EPA’s Coal Decision Creates Vulnerability

Published May 17, 2012

While the Environmental Protection Agency was busy drafting rules to destroy the American coal industry, it overlooked the fact that coal’s greater enemy was already on the hunt. Cheap and plentiful natural gas from the country’s vast shale formations would have done more than enough damage to the industry without government meddling.

Instead of allowing these market forces to work, which would drive innovation in both sectors, EPA is attempting to hasten the departure of coal from our nation’s energy portfolio as quickly as possible. EPA Administrator Lisa Jackson announced Tuesday the agency will now regulate greenhouse gas emissions from all new electricity-generating facilities.

The standard set by the agency will prevent construction of any new coal-fired power plants without the addition of speculative carbon capture and storage technology–fulfilling President Barack Obama’s promise to make coal plants too expensive to build.

Tuesday’s announcement is only the latest wound inflicted by EPA’s ongoing war against coal. From Clean Air Act regulations further decreasing acceptable levels of ozone, mercury, and particulate matter to new restrictions on disposal of relatively inert coal ash, EPA has pulled out all stops in increasing the cost of coal-powered electricity.

U.S. Circuit Court Judge and Obama appointee Amy Berman Jackson ruled just last week that EPA overstepped its authority when it withdrew an operating permit from a coal-mining operation in West Virginia. The judge stated EPA resorted to “magical thinking” and its action would ensure “a permit isn’t worth the paper it’s printed on.” One can easily imagine the uncertainty businesses would face knowing EPA could pull their permits and upend their operations at the whims of an unpredictable bureaucracy.

None of this was necessary in the first place.

On March 16 the price of natural gas dropped to $2.01 per million btu–an amazing figure–and there’s talk it could eventually drop below $1. Shale gas is the reason of course, but recoverable liquids such as propane and butane, which generate the profits, make natural gas almost an afterthought. The figures are astounding: The price of natural gas could drop virtually to zero and the “wet wells” would still be hugely profitable.

The bottom line here is that coal is pretty much dead no matter what the president says–as long as he’s not so destructive as to stop shale gas production as well. Many energy companies are not thinking about coal any more, not because of the rules but because of the economics. However, such fuel-switching does not come without consequences.

Upon EPA’s announcement, the coal industry rightly pointed out becoming too dependent on a single resource could have detrimental future economic effects as our energy portfolio will be less effective at handling price fluctuations. In the past, natural gas was notoriously susceptible to price shocks, and as recently as 2005 prices were more than $15 per million btu. Industry experts agree natural gas prices will increase at some point, and it is unclear how high those prices will rise.

Unfortunately, there’s no real alternative to natural gas if we take coal out of the equation. Solar and wind power aren’t reliable enough, we can’t build nuclear quickly enough, and hydropower is place-specific and near capacity. Natural gas is all we can do, which is good news for gas-turbine giant GE, but less so for consumers who will have to deal with the inevitable price hikes as natural gas demand grows.

In a free market, modern, efficient coal plants would have replaced America’s aging fleet and supplied an important source of competition to natural gas. By the stroke of a pen, EPA has ensured new innovation in coal technology will not take place, giving natural gas a virtual monopoly on the construction of new power plants in the United States.

This decision has ensured the only coal plants that will operate in the United States are decades-old units that should have been replaced years ago but for the intransigence of EPA and the disproportionate sway of the tyrannical environmental groups enabling the agency.

The Obama administration’s dysfunctional energy policies have reeked of crony capitalism from the outset. This latest move may smell sweet to the president’s big donors, but for the average American consumer, it stinks.

Rich Trzupek is a chemist and environmental consultant with Mostardi Platt Environmental and a policy advisor to The Heartland Institute. John Monaghan ([email protected]) is the energy and environment legislative specialist at The Heartland Institute.