U.S. Energy Innovation (Part II: Coal Issues)

By Mary Hutzler -- February 7, 2013

“The technically recoverable coal resources in the United States are unsurpassed and total 50 percent of the world’s coal reserves. At 486 billion short tons, it can supply our country’s electricity demand for coal for almost 500 years at current usage rates.”

Coal produced on federal lands has decreased less than that of oil and natural gas. Coal production on federal and Indian lands peaked at 509 million short tons in fiscal year 2008 and has been decreasing slightly each year since then. In fiscal year 2011, coal sales from production on federal and Indian lands reached 470 million short tons, a 2-percent decrease from fiscal year 2010 and an 8-percent decrease since the peak in fiscal year 2008. [1]

At today’s prices, the value of the government’s estimated coal resources in the lower 48 states is $22.5 trillion for a total fossil fuel value on federal lands of $150.5 trillion. Most of the coal resources in Alaska are deemed to be federally owned and are estimated to be 60 percent higher than those in the entire lower-48 states but are not included in these estimates.

Over 90 percent of coal in the United States is used for electricity generation. Until recently, coal had been used to produce 50 percent of the nation’s electricity, but is losing market share to natural gas and renewable energy as natural gas prices drop, renewable energy is mandated and subsidized, and new environmental regulations take effect.

EPA vs. Improving Coal

The Environmental Protection Agency (EPA) has produced regulations that essentially ban new coal plants and make its continued use in existing plants extremely costly. As a result, coal produced only 42 percent of our electricity in 2011 [2] and is expected to have produced only 38 percent in 2012. [3]

One of the biggest stated concerns about coal is air pollution. Coal produces more emissions than natural gas when burned. However, due to actions taken by industry and technological advances, our air quality is improving and new coal plants are cleaner than ever before.

Pollution-control technologies such as flue gas desulfurization, selective catalytic reducers, fabric filters, and dry sorbent injection have greatly reduced coal plant emissions. According to the National Energy Technology Laboratory (NETL), for example, a new pulverized-coal plant (operating at lower, “subcritical” temperatures and pressures) reduces the emission of nitrogen oxides (NOx) by 86 percent, sulfur dioxide (SO₂) by 98 percent, and particulate matter by 99.8 percent, as compared with a similar plant having no pollution controls. [4]

These advances in technology have enabled large improvements in air quality. Since 1970, the total emissions of the six criteria pollutants have declined by 68 percent, even though energy consumption has increased by 45 percent, vehicle miles traveled have increased by 167 percent, and the economy has grown by 212 percent. [5] (The “criteria pollutants” are carbon monoxide, lead, sulfur dioxide, nitrogen oxides, ground-level ozone, and particulate matter.) The following chart from EPA shows the increase in economic measures compared to the decrease in pollution emissions. [6]

[CLICK ON IMAGE FOR HIGHER RESOLUTION]

As technology continues to advance, coal-fired power plants will become even cleaner and air quality will continue to improve. In fact, as the New York Times has reported, China is actually constructing some coal plants that are cleaner than those allowed to be built in the United States. [7] An irony of our current regulatory policy may be that China will ultimately become the world’s supplier of the most advanced clean coal plants, despite the U.S. coal resource base which dwarfs their own.

Political Attacks

Although coal produces relatively inexpensive energy, many activist groups adamantly oppose coal mining and coal-fired power plants. The Sierra Club, for example, has worked particularly hard to stop coal-fired power plants. They claim that they have prevented 150 new coal-fired power plants from being built. [8]

Coal mines, especially in Appalachia, are coming under increasing fire from environmental interest groups and the Obama administration. The EPA revoked a clean water permit that the Army Corps of Engineers had previously awarded, despite the fact that, according to the Army Corps, the permit complies with West Virginia state water law and the federal Clean Water Act. [9]

The problem, according to EPA, is that granting the permit would lead to changes in the conductivity (or salinity) of the water that might be detrimental to mayflies, stoneflies, and caddis flies. [10] In other words, EPA denied the permit, not because of impacts on human health, but potential impacts on mayflies. Because EPA implemented this conductivity guidance without going through the proper regulatory process, a federal district court threw out EPA’s conductivity standards.

The EPA has promulgated new regulations that target mercury from coal-fired power plants (the Mercury and Air Toxic Standards), which many call Utility MACT because the rule requires “Maximum Achievable Control Technology” for mercury at coal-fired power plants. [11]

These technologies must be installed over a tight 3-year period between 2012 and 2015, raising the cost of generating power from existing coal-fired plants where the economics make sense to install the technology, or forcing those plants to retire or to convert to natural gas. The National Economic Research Associates found compliance costs to be $21 billion per year and lost jobs to amount to 183,000 per year. Because the increased costs will be passed to consumers through higher electricity rates, businesses will be forced to reduce jobs as well. Studies project that retail electricity prices will increase between 10 and 20 percent in most of the country and over 20 percent in the coal-dependent states in the Midwest. [12]

Coal Power Plant Capacity Changes

EIA announced that plant owners and operators expect to retire about 27 gigawatts of coal-fired capacity by 2016 — four times the 6.5 gigawatts of capacity retired between 2007 and 2011 mostly because of the new regulations imposed by the EPA.

In 2012, electric generators are expected to retire 9 gigawatts of coal-fired capacity, the largest amount of retirements in a single year in America’s history. The 27 gigawatts of retiring capacity is 8.5 percent of total coal-fired capacity (318 gigawatts). The 2012 record retirements are expected to be exceeded in 2015 when nearly 10 gigawatts of coal-fired capacity are expected to retire. [13] Most of the units retiring are located in the Mid-Atlantic, Ohio River Valley, and Southeastern United States as shown in the map below.

 [CLICK ON IMAGE FOR HIGHER RESOLUTION]

[CLICK ON IMAGE FOR HIGHER RESOLUTION]

EIA’s numbers are based on current utility expectations. The Edison Electric Institute expects a larger number of forced retirements—about 48 gigawatts of coal units at 231 plants—between 2010 and 2022, or about 15 percent of the coal fleet. [14]

Further, pending greenhouse gas regulations will require all new coal-fired plants to reduce their greenhouse gas emissions even though there is no cost effective way to do so. This is essentially a ban on new coal-fired plants because the technology does not exist commercially for them to meet natural gas carbon dioxide levels that are required by the EPA regulation.

Many believe that the administration is planning on releasing regulations effectively requiring all coal-fired power plants to reduce their greenhouse gas emissions or close. EPA could decide that the modifications made to plants during the upgrades to comply with utility MACT are significant and treat the existing power plant as a “new source” forcing the plant to almost halve its carbon dioxide emissions or shutter.

Regulatory Rethink Necessary

While EPA has denied this, the agency’s recent anti-coal track record calls for close attention to upcoming regulatory initiatives. There is little reason in the record to believe that the EPA will not attempt to regulate carbon dioxide emissions from existing coal-fired power plants.

Regulating carbon dioxide emissions for coal-fired plants will force mass coal plant retirements, causing unemployment at coal-fired power plants and coal mines. According to a report from the United Mine Workers of America, job losses associated with the closure of EPA-targeted coal units (due to Utility MACT and tighter greenhouse gas standards) could amount to more than 50,000 direct jobs in the coal, utility and rail industries, and an indirect job loss figure exceeding 250,000.

Some have suggested that these closures are mainly due to the low price of natural gas made possible through shale gas discoveries. Regardless, it would be prudent for policy makers and analysts to consider the consequences of removing one of the major three sources of electrical generation from our fuel mix for electricity.

Conclusion

Currently our electrical generation mix is largely coal, natural gas and nuclear power. While natural gas prices are currently low, gas-directed rig activity is also very low, which could have an impact on supplies in the out years. Further, the Wall Street Journal reported on January 29 that pressure is increasing to shutter nuclear power plants. [15]

If the United States decides that it can provide the vast majority of its electricity from natural gas, it must assure that those supplies will not be threatened by government actions, including the federalization of hydraulic fracturing regulation or other attempts to require federal permission to drill natural gas wells. The consequences of skyrocketing electricity prices brought on by bad public policies will only exacerbate the economic ills our nation faces going forward.

Footnotes—————————————————————-

[1] Energy Information Administration, Sales of Fossil Fuels Produced on Federal and Indian Lands, FY 2003 Through FY 2011, March 2012.

[2] Energy Information Administration, Monthly Energy Review.

[3] Energy Information Administration, Short-Term Energy Outlook, January 8, 2012.

[4] Email from J. Kukielka, NETL to Mary Hutzler, Institute for Energy Research, January 9, 2009. See also Institute for Energy Research, The Facts About Air Quality and Coal-Fired Power Plants.

[5] Environmental Protection Agency, Air Quality Trends, January 5, 2012.

[6] Environmental Protection Agency, Air Quality Trends. The specific graphic is available here.

[7] New York Times, China Outpaces U.S. in Cleaner Coal-Fired Plants, May 10, 2009.

[8] Sierra Club, 150 Coal Plants Unplugged.  Also, see U.S. Chamber of Commerce, Project, No Project.

[9] Washington Post, Obama administration cracks down on mountaintop mining, January 13, 2011.

[10] Environmental Protection Agency, Final Determination of the U.S. Environmental Protection Agency Pursuant to § 404(c) of the Clean Water Act Concerning the Spruce No. 1 Mine, Logan County, West Virginia.

[11] Environmental Protection Agency, here.

[12] Washington Times, Chance to block Obama’s war on coal, June 19, 2012.

[13] Energy Information Administration, 27 gigawatts of coal-fired capacity to retire over next five years.

[14] Politico, Who is killing the coal-fired power plant?, December 6, 2011.

[15] Wall Street Journal, Can Gas Undo Nuclear Power?, January 29, 2013.

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Note: This three-part post series (Part I: Expanding “Depletable” Resources yesterday; Part III: Federal Lands Potention on Friday) is taken from testimony presented by Mary J. Hutzler on February 5, 2013, before the Subcommittee on Energy and Power, Committee on Energy and Commerce. The hearing was titled: American Energy Security and Innovation: An Assessment of North America’s Energy Resources. A summary of her remarks is here.