Obama Turns Cool on Coal

Energy industry observers say Sen. Barack Obama is waffling in his support of coal-based energy alternatives.

Obama's camp denies any switch has occurred, but the notion could have major implications for investors in alternative-energy plays like Syntroleum (SYNM Quote) and Rentech (RTK Quote) -- as well as for Obama's appeal as a presidential candidate.

Obama, a Democrat from coal-rich Illinois, co-sponsored the Coal-to-Liquid Fuel Promotion Act of 2007 with Sen. Jim Bunning (R., Ky.) in January. The measure offers federal loan guarantees to companies building plants to turn coal into jet and diesel fuels, along with tax credits and a Defense Department study of the process. The sponsors billed the act as underwriting a clean domestic source of energy for the next generation.

But many greens charge that the coal-to-liquid process isn't clean enough. Since January, Obama has largely ceded leadership of the issue to Sens. Bunning and James Inhofe (R., Okla). Another prominent backer, Sen. Craig Thomas (R., Wyo.), died this month.

On Thursday, Obama sponsored a Low Carbon Fuel Initiative that was consistent with his goal of reducing carbon emissions -- but notably omitted coal as a possible solution to America's dependence on foreign oil.

"My approach would reduce carbon emissions overall in the transportation fuel pool, but it wouldn't dictate what feedstocks could satisfy the low carbon fuel standard or how many gallons of a particular fuel would have to be produced. Instead, fuels could be mixed and matched to achieve the carbon reduction targets," Obama said on the Senate floor.