Pennsylvania coal official outlines devastating impacts of EPA rules

Obama Administration environmental policies will over time devastate the economy in the Pennsylvania coalfields, said John Pippy, CEO of the Pennsylvania Coal Alliance (PCA), in Oct. 29 testimony before Congress.

Pippy was among several coalfield officials to testify before the House Subcommittee on Oversight and Investigation, which is looking at the impacts of U.S. Environmental Protection Agency policies affecting both coal-fired power plants and coal mines.

PCA is the principal trade organization representing underground and surface bituminous coal operators in Pennsylvania and the businesses that service and supply the industry. Major coal producers in Pennsylvania include CONSOL Energy (NYSE: CNX), Alpha Natural Resources (NYSE: ANR), Rosebud Mining and Amerikohl Mining.

A number of coal-fired plants in Pennsylvania have closed or are soon to close due to new EPA rules, like the Mercury and Air Toxics Standards (MATS). For example, on Oct. 9, FirstEnergy (NYSE: FE) deactivated its Mitchell and Hatfield’s Ferry coal plants in Pennsylvania.

Pippy noted that Pennsylvania is the fourth leading coal producing state in the nation with total annual production of about 68 million tons. Most of this coal comes from 40 underground and 291 surface bituminous coal mines located in southwestern Pennsylvania. The mining industry is a significant contributor to Pennsylvania’s economy with an annual economic worth valued at over $7bn. It is a jobs creator responsible for 41,500 direct and indirect jobs with a payroll totaling over $2.2bn per year, he added.

Through technical technological advancements coal has become an increasingly cleaner source of electricity. According to Pennsylvania Department of Environmental Protection data, electric generating units in Pennsylvania slashed their emissions of SO2 by 58% and NOx by 41% during the 2000-2010 time period. Pennsylvania DEP even predicts CO2 emissions to decrease by 17% below 2005 levels by 2016, Pippy wrote in his prepared testimony.

About 80% of the coal produced in Pennsylvania is used to generate electricity. Coal remains the fuel choice for Pennsylvania’s electric generating units, accounting for 42% of the state’s total electric generation last year.

“To be sure, there are challenges facing our industry today that at times appear daunting,” Pippy wrote. “These challenges include weaker market conditions and historically low natural gas prices that are impacting the demand for coal. Operators, however, know how to deal with market conditions as they have repeatedly demonstrated throughout the historically cyclical nature of the mining industry.”

Existing rules, and vaguely promised new ones, factor into plant decisions

Although electric rates at existing coal-fired units are lower than or competitive with other sources of electricity, the added compliance costs for recently adopted EPA policies and the regulatory uncertainty about the scope and level of future regulations, have led some generators to rethink their fuel options, Pippy wrote.

“As a result, a number of Pennsylvania-based coal-fired units, like the Hatfield’s Ferry Power Station, are prematurely being retired, in part due to current or pending air quality regulations, displacing jobs and coal production and negatively impacting all levels of the economy,” Pippy said. “Other Pennsylvania-based power units designated for retirement include Mitchell, Elrama, Armstrong, New Castle, Portland, Titus and Shawville. The retirements of these units total over 5,000 MW of electricity, or about ten percent of Pennsylvania’s currently installed electric capacity. This loss of capacity also stresses the electric grid and results in additional price volatility in electric markets.”

Last year Greene County in southwest Pennsylvania, south of Pittsburgh, produced 35 million tons of coal or almost 65% of the state’s total coal production, Pippy noted. The six major coal mines located in Greene County – CONSOL’s Bailey, Enlow Fork and Blacksville #2 operations, Alpha’s Cumberland and Emerald mines, and Dana Mining’s 4 West mine – directly employ about half the state’s total mining workforce with a payroll exceeding $300m per year. All but 4 West are high-production longwall operations.

The direct annual capital expenditures made by these mines are estimated at $1.2bn; the direct and indirect economic benefits $3.7bn per year including the creation of almost 16,000 indirect jobs. Three of the top four major employers in Greene County are mining companies and the average annual salary for a Greene Country miner totals $88,633. By contrast, the average county wage for all occupations is $42,880, or less than half of what a Greene Country miner on average annually earns.

In addition, the mining industry accounts for 25% of the county’s total employment. Tax revenue and money for local services are impacted as well.

“You cannot simply jettison coal from our generation mix without damaging a significant part of western Pennsylvania’s economy and still expect to have an affordable and reliable source of electricity to help foster a growing economy,” Pippy said. “There are environmental and pricing challenges inherent with using any existing energy source. If we shy away from using any of our domestic resources merely because they post challenges, we will find ourselves with fewer, more expensive and less reliable energy options. The true path towards energy security and economic prosperity is a balanced energy policy that wisely utilizes all of our indigenous resources, including coal, through market driven choices to satisfy demand.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.