CASPER, Wyo. — Amid much skepticism, a legislative committee voted this week to take up a draft bill that would add “oxy-combustion” coal-fired power plants to an existing sales-and-use tax exemption for the power industry.

The move comes just months after state lawmakers decided to repeal a similar tax exemption for wind energy facilities, noting that such exemptions result in sapping revenues that are otherwise directed to communities to deal with the impacts of large construction projects.

“I think there are better ways we can support these efforts, either through the Clean Coal Task Force or something with more oversight with research and technology sharing,” said Shannon Anderson, community organizer for the Powder River Basin Resource Council.

The Joint Minerals, Business and Economic Development Interim Committee approved the measure on Tuesday. The “coal value-added facilities tax exemptions” bill is one of only two bills that the committee has taken up for introduction in the upcoming budget session beginning Feb. 8.

The existing tax exemption was established several years ago, intended to make it a little easier to build expensive advanced coal facilities in the state, such as coal gasification and coal-to-liquids plants. When the exemption was created, lawmakers were not aware of the oxy-combustion coal process.

The process involves burning coal within a regulated oxygen environment rather than the common process of burning coal in untreated air. It results in near-zero sulfur dioxide emissions and gives off a more pure stream of carbon dioxide, which makes it easier to use the CO2 for enhanced oil recovery or deep geologic sequestration.

“Getting the first one built is always the most difficult,” said Rep. Tom Lockhart, R-Casper, who supports the measure. “If we’re going to make a difference (environmental), we need to scale up these technologies.”

Exemptions’ impact

By opening the “coal value-added facilities tax exemptions” bill to add oxy-combustion, lawmakers may have inadvertently rekindled skepticism of sales tax exemptions altogether.

One of the main reasons for Wyoming’s Industrial Siting Act is to quickly channel sales tax generated from large construction projects directly to the communities affected by the construction.

“The state could waive those sales taxes, and it’s not that big of an issue for the state (budget). But it is a big deal for those towns and counties,” said Sen. Stan Cooper, R-Kemmerer.

The formula is to measure sales tax revenues from specific communities before construction begins, then compare it to sales tax revenues after construction begins. The incremental increase is considered to be related to the construction project, setting the monetary calculation for community impact assistance payments.

By exempting a construction project from sales taxes, the state essentially takes away a revenue source intended to help nearby communities deal with impacts of large-scale construction, such as road maintenance and emergency services.

In fact, it’s the main reason lawmakers voted to repeal a similar tax exemption for renewable energy, including wind farms.

“If you give a sales tax exemption, then there’s no pot of money to take care of those impacts up front,” Sen. John Schiffer, R-Kaycee, said in an interview.

Although Schiffer is not on the Joint Minerals, Business and Economic Development Commission, he did voice his opinion to committee members during a public meeting Tuesday.

Lockhart said he believes the exemption for advanced coal technologies is necessary to help land some of those facilities in the state. The exemption can be repealed any time the legislature chooses.

As for concerns regarding impact assistance payments, Lockhart said there are discussions about amending the Industrial Siting Act formula itself. One idea voiced to the committee is to base impact assistance payments on the estimated cost of production and take the money from the Abandoned Mine Lands fund or some other source.

Another criticism of the sales tax exemption is that the money comes out of the taxpayers’ pocket, essentially giving a discount to the ratepayers who are served by the power plants — many of whom don’t even live in Wyoming.

“This bill shifts the burden from Rapid City ratepayers to the communities of Wyoming,” Anderson said.

The project

Black Hills Corp., Babcock & Wilcox and Air Liquide Engineering recently announced a plan to build an oxy-combustion coal power plant near Gillette. It would be the nation’s first commercial-scale carbon capture and sequestration coal-fired power plant.

The partnership filed an application to the U.S. Department of Energy seeking clean-coal technology funding available under the agency’s restructured FutureGen project. The plant is anticipated to be in service by 2015, according to Babcock & Wilcox.

B&W said the plan is to capture and permanently store large volumes of CO2 in deep saline formations or for enhanced oil recovery. The plant will serve to “build knowledge to make informed CO2 policy decisions for coal-based power plants,” according to B&W’s Web site.

State officials say using CO2 captured at the oxy-combustion plant for enhanced oil recovery would meet the Energy Department’s funding requirement for carbon sequestration. Supporters also want a sales tax exemption for the technology in an effort to convince the Energy Department that the project is worth funding.

The plant will likely be a mine-mouth facility. There are many oil fields in the region that are candidates for CO2-flood enhanced oil recovery.

The project is among dozens of proposals in Wyoming seeking financial support from DOE programs such as the Clean Coal Power Initiative, which received an appropriation of $800 million from the American Recovery and Reinvestment Act of 2009.

Contact Dustin Bleizeffer at dustin.bleizeffer@trib.com or 307-577-6069.