$8 Billion is Making its Way From Government Coffers to Fossil Fuel Industries

There is a growing realization of the impact that fossil fuels have on the environment and yet the cleaner energy sources available aren't capable of replacing the "dirty" fuels in use today. That's why the Department of Energy, or DOE, has stepped up with $8 billion to help clean up carbon.

The Pigpen of energy
Coal is by far the dirtiest option in the electricity market. Government emission regulations, however, have led to a nearly 90% decline in regulated emissions from coal plants since 1970, according to coal giant Peabody Energy (NYSE: BTU  ) . And, Peabody is pleased to note that the massive decline in emissions came at the same time that coal use tripled.

Technology advances led to those reductions and will likely lead to even cleaner coal in the future. However, technology doesn't take place in a void. It costs money and takes time. That's where the DOE comes in. It's offering loan guarantees for projects as small as $25 million, with no upper bound.

Some of the new technology that could use support on the coal front is on display in Southern Company's (NYSE: SO  ) Kemper coal facility. That project is making use of coal gasification, combined cycle systems, and headline grabbing carbon capture technology.

The bad news is that the project's completion has been pushed back and it's billions of dollars over budget. Southern was pretty much doomed to this fate because it's blazing a new trail on the technology front. But the company's struggles show just how important it is that the government works with industry to help spur innovation.

Not just coal
But this isn't just about coal. In fact, Peter Davidson, executive director of the DOE loan program office, also mentioned reducing water use in hydraulic fracturing. That touches on a currently hot trend in the oil and gas industry, and one that's of increasing concern.

Fracking involves shoving water, chemicals, and sand under ground to free up trapped oil and natural gas. It's a relatively dirty process that has also helped to change the energy landscape in a good way by making it financially viable for utilities to shift more toward cleaner burning natural gas. However, environmentalists aren't happy with the technique and its use has been banned in some states.

If DOE loans could be used by companies to help clean up the drilling effort behind a cleaner fuel, then everyone would win. Making fracking better is exactly what CARBO Ceramics (NYSE: CRR  ) does. CARBO's CEO Gary Kolstad says the company's goal is to be "the leader in improving production and recovery in frac through stimulated wells." Improved production means less "stuff" has to be pushed underground—including less water. The company's next big technology is called KRYPTOSPHERE, the genesis of which stems from a customer request.

So the company sells high-tech ceramic based materials to make the fracking process more effective. But CARBO also has an environmental business that it's working to grow. One of the company's big successes here is a lining system that it has installed at some 6,000 sites to stop tank corrosion and leakage.

While CARBO may or may not apply for a DOE loan, its efforts show that seemingly small changes can have big impacts. Every technological advance doesn't have to be as large or risky as Southern's Kemper plant.

Cleaning things up
CARBO and Southern are proof that even dirty (and dirtier) fuels can be cleaned up if there's enough support. The president's "all of the above" energy policy is a good tag line, but it really is what's needed. Keep en eye on the technologies that are being tested out today and the ones that get DOE support, there's a huge opportunity in clean energy and in cleaning energy. And don't be surprised when technology helps change the fortunes of "dirty" coal companies like Peabody.


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