Utilities are Bailing on Coal

Ken Silverstein | Jun 12, 2012

Coal’s days are getting dimmer. With environmental regulators coming down on it in combination with extremely cheap natural gas prices, it is losing market share. But it’s also losing some support in the utility community.

Make no mistake. Power companies don’t want to forego their productive assets and be forced to build new electric generators, or buy power on the open market. But many now recognize that expending the political capital to fight for plants built in the middle of last century is not worth it -- especially when they can construct combined cycle natural gas facilities with relative regulatory ease while releasing roughly half of the emissions in the meantime.

It’s not personal. It’s business. Those older coal facilities can take much of the credit for increasing this country’s net worth. But their useful lives are over. And now the utilities that own them have been forced by regulators to either retrofit them with new pollution control equipment, or to retire them. Rather than cooperate and live up to their “clean coal” campaigns, many of the utilities and their coal counterparts for years chose to fight the rules. They lost.

Altogether, 112 coal plants totaling 46,000 have been retired, or soon will be, says the Beyond Coal campaign. That is since January 2010.

“Just as there’s been no hesitation to call upon coal to assist in the utility industry’s political, operational and technical agendas, coal is relying on assistance from its utility partners to combat the anti-coal forces ....,” writes Chris Hamilton, in his blog at the West Virginia Coal Forum. “After all, we are ‘partners of sorts’ and the general coal economy is now asking for greater staying power from its energy partner.”

Hamilton, who is a friend of this writer and who is a coal industry lobbyist, adds that the coal industry in West Virginia is responsible for 60 percent of all business taxes paid. In 2008, the industry employed 20,500 people and paid them $1.5 billion in that state. As for cheap natural gas prices: Don’t expect it to always be that way and when prices rise, coal will be there to fill the void -- if the industry can get some regulatory relief, the group says.

Critics of coal have a different take. They say that the industry has, historically, gotten a regulatory pass. And now that it must comply with stricter air and water regulations, the cost of its product is rising relative to what it cost to generate power from competing sources. The Environmental Protection Agency, for example, often cites health care costs tied to coal-related respiratory illnesses.

The Alternatives

A legal case has been underway in the southern counties of West Virginia where coal has long been the favored industry. Hundreds of residents just settled a suit Tuesday they had against Alpha Natural Resources, formerly Massey Energy. The plaintiffs maintained that underground injections of washed coal, called coal slurry, befouled their drinking water supplies. The terms of the settlement have not been disclosed.

Other fights are taking place elsewhere. In Kentucky, hundreds of coal miners are protesting for economic fairness while environmental activists are saying that the state’s leading resource is not coal -- but its people, and their health. One-third of all coal mined in the country is found there, says a report by the International Business Times. Already, 1,000 coal workers there have been laid off, it adds. The loss of mining in that state is devastating to those workers with few alternatives

“Certainly regulations that require improved emissions at coal-fired power plants will create temporary jobs for those installing the equipment and those merchants who benefit secondarily from their commerce,” says Sterling Burnett, an analyst with National Center for Policy Analysis. “But a great many of the power plants affected by the regulations will simply be shuttered, putting thousands of workers, who have been in a relatively high-paying field, out of work.”

Burnett, who spoke with this reporter, also says that EPA tends to overstate both the economic and health benefits associated with switching away from coal. Generally, he says that as communities and countries prosper, they are then in a better position to enact more environmental safeguards and to improve health.

Coal’s friends in Congress are introducing legislation to get EPA off of the sector's tail. But those bills are going nowhere. Shale gas, though, might save the day for Central Appalachia where a plethora of coal resources are located. The area is also rife with the unconventional gas: Trillions of cubic feet are located there and could provide hundreds of thousands of jobs, all at competitive energy prices.

The region has a brighter future. But it’s not likely with coal, which should have assisted its utility partners 20 years ago and provided the skills and resources to make those plants the best they could be. Together, they fought regulatory efforts and now that the outcome is all but certain, many of its close utility allies are bailing and coal is getting left in the dark.

EnergyBiz Insider is named a 2012 Finalist for Original Web Commentary presented by the American Society of Business Press Editors. The column is also the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has been named one of the Top Economics Journalists by Wall Street Economists.

Twitter: @Ken_Silverstein

energybizinsider@energycentral.com

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