Bingaman amendment jeopardizes coal industry, NMA, ACJ say

Bingaman amendment jeopardizes coal industry, NMA, ACJ say

Washington (Platts)--20Jun2005


The climate change amendment set to go before the Senate this week would cost
coal producers $450-bil by 2025, says Connie Holmes, senior economist for the
National Mining Assn.

Holmes told Platts Coal Trader on Monday that the money collected from the
auction of allowances -- estimated by Senate Democratic aides to be roughly
$50 billion -- is a small portion of the actual total value of the primarily
carbon-related allowances "if we had to buy them at the safety valve price
between 2010 and 2025," she said. "The actual value of each and every
[greenhouse gas] allowance that will be required from the coal, oil and gas
industry is $800-bil. The coal industry portion is higher because we are more
carbon intense." 

NMA says 26 states would bear the brunt of the costs with the value of
allowances costing coal producers in Kentucky $39.2-bil; Pennsylvania,
$22.4-bil; and West Virginia, $49.4-bil.

Holmes was referring to an amendment proposed by Sen. Jeff Bingaman, D-N.M.,
called the Climate and Economy Insurance Act of 2005. Bingaman's staff
released details of the amendment last Friday. Under the proposal, the energy
secretary would preside over an emissions trading program to reduce greenhouse
gas emissions intensity by 2.4% each year from 2010 through 2019. The
cap-and-trade program covers the coal, oil and gas industries.
 
The legislation also includes a "safety valve." That section of the proposal
directs the secretary to accept a payment at the safety valve price in lieu of
submission of an allowance for that calendar year.

Democratic Staff Director Bob Simon said the safety valve would give companies
certainty on the price of allowances. If a company can't afford to purchase
them in the market, they would pay no more than $7/metric ton for allowances
they purchase. But he also said that $7/metric ton price goes up 5% year after
year.

"The so-called 'safety valve' provides no safety whatsoever against rapidly
escalating prices for sustaining, much less increasing, coal production," Hal
Quinn, senior vice president of NMA, said in a statement.

NMA said the amendment is anti-growth because it "sequesters economic growth,
not carbon emissions," because it imposes a tax on the use of the most
abundant energy source, coal. It creates market distortions rather than carbon
reductions by allowing companies to sell allowances to companies that import
fuel -- further subsidizing offshore producers at the expense of US companies.

It would turn the energy secretary into a "fossil energy czar" by letting him
determine not only gross national product growth, productivity rates and
emissions intensities, but future profit margins and estimated losses for much
of the energy industry.

Americans for Coal Jobs, a group trying to protect jobs in the coal industry
and allied industries, launched a targeted radio campaign Monday in several
heavy coal-producing states urging their senators to oppose Bingaman's new
"energy tax" amendment.

The ads warn that a proposed climate change program that some members of the
Senate seek to add to pending federal energy legislation is little more than a
$60-bil tax on energy consumers and coal producers, which in turn will stunt
economic growth and lead to job losses and higher energy prices.

"America needs the energy bill, not an energy tax," said Mike Carey, ACJ
executive director. "Sen. Bingaman's proposed amendment is not the solution to
concerns about climate change. All it will do is create significant new
obstacles to economic growth and thwart much-needed efforts to increase
domestic energy supplies and reduce US dependence on foreign energy sources.
It's critical that this $60-bil energy tax amendment be rejected."

In response, Democratic aides say NMA projects a "misleading picture of the
Bingaman proposal aimed to scare coal state senators." The proposal secures
the future of coal through large investments in integrated gasification
combined-cycle technology. 

According to aides, an Energy Information Administration analysis estimates
that coal generation would rise 23% over the next 20 years and jobs would
increase by 27%.

This story was originally published in Platts Coal Trader
http://www.coaltrader.platts.com

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