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To qualify for the tax credits, the makers of this so-called synfuel don't have to prove that they are making a better kind of coal, one that burns more efficiently or offers any other benefit. By IRS ruling, they need only modify the chemical composition of coal. As a result, dozens of plants have sprung up across America to carry out a process that in many cases is so slight that critics call it spray and pray, a reference to their hopes that no one will peek too closely. "You can't believe what goes on," a government official long involved with the coal industry told TIME, blaming Congress for its role in perpetuating the handout. "The people who spend the tax money don't have a clue." The IRS launched an investigation last June into the "scientific validity of the test procedures" used to measure compliance with the minimal standards, but the synfuels credit has enough support in Congress that members have tried (and failed so far) to block the IRS probe.
Why America is stuck with this wasteful program is worth holding up to the light because it demonstrates the failures of U.S. energy policy at a time when prices are rising again and America's dependence on foreign oil is once more creating economic pain. As TIME reported in July, Congress's failure to adopt a serious energy strategy over the past three decades is taking its toll on consumers in bloated prices for petroleum products and natural gas, looming shortages of certain fuels, lost jobs, rolling brownouts and little hope for any relief, given that lawmakers are fixated on passing out subsidies, like the synfuel credit, that will do little or nothing to ease U.S. dependence on foreign oil.
Two weeks ago, crude-oil prices jumped when OPEC moved to keep supplies tight by reducing its output quotas 3.5%, cutting off nearly 1 million bbl. a day from the global market. American consumers are even more vulnerable to energy shocks than they were two decades ago, in part because the U.S. government's policy during that time has failed to produce alternative energy sources. Whipsawed by lobbyists and special interests, taxpayer-supported programs have succeeded mainly in making a few people rich and protecting ineffectual schemes. To be sure, not all energy programs have been a bust. For example, tax credits that gave homeowners an incentive to install storm windows and insulate their homes got results. But the synfuel tax credit is a dead end. It doesn't increase U.S. energy production. It's just a windfall for those who have found a way to exploit it. A TIME investigation into the congressionally authorized, billion-dollar scheme shows how it works:
DAWN OF A GIVEAWAY