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Tom Miller: Manchin right to be skeptical about success of coal-to-liquid plant

Dec. 13, 2008 @ 08:39 PM

One of the most persistent warnings I received from my parents as I was growing up was that "if it sounds too good to be true, it probably is." Last week's announcement of a $3 billion plant in Mingo County that would create 3,000 construction jobs and at least 200 permanent jobs after it is completed reminded me of that admonition.

The idea of converting West Virginia's abundant supply of coal into gasoline has long been a dream of Gov. Joe Manchin and other state officials who persist in the belief that "clean coal," which would appease environmental concerns, is truly the key to this state's economic success in the future.

Adam Victor, president of TransGas Development Systems, Inc., used the governor's 2nd annual West Virginia Energy Summit last week to announce that company's plans to convert 8,500 tons of coal into 18,000 barrels of gasoline daily.

Manchin cautiously joined in the announcement and made it clear that no state money is committed to the project. He said the state's only commitment is to give the company a fair shake so long as it complies with all state regulations. But he did point out that this project would be eligible for the usual state tax credits and subsidies permitted for new business investments in the state.

Unemployed residents of Mingo County obviously welcomed the idea of new job opportunities just as those without jobs in the state's Northern Panhandle are still optimistic that Consol Energy will find the financial backing it needs to develop a coal-to-liquid plant there.

The $800 million coal-to-gas conversion project planned in Marshall County by Consol was stalled recently when its partner in the venture, Synthesis Energy Systems Inc. of Houston, announced it was withdrawing because it couldn't find financing for the project here. Synthesis instead is proceeding with a similar project in China, where financing is readily available.

Consol still hasn't given up on the West Virginia project, and an executive of that company pointed out last week that financial markets in this country are far more receptive to projects under $1 billion. Victor, though, claims the Mingo County project need not worry about that since his company plans to sell stock to the public instead of borrowing the money.

Environmentalists are quick to point out a serious flaw in these coal-to-gas conversion projects. They contend that the plants don't have adequate controls on the carbon dioxide created by this process and thus will cause the release of twice as much greenhouse gases -- once when the coal is turned to liquid and again when the liquid fuel is burned.

Another nagging concern is the news that TransGas announced a $2 billion plant like this in the state of New York but still hasn't even filed a request for air quality permits there. And though it has one gas-fired electric plant in that state, it has been unsuccessful in its efforts to build plants at two other locations.

No wonder that even as West Virginia's congressional delegation and Mingo County economic development leaders were praising the announcement, Manchin was describing the project as a "long shot." Maybe his parents impressed upon him the same admonition that mine did.

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Even though West Virginia has more and more people signing up for food stamps and unemployment is nearing 5 percent again, there is one employer that has thousands of job openings -- state government itself.

A legislative interim committee was given a report in Charleston last week that indicated nearly 1 of every 10 state jobs is vacant right now. With more than 7,000 state workers becoming eligible to retire during the next five years, the number of jobs available figures to become even more dramatic during the coming months.

Admittedly, the salaries of many state employees are not up to the levels in the private sector. And a freeze on merit pay hikes for the last four years has added to that problem. But the fringe benefits including the worker's share of health insurance costs, the pension plan, annual and sick leave and paid holidays adds some balance. Starting salaries range from a low of $16,008 a year to $143,580 for the jobs listed on the West Virginia Division of Personnel's Web page one day last week.

State officials have promised the Legislature to have a new comprehensive plan ready in two months to completely overhaul the present system of hiring people to work in state government. Obviously, there is growing concern about maintaining the level of competence when so many long-time workers retire.

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Finally, legislators learned last week that economic indicators believe the state's two leading sources of tax money to maintain West Virginia's 36,000-mile road system -- taxes on vehicle purchases and the 32.2 cents-per-gallon tax on gasoline -- will both be shrinking in the next few years, so other options may be necessary.

One of the experts said Oregon is considering a plan to install a global positioning system (GPS) in each licensed vehicle so they could tax the mileage driven. If the rate were 1 cent per mile, that would be $120 for 12,000 miles. But the real downside is that the taxpayer would presumably have to pay it separately at the end of the year instead of at the pump each time as part of the gasoline purchase price.

Tom Miller is a retired state government reporter for The Herald-Dispatch. He is a regular contributor to The Herald-Dispatch editorial page.

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