By: Bill Reid
“These are exciting times for the coal industry,” said Jack Gerard, President and CEO of the National
Mining Association in his address to the 31st Annual West Virginia Mining Symposium held at the Charleston House Holiday Inn, Charleston, WV. “I believe we’re on the verge of a major resurgence.”
Gerard said that this optimism may seem odd to those who recall the past few decades. First, there was the threat from the growing promise of nuclear energy. Then, there were public demands for higher environmental standards with the birth of the Clean Air Act and its amendments. This was followed by the increasing clamor for renewable fuels and most recently by the rise of natural gas for almost all new electric power generation. Each of these phenomenon was said to either weaken or spell the end of the long reign of King Coal.
“Well as things are turning out, news of our demise was premature,” said Gerard. “But it didn’t seem that way then.” In the 70’s some said nuclear power would soon make electricity too cheap to meter. Then, there was the environmental movement. Utility customers reduced air emissions by 58% for nitrogen oxide and by 62% for sulfur dioxide as coal utilization increased by 70% from 1980 levels. Senator Byrd pioneered the clean coal technology research, which resulted in impressive pollution reduction gains. Those gains however impressive didn’t prevent pundits from proclaiming that the future belongs to renewable fuels. Important as they are biomass, hydropower, wind and solar are more popular as a discussion topic than as an energy source actually used.
More recently, according to Gerard, coal faces the undeniable appeal of natural gas with 90% of all new power plants being gas fired in the past ten years. Gas may be viewed as clean, but it’s turned out to be increasingly costly. That $2 per mcf price that sparked the gas fired building boom now looks about as unlikely to return as the dime coffee. New futures contacts for February anticipate gas at $7 per mcf. Supply restrictions here at home, the potential of shrinking imports from Canada, and maturing gas fields that yield less and less have raised costs for utilities and serious concerns for investors, policymakers, and consumers. Last summer, Federal Reserve Chairman Alan Greenspan warned of the adverse economic impact of soaring gas prices. Rising fuel costs is one reason why manufacturing competitiveness and manufacturing jobs are lost. Last month, the Energy Information Administration said, “Although only a few years ago, natural gas was the fuel of choice for new generating plants, coal is projected to play a more important role, particularly in the later years of the forecast.”
Gerard referred to some of the achievements in coal. Coal producers have learned to work more efficiently and innovations such as longwall mining has helped boost productivity and deliver more coal at less cost in real terms. Since 1980, while the price of natural gas production soared from $2.54 per million Btu to more than $3.33 last year in inflation adjusted terms, the production price of coal over the same period on a national average fell from $1.93 per million Btu’s to $0.78.
“Seen against this background, my claim about coal’s resurgence is not at all fanciful,” said Gerard. “Looking ahead we can even now see the possibility of an entirely new economy powered by hydrogen – hydrogen derived from coal.”
The worldwide drive to seek ways of reducing greenhouse gases has spurred interest in hydrogen power. Already hydrogen is being produced on an industrial scale from the gasification of coal. To make this technology attractive, ways must be found to extract the energy while storing the greenhouse gas safely underground. That’s why the coal industry has partnered with the Department of Energy to fund FutureGen, which offers the potential for steep reductions in CO2 emissions, while allowing continued use of America’s most abundant fossil fuel.
According to Gerard, the country is on the cusp of a major paradigm shift in the way policymakers enforce compliance with higher environmental standards. Happily, regulators and politicians are beginning to appreciate that the old “command and control” paradigm had the disadvantages of inflexibility and inefficiency. Some are coming around to the notion that it matters less how we get to a cleaner environment than that we get a cleaner environment. For example, some environmental ministers around the world are rethinking their commitment to the Kyoto Treaty for controlling greenhouse gas emissions.
Gerard said that the Bush Administration has proposed a more flexible approach for tightening existing controls on Nox, So2 and particulate emissions from coal-based power plants. EPA’s new Interstate Air Quality Rule would cap the amount of each pollutant allowing facilities which have reduced emissions below the cap to sell pollution credits to plants which are not as far along on the emissions reduction curve. At the same time, the Administration wants to reduce mercury emissions with a separate but similar approach. It proposes to utilize technologies already in place for controlling NOx and SO2, but also reduce mercury through 2010.
Clear Skies legislation would codify the new more flexible approach into law but so far Congress has shown little inclination to pass it. The bill would reduce power plant emissions of NOx, SO2 and particulate by 70%. As a co-benefit of these safe pollution abatement measures, mercury emissions would also fall significantly to 34 tons in 2010, from 48 tons today. Simply put, this market-based approach would produce the largest reduction in emissions in the entire history of the Clean Air Act. “Changing regulatory paradigms is an important aspect of our future,” said Gerard, - “an aspect we are working to resolve in a way that helps our industry and our customers.”
Gerard turned to the Energy Bill. “We have many opportunities to shape our future by being smart and by being resourceful, but none is more valuable than the opportunity we have to pass the Energy Bill that is now before the U.S. Senate,” according to Gerard.
The Energy Bill will:
• Help the coal industry surmount its single biggest barrier to widen market acceptance, the environmental impact associated with coal utilization. A new Clean Air Coal provision authorizes $2 billion to assist with the installation of pollution control equipment authorizes $2 billion to assist with the installation of pollution control equipment and new technology. It’s a 50/50 cost share with the private sector.
• Offers older power plants the opportunity to accelerate depreciation of the cost of new pollution abatement equipment. All of West Virginia’s 14.4 GW of coal-based capacity would be eligible for accelerated depreciation.
• Offers Clean Coal Technology tax incentives, totaling some $2.5 billion, will help speed the adoption of next generation pollution control technology.
• Help develop new coal based power systems authorizing more than $1.4 billion over 5 years to facilitate production and generation of these systems. Also authorizes another $1.8 billion with the Clean Coal Power Initiative funded on a 50/50 cost share basis.
Gerard emphasized that contrary to some reports the bill does not tilt the playing field to help western mines. On the contrary, it will help prevent western production from entering weak markets and aggravating poor market conditions. There is almost $8 billion earmarked for coal related economies.
“Our industry is exciting today because it is in a race, a race that we literally cannot afford to lose,” said Gerard. “The race is not between coal and alternative fuels or even against natural gas. It’s between our industry and rising environmental expectations.” Gerard emphasized the need to meet pollution abatement standards and stay ahead of public expectations. He warned that if the coal industry falls behind these expectations, it will be regulated unmercifully and run the risk of losing market share.
“Thanks to our cost and supply advantages, I’m convinced that we will win this race so long as we stay a step ahead,” said Gerard. “Let’s work to pass this bill and win this race.” cl
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