Coal Tattoo

We published a story in this morning’s Gazette print edition that tries to detail the findings of an interesting new Duke University study about the potential impacts of low natural gas prices and tougher air quality rules on coal-fired power plants:

Coal-fired power plants around the country may face much greater financial risks than previously projected from a combination of low natural gas prices and stronger air quality rules, according to a new Duke University study.

The economic viability of as many as two-thirds of the nation’s existing coal plants could be threatened in the years ahead, according to Duke researchers who examined operating costs for hundreds of coal- and gas-fired plants nationwide.

“This is a much higher fraction of economic vulnerability than has previously been reported,” said Duke geologist and energy expert Lincoln Pratson, the lead author of the paper, published late last week in the journal Environmental Science and Technology.

The paper is apparently the first peer-reviewed study to look closely at issues that caused great controversy in coalfield communities and fueled an ultimately unsuccessful coal industry campaign to defeat President Obama’s re-election bid last year.

The study itself is online here and it includes some supplemental data files that some folks might want to play with. The study previously received media coverage from The Hill and from Brad Plummer on The Washington Post’s Wonkblog, which explained:

As a side note, the study also helps referee a contentious political debate. During the 2012 campaign, there were two big theories for what, exactly, was killing the U.S. coal industry. Many conservatives blamed the EPA’s air pollution rules, part of President Obama’s “war on coal.” Other analysts largely chalked it up to cheap natural gas — this was just the market at work.

This new study suggests that both are crucial factors, and tries to look at how, precisely, natural gas and the EPA will interact with each other in the years ahead.

Now, the Duke study did not address a lot of issues, and as our story and Brad’s post explained, it made a variety of assumptions that should be understood. One important thing for folks here in the Appalachian coalfields to remember is that some of the factors hurting the regional coal market, such as the mining out of the best and cheapest to each reserves, is not part of the Duke analysis. As Union of Concerned Scientists analyst Jeremy Richardson told me:

The way I look at it is that coal facing a sort of “death from a thousand cuts.” It’s not just one or two factors (the Duke paper considers the two dominant forces, natural gas prices and emissions regulations). But coal also faces additional pressures that were outside the scope of the analysis, as the authors note. These include regulations regarding cooling water usage and coal ash, and the eventual reduction in carbon emissions to address climate change.

Also, note that the analysis did not delve into the differences in coal producing regions within the U.S. Regardless of EPA regulations, Central Appalachian coal is already in the midst of steep decline, and EIA projects it will remain at reduced production levels to at least 2040. Factors driving this trend include geology (decreasing productivity because the easiest-to-mine seams are gone) and economics (it’s cheaper in many cases to ship coal from Wyoming).

The National Mining Association said that the Duke study results “confirm the strong impact of EPA’s regulations on coal plant retirements,” but the association also questioned whether the study was too optimistic about natural gas prices staying low:

The Duke analysis appears to rely on the assumption that natural gas prices will remain at current unsustainably low levels. This is not a likely scenario. Already the Department of Energy has applications pending for 24 LNG projects; fleet transportation will offer other markets for gas.

Given the recent history of natural gas price volatility, it’s likely that utility executives wherever possible will idle coal plants rather than retire them. The big difference being that idle capacity can be brought back when gas prices rise and more coal capacity becomes competitive.

Interestingly, yesterday also brought a press release from the group Appalachian Voices, proclaiming:

The number of coal mining jobs nationally in 2011 and 2012 were at the highest level in the last 15 years, contrary to the industry’s oft-repeated accusations that the Obama administration is waging a “war on coal,” according to an analysis released today by Appalachian Voices. Using data from the federal Mining Safety and Health Administration, the organization finds that the average number of coal mining jobs under the Obama administration is 15.3% higher than under the Bush administration.

The group released the analysis prior to Thursday’s scheduled confirmation hearing for the president’s nominee to head the U.S. Environmental Protection Agency, Gina McCarthy, where the industry is expected to once again attack the agency’s efforts over the past several years to institute public health and environmental protections from coal-based energy.

Vicki Smith over at The Associated Press has a story on the Appalachian Voices announcement, and you can look at the group’s numbers yourself here. Folks who have followed my previous stories about MSHA jobs figures for coal mining (see here, here and here) may find the new Appalachian Voices figures a little confusing.  That’s because in trying to track short-term trends in coal jobs, I’ve used the coal jobs figures that mining operators report to MSHA every quarter.  The new Appalachian Voice release uses annual figures for each year, derived by averaging each the four quarterly figures for each year (the same way MSHA produces its annual numbers).

The latest Appalachian Voices data using the average of each year’s quarters shows a decline in WV coal jobs between 2011 and 2012 of only about 900 jobs. But if you look at the actual quarterly data, you’ll see a much larger decrease in mining employment — more than 3,000 jobs if you compare, for example, the 4th quarter of 2011 with the 4th quarter of 2012. But the trend that Appalachian Voices is trying to highlight is pretty much the same:

While the data show some variations among coal-producing states, each of the top ten has had more mining jobs on average under the Obama administration than under the Bush administration. Nine of those states saw higher coal mining employment in 2012 than at any point during the Bush years.

Interestingly enough, while I was thinking about this blog post this morning, I also listened in to a bit of the discussion at the West Virginia Senate’s Energy, Industry and Mining Committee about a little piece of legislation called HB 3072. The purpose of the bill is “to provide a tax credit to coal producers who sell coal to taxpayers who increase their consumption of West Virginia coal in this state for the purpose of increasing coal production and coal related employment in West Virginia.

The state Tax Department, in a fiscal note on the legislation, had this to say about what the tax break would cost the state:

According to our interpretation, the amount of the proposed tax credit may vary substantially from one year to the next. Due to the expected fluctuation in the amount of available tax credit, we are unable to accurately estimate to potential annual reduction in either the General Revenue Fund or local Severance Tax funds resulting from use of the proposed tax credit. However, the reduction could be significant given the volume of coal potentially consumed in West Virginia.

In a recent blog post, the West Virginia Center for Budget and Policy raised the question, Do Coal Companies Need Another Tax Subsidy? and came up with this answer:

… The Senate should proceed with extreme caution if they plan to consider this bill. It doesn’t seem to accomplish its stated purpose and there seems to be all kinds of wiggle room that would essentially being giving free money away at a time when we are cutting vital program like higher education and domestic violence prevention.

Of course, such recommendations didn’t really get the attention of West Virginia lawmakers. During today’s committee meeting, Sen. Ron Stollings, D-Boone, talked about being sure that the Legislature does “anything to help mine more West Virginia coal.”  And, perhaps ironically, Sen. Art Kirkendoll, D-Logan, was heard to say:

We don’t want to get into a situation where we take one industry and give them whatever they want … there’s no a person around this table who believes that, even me, and I’m very pro-coal.”

And during a discussion of how much the coal industry might benefit from the tax credit, West Virginia Coal Association President Bill Raney joked, “We’ll take as much as you’ll give us.”

After voting to approve the legislation, the EIM committee moved on to other business, discussion plans for a legislative resolution in support of the mountaintop removal permit related to the King Coal Highway, a project for which promoters seem to remain unable to come up with reliable job-creation estimates.