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Seeing the bright side of an IRS inquiry

By SCOTT BARANCIK
Published September 8, 2003

An IRS inquiry into whether synfuel tax credits are allowable is putting many utilities on alert, including Progress Energy and TECO Energy.

Both companies have been permitted to shave hundreds of millions of dollars off their federal tax bills in recent years as a reward for making coal-based and other synthetic fuels, an alternative energy source. Critics say the synfuel process makes only minor improvements to coal and isn't worth the tax dollars.

Last week, another local company acknowledged being caught up in the fuel flap, if only tangentially: Walter Industries Inc.

Walter doesn't make synfuel. But unbeknownst to shareholders, its coal-mining subsidiary has supplied coal for years to Alabama Fuel Products LLC, a maker of synfuel.

And now that Alabama Fuel has come under IRS scrutiny and reportedly suspended its synfuel operations, Walter may be looking for a new customer.

Chief executive Don DeFosset isn't concerned. During a conference call last week, he put a positive spin on the situation.

"Ultimately, we believe the curtailment of the synfuel subsidy will be beneficial to the coal industry," he said, "and will result in more sound pricing for the future."

[Last modified September 8, 2003, 01:46:45]

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