No corporation really ever wants to hear that Don Barlett and James Steele are on the phone and want some answers to "just a few questions."
The two-time Pulitzer Prize-winning investigative journalists wrote a book in the early 1990s that's become even more relevant today - called America: What Went Wrong? The duo returned in 2000 with another book, Great American Tax Dodge: How Spiraling Fraud and Avoidance Are Killing Fairness, Destroying the Income Tax, and Costing You.
Which brings us to the Oct. 13 and latest issue of Time magazine, in which reporters Barlett and Steele again tackle misguided government policy and corporate gain at taxpayer expense. The magazine's "special report" is headlined: The Great Energy Scam: How a plan to cut oil imports turned into a corporate giveaway.
Why care? Because the corporations zinged in the article include North Carolina's Progress Energy and Tampa's TECO Energy, the two dominant power companies in the Tampa Bay and Central Florida region. The two companies happen to be prominent players in a surreal piece of the coal business called synthetic fuels, or "synfuels."
I won't dwell on the sordid details of synfuels - just read the Time story on your own. St. Petersburg Times readers may recall at least some of the synfuels controversy from stories in recent years written by this newspaper's business reporters. But the depth of the Barlett-Steele piece - appearing for the first time in a mass consumer news magazine - elevates the synfuels debate to a new level.
The synfuels business was born in the wake of the energy crises of the 1970s. To ease U.S. dependence on foreign oil, Congress passed a tax break to help establish a synthetic-fuels industry. The concept? Turn cheap domestic coal into synthetic natural gas to heat homes and run factories, or into synthetic crude oil to make gasoline and other petroleum products.
The plan never took off. The law sat untouched until somebody realized there were dormant tax credits to be grabbed. By taking regular coal and spray-coating it with a cheap tar or a resin, the coal could be transformed into a so-called synfuel.
To qualify for the tax credits - subsidies ultimately paid for by U.S. taxpayers - the makers of synfuels don't have to prove that they are making a better kind of coal. Some sleight-of-hand synfuels players do so little to "transform" their coal, critics call it spray and pray.
The point? Synfuels are now a corrupted tax break and a pure windfall for their investors. And that, argue Barlett and Steele - along with other critics - is the great energy scam. Estimated cost to taxpayers: at least $4-billion, so far. Closer to $10-billion when this tax credit runs its course in 2007.
"Why America is stuck with this wasteful program is worth holding up to the light because it demonstrates the failures of U.S. energy policy at a time when prices are rising again and America's dependence on foreign oil is once more creating economic pain," the Time reporters state.
Barlett and Steele say Progress Energy, based in Raleigh and the owner of Progress Energy Florida, is among a half-dozen companies that declined to let Time tour their synfuel operations (mostly in West Virginia and surrounding coal states). The article points out that through 2002, Progress Energy alone racked up a hefty $897-million in tax credits from the program.
Progress Energy told Time reporters they could not tour the company synfuel operations because the plants are involved in a lengthy IRS audit, says power company spokesman Keith Poston. He called the Time piece "hard hitting" but breaking little new ground on a topic that has been controversial for years.
The focus of the Time story is not whether Progress Energy did anything wrong - it didn't, Poston says - but whether it makes for good federal policy to offer tax credits for a certain coal treatment.
To be fair, Progress Energy inherited the synfuels business - and its shot at rich tax credits - when it acquired St. Petersburg's Florida Progress Corp. several years ago. Florida Progress had purchased several synfuel plants in the late 1990s and accelerated production to take greater advantage of the federal tax credits.
Progress Energy chief financial officer Peter Scott doubts his company would have entered the synfuels business on its own. By acquiring a Florida company already so involved in it, Progress Energy was obligated like any business to maximize the return on synfuels to its shareholders.
The trick, of course, is that the bloating tax credit is mostly found money. And addictive to the bottom line.
TECO, the parent of Tampa Electric, also plays the synfuels game. After TECO said it sold half of its synfuel facilities for $50-million, Time asked who bought it. TECO told reporters that terms of the sale required the purchaser's name be kept confidential.
Before it sold out to Progress Energy, Florida Progress got into synfuels through a subsidiary called Electric Fuels Corp. The unit acquired four synfuels plants in 1999 from a business called Earthco.
Earthco, Time reports, was a "a mysterious Las Vegas enterprise" whose founder was Jerry W. Slusser. In 1998, a Commodity Futures Trading Commission judge found that Slusser and two of his other companies "pilfered millions of dollars from customers using the commodities market to carry out their scheme."
Synfuels. It's a sham industry whose tax credits need to end soon. And a business area corporations would be better off exiting early.
