Murray vs. Musk: Coal CEO Calls Tesla a “Fraud,” Doesn’t Mention Subsidies for Failing Coal

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On Monday, Robert Murray, President and CEO of coal giant Murray Energy Corporation, called Tesla Motors a “fraud” on CNBC, going on to bash the company for failing to yet turn a profit despite subsidies.

“Tesla is a fraud. [It] has gotten $2 billion from the taxpayer and has not made a penny yet in cash flow. Here again, it’s subsidies,” Murray claimed.

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Tesla founder Elon Musk fired back quickly on Twitter, writing that Tesla gets “pennies” on the dollar in subsidies compared with the coal industry, and that climate science denial is the “real fraud.”

So let’s unpack this unruly exchange a little bit.

Distortion #1: EV subsidies pale in comparison to coal subsidies.

First off, the only direct subsidy that Tesla has received was a $465 million guaranteed loan from the Department of Energy. Which, for the record, the company paid off in full, nine years ahead of schedule, effectively earning the government and American taxpayers millions.

But Murray is technically referring to the indirect subsidies that Tesla benefits from in the form of $7,500 tax credits issued to the purchaser of electric vehicles. So, first, it’s not Tesla that is receiving the $2 billion, but rather the American car buyers that choose to buy a Tesla, or any other electric vehicle. Technically, then, it’s inaccurate to say that Tesla has “gotten $2 billion” from the taxpayer.

But, sure, let’s grant that the company benefits from the increased demand encouraged by the consumer-facing subsidies. So how do those $2 billion in consumer-facing subsidies stack up to what the coal industry receives?

Coal’s very own tax breaks. The coal industry—not the taxpayers that buy the electricity generated by coal, mind you—benefits from billions of dollars of special tax policy loopholes. As ThinkProgress reported, in 2012, the Treasury Department estimated that eliminating just three tax preferences for coal would save taxpayers $2.6 billion between 2013–2022:

  • Expensing of exploration and development costs: Under current law, coal companies can expense costs incurred by locating coal ore deposits.
  • Percentage Depletion for Hard Mineral Fossil Fuels: As the tax code currently stands, coal companies can claim a tax deduction to cover the costs of investments in mines.
  • Capital Gains Treatment for Royalties: Some coal royalties for private owners are treated as long-term capital gains, so they are taxed at a lower rate.

Coal’s cheap ride on the rails: Coal companies benefit directly from subsidized transportation along America’s railways. ThinkProgress laid out the numbers: “As the Association of American Railroads describes, ‘In 2009, coal accounted for 47 percent of tonnage and 25 percent of revenue for U.S. railroads.’ U.S. railroads get loans and loan guarantees from government agencies like the Department of Transportation/Federal Railroad Administration and have received numerous tax incentives for investments in new infrastructure.”

Below market leases on America’s public lands: Most of Murray’s mining operations are in the Northern Appalachia and the Illinois Basin, and most of the mines are on private lands. But at least one, the Lila Canyon mine in Utah is on publicly-owned lands, and so Murray takes advantage of the federal coal leasing process for that mine. It’s been shown time and time again that the federal coal leasing program is tantamount to a massive subsidy to coal companies, which are routinely buying coal owned by American taxpayers for well below market value.

Finally, it’s worth noting that none of these coal-supporting subsidy figures include the costs that are borne by taxpayers related to climate damage, or the local environmental and health impacts of the mining, transportation, combustion, and disposal of coal.

In a 2011 study, Dr. Paul Epstein of Harvard Medical School’s Center for Health and the Global Environment attempted to quantify how harmful coal is in terms of local impacts alone:

Our comprehensive review finds that the best estimate for the total economically quantifiable costs, based on a conservative weighting of many of the study findings, amount to some $345.3 billion, adding close to 17.8¢/kWh of electricity generated from coal…. These and the more difficult to quantify externalities are borne by the general public.

Distortion #2: Murray bashes Musk for not earning a profit, yet coal industry is going bankrupt.

Despite these enormous subsidies, dozens of coal companies are failing, and Murray knows it. He acknowledged as much publicly at a talk he gave at a dinner meeting of the Tug Valley Mining Institute in Utah:

There are currently 52 bankrupt coal companies in the United States. This year, the prestigious McKinsey and Company issued a study showing that, as whole [sic], the United States coal industry is not only bankrupt, but that it also lacks $45 billion in the funds needed to cover its debt and employee-related and reclamation liabilities.

Even with all those billions in subsidies, 52 coal companies have gone bankrupt, and the industry as a whole is worse than bankrupt, owing $45 billion it doesn’t have for its current debts and liabilities. Murray called Tesla a “fraud” for far less dire a financial situation.

As for Murray Energy’s own finances, Moody’s has downgraded its investment rating for Murray Energy Corporation three times over the past year, most recently in February when the investment service wrote that the downgrade “reflects our expectation that the company’s leverage metrics and cash flow generation will continue to be under stress due to the headwinds facing the coal industry.”

Despite all the government support that Murray Energy Corporation receives through subsidies like special tax treatments, still the company’s cash flow is under stress.

Bonus Distortion: Murray says America’s coal plants don’t cause global warming

Now this isn’t related to Musk or Tesla or subsidies, but for the heck of it, and just so you are clear where Murray stands with respect to climate change, he wrapped up the segment with this remarkable statement:

“And by the way you could close down every coal fired power plant in the United States today and you would not affect the temperature of the earth at all. Not at all.”

Okay then.

*Update October 14: Bob Murray sent DeSmog the following note about this article, and pointed to this CNBC article: Musk fires back at coal CEO who called Tesla a ‘fraud’ with alternate figures on fossil fuel and renewable energy subsidies.

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Screen capture of letter received by DeSmog from Bob Murray.
Image credit: Screen capture from CNBC video.