State lawmakers asked the coal and utility industries to investigate how Wyoming can compete with other states in luring commercial-scale "clean coal" development, and lobbyists came back with three draft bills.

One would cut sales and use taxes. Another would cut ad valorem taxes, and another would cut severance taxes.

The Joint Minerals, Business and Economic Development Interim Committee will consider the clean coal incentives package this morning, kicking off two days of hearings in Casper.

"These plants are going to need some significant incentives from the government, and tax policy is one way in this state to grant those incentives. It's the same way the federal government subsidizes solar and wind - that's what these bills are about," said Holland & Hart attorney Larry Wolfe, author of the bills.

Wolfe said direct incentives, such as a $100 million payment, are largely ineffective and wouldn't be allowed under Wyoming's constitution.

But the tax-exemption package misses the point, according to the Equality State Policy Center, a government watchdog group.

If facilities such as DKRW's proposed $2.5 billion coal-to-gasoline plant near Medicine Bow, for example, were to be exempt from sales and use taxes, then where would impact assistance money come from to help provide services for the 500-plus workers who come to build the plant? With no ad valorem or severance taxes, where would the money come from to pay for new schools, extra fire engines and other services?

"The other thing to remember is that every tax exemption means either program cuts or a tax shift to someone else," ESPC Chairman Bob Spencer said in a prepared statement.

Committee Chairman Rep. Tom Lockhart, R-Casper, said the draft bills are merely proposals that await consideration by the committee.

"We asked them to give us all of their thoughts on it, and they did. What the committee will do with it, I'm very uncertain," said Lockhart, who also serves on the board of Arch Coal Inc.

Lockhart said Eastern coal states are offering big financial incentives to potential clean-coal developers, so Wyoming must remain competitive in order to preserve its coal industry.

"When you're competing with them for people to make these large investments, they are asking, 'How does the state support it?"' Lockhart said.

Spencer said investing in research rather than granting tax exemptions gives Wyoming's citizens more say in how their tax dollars are spent toward preserving Wyoming's coal industry.

To that point, the University of Wyoming and General Electric entered into a legal partnership this year to build a $100 million coal-gasification research facility focused on Wyoming's Powder River Basin coal.

Work force training, work force housing and basic infrastructure are bigger incentives and better investments than tax breaks when it comes to fostering industrial development, according to the ESPC. The group suggested that the obstacles for clean coal are in research and scaling up technologies. State taxes won't make or break a clean-coal industry in Wyoming, it said.

"But if we extend the life of Wyoming's coal industry and don't tax the coal or the clean-coal plants, then we've missed the point," ESPC executive director Dan Neal said in a prepared statement. "Without sales and use taxes, property taxes or severance taxes on clean coal, we will miss the revenues needed for dealing with continuing impacts and for saving in the Permanent Mineral Trust Fund."

The combustion of coal for electric generation is the largest man-produced source of carbon dioxide emissions - the main greenhouse gas blamed for global warming. The U.S. Congress is expected to enact some type of carbon regulation in the near future.

Coal states are in fierce competition to attract commercial-scale facilities that use coal in cleaner ways in order to preserve their local coal-based economies.

"These incentives would have a clear, significant impact for the project developers as they look to try to figure out how to get the capital to build a $2 billion plant," Wolfe said. "If you can plan for what your tax obligations will be and won't be, and you can use that money to help pay off the plant, I think it does and it would make a significant difference."

Today's meeting starts at 8 a.m. at the Wyoming Game and Fish Building, 3030 Energy Lane, in Casper. The committee is scheduled to hear the clean-coal proposals beginning at 9 a.m.

Contact energy reporter Dustin Bleizeffer at (307) 577-6069 or dustin.bleizeffer@trib.com.

Last we knew: State lawmakers asked for ideas on possible incentives to attract commercial scale clean-coal facilities to the state.

The latest: The coal and utilities industry drafted three bills that would slash sales and uses taxes, ad valorem taxes and severance taxes.

What's next: The Joint Minerals, Business and Economic Development Interim Committee will consider the bills today, kicking off two days of hearings in Casper.]]>

For a complete agenda of today's and Thursday's meetings, and links to the bills, go to

http://legisweb.state.wy.us/2008/interim/min/MEETINGS/agd1119.htm]]>

Wyoming's disincentives for clean-coal development:

* High elevation, thus higher cost of operation to achieve efficiency compared to other coal states.

* Scarce water resources.

* Limited work force, lack of work force housing.

* Remote location.

* Severe weather.]]>

(Not listed are millions in tax breaks, grants, loans and other incentives)

Colorado

* Full cost recovery of capital with reasonable return on investment.

* Utilities can build/operate coal-gasification facilities, Public Utility Commission is allowed to waive competitive bids.

Florida

* Full cost recovery.

* Includes pre-construction costs in the event the coal-gasification plant is not completed.

* Waiver of normal competitive power supply proposals.

Indiana

* Full cost recovery (plus 3 percent added return)

* Includes pre-construction costs (engineering).

* Duke Energy and Vectren proposed coal-gasification plants are permitted to recover $10 million if plant is not built and $20 million if built.

Virginia

* Enhanced rate of return for clean-coal plants (200 basis points for 10-20 years).

West Virginia

* Public Service Commission has authority to authorize rate-making allowances for electricity utility investment for clean-coal technologies.

Kansas

* Deduction on adjusted gross income (re: amortizable costs for CO2 capture equipment, for 10 years).

North Dakota

* Exemption from 85 percent of state installed capacity tax (5 years).

* State tax deduction for all coal conversion plants based upon percentage of total wages/salaries (first 5 years).

Texas

* No miscellaneous gross receipts taxes on electricity.

Illinois

* Sales tax exemption on building materials.

* Exemption from electricity excise tax.

Wyoming

* Sales and use tax exemption on core equipment for clean-coal facilities.

* $10 million for road and bridge improvements.

Source: DKRW Advanced Fuels report to the Wyoming Legislature's Joint Minerals Committee, September 2008.]]>