Prometheus 6

I just...and I mean just...read of the most blatant example of...I want to call it theft, but technically I can't. It's just taking advantage of tax law...and your Congressional connections. It's the synfuel industry. Once you get a beautiful scam like this working, you know it's going to blow up. Though it does require a significant significant investment of resources

Since 2002, the Council for Energy Independence has spent $2 million lobbying Congress to preserve the tax credit, according to reports filed with the Senate Office of Public Records. Overall, Time estimates, the synfuel lobby has spent more than $5 million during that same period. The effort has got results. In recent years, the lobby has successfully turned aside efforts to revoke the IRS rulings on which the tax credits are calculated. It beat back an effort in the House Ways and Means Committee last year to send a bill to the House floor that would have virtually eliminated the tax credit. The bill's sponsor, Lloyd Doggett, a Texas Democrat, called the tax credit "one of the worst tax loopholes on the books" and described the synfuel industry as "basically a sham." Nevertheless, because of industry lobbying, Doggett's bill has never made it out of committee.

The profit is not only significant, it is guaranteed.

From 2003 through 2005, TIME estimates, the synfuel industry raked in $9 billion in tax credits. That means the lucky few collectively cut their tax bills by that amount, which would be enough to cover a year's worth of federal taxes for 20 million Americans who make less than $20,000 a year and pay income taxes. How important is the tax credit to synfuel producers? In its latest annual report, Headwaters Inc., a Utah-based purveyor of synfuel processes and substances, says flatly, "Headwaters does not believe that production of synthetic fuel will be profitable absent the tax credits."

These clowns aren't even creating synthetic fuel, though.

The coal can look and burn like regular coal. The IRS rule for transforming coal into synfuel—and getting the tax credit—requires only that the substance be chemically altered in some way. The alchemy that satisfies the IRS is a simple process: some plants spray newly mined coal with diesel fuel, pine-tar resin, limestone, acid or other substances—a practice that industry critics call "spray and pray." Other operators mix coal-mining waste with chemicals, coat it with latex and blend it with untreated coal to form briquettes.

And that's not enough...apparently the value of the tax credit (not just a deduction, mind you but a credit) has fallen due to the increase in oil prices over recent times. I wish I could explain that for you right now, but I'm still bugging a bit.
So what have the synfeul lobbyists paid someone in the Senate to do?

Backdate the price of oil, of course. Not for you...just for purposes of calculating the tax credit.

Nine billion dollars of tax credit

Once a few pioneers started reaping the tax credits, it wasn't long before plants using various techniques sprouted next to coal-burning power plants, which buy the so-called synfuel and use it as they would any other coal. Those synfuel operations were a far cry from the state-of-the-art plants that Congress had envisioned as performing a more radical transformation. Instead, they were flimsy facilities that could be easily dismantled and moved to other locations.

Today about 55 such plants around the U.S. process 125 million tons of coal or, in many cases, coal waste from an earlier mining era. For owners and operators, the whole point isn't creating a profitable new energy resource for the U.S.; it's about collecting the tax subsidy. Progress Energy Inc. of Raleigh, N.C., which owns electric utilities that serve portions of the Carolinas and Florida, reported in a filing with the Securities and Exchange Commission that in 2002-04 its synfuel-production losses added up to $400 million. No problem: the company claimed $852 million in tax credits, magically transforming a money-losing operation into a money-making business with $452 million in profits—courtesy of the American taxpayer. And that's not all. Like other synfuel producers, Progress Energy can't immediately use all the tax credits it mines because of tax-law limitations. As of Dec. 31, 2004, it was sitting on $745 million in deferred credits that it can write off against future earnings for years to come. And Progress Energy is not alone. Plants run by DTE Energy Co. of Detroit generated $1.2 billion in tax credits during the same years.

...essentially for bookkeeping rather than new technology.