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Reagan's presidency: Will it add fuel to the fire for more use of coal in US power plants?

Can a Reagan administration build a new head of steam for the nation's drive to burn more coal in existing power plants? The incentive is clear: The US Department of Energy has identified 80 electric generating units, mostly in the Northeast, that are technically capable of burning coal with modifications. Combined, these facilities could consume relatively quickly an additional 30 million tons of domestic coal per year and reduce US oil imports.

However, the push to convert these oil-burning facilities has slowed to a snail's pace. And an attempt by the Carter administration to speed the process with a new federal funding program is considered dead for this term of Congress.

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The Heritage Foundation, a Washington reseach group, has presented President- elect Reagan with a host of energy policy recommendations that include a new approach to coal conversion. Rather than providing federal funds to help utilities convert, the report urges steps so that utilities can raise the capital on their own.

"The financial problems of the utilities are similar to those of the steel and auto industries," says Milton Copulos, an energy analyst with the Heritage Foundation and a member of the Reagan transition team. The Heritage Foundation recommends lower income taxes for individuals and businesses, and faster tax depreciations for businesses, to stimulate more capital formation and investment in these basic US industries.

Mr. Copulos believes that by allowing utilities to accumulate more capital, and "expediting" the licensing of coal plants, conversion to coal will proceed quickly without the need for government grants and loans.

Indeed, the Heritage Foundation has suggested abolishing the Fuel Use Act of 1978 -- the law that gives the US Department of Energy (DOE) the authority to prohibit the burning of oil or natural gas in power plants that are capable of burning coal.

Since the implemention of the Fuel Use Act, the DOE has begun the regulatory process that could lead to the ordering of 35 power plant units to stop burning oil or gas.

Most analysts believe the greatest obstacle to faster coal conversion by electric power plants has been financial.

"The whole utility industry is in less than great financial shape, and the companies in the Northeast are particularly bad off," says Jack Schenck, vice-president of economic policy analysis for the Edison Electric Institute, a trade association. He estimates it costs about $100 million to convert a typical utility power plant of 500 megawatts to coal.

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Although many utilities recognize there are long-term economic benefits to burning coal because it is cheaper than most alternative fuels, they cannot raise the capital needed to make a switch. High and rising interest costs on construction loans and state utility commissions that are not raising electricity rates fast enough are the culprits, according to Mr. Schenck. What capital utilities have raised is, for the most part, already dedicated to new power plants that have been on the drawing boards for years.

Still another major obstacle to burning more coal is concern that it will increase pollution, particularly "acid rain." Scientific research has shown that burning coal, which releases gases such as sulfur dioxide and nitrogen dioxide into the atmosphere, is a major source of acid rain, which can damage lakes, rivers, and farmland.

Acid rain, along with a host of other environmental issues related to burning and mining coal, is expected to be addressed when the Clean Air Act comes up for reauthorization in Congress next year.

Robert Price, executive vice-president of the National Coal Association, believes that coal conversion might actually accelerate now that the Carter administration goal of seeking federal grants and loans has failed.

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