The United Mine Workers of America (UMWA)’s Pension Fund is in serious trouble. A proposed bill, the Miners Protection Act of 2015, would bail out the pension plan by transferring $490 million in federal funds from mine reclamation to the pension fund. However, this bill would not be necessary if the Obama Administration had not instituted regulations on ozone, mercury, carbon, coal-mine dust, among others. President Obama’s regulations have put all public coal companies, and many private ones, out of business. When coal companies go out of business, so do their pension plans.[i] And when thousands and thousands of miners no longer pay into the fund because they are out of work, the pension plan suffers.
Coal Regulations Imposed by the Obama Administration
Over the last eight years, the Obama administration has shown its antagonism toward coal mining, attacking the industry from all angles. The following is a list of some of the regulations it has imposed to destroy the coal industry, thereby reducing coal employment and ultimately increasing the costs of electricity to consumers.
The Environmental Protection Agency (EPA) tightened the ozone standard from 75 parts per billion to 70 parts per billion despite–a decrease of 32 percent in ozone between 1980 and 2015[ii] and the fact that many areas have not yet reached the current standard. The agency is being sued because many states believe the new level is physically impossible to reach through man-made source reductions.[iii] According to an August 2015 report by NERA Economic Consulting, which analyzed the impacts of a 65 ppb standard (EPA ultimately went with a slightly higher 70 ppb standard), the total compliance costs could total $1.7 trillion from 2017 to 2040. The rule could also lead to annualized GDP declines of $140 billion, as well as $830 in consumption losses for households, and the elimination of 1.4 million job equivalents, on average, from 2017 to 2040.[iv]
Mercury and Air Toxic Standards
Another severe regulation is the Mercury and Air Toxics Standards (MATS), which set limits on mercury and other air pollutants like arsenic and metals. Last year, the Supreme Court struck down the rule because EPA did not consider the cost of the rule in its initial promulgation, sending it back down to the lower courts. Despite the Supreme Court ruling, the time constraints on the rule were so tight that utilities had already shut down many of the power plants that could not meet the regulation by the time the court rendered its decision. EPA acknowledged this in their response to the decision, in essence declaring that it had done its job, regardless of the legality of the regulation. The damage was done.
The rule requires about 600 facilities to reduce mercury emissions. The EPA predicted that the rule will have an annual cost of $9.6 billion, in exchange for about $4 million to $6 million in benefits from reduced mercury emissions. But the $9.6 billion in costs appears optimistic, as a study by the National Economic Research Associates found the rule to have an economic cost to consumers of over 2.5 times as much—$25.6 billion per year.[v] This regulation alone caused an estimated 30 percent of coal plant retirements in 2015, many of them capable of producing some of the lowest cost electricity in the nation.[vi]
Clean Power Plan
Another regulation in the courts is EPA’s so-called “Clean Power Plan”, which calls for reducing carbon dioxide emissions from power plants by 32 percent from 2005 levels by 2030. It is a major part of the administration’s pledge to reduce carbon dioxide emissions made at the international Paris Climate Conference in December 2015. Over half the states impacted by the rule are challenging it, arguing that EPA does not have the power under the Clean Air Act to regulate carbon dioxide emissions, and that the rule violates state sovereignty and state power to regulate local utilities. In general, their argument is that the EPA has exceeded its mission of regulation of emissions and instead, assumed powers over the grid and state authority. In February, the Supreme Court temporarily blocked it, issuing a rare stay until the lower courts can rule on it, hoping to avoid the implementation issues that occurred with MATS. The U.S. Court of Appeals for the District of Columbia Circuit is expected to hear oral arguments on its legality in June.
According to a study by NERA Economic Consulting, 47,000 megawatts of coal will be prematurely retired due to the so-called “Clean Power Plan.” The study projected that it will hike electricity prices in all 47 states that are subject to the regulation: 41 states are projected to see double-digit “peak” electricity price increases and 28 states are projected to see “peak” electricity price increases greater than 20 percent.[vii] Another study by Energy Ventures Analysis finds that 41,000 megawatts of perfectly good electric generating capacity will be forced to prematurely retire, forcing the nation’s consumers to pay $64 billion in replacement cost. That study also projects that 45 states will see double digit increases in wholesale electricity costs, and 16 states will see a 25 percent or higher increase in wholesale electricity costs.[viii]
An IER study shows that electricity prices from existing coal-fired power plants being retired are far less than those of new power plants. A new natural gas combined cycle unit is about 40 percent more expensive than an existing coal-fired power plant, a new wind turbine is 2.7 times more costly and a new solar photovoltaic plant is 3.5 times as expensive, which indicates why the above studies project much higher future electricity prices if and when implementation of the rule is completed.[ix]
Americans will have to pay much higher electricity prices despite the minuscule benefits of the Clean Power Plan, which reduces global carbon dioxide emissions by less than 1 percent and global temperatures by 0.02 degrees Celsius by 2100, according to EPA’s own models. Even EPA Administrator Gina McCarthy admitted the fact when she told Congress that EPA cannot measure the impact of the proposed Clean Power Plan on global temperatures, because it would likely be incredibly small.[x]
Cross-State Air Pollution Rule
The Cross-State Air Pollution Rule (CSAPR) requires states to reduce power plant emissions that contribute to ozone and/or fine particle pollution in other states. The rule requires significant reductions in sulfur dioxide (SO2) and nitrogen oxide (NOX) emissions that cross state lines, which react in the atmosphere to form fine particles and ground-level ozone.[xi] The CSAPR was originally proposed in 2011 to help address the interstate transport of ozone and other pollutants typically covered by the National Ambient Air Quality Standards (NAAQS) that regulate the 6 criteria pollutants within individual states. On September 7, EPA finalized those rules, issuing federal implementation plans that provide summertime levels for NOx emissions in 22 states: Alabama, Arkansas, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia, West Virginia, and Wisconsin.[xii] According to EPA, the plans apply only to states that failed to submit approvable state plans under the 2008 update to the CSAPR. Beginning in May 2017, the new rules will affect over 2,800 generating units at 886 coal, natural gas and petroleum power plants. The states will have to reduce ozone to 75 parts per billion measured over eight hours.[xiii]
The 22 states covered by the finalized CASPR
Stream Protection Rule
On July 16, 2015, the Office of Surface Mining Reclamation and Enforcement (OSM) of the Department of the Interior announced a Stream Protection Rule that would revise regulations implementing Title V of the Surface Mining Control and Reclamation Act (SMCRA). The proposal is intended to avoid or minimize adverse impacts of coal mining on surface water, groundwater, fish, wildlife, and other natural resources by limiting the mining of coal in or through streams, placement of waste in streams and limiting the generation of mining waste. OSM estimates that the coal industry would incur annual compliance costs of $52 million above baseline costs that would be incurred in the absence of the rule– $45 million per year for surface coal mining operations and $7 million per year for underground mining. About 46 percent of the expected compliance costs reflect new regulatory requirements on coal mining operations in Appalachian states. Other regions also are expected to experience operational costs, but those costs are expected to vary across mine type (e.g., surface or underground) and region. OSM claims it cannot quantify the benefits of the proposal because of data limitations.[xiv]
Coal Leasing Moratorium
Early this year, President Obama’s Department of Interior ordered a moratorium on new leases for coal mined from federal lands as part of its review of the coal-leasing program, from health and environmental impacts to the return the government receives from the coal companies for leasing its lands. The moratorium will last for 3 years while the Department of Interior (DOI) undertakes a review of the fees charged to mining companies to see if they provide a “fair return to American taxpayers and reflect coal’s impact on the environment”.[xv] During that time, coal companies will continue to be able to mine the coal reserves already under lease. The royalty payment levied on coal production is set at 12.5 percent–the same rate as the royalty for onshore oil and gas.
Most of the nation’s low-sulfur, sub-bituminous coal used in producing electricity is located on federal lands in the Powder River Basin, where President Obama’s new leasing rules will have great impact. Coal resources on federal lands (excluding Alaska) amount to approximately 957 billion short tons, and approximately 57.5 percent of those coal resources are located in the Powder River Basin. According to a study performed for the Institute for Energy Research, the long term effects of opening federal lands in the Powder River Basin to coal leasing would generate $87.9 billion annually for the U.S. economy, producing over 260,000 jobs each year with over $16 billion in additional annual wages. The federal government would receive an additional $16.7 billion annually in federal tax revenues, while state and local tax revenues would rise by $6.2 billion in Wyoming and by $0.5 billion in Montana.[xvi]
Decreased demand for coal has caused a wave of bankruptcies by the nation’s largest coal companies, including Arch Coal, the nation’s second-largest coal company, Walter Energy Inc., Alpha Natural Resources Inc., and Patriot Coal Corp. Peabody Coal, the world’s largest privately owned company, also filed for bankruptcy.[xvii] Over a quarter of U.S. coal production is now in bankruptcy, trying to reorganize to deal with prices that have fallen 50 percent since 2011. Employment in the coal sector has fallen to its lowest level since the 1980s. With thousands of coal miners out of work, starting wages in West Virginia, for example, have fallen to around $20/hour, half of that what they were at the start of the decade.[xviii]
Coal Combustion Residuals (Coal Ash)
The Environmental Protection Agency finalized national regulations to provide for the disposal of coal combustion residuals from coal-fired power plants. Coal ash is generated from the burning of coal at power plants and is disposed of in large ponds called surface impoundments and in landfills. The rule establishes technical requirements for landfills and surface impoundments under Subtitle D of the Resource Conservation and Recovery Act (RCRA), the nation’s primary law for regulating solid waste. The rule sets minimum requirements under which companies could face legal action. In lieu of offering specific implementation guidelines, the EPA encourages states to develop solid waste management plans to include and voluntarily exceed federal minimum standards. These plans must be approved by the EPA, operate parallel to the regulation, and be subject to dual enforcement in respective state and federal courts.[xix]
Revocation of Mountaintop Mining Permit
In 2011, EPA revoked the Spruce No. 1 Mine’s Clean Water Act permit that had previously been issued by the U.S. Army Corps of Engineers. This was the first time that EPA revoked a permit already issued, taking back its approval for Arch Coal’s Spruce No.1 mine in southern West Virginia. The mine was one of the largest surface mining operations in Appalachia. The veto by EPA is part of EPA’s crackdown on mountaintop removal mining, which though sounding ominous, is actually a highly regulated means of mining and reclamation that leaves very valuable and in many cases, much improved lands for human needs and nature. In 2008, the agency blocked the Army Corps of Engineers from issuing nearly 80 permits for proposed Appalachian mines – saying they needed additional review to comply with the Clean Water Act, and later, the agency introduced a tougher standard for obtaining permits.[xx]
It should be noted that EPA’s 2011 permit revocation was highly controversial because EPA’s decision was “riddled with mistakes, incorrect citations, and false certainty.” For example, “The EPA assert[ed] that five species of fish would be buried, despite the fact that no fish were found at the site.”
Arch Coal took the issue to court, but the court upheld EPA’s veto. This decision, like many of the regulatory actions on this list help contribute to the uncertainty surrounding coal mining, particularly coal mining in the eastern United States.
Electrical Conductivity Guidance
EPA issued guidance regarding using water conductivity to measure substances in the water near surface coal mines. The guidance relates to the electrical conductivity of water downstream from the mines, which is a rough measurement of the level of substances such as sulfates and dissolved solids that may be present in the water. After EPA issued the final guidance in 2011, the agency objected to dozens of permits in Kentucky and other states. In the first eight months after the EPA issued the guidelines on an interim basis, only two coal companies received federal water-pollution permits for mountaintop mines in Eastern Kentucky, and both rejected the permits, saying the conditions were too stringent to meet.[xxi] In many cases, natural background conductivity of source water in the area has conductivity exceeding the standards. EPA is asking for cleaner water than nature provides in such cases.
The National Mining Association, Kentucky and West Virginia challenged the EPA in court and won. But the U.S. Court of Appeals later overturned that decision in favor of the EPA. According to the Appeals Court, EPA has the authority to issue enhanced coordination procedures for surface mine permits. But, it also ruled that the final guidance on conductivity does not count as a final agency action that is open to legal challenges.[xxii]
Coal-Mine Dust Rule
The Mine Safety and Health Administration (MSHA) promulgated the coal-mine dust rule in 2014, reducing coal miners’ exposure to dust and equipping them with a device that will record the level of dust where they are working. The rule was challenged in court and upheld. In this ruling, the U.S. Court of Appeals held that MSHA followed the proper procedures and that the rule was a reasonable exercise of the agency’s authority to protect coal miners against black lung disease.[xxiii]
Beginning on February 1st, 2016, Phase II of the rule went into effect requiring coal operators to equip the miners who work in the dustiest jobs with continuous personal dust monitors (CPDMs)—devices that gives the miners real-time information about their dust exposure. The CPDM allows miners to know how much respirable dust they are working in so that they can reduce their exposure, creating a digital record of the dust levels. This adds additional costs with arguable beneficial outcomes.
EPA’s regional haze rule is not a health-based rule, but a purely aesthetic rule. Haze does not affect human health. This rule seeks to cut down on “haze” at a group of U.S. national parks, monuments, and wilderness areas from the burning of fossil fuels for electricity generation and industrial purposes.
Under the Clean Air Act, EPA gave the states the chance to develop compliance plans to reduce pollution in those areas. After rejecting the plans submitted by Texas and Oklahoma, EPA indicated it would provide federal implementation plans to fill the gaps they saw in the state’s compliance plans. Texas took the issue to court stating that it would impose $2 billion in costs on Texas alone without delivering any visible pollution reduction benefits during the compliance period. In June, the judges of the 5th Circuit court ruled in favor of Texas, stating that EPA had acted “arbitrarily, capriciously, and in excess of its statutory authority” when it rejected pollution control plans from Texas and Oklahoma and sought to impose a federal implementation plan for the regional haze rule. The grid operator for Texas estimated the rule would require modifications to 13 coal units and push up to 5 gigawatts of retirements in the next five years.[xxiv]
Recently the Tri-State Generation and Transmission Association announced they were closing a coal-fired unit at Craig Station because of the regional haze rule. This power plant has been targeted by environmental activists for years.[xxv]
Social Cost of Carbon
Under the Obama Administration, the EPA and other federal agencies use the highly controversial and uncertain social cost of carbon when conducting regulatory analyses.[xxvi] It is an estimate of the perceived cost associated with a small increase in carbon dioxide emissions, conventionally one metric ton, in a given year. The dollar estimate also represents the cost of avoiding a small emission reduction. Since the value is added to the cost of fossil fuels based on their carbon content, its presence makes fossil fuels, such as coal, more expensive than they are in the market place, thereby providing an advantage to non-fossil fuels in the analysis.
Other Regulations and Subsidies
While not directly related to coal production and use, the Obama Administration has issued other regulations and guidance that affect the market in which coal must compete and that affect the cost of doing business in the United States. These include:
- Federal Energy Regulatory Commission (FERC) Order 1000, which requires that each independent system operator consider transmission alternatives in its regional transmission planning processes, produce a regional transmission plan and implement a fair cost allocation methodology.[xxvii]
- The Production Tax Credit for wind power and the Investment Tax Credit for solar power that provides intermittent wind and solar power with enormous subsidies, artificially making their costs lower by subsidizing their cost with taxpayers’ money, but which will eventually increase the cost of electricity to consumers. Since they are intermittent, they require additional costs be borne by other sources of electricity when they do not generate. Instead of paying for one electricity system, consumers are bearing the costs of two, in order to have reliable and available electricity.
- The §1603 American Recovery and Reinvestment Tax Act (ARRTA) program offered renewable energy project developers cash payments in lieu of investment tax credits or production tax credits equivalent to 30 percent of the project’s total eligible cost basis in most cases.[xxviii]
- Expansion of the definition of waters in the United states pertaining to the Clean Water Act that would require a federal permit for any activity that results in a discharge into any body of water covered by the new definition, including small streams, wetlands, and seasonal accumulations of waters (mud puddles). The rule is so broad that it could also apply to areas of permafrost that become wetlands if it gets warmer or any other patch of land where water could potentially wash across during the year. [xxix] This vast expansion of federal authority to even the smallest temporary water area on all private land in the country is breathtaking in its scope and has led to numerous lawsuits by over half of the states since it would also affect farming and virtually any uses of private land.
Besides the regulations listed above, President Obama has committed the United States to the Paris Agreement on climate change, which requires the United States to reduce greenhouse gas emissions between 26 and 28 percent from 2005 levels by 2025.[xxx] The implementation of the above regulations affecting the U.S. electric power sector is expected to provide the majority of the reductions to meet that target. The Obama Administration believes that target can be reached without Congressional action, despite the fact that any treaty must be ratified by the Senate, an action that President Obama did not take. The president did not submit what most would consider a binding treaty to the U.S. Senate according to the Constitution, but instead seeks to interpret it as an “agreement” despite the fact that it presumes to bind all Americans to an international obligation. The Paris Agreement will further cripple the coal industry.
President Obama’s goal might not have been to bankrupt the UMWA’s pension fund, but he did a good job of it through his regulatory overreach. The best way for the next president to help the coal industry and consumers’ electricity prices is to end President Obama’s vendetta against this affordable and reliable source of energy.
[i] Wall Street Journal, Mining Taxpayers’ Pockets for Private-Pension Relief, September 8, 2016, http://www.wsj.com/articles/mining-taxpayers-pockets-for-private-pension-relief-1473375903
[iv] NERA Economic Consulting, Economic Impacts of a 65 ppb National Ambient Air Quality Standard for Ozone, February 2015, http://www.nam.org/Issues/Energy-and-Environment/Ozone/Economic-Impacts-of-a-65-ppb-NAAQS-for-Ozone-(NERA).pdf
[v] NERA Economic Consulting, An Economic Impact Analysis of EPA’s Mercury and Air Toxics Standards Rule, March 1, 2012, http://www.nera.com/publications/archive/2012/an-economic-impact-analysis-of-epas-mercury-and-air-toxics-stan.html
[vi] Daily Caller, Obama’s War on Coal is Driving Up Energy Costs, March 23, 2016, http://dailysignal.com/2016/03/23/obamas-war-on-coal-is-driving-up-energy-costs/
[vii] NERA Economic Consulting, Energy and Economic Impacts Of EPA’s Clean Power Plan, November 7, 2015, http://www.americaspower.org/wp-content/uploads/2015/11/NERA-CPP-Final-Nov-7.pdf
[viii] Energy Ventures Analysis, EPA’s Clean Power Plan An Economic Impact Analysis, November 2015, http://nma.org/attachments/article/2368/11.13.15%20NMA_EPAs%20Clean
[ix] Institute for Energy Research, July 26, 2016, http://instituteforenergyresearch.org/press/study-wind-solar-5x-costly-existing-coal-nuclear/
[x] Daily Caller, EPA Head Admits Clean Power Plan Wouldn’t Impact Global Warming, April 21, 2016, http://dailycaller.com/2016/04/21/epa-head-admits-clean-power-plan-wouldnt-impact-global-warming-video/#ixzz46UrzwVUT
[xii] National Law Review, EPA Updates Cross-State Air Pollution Rule for the 2008 Ozone NAAQS, September 14, 2016, http://www.natlawreview.com/article/epa-updates-cross-state-air-pollution-rule-2008-ozone-naaqs
[xiii] Utility Dive, EPA finalizes cross-state pollution rule for ozone-causing nitrogen oxides, September 8, http://www.utilitydive.com/news/epa-finalizes-cross-state-pollution-rule-for-ozone-causing-nitrogen-oxides/425944/
[xiv] Congressional Research Service, The Office of Surface Mining’s Proposed Stream Protection Rule: An Overview, February 1, 2016, http://nationalaglawcenter.org/wp-content/uploads/assets/crs/R44150.pdf
[xv] New York Times, Putting an Environmental Price Tag on Coal, January 15, 2016, http://www.nytimes.com/2016/01/16/opinion/putting-an-environmental-price-tag-on-coal.html?emc=edit_th_20160116&nl=todaysheadlines&nlid=63692790&_r=0
[xvi] Institute for Energy Research, The Economic Effects of Immediately Opening Federal Lands to Oil, Gas, and Coal Leasing, December 2015, http://instituteforenergyresearch.org/wp-content/uploads/2016/01/IER-Mason-Study.pdf
[xvii] Washington Post, How coal titan Peabody, the world’s largest, fell into bankruptcy, April 13, 2016, https://www.washingtonpost.com/news/energy-environment/wp/2016/04/13/coal-titan-peabody-energy-files-for-bankruptcy/?utm_term=.da98ce85c6ba
[xviii] Wall Street Journal, Arch Coal File for Bankruptcy, January 11, 2016, http://www.wsj.com/articles/arch-coal-files-for-bankruptcy-1452500976?cb=logged0.28593429861069136
[xix] Utility Dive, Two years after EPA’s coal ash rule, progress depends on states, May 24, 2016, http://www.utilitydive.com/news/two-years-after-epas-coal-ash-rule-progress-depends-on-states/419672/
[xx] Politico, EPA pulls coal mine permit, January 13, 2011, http://www.politico.com/story/2011/01/epa-pulls-coal-mine-permit-047557
[xxi] The Rural Blog, EPA Guidance using water conductivity to measure water pollution from strip mines is upheld in appeal, July 12, 2014, http://irjci.blogspot.com/2014/07/epa-guidance-using-water-conductivity.html
[xxii] Appeals Court Rules In Favor of EPA in Mountaintop Removal Case, July 11, 2014, http://wfpl.org/appeals-court-rules-favor-epa-mountaintop-removal-case/
[xxiii] Appalachian Citizens’ Law Center, New coal dust regulations take effect after long fight for safer mines, February 1, 2016, https://appalachianlawcenter.org/2016/02/01/new-federal-coal-dust-regulations-take-effect-after-long-fight-for-implementation/
[xxiv] Utility Dive, Appeals court puts judicial stay on EPA regional haze rule, July 19, 2016, http://www.utilitydive.com/news/appeals-court-puts-judicial-stay-on-epa-regional-haze-rule/422880/
[xxvii] PJM, FERC Order 1000 Implementation, http://www.pjm.com/planning/rtep-development/expansion-plan-process/ferc-order-1000.aspx
[xxviii] Overview and Status Update of the 1603 Program, July 31, 2016,https://www.treasury.gov/initiatives/recovery/Documents/STATUS%20OVERVIEW.pdf
[xxix] WOTUS Rule Represents Unprecedented Expansion of Federal Authority, May 28, 2015, http://www.akbizmag.com/Government/Murkowski-WOTUS-Rule-Represents-Unprecedented-Expansion-of-Federal-Authority/
[xxx] Scientific American, U.S. and China Formally Commit to Paris Climate Accord, September 6, 2016, http://www.scientificamerican.com/article/u-s-and-china-formally-commit-to-paris-climate-accord/
The post The Obama Administration Targets Coal Every Which Way It Can appeared first on IER.
from Raymond Castleberry Blog http://raymondcastleberry.blogspot.com/2016/09/the-obama-administration-targets-coal.html