Coal in Your Christmas Stocking

“We are following through on our commitment to proceed in a measured and careful way to reduce [greenhouse gas] pollution that threatens the health and welfare of Americans, and contributes to climate change.”EPA Administrator Lisa Jackson in December 23rd press statement.

“We’re pleased that EPA is working to deliberately bring this dangerous pollution under control, focusing on the biggest polluters first. This is a major endeavor and the timeline laid out in today’s announcement balances the need for public input with the urgency to act quickly.”— Sierra Club Executive Director Michael Brun.

“Today’s announcement is another among several new emissions standards directed at coal-based utilities that EPA is rolling out at dizzying speed. The cumulative impact, based on estimates from our customers and outside analysts, is staggering.  Combined, these regulations will result in the loss of a significant amount of generation capacity, require extensive capital costs to comply, put upward pressure on energy prices and have negative effects on the reliability of our electricity generation system.”— Carol Raulston, National Mining Association.

“It’s hard to know at this point just how onerous EPA’s new regulations will be. If they are reasonable and sensible, then they won’t do much to reduce [greenhouse gas] emissions — and the environmental community will be upset. If the regulations are really designed to reduce emissions, they will drive up energy costs and be very expensive — and everyone else will be upset.”—Jeff Holmstead, Bracewell & Giuliani attorney and former EPA official.

“Perhaps most disturbing about today’s action is the suspect administrative process used to commit our nation to the timetable for refiners and power producers. The agency reached its conclusions in the guise of a settlement agreement without the input of the regulated community.”— Scott Segal, Bracewell & Giuliani attorney representing utilities and refineries.

There in four simple statements is the range of views about the hidden meaning and real intent of the same action by US EPA to begin regulation of greenhouse gas emissions for fossil fuel power plants and petroleum refineries—two of the largest industrial sources, representing nearly 40 percent of the GHG pollution in the United States.

That no one seems to know what to expect next is the common element for all the parties.  EPA said it would be holding “listening sessions” with the stakeholders in early 2011 before its formal rulemaking process begins.  But Scott Segal of Bracewell & Guliani in his quote above complains the US EPA is marching down this path deliberately NOT talking to stakeholders. Then it will propose standards for power plants by July 2011 and for refineries by December 2011 and issue final standards by May 2012 and November 2012, respectively.  To the industries affected this feels like an ambush in the making.

The EPA is also careful not to offend Congressmen and Senators from coal producing states recognizing that even though Senator Rockefeller of West Virginia abandoned his lame duck effort to win approval of a measure to ban this endangerment and GHG regulatory effort by EPA, he still might find common cause in the new Congress with Republicans and other coal state senators to block EPA.  So EPA was careful to say it was not setting up a “cap-and-trade” program for CO2 knowing that is a lightning rod for the Waxman-Market Bill opponents in the Senate.

By spending so much time talking about what it was doing while remaining vague about its true intentions both the industry and coal state legislators feel like prey in the cat and mouse game..

Industry analysts have estimated that tough EPA regulations on greenhouse gas emissions targeted at the coal plants without scrubbers could force retirement of between 30,000 MW to 70,000MW of coal capacity and up to 66 million tons or 6.7% of coal demand for power generation annually by 2015 to 2017, according to a Dec. 13 2010 research report by FBR Capital Markets. FBR estimates that EPA regulations could cost the industry more than $80 billion.  Brattle Group issued a similar report saying as much as 50,000MW of coal fired generation would be forced to close at a cost of $180 billion in compliance costs.

The expectation is that most of the power plants affected will be on the unregulated merchant power generation side of the business, but there are still plenty of utility owned coal fired plants affected with Texas, the Southeast and the coal belt states most affected.

You can see why EPA wants to keep this rulemaking under wraps as long as possible because it knows the consequences of assertive regulatory action demanded by the left will be denounced by virtually everyone else as excessive over-reach with some of the loudest protests coming from Senator Rockefeller and other coal state Democrats.