Kentucky sets biofuel/renewable energy policy, so why does the gov love coal?

Last week, Kentucky Governor Ernie Fletcher signed an energy bill that aims to help biofuel producers make fuel, adds tax credits for biodiesel and creates new credits for ethanol (corn and cellulosic), and promotes making electricity from renewable energy sources. So, how did Fletcher start his prepared comments on the bill? By saying, "I believe coal's full potential has never been realized." Ouch.
The bill is HB1, available online here, and on top of the biofuel aspects listed above, Fletcher says the law "will give energy companies an incentive to build plants in Kentucky that will convert coal, corn and other products into clean-burning fuels." A few steps forward, a few steps back into the mines.

The biofuel support comes in the form of incentives for facilities that get a capital investment of at least $25 million. For projects of this size, EERE says in a newsletter:

The incentives can include an advanced disbursement of the labor costs on a new project; a reimbursement of up to 100% of the sales and use taxes on property bought during construction; and a tax credit of up to 100% of the income tax and limited liability entity tax owed by the company. Under certain conditions, companies can also assess 4% of employee gross wages, which the employees can then take as a credit against their income tax. The bill's incentives will be funded with the proceeds from $100 million in bonds.

The bill also expands an existing tax credit for biodiesel and adds new tax credits for other biofuels. The biodiesel tax credit of $1 per gallon is expanded to include renewable diesel, and the cap on the total tax credit is increased from $1.5 million to $5 million in 2008, and then further increased to $10 million in 2009. The bill creates separate new tax credits of $1 per gallon for ethanol produced from corn, soybeans, or wheat and for ethanol produced from cellulosic biomass, each of which includes a cap of $5 million. However, if some of the $5 million in cellulosic ethanol tax credits go unused, they can be used to increase the cap for the corn ethanol tax credit.

Coal, corn, cellulose. Kentucky is certainly covering the bases with HB1.

[Source: State of Kentucky]

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