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Trend from Coal-to-Gas Overshadows this Month’s Regulatory and Legal Developments

epa_logoThis September is a big month for the coal industry. Early in the month, the US Environmental Protection Agency released its final version of a modified Cross-State Air Pollution Rule that seeks to cut emissions from power plants tied to smog. And, at the end of the month, a federal circuit court will begin hearing arguments over the Clean Power Plan that aims to cut carbon emissions.

The plan to cut nitrogen oxide emissions that cause respiratory illness will no doubt get another challenge in court. Even if it could win such a case, the trend toward retiring older coal-fired plants is well underway. And it’s no doubt getting sped up by the Clean Power Plan, which aims to cut carbon emissions by 32 percent by 2030, from a 2005 baseline. The US Court of Appeals for the District of Columbia is to hear the case, again. 

Regardless of the environmental case, though, the coal industry’s strategy is to confront the environmental movement in the courts, a course that is long and unknown.

For what it is worth, the last few high profile cases — Cross-State Air Pollution Rule and the mercury rule — have not really gone industry’s way. That’s not to say that the courts have not tapered EPA’s desires, which may be the best that coal companies can hope for. But, in the end, tougher emissions rules are likely to take effect.

Unless the courts step in, the rules to cut smog will go into effect in May 2017 and affect 2,800 generating stations at 886 coal and natural gas plants. As far as the Clean Power Plan goes, the coal sector and its backers in big business believe they are in the legal right.

“EPA has no authority to require regulations that apply to the state as a whole,” says Jeff Holmstead, partner in the law firm of Bracewell & Giuliani, in a previous interview with this writer.

“What it can do is to require states to submit a plan that establishes a ‘standard of performance’ for any existing power plant in a state – as long as EPA gives the state the flexibility in setting the standard based on the age of the facility and other economic factors,” he adds.

“This standard must be based on the ‘best system of emission reduction’ that could be applied to that type of plant.”

But Harvard Law Professors Jody Freeman and Richard Lazarus explain that EPA’s rule gives states several alternative options to comply, such as replacing their coal-fired generation with plants that run on cleaner natural gas, or with green energies. States with a lot of coal, for instance, have less stringent requirements.

With that, Freeman and Lazarus point out that coal plants in this country are on average 42-years-old and pollute a lot more than newer plants. Still, coal is expected to supply 30 percent of the nation’s energy mix by 2030, which negates the argument that the plan is nothing more than a “power grab.”

As one analyst recently told this writer, the coal industry is suffering a slow death — by a “thousand cuts.” And if the insiders are correct, the DC circuit court will affirm EPA’s ability to curb carbon emissions, as it has done in the past. While that ruling may get appealed again to the US Supreme Court, it would probably get upheld, given that the court is now split 4-4; a tie vote keeps the lower court ruling in place.

The attack on carbon, mercury and nitrogen oxide are just too much for the utilities that burn coal. With natural gas so cheap and abundant, it is easier and less costly to retire older coal plants and to build combined cycle natural gas facilities. That’s why the regulatory and legal developments this month are really overshadowed by the ongoing trend.

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3 thoughts on “Trend from Coal-to-Gas Overshadows this Month’s Regulatory and Legal Developments

  1. The Administration has given the utilities that use coal for fuel the option to install very expensive Carbon Capture Sequestration or “shut it down”.
    There is another option that they do not want to promote, Carbon Capture Utilization Systems. These technologies transform the CO2 into useable – saleable products. This technology cost a fraction of a CCS system, and there is a Return On Investment. It creates many full time jobs in a number of sectors.
    Applying this CCU technology will have these coal power plants emitting less CO2 into the atmosphere than a natural gas power plant.
    But this goes against the Administrations goal to bankrupt the coal industry.

  2. Bankrupting the coal industry is not anybody’s goal. The fact of the matter is that the coal industry started its decline long before President Obama took office, and it has largely been driven by market forces. Natural gas has been beating coal on costs to build the plants, costs to transport the fuel (coal or gas), and costs to purchase the fuel. In addition, only the coal industry is saddled with these further items: costs to deal with the residual coal ash that remains after combustion, and costs to reduce toxic components of the smokestack emissions such as mercury and other pollutants.

    Carbon capture would only add significantly to all these costs. It is expensive to install carbon capture technology at any fossil fuel power plant – gas or coal fired. Furthermore, the carbon capture process consumes a lot of energy, which has to be made up by having the power plant in question buy, transport, and burn even more fuel than previously; just to deliver the same amount of energy to consumers. CCU versus CCS changes none of these facts. Therefore, CCU is not a magic pill that will somehow keep the coal industry afloat.

    And finally, it is misleading to claim that all the carbon captured from the entire fleet of fossil fuel fired power plants can possibly be transformed into usable products. The sheer volume of CO2 thus captured would completely dwarf the economic capacity to utilize it.

    Coal is permanently on the way out as a significant power source. The only potential future it has is on a hugely reduced scale to supply niche needs (certain steps in steel making, for example).

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