Looking for The ‘War On Coal’
[imgbelt img=SignWaronCoal.jpeg]Republicans claim President Obama is waging a “war on coal.” The facts of coal and coal production are so much more complicated.
The Brattle Group’s Oct. 1 study, updating a similar paper released in 2010, analyzed coal plant retirements under two scenarios of future EPA rules—strict and lenient. All other factors were kept constant.
As in its previous report, the Brattle Group found that EPA regulations will have some effect on coal’s future: Operators would retire 77 gigawatts’ worth of coal by 2017 under strict regulations and would shutter 59 gigawatts under more lax requirements. All would be older, inefficient facilities—many between 40 and 50 years old—that have long been slated for closure.
But the report also found something new—that retirements will grow by about 25 gigawatts compared to 2010 projections. “[T]hat change is primarily due to changing market conditions, not environmental rule revisions, which have trended towards more lenient requirements and schedules,” it said.
The reason is simple. Whereas sinking natural gas prices have had an immediate and merciless impact on the coal market, two key EPA pollution rules—the Cross-State Air Pollution Rule and the the Boiler Maximum Achievable Control Technology (MACT) Rule — are stuck in legal and regulatory limbo, and their impact on the industry has actually lessened.
That finding punches a hole in the simple narrative that new environmental regulations are driving the decline of U.S. coal.
“Natural gas often sets the price of electricity, and wholesale prices are down,” said Christopher Van Atten, a senior vice president at M.J. Bradley & Associates who has studied coal plant shutdowns. “That reduces the profitability of a coal-fired generation facility and makes it cheaper to run on natural gas.”
In July 2011, the EPA set limits on sulfur dioxide and nitrogen oxide emissions under its cross-state pollution rule, but an industry challenge led to a federal court striking down the regulations in August. The EPA has asked for the case to be reheard, and environmental groups are working on appeals or tweaks to the law so it could win wider support.
Also last year, the Obama administration finalized the MACT rule that requires emissions controls for hazardous materials spewed by coal plants. This summer, the EPA altered those standards to apply only to new facilities. They’re set to be enforced by 2016, but the U.S. Chamber of Commerce and industry groups have filed a petition in a federal appeals court to block them. Other rules, including those on greenhouse gas emissions and on fine particulate matter, would also affect the industry, though they have drawn less attention.
While the rules are being challenged, U.S. production of natural gas has boomed thanks to the process of fracking, which has dramatically increased the size of recoverable reserves.
Last month natural gas prices averaged $2.85 per million British thermal units (mmBtu), down more than 25 percent compared to September of last year. By contrast, coal prices have stayed steady at roughly $3 per mmBtu, according to the U.S. Energy Information Administration (EIA).
The EIA estimates that 60 percent of new power between 2011 and 2035 will come from natural gas plants because of the fuel’s low costs.
The Brattle Group report also examined a lower natural gas price scenario. It found that if natural gas prices fell by $1 by 2017, coal shutdowns would rise to 115 gigawatts by 2017, even in a lenient regulatory scenario. By contrast, an increase of $1 would keep more plants online, with retirements totaling just 21 gigawatts.
In short, it’s complicated, said Celebi, the Brattle Group study co-author.
“If there were no EPA regulations forcing these coal units to install additional pollution control mechanisms, the retirements would be much fewer—even with the current low gas prices,” he said in an interview. “But if there were just regulations and gas prices were high, I don’t think you’d see as many.”
Another factor working against the coal industry, according to Celebi and other analysts, is lower electricity demand due to the economic recession and recent mild winters.
Already, operators have announced plans to shutter 30 gigawatts of coal plants, about 10 percent of the nation’s capacity, by 2016.
M.J. Bradley’s Van Atten said that based on discussions with industry officials and analysts, many of those closures wouldn’t be reversed even if EPA regulations vanished tomorrow. “There are some clear situations where the retirement of a plant is driven by regulations or you can tease out exactly what the cause was,” he said. “But in many cases it’s a combination of these factors.”
A July report by the Bipartisan Policy Center, a nonpartisan think tank, tried to tease out the exact impact of EPA policy on coal’s decline. It estimated that about 30 percent of projected coal retirements of 56 gigawatts by 2016 would be tied to pollution rules. The rest, it found, would be due to low natural gas prices, shrinking demand for power and the rising share of renewable energy in electricity generation.
Coal Caught in Election-Year Politics
The coal industry’s future has emerged as a major storyline in this year’s election—not a surprising development given the size of the industry and its prominence in battleground states like Ohio, West Virginia and Kentucky. Romney in September released a trio of ads centered on Obama’s alleged “war on coal.” He has also used coal factories as rally sites. At a Saturday appearance in Portsmouth, Ohio, he declared, “We have a lot of coal, we’re going to use it.”
Lisa Camooso Miller, a spokesperson for the American Coalition for Clean Coal Electricity, an industry lobbying arm, told InsideClimate News it’s “not an accident” that Romney is painting Obama as an enemy of coal, because industry polls suggest the issue could turn moderate Democrats against the president.
ACCCE recently released polling data that found that 59 percent of voters in Ohio, Pennsylvania and Virginia support the use of coal, with that number rising to 68 percent among so-called “working class Democrats” and Democrat-leaning independent voters. When told that EPA regulations could lead to major job losses or an increase in energy prices, the number of coal-supporting respondents rose to 70 percent.
Obama also has been heavily campaigning in coal states. Earlier this month he released an ad responding to Romney’s attacks, which includes a 2003 clip of Romney as Massachusetts governor decrying a coal plant. Obama’s “all-of-the-above” energy approach includes developing clean coal technology within 10 years.
The campaign rhetoric has effectively made the EPA a “scapegoat,” said David Marshall, an attorney with the Clean Air Task Force, a nonprofit group working to reduce air pollution.
“The coal industry has a lot of problems, and blaming everything on EPA is an extremely simplistic and opportunistic approach,” said Marshall, who was part of the legal team representing a coalition of environmental groups that defended the cross-state pollution rule this summer.
Marshall and other environmentalists say the EPA is simply enforcing pollution rules that should have been in place long ago, and that the health and environmental benefits would outweigh the costs of compliance—a point that has disappeared from the national debate.
The EPA has estimated that the MACT rule could cost the industry $9.6 billion a year by 2015, although industry estimates put the figure at $10.4 billion. The cross-state pollution rule could cost $800 million a year during that same time period.
The agency has also said that the sulfur dioxide and nitrogen oxide reductions from power plants could save as much as $280 billion in health costs a year, while preventing 34,000 annual deaths. The MACT rule, meanwhile, would create some $90 billion in annual health and economic benefits from reduced pollution.
“When you’re looking at any of these EPA regulations that the coal industry or Romney are pointing to, they’re actually extremely cost effective,” Marshall said.
“You have to keep in mind all of these external costs, like the health impact and environmental costs. If you look at this in a holistic way, it’s clear that no matter how you slice it there are benefits.”
Republished with permission of InsideClimate News, a non-profit, non-partisan news organization that covers energy and climate change—plus the territory in between where law, policy and public opinion are shaped.