Benchmarks

A tax credit for synthetic fuel wreaks havoc on coal markets.

The recent introduction of synthetic coal products has upset the fragile balance between supply and demand in the U.S. coal market. A recent study by Resource Data International (RDI) on synthetic coal finds that imbalance is being driven by the operation of more than 40 facilities that were rushed into commercial service to meet a July 1, 1998, deadline to qualify for a tax credit. Favorable treatment by the U.S. tax code will encourage synthetic coal producers to continue expanding production levels to as much as 30 million tons per year, significantly influencing utility steam coal markets for the foreseeable future.