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Energy Department releases draft plan for $8 billion in fossil fuel tech loans

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In a speech that ignited furor from pro-coal politicians last week, President Barack Obama said part of his plan to lower carbon emissions would include up to $8 billion in loan guarantees for advanced fossil fuel technologies.

The loan guarantees would seek to give fossil fuels a chance to carve out a spot in the nation's energy mix under a policy scheme that insists on low carbon dioxide emissions. Obama's climate plan insisted that new developments in technology will come along to reduce carbon dioxide emissions, including an acknowledgement that fossil fuels will be a part of that transition.

"Now, one thing I want to make sure everybody understands -- this does not mean that we're going to suddenly stop producing fossil fuels," Obama said during the speech. "Our economy wouldn't run very well if it did."

Today, the Energy Department released a draft solicitation of how that money would be allocated. The draft will be open to comments from the industry, public and other stakeholders through until early September.

"America needs an all-of-the-above approach to develop homegrown energy and steady, responsible steps to cut carbon pollution, so we can protect our kids' health and begin to slow the effects of climate change," said energy secretary Ernest Moniz. "These investments will play a critical role in accelerating the introduction of low-carbon fossil fuel technologies into the marketplace and reduce greenhouse gas pollution. Fossil fuels currently provide more than 80 percent of our energy, and adopting technologies to use them cleanly and more efficiently is critical to our all-of-the-above approach."

The loan guarantees solicitation is for fossil fuel energy projects that "substantially reduce greenhouse gas and other air pollution." The loans would be for those producing technologies that could capture and store carbon dioxide or avoid producing it altogether.

Investors often have been hesitant to move forward on such technologies because of uncertainties, economic and political, associated with the technologies.

The draft solicitation will be the sixth issue under Section 1703 of Title XVII of the Energy Policy Act of 2005 which authorizes the Energy Department to support innovative certain energy technologies. The draft includes a list of qualifying technologies. The public is welcome to suggest other technologies that should be added to the list.

The current draft places technologies into four separate areas: advance resource development, carbon capture, low-carbon power systems and efficiency improvements.

Advanced resource development attempts to cut back on lifecycle contribution to greenhouse gas emissions, including fugitive emissions from the mining and extraction of coal and natural gases. Developing the resources, the Energy Department estimates, accounts for about 5 percent of the greenhouse gas emissions in the U.S.

Examples include novel drilling techniques, gas flaring reductions, coal gasification and collection of coalbed methane.

The carbon capture area includes capture from synthesis of fuel from coal or other fuels, capturing carbon from electricity generation and capture of industrial carbon.

"Currently, these facilities account for over half of the United States' annual greenhouse gas emissions," a fact sheet on the draft assessment notes. "The purpose of carbon capture technology is to selectively remove CO2 from process streams and flue gases, and produce a concentrated stream that can be compressed and transported to a permanent storage site.  Carbon capture technologies are most applicable to large, centralized sources of CO2 in the power and industrial sectors."

The low-carbon power systems area includes novel processes for burning coal including oxycombustion of coal or natural gas, chemical looping process and hydrogen turbines. The efficiency improvements area of the draft would encourage development of technologies that allow more energy to be beneficially used with less fossil fuel used.

The full draft is available here: http://energy.gov/sites/prod/files/2013/07/f2/Draft%20Advanced%20Fossil%20Solicitation.02.07.13.pdf