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McCain, Fair-Weather Free Marketeer: Courting Coal

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We've discussed in this space Senator John McCain's occasional backsliding from the free market orthodoxy. He opposes government intervention in the markets, except when he favors it -- when, say, CEO's make too much money, "speculators" drive up oil prices, or giant government sponsored enterprises teeter on the brink. Now we might add energy technology to the list of exceptions.

It is common for Republicans to rail against government R&D investment or other incentives for alternative energy -- it's Washington picking winners and losers, they like to say. McCain himself has condemned the ethanol subsidies as a handout to farmers. "Ethanol is bad policy and has harmed us," Douglas Holtz-Eakin, McCain's top economic adviser told Business Week in May. "We should have an equal approach for all technologies." Said McCain a month later: "I'm not picking winners and losers here. I think the way we're going to solve this issue is to let a thousand flowers bloom. I'm for federal funding of pure research and development.'

"Yes, that means no ethanol subsidies," the candidate told ethanol producers in Iowa back in November. "But it also means no rifle-shot tax breaks for big oil. It means no line items for hydrogen, no mandates for other renewable fuels, and no big-government debacles like the Dakotas Synfuels plant. It means ethanol entrepreneurs get a level playing field to make their case -- and earn their profits." (Democrat Barack Obama supports not just ethanol subsidies, but tax credits for wind and solar power, which McCain also opposes.)

So then why does McCain support ginormous subsidies for nuclear power and so-called "clean coal"? McCain pledges to build 45 new nuclear power plants -- the U.S. hasn't constructed a new reactor in three decades -- and though his campaign doesn't say how it will accomplish this, McCain suggested in June that his administration might offer "some guarantees." Guarantees? Why, it was guarantees -- loan guarantees, in fact -- that built the Great Plains Synfuels Plant in North Dakota that McCain criticized in his Iowa speech.

That was a surprising slam, because McCain also promises to commit $2 billion a year for 15 years to developing clean coal technologies -- precisely the kind deployed at the North Dakota plant. National Public Radio's Scott Horsley asked McCain about this recently:

Horsley: Senator, you've said you don't want the federal government to pick winners and losers in the energy sector. Why, then, spend $2 billion on clean coal?
McCain: Well, because we know clean coal is a winner.

We do? Who knew! Certainly not environmental advocates. Clean coal technology relies on a process called gasification -- rather than combusting coal, it heats the fuel until it breaks down to its constituent elements and becomes a gas. The carbon dioxide can be easily removed and stored (perhaps underground), while the remaining gas can then be used to drive a turbine. (At Great Plains, the gas is sold as a substitute for natural gas.) That's the theory, anyway. The Department of Energy helped finance three such electric plants powered by gasified coal. One failed outright; of the two that operate, in Terre Haute, Indiana, and Tampa, Florida, the Indiana plant has suffered from reliability problems. Neither actually captures and sequesters the carbon dioxide -- and that is precisely the hard part. The Department of Energy planned to spend $1 billion to build a gasification electricity plant in Illinois that sequestered greenhouse gasses, but canceled the project in January after the projected costs had nearly doubled. Gasified coal can also be converted to liquid fuels like ethanol or diesel, but a DOE-sponsored lab determined last year that making liquid fuels from coal creates more than twice as much greenhouse gas than simply pumping diesel fuel from a well and two-thirds more CO2 than producing gasoline. Even when the CO2 is sequestered, liquid coal emits 20 percent more carbon dioxide than conventional diesel.

Calling clean coal a winner is, then, a tad premature. But if clean coal isn't exactly an environmental winner, it is, as NPR's Horsley pointed out when I called him today, a political winner. "The swing states of Pennsylvania, Ohio, Virginia and Colorado are all among the top coal producers," Horsley said after McCain wrapped up a town hall meeting in Lima, Ohio. "When he talks about it, he'll say, 'Think how many jobs that means right here in Ohio.' When we're in Pennsylvania, he'll say, 'Think how many jobs that means right here in Pennsylvania.' " Notably, Barack Obama, too, supports clean coal technology, though he's become more restrained about coal-to-liquids lately after being chided by environmentalists.

None of which is to suggest that government shouldn't invest in clean coal. On the contrary, it should -- as part of a broad and comprehensive investment portfolio that includes clean coal, wind, solar, ethanol, and maybe even nukes. If we're actually picking winners, even when we say we're not, why limit it to just two?

McCain might take a few minutes to sort out his feelings about the Great Plains Synfuels Plant in North Dakota. It turns out the refinery is a pioneering investment in clean coal. It didn't start out that way -- it was instead a 1970s initiative to free the U.S. from expensive natural gas and Arab oil. Great Plains was never meant to capture CO2, and didn't for years. Then, in the late 1990s, it began exporting carbon dioxide in a pipeline to an oil field in Saskatchewan, where the gas is pumped deep into the ground to dislodge petroleum out of the rock. According to the National Resources Defense Council, it's "the first time in North America that man-made CO2 destined for atmospheric release [is instead] pumped deep into the earth, where it might potentially be sequestered for thousands or even millions of years."

And the power plant is being paid for its effort -- $30 million a year, as of 2005. Not bad for a debacle.

Last updated: Aug 7, 2008




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