Obama Faces Coal Backlash

While the mainstream press focuses on Monday's symbolic "no confidence" vote over Attorney General Alberto Gonzales, the Senate also took up the energy bill, legislation with far-reaching implications for investors and at least one presidential candidate.

Fuel-efficiency standards for automakers, and renewable energy requirements for utilities will dominate the headlines, but amendments promoting coal-based fuels fall squarely into the "politics makes strange bedfellows" department.

It turns out Democratic presidential aspirant and Illinois Sen. Barack Obama has more in common with the U.S. Air Force than the Natural Resources Defense Council or Moveon.org when it comes to solving America's dependence on foreign oil.

Both Obama and the Air Force have determined the path to energy independence runs through the coal mines of Appalachia, Wyoming and, yes, Illinois. This unlikely pairing has both political and investing implications for those gaming the possibility of an Obama presidency.

Coal's political appeal is clear: There are more than 250 billion tons of recoverable coal reserves in the U.S., the equivalent of about 800 billion barrels of oil, or more than three times Saudi Arabia's proven oil reserves, according to the National Mining Association.

Thus, while the popular press, celebrities and a certain former vice president focus on "greenhouse gases," the energy bill is likely to contemplate recent legislative proposals such as taxpayer-funded loan guarantees to build coal-to-liquid plants.

Spearheading current legislation in the House are Rick Boucher (D., Va.) and Geoff Davis (R., Ky.), while Senate sponsorship is coming from Republican Jim Bunning of Kentucky, who co-sponsored the Coal-to-Liquid Fuel Promotion Act of 2007 with Obama in January.

Illinois ranks as the nation's seventh-leading coal producer, according to the Department of Energy. Nearly 32 million tons of Illinois coal were mined in 2005, generating nearly $1 billion in gross revenue, according to the Illinois Department of Commerce.

Such statistics help explain Obama's support for coal-based initiatives. But amid a January backlash from environmentally conscious Democratic primary voters, Obama largely ceded leadership on the issue to Bunning.

In May, Bunning and the late Craig Thomas (R., Wyo.) proposed to diminish the role of ethanol in the energy bill and mandate the use of 21 billion gallons of coal-based fuels by 2022. The amendment was defeated in the Senate Energy and Natural Resources Committee by a 12-11 vote on party lines. (Obama is not a committee member.)

Coal Gets Greens Red in the Face

Environmental groups oppose coal-to-liquids because nearly two times the carbon dioxide is emitted in the production of coal-to-liquid, or CTL, vs. traditional petroleum fuels.

"In a nutshell, CTL is worse than conventional fuels," says Elizabeth Martin Perera, climate policy specialist at the Natural Resources Defense Council, a not-for-profit organization. "CTL has higher life-cycle CO2 emissions than conventional fuels, even with carbon capture and storage."

Aaron Task sat down with TSC TV correspondent Farnoosh Torabi to discuss this story in our TV studio.