By Lee Buchsbaum, Associate Editor & Photographer
The dominant theme at this year’s fall meeting of the National Coal Transportation Association (NCTA) in Denver was the continuing effects of the Obama administration’s “War on Coal.” Speakers from several groups and organizations illustrated the battles won and lost, and those that may likely be decided by the upcoming presidential election and other state contests. The War on Coal will likely be won more at the ballot box than on any other battlefield. Two presenters, Todd Wynn, of the American Legislative Exchange Council (ALEC), and Chris Hamilton, senior vice president of the West Virginia Coal Association (WVCA), analyzed the forces aligned against coal from a national perspective and what can be done about it.
Federal Government Attacks Coal
Todd Wynn, the Energy, Environment, and Agriculture task force director for ALEC, the largest non-partisan association of state legislators in the country, detailed how tough the fight is and will continue to be. With 2,000 members from all 50 states including a third of the state legislators nationwide, ALEC works directly with lawmakers on the state level to promote certain bills or defeat them. ALEC also has a hundred alumni members in Congress. “Our legislators are paying annual dues. They have skin in the game because they are committed to three principles: limited government, free enterprise and federalism, the delicate balance between the power of the federal government and the state,” said Wynn.
Wynn works closely with 170 state legislators who “are the leaders in the country because they serve on their energy, environment or natural resource committees. Of them, 60 are chairs or vice chairs on their respective committees. These are the people who are making policy and guiding regulation that affects the coal industry in this country.” ALEC also works with private sector members. These private sector members interact with ALEC member state legislators to educate them on how policies impact their industry. Together, ALEC also helps develop models to increase economic growth.
Beginning in 2010, ALEC state legislators noted the Environmental Protection Agency’s (EPA) power had “grown to an enormous amount and had begun trampling on states’ rights as far as environmental protection was concerned. ALEC launched an initiative in the very beginning of 2011 called “EPA Regulatory Trainwreck: Strategies for State Legislators.” ALEC continued this effort in April 2012 with the publication of the study “Economy Derailed.” In these publications, ALEC wanted to educate not only its constituents, but also state and federal legislators on the issues of environmental improvements, and the impact of affordable and reliable energy on the U.S. economy. The main thrust was to discuss the causes of what ALEC has termed “an economic derailment: Nine major EPA actions that would fundamentally change and transform the way energy is used and distributed in this country.”
Wynn began his presentation with a specific example on how the EPA “has evolved from an agency about protecting property rights and reducing real pollutants and real harm on American citizens to an agency that has pushed the political agenda based on clean energy and global warming goals.” In December 2011, the EPA unveiled one of the most costly regulations in the electric power industry in history. Known as the Utility MACT, or the Mercury and Air Toxic Standard (MATS) Rule, it mainly targets coal-fired power plants. This initiative was unveiled by EPA Administrator Lisa Jackson through a series of speeches in front of the Children’s National Medical Center in Washington, D.C., each mentioning children and the protection of children numerous times. “Because of these types of tactics, and the use of emotional arguments that purport to protect children from mercury pollution, it’s not surprising that constituents support some of these regulations, and public officials have a harder time saying “no” to these types of things. Propaganda from the EPA and environmental advocacy groups fuels the sentiment. The media furthers it because ‘crisis sells.’ Unfortunately the EPA is only telling one part of the story, and they’re telling it in a misleading way,” said Wynn.
Mercury emissions have been on the decline for decades, and Jackson and the EPA failed to mention that this regulation would have little to no impact on people’s exposure to mercury whatsoever. “Even a foreign environmental administrator for air radiation said, ‘Even if you could eliminate all mercury emissions in the United States completely, it would have almost no impact on people’s exposure.’ This is mainly due to mercury being vastly outweighed in natural sources than in man-made sources. Even the EPA says only 2% of mercury deposition in the U.S. comes from coal-fired power plants,” said Wynn.
The highest health benefits the EPA calculates for Utility MACT is anywhere between $500,000 to $6 million a year in benefits. However, the cost estimate for compliance including increases in electricity rates and an effect on the economy as well as American competitiveness is $10.9 billion. “By their own calculations, the costs outweigh the benefits in this regulation roughly 1,800 to one. It makes no economic sense whatsoever. But it’s hard to talk about this, though, because the EPA mentioned children and mercury, and who wants to be on the wrong side of that?” said Wynn.
However, mercury emissions since 1990 alone have decreased 58%, “leading this country at this time to have the lowest mercury emissions in industrial society.” But that trend is not just isolated to mercury emissions. Sulfur dioxide has also been decreasing for decades as has nitrogen dioxide. Additionally, particulate matter, fine particulate matter, ozone, carbon monoxide and lead have all decreased in ambient concentrations in the atmosphere in total emissions overall “leading the U.S. to have almost the cleanest air and water in the entire world. The EPA’s air quality index is a similar success story. This is a metric that determines what days aren’t healthy for sensitive populations, meaning the elderly, or respiratory ailments in urban areas. In 10 years, it has decreased 63%, meaning there are 63% fewer days that the air is not healthy for these sensitive populations. These are resounding success stories that we should all talk about and we should all be proud of them,” said Wynn.
But the EPA and other environmental groups believe we should continually chase that additional amount of pollutant in our air and water. “They say that it always makes sense to reduce that amount of pollutant. In the 1970s we were regulating parts-per-thousand, parts-per-million, parts-per-billion, we reached parts-per-trillion. Each time we reduce an amount of pollutant, the costs of reducing that pollutant increases, and the benefits decrease. Without a thoughtful look at cost to benefits, which obviously was not done with the MATS, there could be serious harm to the standard of living of Americans and the health of American citizens as they’re both intricately tied,” said Wynn.
What people don’t understand, said Wynn, and what ALEC and its supporters need to keep preaching is that “affordable access to reliable energy has led to the greatest expansion of standard of living and life expectancies this country has ever seen. And when you threaten that with expensive inefficient regulations, you could be doing a lot of harm to the health of Americans.” To put this in perspective, according to the U.S. census, nearly 50% of U.S. households make less than $50,000 a year. These households spend more on energy than they do on food, twice as much on energy than they do on healthcare, and more on energy than anything else except for housing. “So when the energy costs increase due to a regulatory environment that doesn’t make sense, you are forcing those households to divert away from potentially helpful activities such as the purchase of healthcare or food, toward meeting the increasing regulatory burden imposed by the EPA.”
The nine major EPA actions that directly address the coal industry, taken together are going to fundamentally change the way energy is used, distributed, extracted and burned in this country. However, in the past few years, the EPA has proposed more than 150 policy rules and more than 40 major regulations on the electric power and energy industry as a whole.
1) The Utility MACT: This act could become the most expensive piece of regulation in U.S. history, requiring retrofits for up to 753 electricity generating units across the country. And because the cost of compliance is so high, and the compliant time limits are so stringent, electric utilities are deciding that it makes more sense to shut down coal-fired power plants than to continue operating. “More than 15 gigawatts could be forced into early retirement. To put that in perspective—that’s about enough energy to power up a park, something like 10 million U.S. households. And because the compliance and the standards are so stringent, no new coal-fired power plants are likely to be built in this country.”
2) The Boiler Act: “This affects commercial, industrial and institutional boilers that provide heat, electricity by burning biomass, natural gas, and in many cases coal as well. The original version of this regulation affected nearly 800,000 jobs and every million dollars spent on it will reduce the U.S. GDP by $1.2 billion and could cost 16,000 jobs.” Thought it’s been pushed back by policy makers and industry itself, the act is still affecting some of the major sources, including factories and paper mills. According to Wynn and ALEC, not a single health benefit has been estimated from the pollutants that this rule was intended to address. The EPA failed to estimate the health benefits of it. So they know the costs are significant, but they have no idea exactly what the benefits are.”
3) The Cross State Air Pollution Rule (CSPAR): Even though a recent court decision has pushed back on this rule (See NMA Prevails, p. 4), the fight against what it includes is an on-going battle. “Cross state air pollution was attempting to reduce emissions across state lines mainly on the eastern half of the United States; mainly targeted coal-fired and electricity. This rule would affect 7 gigawatts, which is approximately enough energy to power 5 million U.S. households. Cost of compliance would have been about $120 billion. The EPA justified this regulation by using data from 2006 and certain data from 2010, which did not capture the emissions reductions in those four years and it inflated the non-attainment areas by 1,200% to justify this.”
Even though this law was defeated, when a utility looks at the next time horizon they know that this is isn’t over. “They know the EPA is going to bring back another rule,” Wynn said. “And they don’t know what it’s going to look like.” That leads to investment uncertainty as far as building new plants is concerned.
4) Cooling Water and Tank Regulation: The EPA is considering a broad regulation to retrofit power plants, affecting about 1,000 electricity generating units. “It’s an extremely costly proposition. To put it in perspective, nuclear power plants can cost up to $1 billion. This rule alone can affect 41 gigawatts with early retirement, a significant amount of electricity coming offline. And this regulation is going to come through in the next year.
5) Coal ash and byproducts of coal combustion at coal-fired power plants: “Currently much of this is stored in liquid impoundments. It’s stored in landfills and in many cases up to 43% currently is beneficially recycled for drywall, cement, concrete and bowling balls. The EPA has considered classifying coal ash as hazardous waste, despite studies even a few years ago saying that it wasn’t that. If this happens and the EPA succeeds in classifying coal ash as hazardous waste, this will cost approximately $1.5 billion a year for the next 50 years as well, according to EPA estimates. Other estimates go up to $20 billion a year,” Wynn said.
In addition, environmental advocacy groups have gotten really good at suing the EPA. They petition the EPA to include coal mines under new source review which under the Clean Air Act allows them to regulate the air emissions from coal mines. “When the EPA doesn’t respond, environmental groups litigate and force them into a sue-and-settlement agreement and the EPA gladly takes on a new regulation because it justifies their existence. That would add an increasing regulatory burden on coal mining as well.”
6) Green House Gas regulations: On March 27, the EPA proposed a carbon dioxide standard for new power plants. “Currently there is not a single coal-fired power plant in the entire United States and anywhere in the world that can meet their new standard. That means that this regulation is a de facto ban on building coal-fired power plants. As long as the EPA’s CO2 regulation stands, we will never build another one again in this country,” said Wynn.
When the EPA releases a new regulation, they come up with a regulatory impact analysis, an RIA, which assesses costs and also benefits. For this one it was 300 pages or so. “I have no idea why it was so long because they didn’t assess costs nor benefits at all. They said, ‘assumed no costs,’ because they assumed no one would build a coal-fired power plant in this country ever again due to the other rules. However, they also estimated no human benefits because carbon dioxide is not a direct human health pollutant. If it was, we’d have respiratory ailments, we’d be coughing right now. So there is no direct human health benefit from reducing carbon dioxide, and they did not estimate such in this report.” Ominously, in the first three pages of the report the authors wrote, “This proposed rule is consistent with the president’s goal to ensure that by 2035, we will generate 80% of our electricity from a diverse set of clean energy sources.” Under the Obama administration, the EPA has become the go-to tool to advance clean energy with global warming goals.
The one “out” the EPA provided for new coal-fired power plants, however, was the implementation of carbon capture and sequestration. But in the same impact analysis they stated, that the technology is not feasible without a massive infusion of tax-payer dollars. This means no new coal-fired power plants. And, “if the EPA gets its way and reviews and implements similarly stringent regulations on the existing power plants and oil refineries, then U.S. energy costs are going to necessarily skyrocket. 50% for residential electricity prices of gasoline, 75% for industrial electricity prices, and 600% for electric utility and coal prices. Job losses would be in the millions.”
ALEC maybe a partisan organization, but the government’s own data paints a similar picture as to how coal will be affected near term as a result of the above regulations. “The Energy Information Administration predicts that over 27 gigawatts of coal-fired capacity will be coming offline in the next five years. This year alone is going to be the nation’s greatest retirement in coal-fired capacity that this country’s ever seen. This is mainly because of the cost of compliance with MACT. The Government Accountability Office says the same thing. Just a month ago, it said that between 2%-12% of coal-fired capacity could come offline as a result of these rules over the next few years. Electricity rates could rise as much as 13%. In the Midwest, it could go as high as 18%.”
It is for these reasons that state legislators are beginning to fight back. “We want to provide action for our state legislators so they can feel more empowered and hopefully add to this debate,” said Wynn. One of the success stories of ALEC is that it has helped create a draft regulation opposing the regulatory train wreck that was adopted by numerous states. “2011 was our biggest year for this. Twenty-two states introduced this resolution and twelve of them passed it. This past June, the legislators in Alabama’s session passed the resolution as well. What this tells us is that it sends a clear powerful signal not only to the White House, to the administration, to the agency, but to the federal lawmakers on Capitol Hill as well, that the states have had enough on this. In fact, this effort actually led to a number of state attorney generals to get involved in ongoing law suits, which helped pull back the cross state air pollution act as well. We’re building on these efforts. In every single meeting we have with state legislators, this is on their docket. They want this issue addressed. They want to push back against the EPA.”
The EPA’s Overreach
Chris Hamilton, senior vice president of the WVCA, spoke about the vital role coal plays in his state, the second largest domestic coal producer, and the threat West Virginia is now under because of Obama’s attack on the industry. “There is now no question that we are under siege at the current time. We do believe that coal is going to play a role once more in the nation’s energy mix, we’re going to have to fight for it,” said Hamilton.
West Virginia historically produced about 165 million-170 million tons of coal per year. State production has fallen to 138 million tons in the last two years and this year it will extract about 120 million tons. Surface mining accounts for between 35% and 40% of production. In total, Central Appalachia represents about 11% of total U.S. coal production. Coal generates about 77,000 jobs, direct and indirect, in the area.
These jobs are all under attack through the legislation and policies of the Obama administration. Though cap and trade legislation was defeated, The Obama administration is using the EPA to implement it by back door means.
“We think we’re getting a double whammy as it relates to the EPA’s attack on our mountaintop mining activity and coal-fired power. The major coal producers east of the Mississippi appear to be under siege bythe EPA,” Hamilton said. “Let’s face it, they had a moratorium in place on new mining permits since the day they took office. In West Virginia, we’ve only had about four or five mining permits approved over the last four years.”
There are also discussions about a re-write or reinterpretation of [the] Stream Buffer Zone by the current administration that, according to the Department of Interior, would eliminate 7,000 coal mining jobs and the coal mining industry would decline or stay flat in more than 20 states. That mainly affects southern and central Appalachia, but a lot of different states as well. And, industry estimates put the coal mining related job losses, meaning rail jobs as well, at more than 270,000 by implementing a rewrite of this rule. Direct coal mining losses are at 79,000.
West Virginia has a universe of more than 1,000 mining permits that require federal actions. “They’re not all new permits. They’re renewals, they’re to expand the operations, and they are for new mines and operations. There have only been a couple approved. Coal producers have been fighting from the permit side, our utilities are fighting it from the consumption side. There have been four court cases where industry has prevailed, and in every single case judges have said the federal government is acting outside its boundaries or acting out of its jurisdiction. Judges have consistently said they have no statutory authority to do what they’re doing.”
Hamilton, like many speakers concluded with a call to arms. “What we really need to do first is create a workable coal energy friendly policy for this country. To ensure that, we need to exercise our fundamental right and vote on November 6. Above and beyond all else I would encourage you to vote for Romney,” said Hamilton.
