Issue July 31, 2007

Dry-humping Mr. Peabody

What do corporate giveaways, Jody Richards and “alternative” coal technology have in common? They all suck

Kentucky House Speaker Jody Richards: Photo by Ben Schneider
Kentucky House Speaker Jody Richards: Photo by Ben Schneider

A month ago, House Speaker Jody Richards stood up against Gov. Ernie Fletcher and his call for a special session of the General Assembly by adjourning the House of Representatives. It was a strong protest of a clearly wasteful special session, ostensibly to pass a package of “alternative energy” proposals that amount to a gift of Kentucky taxpayer money to the world’s largest coal company. The Democrats stood in direct defiance of Fletcher and the Republicans, who’d been trying to bully through, among other things, a ban on domestic partner benefits at state universities.

I wrote a piece in LEO at the time commending Richards, Democratic Party chairman Jonathan Miller, and all other participating Democrats for standing up for the Kentucky taxpayer and ending the special interest session. I wrote about what appeared to be a new strategy among Democrats, to act on behalf of what’s right, not what’s politically expedient; in other words, to act with Guts. I commended them for bailing on the unprecedented corporate giveaway of $315 million in tax incentives to Peabody Energy, to try and lure the company to build a coal-to-liquid or coal-to-gas plant in Kentucky.

Damn was I wrong.

Slowly but surely, Richards — the longest serving Speaker of the House in Kentucky history — gave in to Big Coal, Fletcher and the Republicans. First he proposed a meeting with Peabody’s CEO, Fletcher and Senate President David Williams; Fletcher rebuffed. Maybe Richards thought the brinksmanship wouldn’t work. He must’ve forgotten he was dealing with a pair of opportunists who will do anything to advance a political agenda (see constitutional amendment to ban gay marriage, 2004).

After the meeting, held last week in Louisville, Richards said Democrats would agree to restart the special session in August with the sole purpose of passing a massive tax incentive for that company, dropping everything else on Fletcher’s original agenda.

By all reports, Peabody CEO Gregory Boyce didn’t tell Richards and the gang anything but that a massive tax incentive package would prompt the company to consider Kentucky among two other possibilities, Indiana and Illinois. In Illinois, Peabody is set to break ground on a 1,600-megawatt coal-fired power plant this fall. Its Thoroughbred Generating Station, the 1,500-megawatt “clean” plant of the future — to be located in Richards’ neck of the woods in Western Kentucky — has stalled, after the Public Service Commission decided the proposal runs afoul of the Clean Air Act. That’s got to be frustrating.

So Boyce flew to Louisville from St. Louis, on a private jet, and Fletcher, Richards and Williams drove separately from various parts of the state — along with other, lower-level House members — to have their little summit about “alternative” energy, the result of which was something that we 1) already knew; and 2) could’ve just as easily done by phone or teleconference, without burning all that fuel.

These are the people making decisions about our energy future? Richards sold us all out for a technology that is about as “alternative” as he is. The others were born losers.
More than that, though, is the actual incentives package they’re pushing. It is a hideous corporate welfare scheme designed in part to raid a fund developed expressly to aid communities devastated by Big Coal.

What about “clean coal” technology? As you may have already guessed — if you breathe air and don’t take money from Big Coal, like Richards, Fletcher and Williams have — there is nothing clean about it. It’s a boondoggle that may soon rival ethanol in size and scope.

DeAngelo Crane: Photo by Mary Q. Burton
DeAngelo Crane: Photo by Mary Q. Burton

The process of creating “liquid coal” — akin to diesel fuel, and meant as one piece of a puzzle to slowly replace our dependence on foreign oil — is twice as polluting (carbon-intensive) as the refinery process used now for petroleum. A recent study by the Natural Resources Defense Council analyzed Peabody’s goal to produce 2.6 million barrels per day of liquid coal by 2025. It found that meeting that goal would require a massive expansion of coal mining operations, up 43 percent from today. That would also increase carbon dioxide emissions more than 2 billion tons over what is being projected now for 2025.

According to the National Energy Information Center, the United States is expected to drop its carbon emissions 25 percent by that year. Not in Kentucky, folks. At least not while these clowns are in charge. We’ll be content here, living in the past and stinking up the place. But at least we’ll have 2,805 new jobs, according to a recent op-ed floated by state Economic Development Secretary John Hindman.

In it, Hindman included this seemingly harmless line: “The opportunity to bring to Kentucky a high-tech multi-billion dollar investment that will make our natural resources more valuable is a rare and precious one. While the extraction of natural resources such as coal has been important to Kentucky’s economy, we must look ahead to the value-added industries that create wealth in the state.”

This idea is cynical and manipulative, if not dangerous. Politicians and the bureaucrats whose salaries depend on them, like Hindman, pimp the self-serving fantasy that “clean coal” technologies will be good for Kentucky at great cost to the average Kentuckian. The citizen advocacy group Kentuckians for the Commonwealth is working overtime to try and remind legislators of the reality of turning over the golden key to Peabody, as is the Kentucky Resources Council and myriad other environmental and citizen advocacy groups.
Here is a slice of that reality.

Senate Bill 1, ostensibly the reason for all this mess, is the tax-incentives-for-Big-Coal bill. Passed by the Senate in the first few days of the special session, the bill offers four separate economic incentives for Peabody; these incentives simply move public money to a private corporation without replenishing the public money pulled from other things — we’ll get to that in a moment. The bill includes absolutely zero accounting for the environmental degradation that will follow, like the guaranteed increase in carbon emissions from a coal conversion plant at a time when the United States seems on the verge of instituting carbon emissions caps. How much will those fines cost Kentucky?

If it decides to locate a new multibillion-dollar plant here, Peabody will not pay sales or income tax, period. It will not pay sales or usage taxes on any equipment it buys that reduces the consumption of energy or energy-producing fuels by 15 percent. The incentives package will last for 25 years.

While this may be appalling to you, it gets worse. The real menace, as KFTC and other groups have pointed out in new literature and a letter to the Big Coal Trio (Fletcher, Richards and Williams), is the payout Peabody will receive from the coal severance tax fund.

The coal severance tax exists, in some part, to replenish communities degraded by large-scale coal operations. It is a tax on coal removed from the state — every state with major coal operations has one, and Kentucky’s is lower than most. It has been 4.5 percent since 1976. In 2005, the state took in more than $165 million in coal severance tax money. Some of that, usually about half, goes to the General Fund, and the rest goes back to communities that house coal operations, through local development funds.

According to a KFTC analysis of SB 1, nearly half of the incentives for Peabody will come from the coal severance tax. Without raising the percentage on that tax — a move sure to prompt sharp criticism from coal operators throughout the state, the same companies our legislative leaders are so clearly afraid of standing against — the Peabody incentive is essentially a raid on what little money the state tosses to communities devastated by massive coal mining operations, much like the one Peabody tried and failed to build near Richards’ home base.

This is unconscionable. Peabody is the world’s largest private coal company. Over the last three years it has seen profits increase 342 percent. Last year, its net profit was more than $600 million. And here goes Kentucky’s so-called leadership, ready to take money away from some of the poorest regions in America and hand it to a coal company.

Fletcher, Richards and Williams certainly aren’t the only ones. When the General Assembly reconvenes Aug. 13, pay attention to who votes for this bill — most will, regardless of party. With scant exception I have heard barely a peep out of a lawmaker questioning whether this sort of thing is good for Kentucky.
Shame on them.