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SEMPRA Energy, the holding company for San Diego Gas & Electric, chalked up a comparatively low tax rate of 17% in the first quarter of this year. After questioning by a UBS Warburg analyst, the company acknowledged that the reduced taxes were attributable to synthetic-fuel tax credits of $45 million to $50 million.
And then there are all the plants' part owners that share the tax credits. Such is the case with Pace Carbon Synfuels Investors, a Delaware limited partnership with a stake in four facilities. Among the investors who have taken advantage of the tax credits: the Federal National Mortgage Association (Fannie Mae), the publicly owned but government-sponsored corporation that bills itself as the nation's largest source of financing for home mortgages; Morgan Stanley, the global financial-services firm; and Norfolk Southern Corp., which owns two major railroads in the Northeast as well as half of Conrail.
Many individuals and businesses cashing in on the tax credits prefer to remain anonymous. Earlier this year, TECO Energy, the holding company for Florida's Tampa Electric, disclosed in a filing with the U.S. Securities and Exchange Commission that it had received "more than $50 million from the sale of half of TECO Coal's synthetic-fuel production facilities." The buyer was not named. A TECO official told TIME that "part of the agreement that we signed says that we are not allowed to reveal the name of the purchaser." WPS Resources, the parent company of Wisconsin Public Service, sold a portion of its operation to "a subsidiary of a public company" whose name was not disclosed. Massey Energy Company sold its interest in a synthetic-fuel plant to an "unidentified affiliate of a major financial institution."
The manager at Warrior Synfuel, near Tuscaloosa, Ala., declined to identify the "private parties," as he called them, that own the plant. He said he had conveyed TIME's request to speak with them: "I believe their choice was that they didn't feel that this was appropriate."
THE TECHNOLOGY WIZARDS
With some exceptions, the 21st Century version of synthetic-fuel plants uses competing coal-altering processes developed by a handful of companies, which make money by licensing their technology. One is Earthco, a mysterious Las Vegas enterprise whose technology is used in 10 plants in six states. An Earthco founding principal was Jerry W. Slusser, 57, who has been involved in a string of curious businesses. In 1998 a Commodity Futures Trading Commission judge found that Slusser and two of his companies "pilfered millions of dollars from customers using the commodities market to carry out their scheme." Some of the money was funneled through accounts of Slusser's Sterling International Bank Ltd., which existed as a post office drop on the Caribbean island of Montserrat. The commission barred Slusser and his firms from trading commodity futures and assessed a $10 million penalty, the largest ever in an administrative hearing. A U.S. appeals court, while acknowledging there had been "multiple frauds," reduced the fines to $600,000, which Slusser has again appealed.