IEEFA Update: How a ‘Clean Coal’ Myth Squandered Hundreds of Millions of Taxpayer Dollars Before It Was Unmasked

When the U.S. Department of Energy pulled the plug in February on a $1 billion subsidy to build FutureGen, a “clean coal” plant in Illinois, it put a merciful end to a twisted tale that had been unraveling for years. The coal industry peddled influence at high levels among both Democrats and Republicans to move the project forward, but in the end it was killed—and rightly so—by economic realities.

“Clean coal” is an oxymoron used to describe a variety of technological schemes that might be used not to make coal itself—a highly polluting fuel—“clean,” but to remove pollutants that are generated when coal is burned for fuel. Sometimes the term “clean coal” refers to modern air pollution controls that can be added to coal-fired power plants. Sometimes it means trying to capture more of a plant’s harmful emissions by “gasifying” coal before it is burned. FutureGen involved gasification along with an experimental technology known as carbon capture and sequestration in which the carbon dioxide generated from burning coal is stored underground.

FutureGen was first proposed with great fanfare in 2003 by the Bush administration, which described it as a “zero-emissions” coal plant that would rescue the coal industry in the face of potentially broader regulations on emissions. A consortium of coal companies, among them Peabody Energy, Alpha Natural Resources, AngloAmerican, Glencore, and JoyGlobal, formed an alliance and promised to put up $250 million to build FutureGen if the U.S. government pitched in $700 million.

AS ALWAYS WITH SUCH PROJECTS, PROPONENTS DRUMMED UP POLITICAL SUPPORT WITH PROMISES OF AN EMPLOYMENT WINDFALL. News organizations published job-creation estimates at the time that ran the gamut from 1,000 construction jobs and 150 permanent jobs to 11,000 employees and “countless” spin-off jobs. It’s unlikely any of these numbers were verified at the time, but they made for a good sales pitch.

The Bush administration set up a national bidding war to get FutureGen going. Seven states— Illinois, Kentucky, North Dakota, Ohio, Texas, West Virginia and Wyoming—fell all over themselves offering subsidies to woo FutureGen. A June 2006 story in the Washington Post described the pageant like this:

“Illinois has up to $80 million in incentives on the table, from grants to low-interest loans. Ohio is offering twice that, while Texas has passed a law making it responsible for any legal entanglements stemming from the coal-fired plant’s carbon dioxide emissions. Some of the states are ponying up everything from sales-tax relief to free land, pushing the enticements into the hundreds of millions of dollars.”

In December 2007, Mattoon, Ill., was selected as the site for the plant after Gov. Rod Blagojevich (now serving a 14-year prison sentence for corruption) led an intensive campaign to attract FutureGen, lining up support from the state’s political delegation, organizing rallies, and hiring a major D.C. lobbying firm, Cassidy and Associates, at a taxpayer cost of $460,000.

Much to the chagrin of Blagojevich and friends, the Bush administration turned around and cancelled the project in February 2008, citing cost overruns that had increased the price tag from $1 billion to $1.8 billion. Energy Secretary Samuel W. Bodman told the honest truth in explaining that FutureGen was scuttled on “the likelihood that it would fail, leaving the American people with hundreds of millions of dollars in sunk cost and none of the benefits.”

“Not acceptable,” Bodman said.

Not to be deterred, the Blagojevich machine revved up again when a senator from Illinois—Barack Obama—was elected to the White House. The state’s congressional delegation got funding for FutureGen restored in President Obama’s federal stimulus package in 2009, and the Obama administration announced a $1 billion grant for FutureGen in February 2010.

But a funny thing happened on the way to completion. After the Department of Energy spent $116.5 million for work on the power plant itself and $86 million on its underground gasification site, the project stalled out last year. The technology hadn’t taken off the way it was supposed to, echoing similar failures elsewhere. American Electric Power, a company with a much-ballyhooed plan to implement carbon capture and sequestration at its Huntington Plant in West Va., cancelled its project in 2012 after concluding that the technology was unviable on a commercial scale. Today, Mississippi Power Company presses ahead with its Kemper ‘integrated gasification coal combined cycle,” or IGCC plant, although the price of the plant—which will be borne by ratepayers—has now doubled since inception and the long-delayed project is at least a year away from operation. The performance history of Duke Energy’s IGCC plant in Edwardsport, Indiana, suggests Kemper is extremely unlikely to function as promised.

WHEN THE OBAMA ADMINISTRATION—LIKE THE BUSH ADMINISTRATION BEFORE IT—ANNOUNCED IT WAS CUTTING OFF FUTUREGEN FUNDING, it said it was doing so “in order to best protect taxpayer interest.”

What was left largely unsaid was that the private side of the original private-public partnership had never really stepped up. Illinois Sen. Dick Durbin, one of FutureGen’s foremost cheerleaders, did hint that the coal industry had not held up its end of the bargain, saying the “project has always depended on a private commitment and can’t go forward without it.”

FutureGen, in fact, was a taxpayer handout to the coal industry all along. The whole history of the “clean coal” gambit is rooted in a series of federal subsidies, publicly funded bond issues, and university research grants. If the coal industry really believed a miracle technology could be found to burn coal in an affordable and environmentally sound way, it would be investing its own money—earnestly and in great quantities—to make that happen, not just hoping to hoodwink taxpayers into footing the bill.

Sandy Buchanan is IEEFA’s executive director.