal producers pay severance tax in Wyoming, the bill would have to be structured in a way to translate the savings from the producer to the customer who utilizes this cleaner technology.

NewsTracker

* Last we knew: Wyoming is competing with other states to land the first round of commercial coal-gasification power plants.

* The latest: A legislative interim committee approved a proposal that would eliminate the severance tax on coal used in coal-gasification plants built in Wyoming.

* What's next: The proposal will come under consideration in the next legislative session.

Energy reporter Dustin Bleizeffer can be reached at (307) 682-3388 or dustin.bleizeffer@casperstartribune.net.