By Luke Popovich
If misery loves company, this past month has been good for the coal industry. Whether we mine coal, process minerals, manufacture mining machinery or provide any one of scores of mining services, few concerns unite our voices as much as the concern over regulatory overreach. After revelations that the Justice Department confiscated thousands of Associated Press phone records, even the news media is sharing our concerns and joining the chorus for federal restraint.
Enjoy it now, dear readers. We may wait another 100 years to share the same indignation as The New York Times editorial board.
We’re equally impressed when the heavy impact of regulations on mining is confirmed by non-industry sources, especially unlikely ones with considerable credibility. So much so, we feel obliged to pass the news along. In this case, confirmation comes from Duke University’s Nicholas School of the Environment. As the name implies, this is not a Tea Party organization, a gun-toting survivalist, or a GOP think tank. Yet in a paper published in the current issue of Environmental Science and Technology, the school’s authors show the enormous impact of Environmental Protection Agency regulations on the retirement of current coal generation capacity—contradicting the narrative that low natural gas prices are the primary driver of power plant retirements.
It’s as if the BCS reported there is way too much money in college football.
Duke’s analysis partially confirms that at current prices, gas could indeed be driving coal out of the generation market. No surprises here. It concludes gas will continue to compete with coal even as LNG and domestic manufacturing markets open up to gas. Nevertheless, says Duke, a moderate increase in gas prices could alter the competitive equation “such that a majority of coal plants once again become significantly cheaper than the lowest cost natural gas plant.” “Could…” but for one problem: the full implementation of EPA’s finalized power sector regulations continues to tilt the playing field away from coal. Under this scenario, say the Duke University analysts, gas will compete with coal even if the price of natural gas rises 4.3 times higher than the coal price.
Put another way, low gas prices alone would not have led to the coal plant retirements we are seeing—retirements that will eliminate about a fifth of the entire fleet. Cheap gas would have displaced some coal generation, not devoured a big chunk of it. Here then is the true cost of environmental policy as a surrogate for a national energy policy.
These findings also underscore the importance of NMA’s top coal policy objective: persuade the administration to modify its proposed greenhouse gas rule for new coal-based power plants so that business conditions—and not regulations—drive decisions over fuel cost and use. That won’t be easy. The EPA has already proposed a technology standard based on emissions reductions that only natural gas generation can achieve. No state-of-the-art technology that is commercially viable for coal can meet a standard designed for combined-cycle natural gas.
A one-size-fits-all standard seldom works and certainly doesn’t in this case. In the history of the Clean Air Act, the EPA until now has always based technology standards on fuel type, not on fuel preference. Besides, advanced coal technologies have proven their effectiveness for driving down all emissions—from sulfur dioxide and mercury to particulate matter and even carbon dioxide. Setting the bar for these coal technologies would make far more sense—not only for coal but for a country that has enormous coal supplies, the need to help keep U.S. options open and gas generation prices in check.
What about the environmental benefits of the EPA’s proposed rule? They are few. China and India alone account for the lion’s share of global greenhouse gas emissions and are slated to account for an even rising share. So eliminating the carbon contributions from U.S. coal in hopes of curbing climate change is like burning your house down to light your cigar. There are more sensible ways to achieve this goal.
Popovich is a spokesperson for the National Mining Association, the industry’s trade group based in Washington, D.C.
