[Congressional Record Volume 156, Number 28 (Tuesday, March 2, 2010)]
[Extensions of Remarks]
[Pages E281-E282]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      EXTEND TAX CREDIT FOR THE PRODUCTION OF STEEL INDUSTRY FUEL

                                 ______
                                 

                         HON. MICHAEL F. DOYLE

                            of pennsylvania

                    in the house of representatives

                         Tuesday, March 2, 2010

  Mr. DOYLE. Madam Speaker, I rise today to lend my support to a 
provision in the Extenders Bill that is being debated in the Senate to 
extend and clarify a tax credit for the production of Steel Industry 
Fuel, SIF. Last Fall, my colleagues and I introduced a similar bill to 
extend and clarify the SIF credit. SIF is used by the domestic steel 
industry as a feedstock for the manufacture of coke, which is coal that 
has been carbonized and is used as a fuel in steel making.
  In October, 2008, Congress enacted a new refined coal tax credit 
under Section 45 of the tax code for the production of steel industry 
fuel, which is made from coal waste sludge and coal. The availability 
of the steel industry fuel tax credit provides a subsidy for projects 
that may not otherwise be commercially viable on account of materials, 
process, technology and other transaction costs. As originally enacted, 
the SIF credit was available for only one year. The placed-in-service 
period for the credit expired as of December 31, 2009, so new steel 
industry fuel projects cannot be brought on line without an extension 
of the credit.
  The use of Steel Industry Fuel provides significant energy, 
environmental, and economic benefits, all of which argue for an 
extension of the SIF credit. The primary benefit of manufacturing SIF 
is that the production process recaptures the BTU content of coal waste 
sludge. The Environmental Protection Agency has approved the production 
of SIF as a method for disposing of coal waste sludge, and the 
production of SIF is the preferred method of coal waste sludge 
disposal. In addition, our domestic steel industry can become more 
competitive by using SIF because it lowers production and operation 
costs.
  From an energy resource and environmental standpoint, the production 
of SIF is the superior method of disposing of coal waste sludge, it 
would otherwise be treated as a hazardous waste under applicable 
Federal environmental rules. The alternative methods of disposal are 
incineration and land-filling, each of which requires the physical 
conveyance of a waste product off-site. These disposal methods fail to

[[Page E282]]

recapture the energy content of the coal waste sludge because the coal 
waste sludge, which has a high BTU content, is not used as a fuel.
  An extension of the Steel Industry Fuel tax incentive is of critical 
importance in the current economic downturn, and its expiration has had 
a negative impact on our domestic steel industry. Steel companies and 
coke plant operators have suffered large losses as steel demand has 
declined significantly. These companies have been forced to lay off 
thousands of workers in my State of Pennsylvania, as well as in 
Illinois, Indiana, Michigan, Ohio, West Virginia, Kentucky, and 
elsewhere. Domestic steel manufacturers have had to operate at low 
capacity utilization rates and coke batteries have been placed on ``hot 
idle,'' which is a holding pattern to prevent the coke battery bricks 
from cooling and damaging the battery. The extension and clarification 
of the SIF credit will help these manufacturers mitigate their losses 
as the economy recovers.
  The one-year credit period and short placed-in-service deadline for 
SIF facilities have had a negative impact on SIF producers' ability to 
attract the outside investment needed to finance SIF projects. This 
negative impact has been compounded by the economic conditions that 
have prevailed since the enactment of the credit. SIF projects 
typically involve lengthy negotiations to implement the transaction 
structure necessary to claim the SIF credit, address environmental 
considerations, and negotiate the relevant economic terms. This in turn 
effectively reduced the one-year credit period to a lesser period for 
certain projects. The short time period to place projects in service--
slightly over one year after the enactment of the credit--meant that 
there was too little time to get projects up and running. For these 
reasons, the intended subsidy of the SIF credit did not operate as 
designed and the extension of the credit--from one year to at least two 
years--and the extension of the placed-in-service deadline--from 
December 31, 2009 to December 31, 2010--are needed.

  Included in the legislation I cosponsored is an important 
clarification on an issue that has slowed negotiations with respect to 
SIF projects. I very much hope that the final extenders package will 
include this and other clarifications. It is expected that, for the 
convenience of the parties and for environmental safety, facilities 
producing SIF will typically be located on land leased from a steel 
company or other owner of a coking operation. Such a lessor will not be 
treated as having an ownership interest in the SIF facility under the 
clarification because it leases land and related facilities, sells coal 
waste sludge or coal feedstock, and/or buys SIF so long as such 
person's entitlement to rent and/or other net payments is measured by a 
fixed dollar amount or a fixed dollar amount per ton, or otherwise not 
determined by reference to the profit or loss of the facility. 
Similarly, a licensor of technology will not be treated as having an 
ownership interest in the SIF facility because it is entitled to a 
royalty and/or other payment that is a fixed amount per ton or 
otherwise not determined by reference to the profit or loss of the 
facility. Such arrangements may also cause facilities that produce SIF 
to operate at a loss before the credit is taken into account. However, 
it is intended that the occurrence of such a ``pre-tax loss'' will not 
affect entitlement to this credit, regardless of whether such ``pre-tax 
loss'' is caused by the terms of the lease, license, supply or sales 
contracts between the parties. To that end, the bill provides necessary 
flexibility for varying circumstances of ownership interests and 
clarifies that the existence of such arrangements will not prevent the 
equity owner of a facility from receiving tax credits for its sales of 
SIF. This amendment would provide greater tax certainty to potential 
investors in SIF projects.
  SIF is typically produced at facilities that are located on the 
premises of coke plants that are owned by integrated steel companies 
that are unrelated to the SIF producers. The SIF production facility is 
situated on or near conveyor belts that may be leased from the 
integrated steel company and production of SIF may occur while coal--
and coal blended with petroleum coke--is transported on the conveyor 
belts. SIF producers may purchase coal from the integrated steel 
producer, taking title and having risk of loss while such coal is 
transported on the conveyor belt.
  The bill provides a safe harbor that establishes that the SIF 
producer shall be treated as the producer and seller of SIF that it 
manufactures from coal to which it has taken title. The bill further 
clarifies that the sale of SIF shall not fail to qualify as a sale to 
an unrelated party for purposes of the SIF credit solely because the 
sale is to a party that is also a ground lessor, supplier, and/or 
customer.
  Our bill also establishes that SIF may also be made using coal or 
coal that is mixed with some petroleum coke or other coke feedstock. 
Such ``pet coke'' has traditionally been used by steel companies/coke 
operators in a blend with coal as a feedstock for coke. Steel companies 
also have explored and presently contemplate the use of other coke 
feedstocks to manufacture SIF. The bill provides that the use of pet 
coke or other coke feedstocks in the production of SIF does not 
invalidate or otherwise reduce the credit.
  The steel industry is still prominent in my district in Pittsburgh 
and I'm hopeful that SIF projects will expand our domestic energy 
resources by using what would otherwise be a hazardous waste of the 
coking process in a fuel product. The availability of the tax credit 
will attract outside investment to the steel and coke production 
industries and promote job growth in the domestic steel production 
industry and in related industries that service the steel and coke 
production industries. The extension of the SIF credit will spur the 
investment of millions of dollars that will create hundreds of new 
jobs--in construction and processing--and maintain other jobs in the 
domestic steel industry, in Pittsburgh and around the country. I urge 
my colleagues to support this legislation and hope the Senate will 
extend this credit and make these much needed technical corrections.

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