Coal mine union, AEP raise alarm about Clean Power Plan impacts on West Virginia

The U.S. Environmental Protection Agency’s proposed Clean Power Plan would have devastating impacts on both coal production and coal-fired power in West Virginia, especially since much of the state’s coal output goes to power plants outside the state that would be shut under this plan, said Gene Trisko, who represents the United Mine Workers of America labor union.

Trisko testified March 23 at a field hearing of the U.S. Senate Environment and Public Works Committee in Beckley, W.Va. The hearing was on specific impacts of the CO2-reducing Clean Power Plan on West Virginia, which is the nation’s second-largest coal producer, well behind number one producer Wyoming.

Trisko noted that EPA itself projects that State Option I would reduce U.S. coal production for electric generation by 27%, or 228 million tons in 2020 relative to the base case in 2020. Production for the overall Appalachian region, stretching from Pennsylvania to Alabama, is projected to decline by 35% from 140 million tons to 91 million tons in that year. West Virginia alone traditionally produces more than 100 million tons of coal annually, Trisko noted.

Said Trisko in his prepared testimony: “The fundamental problems that the EPA carbon rule poses for West Virginia are two-fold: first, the majority of West Virginia’s coal production is shipped to other states that have even larger emission reduction requirements than West Virginia; and second, the majority of the coal-based electricity generated in West Virginia is exported to other states affected by the rule. In 2013, West Virginia produced 116 million tons of coal. West Virginia’s electric utilities and independent power producers consumed 30 million tons of coal from all sources in 2013, equivalent to just 26% of total production. (DOE/EIA Annual Coal Report 2013). In 2014, West Virginia power plants generated 88,047 GWh of electricity, with total in-state retail electricity sales of 28,919 GWh, equivalent to one-third of total generation. (DOE/EIA, Electric Power Monthly, March 2015).

“In short, there is no compliance option for West Virginia – including potential interstate agreements – that can effectively mitigate the adverse impacts of the EPA rule attributable to the compliance actions of other states. The UMWA has long advocated increased investment in [carbopn capture and storage] technologies as a means to reduce carbon emissions while preserving coal as a mainstay of U.S. electric generation. Unfortunately, government funding and regulatory support for CCS projects have been disappointing, leaving natural gas as the principal option for future electric generation.

“Our estimates of the national job impacts of the Clean Power rule indicate the potential loss of 52,000 permanent direct jobs by 2020 in the utility, rail and coal sectors due to power plant retirements, and the loss of 167,000 total direct and indirect jobs. These direct jobs are all high-paying jobs, typically in rural communities such as those here in southern West Virginia, without opportunities for comparable employment. These impacts do not consider any of the plant closures and job losses expected over the next few years due to the MATS rule and other factors, or the impacts of higher electricity and natural gas prices on other industries.

“In UMWA’s meetings with EPA prior to the June 2014 proposal, we urged EPA to focus the rule on options for reducing emissions within the plant fence line. This is consistent with our legal understanding of the scope of Section 111(d). The agency has taken a far more expansive view of its authority. We are mindful in this regard of the cautions recently raised by the Supreme Court in UARG v. EPA (2014) of an overly-expansive interpretation of the authority to regulate greenhouse gases under the Clean Air Act.”

AEP witness raises issues with cost, fuel diversity

Another hearing witness was Charles Patton, the President and Chief Operating Officer of Appalachian Power Co. (APCo), an American Electric Power (NYSE: AEP) subsidiary that operates several coal-fired plants in West Virginia. Notable is that AEP by June 1 will shut a lot of coal capacity in and around West Virginia due to the EPA’s about-to-go-into-effect Mercury and Air Toxics Standards (MATS).

“In 2013, coal provided 95% of West Virginia’s electricity and is responsible for 89,000 direct and indirect jobs within the state,” Patton wrote. “However, the proposed Clean Power Plan (CPP) would likely result in substantial reductions in coal-fired generation and coal-related jobs by requiring an 8% reduction in the state’s CO2 emission rate by 2020 and a 20% reduction by 2030. These required emission cuts would force West Virginian’s to switch to more expensive energy sources, which come at a substantial cost premium to existing low-cost coal-fired generation.

“The over 400,000 low-income and middle-income families in West Virginia, representing 59% of the state’s households, already spend 20% of their after-tax income on energy. Modeling by NERA Economic Consulting projects that the CPP will cause a 12% increase in electricity prices for West Virginia consumers, with a peak year increase of 14%. Under another scenario (what would happen if West Virginia consumers do not significantly reduce their electricity use), electricity prices in West Virginia could increase by 28%, with a peak year increase of 21%.

“These added costs come at a time where West Virginia is already making substantial progress in reducing its CO2 emissions, largely through the announced retirement of 18 coal units totaling 2,237 MW. However, through the building block approach utilized by EPA in developing the CPP, West Virginia is assumed to bear the burden of additional significant reductions without appropriate credit for committed coal retirements. In fact, West Virginia’s remaining coal EGUs, (after the announced retirements), would have the lowest average CO2 emission rate for coal units in the US, 2,048 lbs CO2/net electricity MWh, according to the West Virginia Department of Environmental Protection.

“EPA’s building block formula assumes West Virginia would be able to decrease average coal plant heat rates by 6%, increase renewable energy output by 700% and cut customer demand by 10% through energy efficiency by 10% by 2030. As AEP and WV DEP and many others have noted in their comments to EPA, there are significant problems with how these figures were developed and calculated as well as errors in the data used. This in turn has meant that EPA has substantially overstated the amount of reductions in CO2 that can be achieved thru its Building Blocks. As a result, EPA is ultimately requiring new and dramatic changes in the energy supply mix when the electric utility industry is still coming to grips with the dramatic loss of a substantial amount of base load coal capacity that has supported the grid over many decades.

“U.S. EPA’s own analysis of the proposed guidelines predicts that 46,000 to 49,000 megawatts of coal-fueled generation will be shut down no later than 2020 as a result of this proposal. That’s in addition to approximately 71,000 megawatts of coal-fueled generation that EPA concludes has retired or will retire between 2010 and 2016. This means about one-third of all existing coal-fueled power plants, enough generation to power 60 million homes, would be gone in just five years. EPA estimates that most of these combined retirements (about 120,000 megawatts) occur by 2016. The additional retirements will happen at plants that have made, or are just completing, significant environmental investments to comply with other EPA regulations.

“Closing this much generation in such a short timeframe raises serious concerns about the ability to maintain reliability and meet peak demand, particularly in periods of extreme weather. Higher-cost replacement generation will need to be built and significant investment in transmission and other mitigation will be necessary to maintain the reliability of the electricity grid – all of which will take time and ultimately, will increase the cost of electricity.”

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.