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Federal Loans for Coal Plants Clash With Carbon Cuts

Glenn English, chief executive of the National Rural Electric Cooperative Association, said rural areas still need help to meet growing power demands at reasonable costs and that burning coal makes sense. He said per capita income of co-op members and consumers is 15 percent below the national average.

The key to the longevity of the Agriculture Department's programs for rural utilities has been the co-ops' powerful political voice. More than 30,000 members gave an average of $41 last year to the co-op association for political contributions. Given their geographic scope, the co-ops can mobilize letter-writing campaigns across a vast number of states and congressional districts.

Rural utilities often assume broader roles in local economies. One co-op, English said, reopened a gas station that went out of business. Another, he said, bought and kept open a beloved Dairy Queen.

"Sometimes they can take over functions even local government can't," said English, a former Democratic congressman. And that, he said, can help keep people from moving away from places like his home town of Cordell, Okla., where the population, now about 3,000, peaked in the late 1920s.

Although presidents over the years have tried to curtail the rural-electricity lending program, it has survived, proving one of the basic laws of legislative thermodynamics: Creating a government program is easier than killing one.

This year is no exception. In his fiscal 2008 budget, President Bush asked Congress to tighten lending rules for rural co-ops. Reps. Allen Boyd (D-Fla.) and Frank D. Lucas (R-Okla.) are gathering signatures for a letter asking that the low-cost government loans be continued.

English chalks it up to "political gamesmanship." "Congress knows that the president expects them to restore that money so that it doesn't look like he's the big spender," he said. "So Congress will tweak it and get it back to where the president wanted it in the first place."

Among those asking for federal loans:

· The Seminole Electric Cooperative in Tampa is planning a $1.8 billion, 750-megawatt coal plant that would boost the utility's generating capacity by 60 percent. The co-op applied for a $1.4 billion loan. If approved, the interest rate for the heavily indebted co-op, which Standard & Poor's says has less than a month's worth of cash, would be as low as the rates for the most rock-solid corporate bonds.

· A group of rural cooperatives plans to build two, 700-megawatt plants in western Kansas.

· The East Kentucky Power Cooperative -- which is fighting the Justice Department over alleged violations of the Clean Air Act -- has received approval for Rural Utilities Service loans to pay for new coal-fired capacity.

English acknowledged that global warming has shifted the debate. But, he said, any climate change legislation should show leniency toward the rural co-ops. "Rural electric generating cooperatives . . . are in economic situations that make it very hard for them to invest in cutting-edge technologies," he wrote in a letter to the House Energy and Commerce Committee.

English is quick to point out that taxable utilities get tax breaks to encourage wind farms or more-efficient coal plants, and that municipal utilities can sell tax-exempt bonds to raise money cheaply. English wants Congress to give the nonprofit, tax-exempt rural utilities similar incentives, such as no-interest loans.

In March, 10,000 rural-utility executives and spouses attended their annual meeting in Las Vegas. Guests included former CIA director R. James Woolsey Jr., former NFL coach Mike Ditka and singer Charlie Daniels.

English rallied the association's members to fight proposed laws on climate change that might hurt the rural co-ops. Such proposals would mean higher electricity rates, he said, and that would anger voters.

"So are we supposed to tell members of Congress that you've got to be willing to sacrifice your seat for the sake of energy efficiency?" he said. "I don't think the political community wants to take out the knife and commit hara-kiri."

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