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Associated Press
Ky. Governor Signs Coal Tech Bill
By ROGER ALFORD 08.30.07, 4:59 PM ET


Political leaders in Kentucky, worried about the future of coal amid ever-increasing environmental demands, have taken action that they say is critical to protecting a mainstay of the state's economy.

In a move widely opposed by environmentalists, Gov. Ernie Fletcher signed a bill into law on Thursday that will provide hundreds of millions of dollars in incentives to companies that build high-tech plants to convert coal into cleaner-burning alternative fuels.

Lawmakers say the measure is critical to Kentucky's future because it could keep coal a viable source of fuel for generations to come despite a push for stricter federal limits on emissions of so-called "greenhouse gases" from coal-fired generating plants.

"It puts Kentucky in a position to be the national leader in the energy arena," said House Floor Leader Rocky Adkins, D-Sandy Hook, a coal executive and one of the chief architects of the new law. "It puts us in a position to really grow our economy and expand our ability in research and development in the energy field."

Public debate of the measure centered primarily around its effects on coal, a $4.8 billion state industry that employs 15,000 miners. But the measure also provides incentives for developing wind, hydro, solar and biomass technologies.

Teri Blanton, a member of the environmental group Kentuckians for the Commonwealth, said promoting renewable forms of energy like wind and solar power is laudable, but she still disapproves of the new law because she said it will lead to the destruction of more Appalachian mountaintops by mining companies in search of coal.

Blanton said she objects to providing tax breaks for companies that destroy the environment.

Fletcher, who signed the measure at a Louisville hotel on Thursday, said it will help Kentucky compete with other states in trying to land new energy projects.

"I disagree with any of the naysayers," Fletcher said. "I think this is very important. I think it will move Kentucky forward."

Legislative leaders developed the initiative behind closed doors over the summer after executives from St. Louis-based Peabody Energy (nyse: BTU - news - people ) said they were considering building a $3 billion coal gasification plant in the state. Early estimates put the value of the proposed Peabody incentives under the new law at $300 million with breaks on sales taxes, income taxes and coal severance taxes.

Adkins said the law puts Kentucky on equal footing with other states that already offer incentives for companies that development cleaner-burning fuels from coal. He said the measure has the potential to improve national security by reducing dependence on foreign oil with investment in production of ethanol and biodiesel plants, even hydrogen fuel cells.

Bill Caylor, president of the Kentucky Coal Association, said he believes vast U.S. coal reserves, which already supply half of the nation's electricity, hold the key to cutting dependence on foreign oil. He said encouraging companies to invest in technology to convert coal to gas and liquid fuels is crucial.

"This country is in such a rush to satisfy environmental activists and their perception of environmental doom that it is jeopardizing our future," Caylor said. "We need to be more energy independent."

Associated Press Writer Malcolm Knox in Louisville contributed to this story.

Copyright 2007 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

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