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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