Coal’s Comeback?

May 30 2013 @ 2:39pm

Brad Plumer sifts through the latest numbers:

Remember all the stories about how a glut of cheap shale gas was killing off coal in the United States and slashing the country’s carbon-dioxide emissions? It’s time to revise those headlines slightly. According to the latest data from the Energy Information Administration, coal has been reclaiming some — though not all — of its market share in 2013…

That said, coal could continue to struggle. It’s important not to go overboard here. Natural gas is still more dominant than it was in 2007, thanks to the fracking boom, and it’s not vanishing. Even in the EIA’s worst-case scenarios, natural gas prices only rise to about $6 per million BTU by 2020. That might make it easier for existing power plants to burn more coal. But, according to most projections, it will still be uneconomical for utilities to build new coal-fired facilities for the foreseeable future. What’s more, new pollution regulations from the Obama administration are constraining the coal industry.

Meanwhile, Stephen Gandel explores a nuance in the tax law that allows fossil fuel companies to drastically reduce their tax bills:

So-called master limited partnerships [MLPs] were created in their current form in 1987. The corporate tax exemption is available for passive companies that pay out nearly all of their income to shareholders, who then pay taxes — generally real estate or investment firms. But the law also extended the tax-free status to certain types of oil and gas companies. For a long time, the MLP structure was primarily used by the transport companies. U.S. pipeline owners argued that the tax break allowed them to attract investors to a low-growth, but vital, portion of the nation’s energy infrastructure. Recently, though, a growing variety of energy companies have been seeking out the tax-free status, many of which are not low-growth or lacking investment. …

[A]t a time when many are worried about the national debt, and when there is increased scrutiny on whether companies are paying their fair share of taxes, it’s worth noting that an increasing number of companies participating in [the energy industry’s] boom don’t pay corporate taxes. There is now $400 billion invested in publicly traded MLPs, up from $40 billion a decade ago. And the number of companies eligible for the status could soon grow dramatically. Industry lobbying groups are pushing a bill in Congress that would further extend the MLP-tax-free status to alternative energy companies, which currently don’t qualify.