Providing subsidies to companies involved in liquid coal, oil shale and tar sands "threatens drastic increases in heat-trapping global warming pollution and severe impacts on popular habitats across the United States and Western Canada," says a report released in June by the New York-based Natural Resources Defence Council (NRDC).

Driving It Home: Choosing the Right Path for Fueling North America's Transportation Future, examines the tough choices that will have to be made as the world approaches the end of cheap and plentiful conventional oil. The report was co-authored by the Colorado-based Western Resources Advocates (WRA) and the Alberta-based Pembina Institute.

"Common to tar sands, oil shale, and liquid coal is the need for subsidies and incentives to jump-start the capital-intensive industry. In many cases, these initial subsidies turn into entitlements for mature industries that cost taxpayers billions," says the report.

The NRDC uses the tar sands of Alberta as an example. In the mid-1990s, incentives for research and development, as well as favorable tax and royalty systems, were put in place to encourage costly oil production from the tar sands. Yet today "these incentives have remained in place despite the fact that the industry has achieved economic viability," says the report.

The report also warns of energy companies aggressively seeking subsidies in energy legislation currently before the US Congress, including long-term contracts, price guarantees, and special tax treatments. In particular, proponents of liquid coal are "pushing Congress to provide a suite of taxpayer subsidies, including price floors, tax credits and research funds, to build some, if not all, of the nine liquid coal plants currently proposed in the United States."