New legislation designed to jump start CTL production

Rep. Devin Nunes has introduced new legislation designed to expedite the production of clean, domestic coal-to-liquid (CTL) transportation fuels by providing a new risk management tool meant to shield CTL producers from dramatic price swings in the oil market.

Introduced on August 1, the “Coal-to-Liquid Fuel Marketing Act of 2007” would enable the secretary of the treasury to auction “put contracts” for CTL fuels. Under the bill, CTL producers would be permitted to purchase “put contracts” through bids in the open market. The contacts would include a fair market price, known as a strike price, at which the Government would maintain a standing offer to purchase CTL fuels. If prices fall below the strike price contained in the contract, the CTL producer could chose to either sell the fuel to the government at the strike price or accept payment from the government for the difference between the strike price and actual market price.

The risk management tool will raise revenues for the federal government, based on the auction of the “put contacts,” and will provide additional security to investors, as CTL fuel will be protected from any potential price manipulation by foreign energy cartels looking to end emerging competition.

“Our nation has a 250-year supply of coal,” Nunes said. “If we use this resource, we could reduce our dependence on foreign oil by 2.6 Mbbl/d. This would completely eliminate our dependence on Middle Eastern oil and would vastly improve our national security.”