Emissions: In Obama's Crosshairs?

Mining industry bears the brunt of new energy policies.

No off-highway market has been as shell-shocked as has been mining since the Obama Administration arrived in Washington. The credit squeeze may have wreaked havoc on construction, but the federal stimulus package will pump tens of billions into building and infrastructure projects. Agriculture may be suffering, but prices remain higher than historical averages thanks in part to the government’s ethanol mandates.

However, when it comes to mining — specifically coal — the new administration has offered many more sticks than carrots. In its first 100 days, the new administration has:

  • Threatened the financial viability of coal-fired power plants by declaring carbon dioxide a pollutant requiring stringent federal regulation.
  • Pushed ahead with cap-and-trade legislation that would increase the cost of using coal to create electricity.
  • Notified the Army Corps of Engineers that it plans to play a major role with permits for mountaintop mining.
  • Proposed requirements to monitor greenhouse gas emissions from underground mines starting in 2010.
  • Began efforts to revoke a Department of Interior rule regarding stream buffer zones, which many believe will lead to more stringent regulations.

Good cops, bad cops

Everyone knew that an Obama presidency, emboldened by solid Democratic majorities in both houses of Congress, would mean trouble for the coal industry. But many are surprised with the intensity and speed with which Washington is moving against coal.

“It’s been kind of a confusing good-cop, bad-cop thing,” says Luke Popovich, a spokesperson for the National Mining Assn. (NMA). “You’ve got the president and the energy secretary talking up the importance of coal and the need for clean-coal technologies, but at the same time you have federal agencies being the bad cops, taking more of a jaundiced view of coal. We are wondering which cop will ultimately be assigned to coal.”

The political fall-out could soon spread to the companies that manufacture mining equipment. While many are still flush with cash from back orders they’re still filling, the demand for new equipment could soon get buried under the onslaught of regulation and financial disincentives. USA Today estimated that utilities have cancelled or delayed 60 coal-fired power plants because of concerns about impending legislation. The federal Energy Information Administration has estimated that cap-and-trade could cause coal use to decline 65% by 2030.

“There is a great deal of uncertainty,” says Popovich. “Plans for new plants are being shelved as credit dries up and local opposition mounts. If we cannot get a commitment to coal and to carbon-reduction technologies, the outlook for our industry does not look good.”

Washington’s change in tone has already dampened plans for future mining projects. Pittsburgh-based Consul Energy has delayed two large mining projects in Northern Appalachia. EPA’s intention to play an active oversight role in the Army Corps of Engineers’ permitting process for mountaintop mining has put the brakes on a segment that employs about 14,000 people.

But perhaps nothing is more threatening than Washington’s double-barreled assault on coal, with one barrel being the EPA regulations and the other barrel being cap-and-trade legislation. President Obama has indicated that EPA regulation would be pursued only if Congress cannot enact legislation, but the threat of regulation will help the administration implement more stringent regulations than if Congress was acting alone.

Coal proponents hope that cooler heads will prevail as legislation and/or regulation winds its way through Washington and the public gains a more complete picture of how important coal is to the world. According to NMA, coal accounts for 27% of total energy use worldwide and generates 41% of the world’s electricity.

Some estimates show that current cap-and-trade proposals could drive up annual energy costs thousands of dollars per household in areas dependent on coal-powered electricity plants.

That’s a hefty price to pay when there’s no guarantee that it will have an impact. The Intl. Energy Agency estimates that carbon dioxide emissions will grow by almost 60% through 2030. Almost all of the growth will come from developing countries such as China and India, which rely on coal to meet more than 70% of their electricity needs. This means that there could be no change in global carbon dioxide emissions 20 years from now — even if the United States shut down all of its coal-fired power plants.

Taking the carbon out of coal

There is extensive research under way to find ways to deal with the carbon dioxide emitted by coal. One strategy is to trap the carbon dioxide and pump it underground. If successful, it would not only remove a significant hurdle for coal-fired power plants but could pave the way for using coal to make diesel fuel (see OEM Off-Highway, July 2007).

The stimulus bill passed by Congress earlier this year allocates $3.4 billion to develop clean coal technologies, but the Electric Power Research Institute and the Coal Utilization Research Council estimate that it will take $29 billion over the next 15 years to make any of these technologies commercially viable.

The mining industry’s concern is that cap-and-trade legislation could be so disruptive to the coal industry that no one will want to invest in technology that is, at best, more than a decade away. If investors shy away from coal plants, or if environmentalists win even a partial moratorium on new coal plant permits, there may be no long-term financial stomach for coal.

“We can’t expect to build a plant with 65% carbon capture if we don’t first build with 20% capture,” Hal Quinn, president and CEO of NMA, testified before Congress earlier this year. “As with any technological advance, we must walk before we can run. Toyota would not have developed the Prius if it had to await development of plug-in hybrid vehicles.”

Dave Jensen is a contributing editor from Milwaukee, WI.