Global Consumption is Surging

China is now consuming nearly as much coal as the rest of the world combined, and other emerging markets, ranging from India and Indonesia to Brazil, are turning to coal to bring tens of millions out of poverty and drive economic growth. Europe too is burning more coal to balance energy costs and improve energy security.

And yet, the U.S., the nation with the world’s largest coal reserves and energy research capability, is casting aside the domestic use of coal for power generation. That is nonsensical, given the global need for more efficient coal-burning technologies.

Coal-generated electricity in the U.S. has fallen in recent years due to an influx of cheap natural gas, the product of our shale-gas revolution, and a wave of new environmental regulations. While President Obama professes to support and all-of-the-above energy strategy, the U.S. Environmental Protection Agency (EPA), under his direction, is crafting one regulation after another to phase out our existing coal fleet and make it virtually impossible to build new coal plants.

EPA’s latest rule, aimed at greenhouse gas emissions, would require all new coal plants to equipped with carbon capture and storage (CCS) technology. But CCS technology, for all practical purposes does not exist.

There is not one coal plant in the U.S. using CCS and only a handful of demonstration projects under development, not one of which is at commercial scale [SEE: AEP’s unsuccessful attempt in St. Albans, WV.]

Simply put, EPA’s new standard for coal plants cannot be met with technology that is currently available.

Driving EPA’s anti-coal agenda is the belief that coal is a fuel of the past and that if the U.S. is to tackle climate change, coal generation must be phased out. But that approach totally ignores coal’s global appeal.

The U.S. cannot stop climate change by itself. We are not even the world’s largest carbon emitter. Abandoning our largest source of electricity in the misplaced hope the rest of the world might stop using coal is nonsensical. Unilaterally turning away from coal undermine America’s economic competiveness.

Instead of taking the wrong path, let’s adopt an energy policy that helps drive economic growth, reflecting the reality that coal is more important than ever globally. Rather than phasing out the use of coal in this country, we should be leading the world in research, development and demonstration of clean-coal technology. Technology, not overzealous regulation, is the key to reducing our carbon footprint.

The Paris-based International Energy Agency has pegged the development and adoption of clean-coal technology, particularly CCs, as just as important as the growth of renewable power in reducing global emissions. The numbers suggest why that is. Wind and solar power generate less than (5) five percent of the nation’s electricity while coal provides 40 percent of the nation’s power. In China, coal meets 80 percent of that country’s growing electricity demand. Many other countries with fast-growing economies, including Indonesia, India and Brazil, also rely heavily on coal.

Let’s move forward with an honest all-of-the-above energy strategy. We can develop advanced energy technologies in unison. Such a strategy, by definition, should not mean picking one technology and casting aside another.

The Obama administration’s anti-coal agenda threatens hundreds of thousands of jobs, state economies and tens of millions of people who require affordable energy. Bad policy, void of any pragmatism, is not what the country needs.

DODD-FRANK COMMENTARY

President Obama is urging Congress to approve trade agreements that would put people back to work and energize our nation’s economy. But he also wants to clamp additional taxes on the oil and natural gas industry, partly by eliminating a tax credit for royalties paid to foreign governments. That could send billions of dollars and thousands of jobs to foreign competitors who don’t face similar taxes. Now, the Securities and Exchange Commission (SEC) is on the verge of implementing a provision of the Dodd-Frank financial reform law that would require any oil and natural gas company or hard-rock mineral company to disclose in its annual report payments to the United States and a foreign government. Such payments include taxes, royalties, license fees, production entitlements and bonuses. In other words, the provision covers just about any payments that a company makes in foreign trade. Together, more taxes and government regulations will undercut the U.S. oil and gas industry, one of the few sectors recording major job gains. Experience shows that eliminating tax credits would encourage some companies to outsource their work to countries with lower taxes, and it could also lead to higher prices for gasoline, diesel and other petroleum products. The SEC is scheduled to approve the disclosure provision on 22 August. It requires oil and gas and hard-rock mineral companies to make public a summary of expenses by country and possibly by project. The statement of financial payments must be submitted to the SEC and published in a company’s annual report where it can be accessed by foreign competitors as well as the public at large. This is information that until now was considered confidential and proprietary. The purpose of the disclosure provision is to increase transparency in the oil and gas and hard-rock mining industries. But in practice, it will subject U.S. to a lot of red tape and costly compliance obligations. Never mind that these companies are already subject to the Foreign Corrupt Practices Act that prohibits payments to foreign officials for the purpose of obtaining or retaining business. U.S. energy companies face tough competition from foreign national oil companies that don’t have to comply with such disclosure requirements, and that could put them at a disadvantage when bidding for contracts. State-owned companies such as Saudi Aramco, Russia’s Gazprom and the China National Petroleum Company control 80% of the world’s oil resources. Non-SEC registered companies would have a great advantage in forming joint ventures with national companies that have ready access to capital. The big question is whether the SEC will require disclosure by project. That would harm companies large and small, jeopardizing thousands of jobs, while contributing little information that isn’t already made public under other disclosure requirements. It is bad enough for a government regulation to be inordinately expensive or to be ineffective-it certainly should not be both.

Is it possible that we won’t have enough power plants to meet growing demand for electricity? Not without absurd compromises. Not without giving into the anti-coal environmental zealots so that whatever it is we try
To do jeopardizes electric-power reliability. Or are we just going to depend on wind and solar energy to satisfy our electricity needs?

Take the U.S. Environmental Protection Agency’s proposal to establish a maximum achievable control technology standard for mercury and other hazardous air emissions, which was issued in March. It would require utilities to install equipment that is prohibitively expensive or, in some cases, doesn’t yet exist. Utilities would have three years to comply with the standard. But that is not enough time to design and install the necessary emission controls. According to a study done for the utility industry, the combination of this rule and another aimed at reducing nitrogen and sulfur dioxide emissions by 70 per cent by 2025 could force the retirement of as many as 140 coal plants, greatly increasing the cost of electricity.

Do electricity ratepayers have any rights? Of course. But it is up to the EPA to balance those rights against the public-health benefits from curtailing emissions. And it is also EPA’s responsibility before issuing proposed regulations to work together with the Federal Energy Regulatory Commission (FERC), which is charged by law with ensuring generation reliability, to make certain the constraints do not jeopardize electric-power production. But that is not being done.

In letters to Senator Lisa Murkowski (R-Alaska) of the Committee on Energy and Natural Resources,
FERC Chairman Jon Wellinghoff and FERC commissioners clearly stated that no formal assessment has been made of the impact the air-quality regulations would have on the nation’s ability to meet the electricity needs of American households and businesses.

Senator Murkowski said that this is a serious breach of regulatory responsibility. Some energy officials believe the regulatory pendulum has swung too far toward EPA and that the Agency is riding ruthlessly over the public interest.

With the nation’s economy stagnating and 14 million Americans out of work, we can ill-afford regulatory actions that would make matters even worse. Yet EPA is pursuing a no-holds-barred regulatory strategy aimed mainly at coal plants that supply more than half of the nation’s electricity. Those tempted to think that natural gas can replace coal in electricity generation without an adverse effect on the economy should think again. Though natural gas is cheap now, you can be sure that its price will rise sharply as the use of gas increases and the U. S. uses liquefied natural gas (LNG) terminals to export gas to Asian markets. Several LNG terminals are being modified for precisely that purpose.

We can look back to the 1980’s when natural gas prices rose precipitously and those gas companies that had contracted to supply low cost fuel to both electric generation and the chemicals/plastics industry had to declare bankruptcy to discharge those contracts. Natural gas has proven that is too subject to volatility to rely upon it for long-term needs such electric generation and the operation of chemical/plastic facilities. Natural gas is, by its very nature, a fuel that is better suited for short term uses. Reliance upon natural gas for long-term needs has been shown to be problematic.

So it is fair to ask if EPA has calculated the cumulative cost of stricter air-quality standards. A half-dozen major regulations are in the hopper. For instance, the EPA is preparing to regulate carbon dioxide and other greenhouse gas emissions from power plants and large industries. It is planning to issue tougher limits on smog-causing ozone, an action that the agency itself estimates could cost the economy as much as $90 billion annually by 2020. It is considering regulating coal ash as a hazardous waste, would deprive the construction industry of a valuable resource used in road construction and cost tens of thousands of jobs. And it is preparing to mandate the use of expensive cooling towers at new and existing power plants, which would cost an estimated $300 million per coal fired power plant.

Clean air is a worthwhile goal. But electric utilities have made great strides since passage of the landmark Clean Air Act of 1970. Though the use of coal has tripled since I graduated from the WV School of Mines, power plant emissions are down by more than 70%. Acid rain is no longer the issue that it once was. And emissions of nitrogen oxides have been curbed.

The next time a factory in Virginia closes down due to high energy costs; ask yourself if you would have forced utilities to curtail the use of coal. Then maybe it will be time for the pendulum to start swinging back.