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Coal irked by tax reform bill as industry backers seek billions in tax credits

At least some in the American coal industry were disappointed to see the Senate's version of sweeping changes to the U.S. tax code, as proponents of the sector are seeking billions in new tax credits before the end of the year.

While a National Mining Association representative said it was premature to comment on the reform effort, West Virginia Coal Association Senior Vice President Chris Hamilton said he was "terribly disappointed" in the version of tax reform that came out of the U.S. Senate.

"It effectively raises taxes on coal operations potentially offsetting practically everything the Trump administration has done to help the U.S. coal industry to get back on its feet," Hamilton said.

The same provision drew criticism from Murray Energy Corp., which issued a statement over the weekend stating the company was "very distressed" over the "mockery of tax reform" passed by the U.S. Senate.

"Undoubtedly, the Senate's so-called 'tax reform' will cause even more coal companies to file for bankruptcy and more coal mining families to lose their jobs, healthcare, and retirement security," said Murray Energy Chairman, President and CEO Robert Murray.

While coal companies expressed dismay over the proposed tax reform, advocates of carbon capture remain hopeful that the technology might still see action in an energy tax credit extenders package that could be included in a continuing resolution for government spending necessary over the next few days, after not being included in the House or Senate versions of the tax reform bill.

"The Senate strategy has been to oppose the energy credits on the House bill and then to act on energy credits as part of an extenders package," Hunter Johnston, a partner in Steptoe & Johnson LLC's Washington office who has been involved in a project to capture carbon dioxide from synthetic gas in Louisiana, told S&P Global Market Intelligence.

"There's almost no chance that the 45Q is going to pass through as is," he said. "The extenders package is foreseeably the only other vehicle that something like this could go in," he added.

The Senate's proposal comes as coal and nuclear power proponents urge supporters in Congress to introduce new tax credits before the end of the year, potentially providing billions in dollars of support to indsutry plants.

Unlike the Department of Energy's cost recovery proposal, which only applies to about 40,000 MW of coal capacity, the American Electric Power Co. Inc. and American Coalition for Clean Coal Electricity are seeking tax credits that would be available to almost all the 262,000 MW of U.S. coal-fired capacity, said Michelle Bloodworth, COO of American Coalition for Clean Coal Electricity.

Melissa McHenry, a spokesperson for coal-heavy generator AEP, said the tax credits would provide temporary support for coal plants while the Federal Energy Regulatory Commission or the North American Electric Reliability Corp. conduct a deeper study on what plants are needed to ensure a reliable and resilient grid as part of the DOE action.

The legislative uncertainties surrounding the industry come amid bullishness in the U.S. coal export market, which is projected to continue posting strength through the first half of 2018.

Providing the keynote speech Dec. 5 at the 16th annual American Coal Council's Coal Trading Conference in New York City, Xcoal Energy & Resourcess President Jack Porco offered a "rose-colored" near-term outlook for the market.

He attributed the recent strength of the U.S. export market to the industry's role as a "key swing supplier" in the Atlantic Basin, with the infrastructure and flexibility to provide "quick response time to changing market conditions." He also pointed to a series of market factors to explain the recovery, including strong economic growth in Europe and Brazil.

However, some believe that the upbeat scenario in the export market is only a temporary boost to the sector given the bearish long-term fundamentals for domestic consumption.

Emily Medine, a principal with Energy Ventures Analysis, said at the American Coal Council's annual Coal Trading Conference in New York that the thermal coal sector remains "challenged."

Medine cited a surplus of natural gas, lack of growth in power demand, wind production tax credits, a strong U.S. dollar, continued regulatory pressure and public perception against coal.

The week also saw the Millennium Bulk Terminals-Longview appealing the Cowlitz County's decision against the critical shoreline permits needed for its planned coal export terminal in Washington.

According to documents filed Dec. 4 before the Washington Shorelines Hearing Board, Millennium Bulk is appealing the decision, alleging the Cowlitz County hearing examiner "thoroughly and fundamentally misreads and, therefore, misapplies the State Environmental Policy Act and the Shoreline Management Act, and does not analyze the project's consistency with the local [Cowlitz County Shoreline Master Program] as required."

Upcoming events:

American Coal Council: ACC will host its "Coal Q&A Webcast: Enhancing Coal's Social Media Effectiveness" on Dec. 11 at 2 p.m. in Washington, D.C.