(These comments were submitted by Kevin Crapsey, Vice President of Corporate Strategy & Development at Eco Power Solutions.)

Coal provides half of America’s power, so rumors of its death are premature. I expect coal to be a big part of our nation’s energy mix for years to come. But there is no reason that we shouldn’t meet the EPA’s regulations, which finally apply the environmental cost of coal-fired power to the price of electricity. With innovative technologies like multi-pollutant emissions control systems, we can keep the lights on while making coal clean.

Unlike traditional scrubber or flue gas desulfurization technologies that address pollutants individually, multi-pollutant emissions control technologies address CO2, mercury, particulate matter, SOx and NOx in an all-in-one solution. Addressing multiple pollutants in this manner reduces installation costs and minimizes the amount of space needed.

Unlike carbon capture and sequestration, multi-pollutant emissions control technologies are available on the market today. These innovative technologies provide the most cost-effective option for existing plants to comply with new and future emissions regulations. EPA recognized that technologies like that provided by Eco Power Solutions can provide a solution in its March 2011 MACT ruling.

The EPA’s regulations have changed the game on the power industry; now the power industry needs its own game-changer. The public health costs of fossil-fired power generation are now a market disruptor and the power industry must respond with a technology disruptor like multi-pollutant emissions control systems.

The EPA's new carbon pollution standards can't be blamed for the demise of coal -- but they will make our air healthier for all Americans.

Republicans love to tout market forces as the solution to all problems -- until the market starts voting against their pet industries. It is the market, not the government, that is causing the decline of coal.

The new carbon protections proposed by the EPA do not even affect the more than 400 existing coal plants in the U.S. They do require new plants to have pollution safeguards in place -- a commonsense approach that ensures new power plants will be cleaner than the old ones.

When it comes to developing power plants, it's become clear to most business people that coal is simply a bad investment. Not only is coal-fired power a dirty and antiquated fuel, but other sources of energy have become significantly less expensive. The price of renewable energy continues to fall and, in some parts of the country, wind power is already cheaper than coal, puts more people to work, and doesn't destabilize our climate in the process.

Coal-fired power plants are our nation's largest source of carbon pollution, which is linked to life-threatening air pollution like the smog that triggers asthma attacks as well as to climate disruption. Up until the EPA's announcement last month, there had been no national limit on the amount of carbon emitted by these plants. By establishing these carbon pollution protections, the EPA is finally moving forward to clean up and modernize the way we power our country. The result will be healthier kids, families, and workers, as well as much-needed jobs in new, clean technologies. What's not to like about that?

The U.S. electric power system is gradually shifting toward cleaner forms of generation. One sign of this transition is the declining use of coal for electric power production. In 2011, coal dropped to its lowest level of power generation in more than a decade, according to the U.S. government’s independent Energy Information Administration (EIA). In fact, the EIA recently reported that coal’s share of U.S. electric power generation fell below 40% for the last two months of 2011, the lowest level since 1978.

To understand the cause of this decline, it is important to examine the underlying market forces. Doing so provides important context for recent coal plant retirement announcements, particularly given that some companies have attributed retirements to EPA rules that are still years away from going into force. For example, FirstEnergy Corp. announced in late January 2012 that it would retire several of its smaller coal fired power plants, explaining that the decision was “based on the U.S. Environmental Protection Agency Mercury and Air Toxics Standards (MATS), which were recently finalized, and other environmental regulations.” FirstEnergy, however, had previously cited a range of reasons for its decision to reduce operations at many of its smaller coal plants.

Furthermore, available evidence does not support the notion that new EPA regulations are the primary driver behind recent coal plant retirements. These business decisions are heavily influenced by market forces, such as falling natural gas prices, declining demand for electricity, rising prices for coal and the expanding market for renewables.

A Closer Look at Key Drivers

Following are some of the key drivers influencing the direction of the U.S. power sector:

1. Natural gas prices are low. Monthly average prices for natural gas delivered to electric generators are approaching a 10-year low, which is largely attributable to the rapidly expanding supply of shale gas. As a result, wholesale prices for on-peak electricity are down in most parts of the United States.

2. Coal prices have increased significantly. U.S. average annual coal prices have increased by more than 70% in the past decade (inflation adjusted), driven in part by growing exports. Between 2005 and 2011, U.S. coal exports grew at an average annual rate of 14%. In addition to growing demand for coal in Asia, rising U.S. coal prices have also been attributed to declining productivity at U.S. coal mines, which dropped by more than 20%, on average, between 2000 and 2010.

3. Growth in electricity demand has slowed. In the past couple of years, growth in U.S. electricity consumption has declined in part because of the economic recession, but also as a result of technology advancements, along with programs designed to promote energy efficiency and demand side management. In fact, EIA data (AEO 2011, figure 76) show that U.S. electricity demand growth has gradually slowed over several decades.

4. Renewables are becoming more affordable and their market share is on the rise. In some regions, renewables are already becoming cost competitive. For example, the Public Service Commission of Michigan, which is responsible for approving new electric power contracts, recently found that new contracts for electricity from new wind farms were up to 40% cheaper than the cost of building new coal-fired power in that state. The trend of increasingly affordable renewable electricity is forecast to continue. According to the EIA, new wind power is expected to be more affordable than new coal-fired power in many regions by 2016.

These trends are driving significant shifts in U.S. energy markets that fundamentally challenge prior assumptions regarding the direction of U.S. energy investments. Natural gas is cheaper, coal is more expensive, electricity demand growth is down, and renewables are already more cost-effective than new coal plants in some markets.

New EPA rules will provide significant benefits to consumers, as well as protect public health and the environment by augmenting shifts toward cleaner and more efficient energy sources. With compliance deadlines still three or more years away – as is the case of the Mercury Air Toxics Standard (MATS) – and other market forces already contributing to declining U.S. coal use, available evidence does not support claims that new regulations are to blame for the retirement of America’s aging coal fleet.

(These comments were submitted by Evan Tracey, Senior Vice President for Communications at the American Coalition for Clean Coal Electricity).

Recently-imposed EPA regulations are dramatically hurting the coal industry – but more importantly, they’re hurting American families and businesses. Through their new rules and regulations, one after the next, the EPA is driving up energy prices and destroying jobs.

An analysis last year for ACCCE by the National Economic Research Associates (NERA) found that the EPA’s Utility MACT rule and other EPA regulations could destroy an average of 183,000 jobs every year from 2012- 2020 and increase electricity and other energy prices by $170 billion. The NERA analysis also found that the average American household would have $270 less to spend each year because of new EPA regulations. According to EPA’s own analysis, the Utility MACT regulation could cost $90 billion. Also, new regulations are responsible for recently announced retirements of coal plants in 20 states.

And, the EPA’s latest rule, New Source Performance Standards, will make it impossible to build any new coal-fired power plants..

Even a bipartisan majority of the House of Representatives agrees that the EPA has overstepped its bounds in its attempts to shutter the coal industry. Earlier this year, 221 Democrat and Republican Members of the U.S. House of Representatives signed a letter to the White House Office of Management and Budget explaining that new GHG standards for coal-fueled power plants would force a transition to undeveloped technologies and send thousands of U.S. jobs overseas.

While coal is still the single largest source of electricity in the U.S, the series of regulations coming from the EPA are preventing the U.S. from taking full advantage of our vast coal resources that are responsible for providing affordable electricity for America’s families and businesses.

The Bush Administration and, yes, the Obama Administration, have both acknowledged that coal will continue to be a vital and valuable piece of our energy portfolio. After all, our nation is sitting on 500 years worth of coal – we’re not likely to just ignore it.

But at the same time, the President is focused on diversifying our nation’s energy portfolio. This isn’t designed to kill coal, but rather to increase the production of other types of energy. The strategy is not simply to replace one type of energy for another. At the rate Americans use energy, the reality is that we simply need more energy to power our lives, our communities and our nation.

So let’s be clear — the EPA’s clean-air rules are not designed with the purpose of making coal more costly. They are designed to encourage efficient, sustainable production of new energy resources. By taking away some of the favors that have previously been handed out to the coal industry over the years, the EPA is seeking to level the playing field for other sources of energy like solar and wind. I have a hard time seeing how this is a bad thing. Indeed, isn't the elimination of subsidies and government handouts at the heart of the Tea Party mantra?

So why not level the playing field?

Of course, at the core of our energy problems is our nation’s voracious appetite for energy. We use it for everything and we rarely even think about it. But it’s time we get energy smart.

While it may not account for much of the decline in coal, energy efficiency programs like Energize New York and Connecticut’s Neighbor To Neighbor Energy Challenge are reducing the amount of energy homeowners require to power their homes thanks to energy efficiency upgrades. Energize New York found that their program alone is capable of saving Northern Westchester residents a total of $52 million in energy bills if one in three homeowners pursue their recommended assessment upgrades. That’s $52 million less going to oil and natural gas companies.

With every small step towards energy efficiency — like reducing phantom load by unplugging devices when they are turned off — industries like coal are taking one small step backwards. I have a hard time seeing this as a bad thing. And as clean energy becomes mainstream — which I assure you, it will — coal will face even larger losses. For an energy resource that is both dirty and finite, this end result is inevitable. We might as well make the transition sooner rather than later.

There’s a great scene in the 1983 movie classic Mr. Mom where Michael Keaton’s character is dropping off the kids at school and they’re yelling at him, “Dad! You’re doing it wrong!” Keaton doesn’t listen and gets chastised by the volunteer Mom who simply deadpans “You’re doing it wrong.”

It’s no surprise that movie memory comes to my mind when it comes to the Obama Administration’s attempt to regulate the future world of energy – specifically coal generation. In my mind they are simply doing it wrong. I think this for many reasons, including:

· Arbitrarily moving the goal posts. The most recent regulations from the US EPA on allowable greenhouse gas emissions from future generation sets a limit which most natural gas generators can accommodate -- but that coal generation cannot. Is there any science in this limit? Isn’t it a bit strange that this magic limit saves the planet and just so happens to allow natural gas generation but not coal generation? I’m skeptical.

· All of the above means all of the above, not some of the above. Diversity in our energy portfolio is good goal and we certainly have many options we couldn’t have dreamed of in past generations. However, it seems as though we’re going to have to rely on everything but coal in our future baseload generation since it’s hard to imagine anyone willing to invest in a power source that will be out of compliance before the first kilowatt is generated. We have 25% of the world’s coal reserves. Isn’t it worth trying a bit harder to make it part of the future energy mix?

· Giving them time, but no hope for money. There is a provision in the EPA regulations for coal companies to average their GHG emissions over 30 years, theoretically allowing them to build a new plant and retrofit it with sequestration technology when (and if) it becomes available and economical. This is bogus. What company will be able to get financing for a new plant that is built on the hope that new technology will be available and affordable at some point in the future? Investors account for risk, but they are not foolish.

· The US should be inventing new energy solutions, but why not new coal energy solutions? The Administration has bent over backwards telling us that the new alternative energy technologies should be invented here in America. Fantastic! Meanwhile, the world is investing in coal power and clean coal technology, while U.S. ingenuity is being squashed by its own government. I guess we’re being told that it’s OK if China owns the patents for future cleaner coal inventions.

It’s a bit ironic that Obama hails from coal-rich Illinois and yet his EPA seems hell bent on threatening the very existence of new coal plants. Illinois has a lot invested in jobs and economic development in coal production and generation and could benefit from new coal development in the coming years and decades.

So is this Administration trying to kill coal? In the past they have implied that it’s a friend of coal, but with friends like these who needs enemies! If the Administration is truly trying to keep coal a viable option for future generations, they are certainly “doing it wrong.”

Michael Keaton’s character in Mr. Mom does eventually pull it together and finds ways to do things right while staying true to himself. I believe the Obama Administration can do the same thing but fear we will discover once again that life in Washington doesn’t have Hollywood endings.

Washington is in a tizzy about “who killed coal?” in the wake of EPA’s new air pollution standard for carbon pollution. That standard, which requires that new power plants be at least as clean as a new natural gas plant, has blocked a miniscule number of coal plants that were still proceeding – but observers are pointing out that almost all of the new coal plants being proposed five years ago had already been cancelled, because of underlying economic uncertainty, deployment of wind, and cheap gas. That doesn’t stop coal industry advocates from blaming EPA. Just before EPA issued the rule, coal industry allies in Congress wrote a letter referencing claims that EPA’s clean-air rulemaking in the last two years had already cost 1.4 million jobs. The American Clean Coal Council complained that EPA’s rules had already shut down 140 coal plants.

But the back-story is not being told. It turns out that while Joshua Freed is correct in saying that “Blaming regulation for the decline of coal is like blaming cars for the demise of horse-drawn carriages”, coal actually laid the foundation for its own demise thirty years ago.

In 1977, Congress proposed to require all power plants – regardless of when they were built or what they burned – to meet basic pollution control standards. Coal and its utility allies – led by the Southern Company – argued that they were about to shut down their fleet of old coal clunkers anyway, and that pollution controls would be a silly expense for assets that were about to be retired. Congress believed them, and even gave the Southern company a loophole that allowed it to “grandfather” and exempt from pollution controls coal power plants that came on line as late as a twelve years after the law was passed.

And then, from 1977 until 2000, utility companies simply refused to upgrade their plants, allowing the entire fleet to continue, vampire like, as a seemingly immortal threat to the public health. Running for President, even George W. Bush implausibly promised to end the “grandfathering” scandal, only to back off once in the White House at the behest of Vice-President Cheney.

Instead, coal companies and utilities promised a brand-new fleet of “clean” coal plants – if you didn’t count carbon pollution. A total of 180 was placed in the permit and finance queue – until, on close examination, it became clear that these new facilities would be neither clean or cheap – and one by one, they almost all were cancelled or abandoned. The few that opened almost broke the financial backs of the utilities that built them – forcing 25-50% rate increases on customers.

And when the new plants didn’t materialize, and wind and natural gas got cheap, the utilities who, after all, are businessmen, not coal miners, simply dumped the dirty black rock. When EPA finally blew the whistle on pollutants like mercury, coal ash and particulates that legally should have been cleaned up in the decades from 1977 to 2008, the bill for upgrading old coal no longer made sense – even as the bill for deploying new coal had already gone through the roof. Coal it turned out was not only not clean – as Al Gore’s Reality campaign had already pointed out – worse, it was no longer cheap.

And that has made all the difference. But it was a self-inflicted wound – because if the coal industry and its utility allies had really invested in cleaning up their plants from 1977-2000, when the economics still appeared to make sense, then even the arrival of cheap wind and gas wouldn’t have been able to knock them off their perch.

Coal is declining for four very solid reasons, not really connected to each other. First, is the availability of lower cost natural gas, as well as the fact that natural gas generation plants are just lower cost to build and in lower megawatt output increments. Second, as electric grids become more sophisticated, those electric utilities want options as to the variability of output of electric generation plants -- and natural gas generators are easier to "dial up and down" than most other options. Third, State Renewable Energy Portfolio Standards and State Clean Air Act Implementation Plans favor high value energy efficiency, renewable energy, and natural gas in a combination of States where over 60 percent of US electric ratepayers live. And Four, existing and imminent clean air and clean water standards do have some impact - but the looming threat of further legal action on the other heavy metals and carcinogens coming out of smoke stacks and coal ash storage ponds. The potential for coal evolving into the "tobacco" of energy sources even without the added burden that the entire fuel cycle is the highest emitter of greenhouse gases hasn't gotten much attention, but the investment community is sensitive to these existing and emerging risks which impacts investments. - Scott Sklar, President of The Stella Group, Ltd. and Adjunct Professor at both The George Washington University and The American University.

What’s Really Causing Coal’s Decline?

Let’s start by correcting the premise. The simplest answer to the question posed by The National Journal this week is “hyperbole” is behind the talk of coal’s “decline”. Like Mark Twain’s quip about his own demise, the news of coal’s decline is greatly exaggerated. It is, nonetheless, the cause for legitimate concern among those who value affordable electricity from a secure and abundant domestic energy source. So, let’s look at the question from a more dispassionate perspective.

First of all, the “decline-of-coal” that is now the subject of inside-the-Beltway chatter is very relative. From generating virtually half the nation’s electricity for a decade, coal is now generating 40 percent-plus. And with a 260-year supply of domestic coal under our feet, Americans will be relying on coal for the foreseeable future. That’s why the EIA’s most recent Outlook projects renewed growth in 2013.

To be sure, natural gas has increased its share of the electricity generation market in part due to unsustainably low gas prices. Moving forward, however, polices like those coming from EPA should cause consumers and policy makers grave concern as they recall the historic volatility of gas prices. The National Energy Technology Laboratory warned several years ago that “policies that encourage the use of natural gas to substitute for coal in power generation could very well lead to spectacular price increases for households and industry.” If past is prologue, we may soon rue the day that EPA directed too many of our energy eggs into the gas basket.

Whatever the future holds for new coal plants, let’s not overlook the current capacity coming on line by 2014. According to federal capacity data, almost 17 GW of new coal-based generation is expected – plants already under construction or permitted. And, despite the retirements of older coal plants forced by EPA rules, the remaining ones will be running at higher capacity factors to provide households and businesses affordable and reliable power.

Finally, coal’s decline will certainly be news to the world’s fastest growing economies. They have led the five-year march that has made coal the world’s fastest growing energy source. From Brazil to China, a 21st century industrial revolution is spurring renewed interest in U.S. coal for steelmaking and electricity generation. Last year U.S. coal exports reached 107 million short tons, the most in twenty years. Over the next five years, the International Energy Agency estimates that coal demand globally will increase by more than a half million tons a day, and some forecasts peg coal to surpass oil as the world’s most prominent fuel within the next 15 years. With the largest proven coal reserves of any country, the rest of the world wants what the U.S. has the most of.

This isn’t to minimize the obstacles to coal based generation expected from EPA’s ill-conceived and likely illegal Clean Air Act regulations. At every turn, EPA has insisted upon the most costly and least flexible requirements for raising environmental performance. EPA’s policy choices are unsupported by the scientific data and unresponsive to the cumulative impact on electricity costs and grid reliability.

The betting here is that the laws of supply and demand for coal will not be repealed. It is still the most reliable and abundant energy source we have.

Blaming regulation for the decline of coal is like blaming cars for the demise of horse-drawn carriages. The market, not big bad regulators, replaced an antiquated technology with a more efficient one.

Coal is a nineteenth century technology that maintained dominance in the electricity sector because it was cheap. The precipitous decline in natural gas prices, thanks to hydraulic fracturing, are eliminating cost as a reason to use coal. The result has been a boom in new natural gas power plants, along with a dramatic increase in solar and wind power (whose prices are also declining rapidly), and virtually no new coal plants.

At today's prices, a dollar spent on natural gas can get a utility 53% more energy than a dollar spent on bituminous coal. And that is before efficiency is taken into account. Natural gas plants are 28% more efficient than coal plants. So not only can a utility get more natural gas per dollar than coal, they can also get more energy out of that natural gas. That means less waste in the form of harmful pollutants. A natural gas combined cycle (NGCC) plant releases 44% less carbon dioxide, 68% less nitrogen oxide, and 100% less mercury than a coal plant. As Third Way's recent focus groups found, even in the traditional energy states of Ohio and North Carolina, there is enormous support for eliminating pollution-emitting coal plants across education, gender, and economic lines.

It is also much cheaper to build a natural gas plant than a new coal plant. Per kilowatt, construction of a pulverized coal plant is almost three times more expensive than a NGCC plant. In addition, many natural gas plants across the country have excess capacity, meaning utilities can begin to capitalize on the economic advantages of natural gas right away without having to construct new plants.

These factors led to natural gas taking 9% of coal’s power market share in 2009, 8% in 2010, and 12% in 2011. It is expected to take 14% in 2012. Even regions that have been slower to shift from coal to natural gas, like the West and Texas/Louisiana regions, are starting to make the switch.

Has regulation had an impact? Without a doubt. But the EPA's new greenhouse gas regulations have merely accelerated the transition away from a technology that was going to have a hard time competing in the market. Of course, there is one place where government can get some of the blame for assisting in the decline of coal: the Department of Energy helped fund research that led to the hydraulic fracturing drilling technology that has made cheap natural gas possible.

Are EPA rules the reason the coal industry is declining? Or is natural gas and other market forces the cause? The very short answer is YES!

EPA’s new clean air rules are likely to become a course in the Law of Unintended Consequences. Although for this Administration and EPA, the unintended consequences will be the intended outcome. There is no subtlety to the Administration’s hostility to fossil energy. EPA has been carrying out the President’s objective with zest and vigor.

What this rule really says is that EPA does not trust market forces. If it did, it would not have issued it and instead would have explored incentives to speed the transition from coal to gas in existing power plants. The growth in energy consumption is in the electricity sector as the composition of our economy changes and as consumers make greater use of information technologies--computers and smart phones. To meet this growing demand, the nation has to make major investments in new generation capacity and reliability. EPA’s regulation of the electric power sector puts those investments at risk.

EPA tried to make the case that its regulation exempted existing coal fired plants and therefore did not impose a cost on society. What EPA didn’t say was that the regulations that are being imposed on coal fired utilities--e.g. new source review for making modifications, utilty MACT, etc.--are a death knell. One utility, AEP, stated that it would close five coal fired power plants because of the cumulative cost of complying with EPA regulations--$6-$8 billion and increase electricity prices by 10%-35%.



Recent advances in technology and the abundance of natural gas that it has made possible began a market driven shift away from coal for new power generating investments. That is good news for consumers and the environment in that natural gas is a cleaner burning source of energy. But the bright future for gas is predicated on a rational regulatory environment and low costs, neither of which can be predicted with the certainty that EPA implies in its rule. If EPA decides to replace state regulations on fracking and horizontal drilling with a national regulation, it is a sure bet that the cost of producing natural gas will go up. It is also a virtual certainty that the affection environmentalists had for natural gas a few years ago will be replaced with a campaign for heavy handed regulation that will be a serious threat to a bright energy future.

Environmental zealots, not real environmentalists, are hostile to abundant, low cost energy, preferring alternatives that exist in theory but not in the real world where competitive markets mean something.



EPA’s regulation is predicated on the mistaken notion that it must drive CO2 emissions as low as possible without regard to cost or science to prevent dangerous global warming or the preferred term climate change. This is a case, paraphrasing Mark Twain, of the problem not being what EPA doesn’t know but all the things it knows that just aren’t so. It and the climate orthodoxy true believers can repeat over and over that fossil energy emissions are causing dangerous climate change but the facts just aren’t there. Since the El Nino in 1998, global temperatures have not increased. In the meantime, new research on the pacific decadal oscillation, climate sensitivity, and solar impacts have provided undermined the conventional wisdom that human activities are creating a climate catastrophe.

While the Obama Administration moves to regulate coal out of business, the rest of the world is not. Coal exports are climbing and will continue to do so. As developing nations grow economically, CO2 emissions will continue to grow and the atmospheric affect of EPA regulations will not be noticeable.

The economic well being of our nation now and in coming years badly needs policies that recognize the factors that produce growth, those that constrain it, and those, like a growing deficit and debt, that put the economy in “harms way.” Those policies are in short supply.

People sometimes say silly things in the heat of public policy debates. Consider, for example, the eyebrow-raising comments last week by Cecil Roberts, president of the United Mine Workers of America, who asserted that the U.S. Environmental Protection Agency had killed the coal industry.

“The Navy SEALs shot Osama bin Laden in Pakistan,” Roberts said in an interview. “And Lisa Jackson shot us in Washington.” http://bit.ly/Hf27nX

Aside from the fact that it was a tasteless and most bizarre analogy – did Cecil really mean to say his members were like terrorists and that the head of the EPA was a world-class hero? – the content was dead wrong. He was specifically denouncing EPA’s proposed greenhouse gas emission standards for new power plants, standards symbolically of interest but of negligible impact for at least the next decade. (EPA itself, in a document vetted by the regulation-gate-keeping staff of OMB’s Cass Sunstein, notes that the rules will have ZERO impact on jobs or electricity prices.http://epa.gov/carbonpollutionstandard/pdfs/20120327proposalRIA.pdf )

Coal use in the U.S. for electricity is clearly on the decline, according to U.S. Energy Information Administration statistics http://www.eia.gov/coal/ (Though, wait, stop the presses! Utility coal use actually rose from 2009 to 2010! http://bit.ly/I4uJkU Does that mean Obama administration policies were encouraging more coal burning?)

Though it is cheap and easy to blame Obama for coal’s woes, I believe it is more accurate to look at the price of alternatives, particularly gas. The decline in coal pretty much parallels the decline in natural gas prices, which have plunged since 2008, according to EIA. http://www.eia.gov/dnav/ng/hist/n9190us3a.htm So has a corresponding increase in gas use at electric utilities. http://www.eia.gov/totalenergy/data/monthly/pdf/sec4_5.pdf

Needless to say, a weaker economy as well as the weather – for example, this year’s warm winter – have been contributing factors.

But I believe market forces have ultimately been the biggest factor in coal’s decline. (Question: is the climate better off with more gas use? As an excellent National Journal piece noted this week, the jury is still out because of methane emissions associated with gas extraction. Upcoming EPA standards reportedly will promote some reduction in those emissions, but an already inadequate proposal is likely to be watered down in response to oil and gas lobbying.)

Let’s consider an example of the market at work – and juxtapose it to political demagoguery. The FirstEnergy Corp. is a good case in point.

The company has become something of a political poster child for the alleged EPA monster.

FirstEnergy recently announced that it plans to retire six older coal-fired power plants in Ohio, Pennsylvania and Maryland by September 1, 2012. (These plants are part of FirstEnergy’s unregulated, competitive generation business, meaning their fortunes rise and fall based on free market forces: electricity prices, fuel prices, electricity demand, capacity prices, and capital costs. When times are good, cash flow is strong, and the company can borrow and invest in upkeep. At other times the company may find financing difficult and decide to defer maintenance expenses. Market conditions can make or break a power plant’s future potential.)

Ignoring economic realities, FirstEnergy blamed EPA, citing the agency’s mercury/air toxic standards. https://www.firstenergycorp.com/newsroom/featured_stories/Coal_Plant_Retirements0.html

Republicans in Congress almost immediately seized on FirstEnergy’s announcement to tie EPA up to the political whipping post. http://republicans.energycommerce.house.gov/Media/file/Hearings/Energy/20120208/HHRG-112-IF03-MState-W000413-20120208.pdf

But, as one very astute blogger noted http://johnhanger.blogspot.com/2012/02/first-energy-closes-coal-plants-blaming.html, FirstEnergy’s claims about the EPA rules were not “credible.”

First, the Air Toxic Rule does not take effect until January 2015 so the plants legally could have operated for another 28 months. If the plants were profitable for shareholders, closing them 28 months before the law required a mercury clean up would be a decision not in the interest of the company's shareholders… In short, the plants for the last three years had been partially closed by economic forces. They ran infrequently, because they were not competitive with other baseload generation in the wholesale electricity marketplace. The operating costs of the plants were high, both because they were inefficient and the price of coal rose more than twice the rate of inflation over the last 10 years.

While these plants production costs were high and probably increasing, the crash in gas prices and the drop in electricity demand meant that the competition with gas plants and other forms of generation got much tougher.

But don’t just take this blogger’s word for it. Let’s hear from FirstEnergy itself: In August 2010, FirstEnergy announced that it was idling its Lake Shore, Eastlake, Ashtabula, and Bay Shore plants because they weren’t needed. To quote from the company’s release:

“While we’ve seen signs of economic recovery in the first half of this year

compared with 2009, customer demand is still well below 2008 levels,” said Gary R.

Leidich, executive vice president of FirstEnergy and president of FirstEnergy Generation

Corp. “As a result, our smaller, load-following plants have been called upon to operate

less frequently. By reducing operations at these facilities, we will better match our

generation with our expected customer loads and position our company to comply with

ever increasing environmental regulations.”… As a result of the operating changes at the plants, the company estimates it could write off up to $287 million in value related to the assets…

In 2009, FirstEnergy Generation Corp. took steps to minimize the use of these

plants in response to the slowing economy. These included dispatching all the units on

an economic basis and establishing a three-day start time with MISO for the Lake Shore

and Ashtabula plants. Since that time, the units have been called upon to operate on a

limited basis. Together, the units have a generating capacity of 1,620 megawatts (MW). In

2009 they produced approximately 6.8 percent of the company’s total generation output

that year. https://www.firstenergycorp.com/content/dam/newsroom/files/news-releases/2010-08-12%20FE%20Generation%20Corp.%20Announces%20Plans%20To%20Reduce%20Ope.pdf

Translation: these plants are old dogs that cost too much to run, and they aren’t really needed. Their output could easily be replaced by newer, more efficient power plants nearby.

In fact, FirstEnergy recently told Wall Street analysts that, in sharp contrast to all the political moaning about EPA regulations, its overall electricity production will actually increase in 2012 and 2013, in spite of the retirements. This is slide 33 at the “2012 FirstEnergy Analyst Meeting Presentation” at http://investors.firstenergycorp.com/phoenix.zhtml?c=102230&p=irol-IRHome

To sum this up, the company had already idled its outmoded coal plants long before EPA’s rules came out. It announced those plants would shut down permanently literally years before they would have to under EPA requirements. And despite those changes, the company will still produce even more electricity.

So why on earth would this company try to make EPA such an obvious scapegoat? Our astute blogger, noted above, suspected a link between the company and the Republican Party because the corporate announcements appeared timed with a House hearing designed to rake EPA over the coals.

Well, I can’t prove such a link, of course. But a quick perusal of campaign contributions is interesting. Like most big companies, FirstEnergy gives to both parties. But the biggest check -- $10,000 --went to House Speaker John Boehner. http://bit.ly/HpvS92

Consider also individual contributions by FirstEnergy employees. http://www.opensecrets.org/usearch/index.php?q=first+energy&cx=010677907462955562473%3Anlldkv0jvam&cof=FORID%3A11&searchButt_clean.x=42&searchButt_clean.y=31

Not only did FirstEnergy CEO give $5,000 to Boehner’s “Freedom Project,” and $2,500 personally to Boehner, but seven other corporate execs gave Boehner $2,000, with lesser amounts contributed to the Speaker by other FirstEnergy employees. Quite a coincidence! (It is, of course, illegal for companies to reimburse employees for political contributions.) Boehner, of course, has made attacks on EPA a regular part of the official Republican mantra. http://www.speaker.gov/News/DocumentSingle.aspx?DocumentID=288837

One final note of possible interest: After the FirstEnergy/Republican diatribes against EPA, FirstEnergy has begun exploring a plan to build new natural gas turbines at one of its to-be-closed plants – the biggest of those under discussion – a move that would keep the plant open though using a different fuel. https://www.firstenergycorp.com/newsroom/news_releases/firstenergy_generationcorpfilesinterconnectionstudyrequestwithpj.html

This is probably of little consolation to Cecil Roberts, but isn’t this free enterprise at work?