[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
NATIONAL ENERGY POLICY: COAL
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ENERGY AND AIR QUALITY
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
MARCH 14, 2001
__________
Serial No. 107-2
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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____________________________________________________________________________
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COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma BART GORDON, Tennessee
RICHARD BURR, North Carolina PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York DIANA DeGETTE, Colorado
ROY BLUNT, Missouri THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia BILL LUTHER, Minnesota
ED BRYANT, Tennessee LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Energy and Air Quality
JOE BARTON, Texas, Chairman
CHRISTOPHER COX, California RICK BOUCHER, Virginia
STEVE LARGENT, Oklahoma RALPH M. HALL, Texas
Vice Chairman TOM SAWYER, Ohio
RICHARD BURR, North Carolina ALBERT R. WYNN, Maryland
ED WHITFIELD, Kentucky MICHAEL F. DOYLE, Pennsylvania
GREG GANSKE, Iowa CHRISTOPHER JOHN, Louisiana
CHARLIE NORWOOD, Georgia HENRY A. WAXMAN, California
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
HEATHER WILSON, New Mexico BART GORDON, Tennessee
JOHN SHADEGG, Arizona BOBBY L. RUSH, Illinois
CHARLES ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi TED STRICKLAND, Ohio
VITO FOSSELLA, New York THOMAS M. BARRETT, Wisconsin
ROY BLUNT, Missouri BILL LUTHER, Minnesota
ED BRYANT, Tennessee JOHN D. DINGELL, Michigan
GEORGE RADANOVICH, California (Ex Officio)
MARY BONO, California
GREG WALDEN, Oregon
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Abdoo, Richard A., Chairman, President and CEO, Wisconsin
Energy Corporation......................................... 33
Cohen, Armond, Executive Director, Clean Air Task Force...... 62
Gregg, Billy Jack, Director Consumer Advocate Division,
Public Service Commission of West Virginia................. 58
Harvey, J. Brett, President and CEO, Consol Energy,
Incorporated............................................... 40
Hutzler, Mary J., Director, Office of Integrated Analysis and
Forecasting, Energy Information Agency, Department of
Energy..................................................... 21
Pinero, Edwin, Director of Program Operations, Pennsylvania
Department of Environmental Protection, Office of Pollution
and Compliance Assistance.................................. 70
Roberts, Cecil E., President, United Mine Workers of America. 49
Yoon, Roe-Hoan, Director, Virginia Center for Coal and
Minerals Processing, Virginia Tech......................... 56
Material submitted for the record by:
Abdoo, Richard A., Chairman, President and CEO, Wisconsin
Energy Corporation, letter dated April 12, 2001, enclosing
material for the record.................................... 96
The Illinois Coal Industry 1999, white paper entitled........ 98
(iii)
NATIONAL ENERGY POLICY: COAL
----------
WEDNESDAY, MARCH 14, 2001
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Energy and Air Quality,
Washington, DC.
The subcommittee met, pursuant to notice, at 1:02 p.m., in
room 2123, Rayburn House Office Building, Hon. Joe Barton
(chairman) presiding.
Members present: Representatives Barton, Largent, Burr,
Whitfield, Ganske, Norwood, Shimkus, Wilson, Shadegg, Bryant,
Radanovich, Bono, Walden, Boucher, Sawyer, Wynn, Doyle, John,
Waxman, Markey, McCarthy, Strickland, Barrett, and Luther.
Also present: Representative Pallone.
Staff present: Joe Stanko, majority counsel; Andy Black,
policy coordinator; Bob Meyers, majority counsel; Jason
Bentley, majority counsel; Peter Kielty, legislative clerk; Sue
Sheridan, minority counsel; Eric Kessler, professional staff;
Alison Taylor, minority counsel; and Courtney Johnson, staff
assistant.
Mr. Barton. The subcommittee will come to order. Today is
the third in a series of hearings dealing with our national
energy policy. Today's hearing is going to deal with the
subject of coal, which is a vital part of our energy portfolio.
Coal fuels at least 52 percent of the electricity consumed
in our Nation. Its reserves are significant, as are the
technological advancements concerning its use that have been
made in the last several years.
I have asked the witnesses appearing before the
subcommittee today to discuss the current use of coal,
statutory and regulatory provisions that impact the supply of
coal, the prospects of using coal to meet future generation
needs, the use of new technologies, and the role of coal in a
comprehensive national energy policy.
This subcommittee has many members who are very
knowledgeable about coal. I want to applaud their work on both
sides of the aisle, and pledge my commitment to work with them
to continue to craft legislation that will allow coal to be a
significant energy resource for this country.
I want to especially point out the good work that the
ranking member, my good friend, the gentleman from Southwestern
Virginia, the Honorable Rick Boucher, has done on coal. He is
one of the, if not the, acknowledged leader in the field in
this specific energy area.
Congressman Boucher has done yeoman's work trying to push
the different parts of the coal sector into consensus. I should
not say push, but trying to encourage, mediate, whatever. And
it is my understanding that some of those issues are being
worked on literally as we speak so that we can address them in
a legislative fashion later before this subcommittee.
It is estimated that the United States possesses 25 percent
of the world's total recoverable reserves of coal. We could say
that the United States is ``The Saudi Arabia of Coal.'' This
strategic resource will not and should not be ignored or
neglected in a comprehensive energy strategy.
There are, of course, environmental issues concerning
expanded use of coal. I, and many other members of the
subcommittee, support the advancement of clean coal
technologies. Much has been done to make coal burn more
cleanly, but more obviously needs to be done.
This is absolutely not the time, however, to label carbon
dioxide as something which it is not, which is a pollutant. Nor
is it the time to regulate beyond what is scientifically proven
and necessary.
And it is not the time to take coal off the table when in
my opinion we need to put it more on the table. Having said
that, I want to applaud the Bush Administration for the common
sense decision that they made yesterday to not regulate
CO2 as a pollutant.
That is absolutely the right decision at the right time for
the right reasons, and as I told high level officials in the
Bush Administration, had they not made that decision any so-
called four pollutant bill would have not even been dead on
arrival before this subcommittee. It would not have arrived at
this subcommittee.
So it was the right decision for the right reasons, and I
want to publicly applaud President Bush for the decision that
he made. As we will discuss next week in our hearings on the
California electricity situation, our Nation's consumers
desperately need reliable, affordable power.
Power shortages are bad for the economy and the daily life
of Americans. If you look at our reserves in the United States,
it is absolutely obvious that coal is a resource that we should
look to use in an expanded fashion, and in that regard today's
hearing is very timely.
I look forward to hearing from the witnesses, and I look
forward to working with members on both sides of the aisle of
this subcommittee to craft a legislative strategy that does in
fact encourage the private sector to expand its use of coal.
With that, I would like to recognize the ranking member,
Congressman Boucher, for an opening statement.
Mr. Boucher. Well, thank you very much, Mr. Chairman, and
thank you for your kind remarks concerning the work that my
office has undertaken with regard to coal related matters. And
I want to thank you for focusing this afternoon on the
potential of coal to make a greater contribution to our
Nation's energy, security, independence, and affordability.
With domestic reserves of at least another 250 years, coal
is our most abundant domestic energy resource, and more than
one-half of the electricity generated in the United States
today is produced through coal combustion.
Coal is also our Nation's least expensive fuel. On average,
coal-fired power plants produce electricity at one-half the
cost of oil-fired plants, and at current prices at only one-
fifth of the cost of plants that are fired with natural gas.
The most certain way for the United States to achieve the
greater availability of more affordable electricity is to take
the steps this year as a part of our national energy
legislation to incent electric utilities to use coal as the
fuel for new generating facilities that electric utilities will
soon be constructing.
Few new coal-fired plants have been built in recent years.
The low prices for natural gas during the past decade made
natural gas the fuel of choice for most of the newly
constructed generating units.
Even today with much higher gas prices the Energy
Information Administration projects that 90 percent of the new
electricity generating units to be built in the coming decade
will be gas-fired. I hope that with the passage of our national
energy strategy legislation, which I look forward to working
with Chairman Barton to construct, that we can alter that
calculus.
I hope that the provision of a modest set of incentives by
way of tax credits for meeting some of the costs of compliance
with the Clean Air Act, and through other steps that we can
consider taking, that there will be a resulting decision of a
large number of electric utilities to use coal instead of
natural gas as the fuel for new electricity generating units.
I intend to suggest these modest incentives as our work on
the formation of a national energy strategy proceeds. During
the course of today's hearing, I would welcome comments from
our witnesses on the steps that we should take which will
encourage the construction of new coal-fired electricity
generating facilities.
Specifically, should we increase the Federal Government's
commitment to research and development of new coal related
technologies which can increase the efficiency of coal-fired
boilers and improve on clean coal technologies.
We are honored to be joined today by Dr. Roe-Hoan Yoon as
one of our witnesses. Dr. Yoon is one of the Nation's leading
coal research scientists, who has been the recipient of a
series of Federal research awards for the ground breaking work
that he is doing in pre-combustion coal technology.
The technologies which have been developed in Dr. Yoon's
laboratories at Virginia Tech have enabled coal companies to
make a cleaner product. His work has also enhanced the use of
coal as a fuel by enabling coal companies to recover fine coal
particles which might otherwise be discarded, with a resulting
decrease in overall coal production costs.
I will be interested today in learning from Dr. Yoon what
directions in coal R&D funding are most promising and the
effort to encourage greater coal utilization in the generation
of electricity.
I will also welcome comments from our other witnesses
regarding additional steps at the Federal level, in areas such
as tax credits for Clean Air Act compliance costs, more
facilitation of the permitting process which might encourage
electric utilities to site coal plants with greater ease, which
will serve as incentives to electric utilities toward a greater
reliance on coal.
Mr. Chairman, I thank you very much for affording these
outstanding witnesses the opportunity to comment to us today on
the steps that we should take at the national level, which will
result in a greater utilization of coal, and consequently a
much greater level of American energy independence. And we have
a new chairman, and I thank you, Mr. Chairman, and I yield
back.
Mr. Walden. Mr. Boucher, thanks for your statement, and I
want everyone to know that our chairman is not throwing up his
hands. He simply went to take a phone call.
I, too, am delighted that we are having this hearing today
on coal. I think all of us recognize that coal must play an
important part if we are going to solve our energy problems in
the United States for the short term and the long term.
And I am going to submit my total opening statement for the
record, but one thing that I wanted to point out today, which I
am sure that everyone is very much aware of, is that you cannot
talk about coal without talking about the Clean Air Act, and
sulfur dioxide, and carbon dioxide, and global warming, and
acid rain, and all of those things.
And we are not going to come up with a solution unless all
of us can work together from different perspectives on those
issues. And Mr. Waxman and I may not agree on everything about
the Clean Air Act, but we are all are going to have to work
together to solve it.
And I wanted to read just briefly from a book, ``A Moment
on the Earth,'' which was written by Greg Esterbrook. And in
this particular passage, he is talking about these different
polar positions on these issues.
``Global warming can inspire such polar positions because
the subject is so pleasingly nebulous. Crime, welfare, health
care, most issues are anchored in the muck of the real. The
greenhouse effect is a blank screen unto which partisans may
project whatever they wish to behold.''
``Reactions to the greenhouse issue fracture along the
fault lines of conventional politics. Such divisions are found
in the science, as well as political, worlds. In the United
States the most prominent green house true believers, John
Furrer, of the National Center for Atmospheric Research, James
Hanson, of the Godard Institute, and Steven Synder, of
Stanford, are political liberals.''
``The most prominent greenhouse naysayers, Robert Jastrow
of Dartmouth, Richard Linzen, of MIT, and Patrick Michaels of
the University of Virginia, are political conservatives. In the
overheated atmosphere of global warming politics, science is
subject to more than the usual misuse.''
``Linzen's work is often described by right-wing
commentators as establishing that global warming will not
happen, something that Linzen himself has never said. He says
only that the artificial greenhouse effect is an unproven
hypothesis.''
``By the same token, but from the opposite perspective,
Vice President Gore, for example, attributes to the late Roger
Revelle, who is sometimes called Dr. Greenhouse, the notion
that global warming means certain doom, something Revelle did
not say.''
``It was Revelle, Gore has said, who persuaded him that the
greenhouse effect is a dire emergency. Yet, before his death in
1991, Revelle co-authored a paper that concludes that the
scientific base for greenhouse warming is too uncertain to
justify drastic action at this time.''
I want to point that out because everyone can come up with
studies on these issues, and yet as I said, in order to solve
the problem we are all going to have to work together, and we
are going to have to be reasonable, and I for one also do
applaud President Bush for his action on CO2, which
is a natural component of our atmosphere.
And with that, I will conclude my remarks, and the next
speaker, we will recognize Mr. Waxman of California.
Mr. Waxman. Thank you very much, Mr. Chairman.
Our country needs coal as part of our energy future, but
our country also needs to continue to deal with the fact that
coal is the dirtiest fuel in widespread use in the United
States, and poses the most significant environmental threats
from acid rain and urban smog, to global warming.
In politics, too often we talk about tough choices, but
never do anything about them. Yesterday, President Bush faced
one of the first tough choices of his presidency and he struck
out. During last year's Presidential campaign, George Bush
tried to convince voters that he would responsibly address the
threat of global warming.
In fact, on September 29, 2000, he promised that as
president that he would work for legislation requiring power
plants to clean up their air pollution, and in his debates with
Al Gore, President Bush went on the attack on this issue,
highlighting his support for mandatory reductions.
Yesterday in a letter to Senator Hagel, President Bush
broke that promise. While the President gives several reasons
for his reversal, none of these reasons appear to hold up to
scrutiny.
First, the President cites a single highly flawed report to
explain that electricity prices would increase significantly if
we address carbon dioxide emissions. There have been at least
four other studies published in the last 6 months by the
Department of Energy and others that all conclude that the cost
of a multi-pollutant strategy would be quite reasonable.
Second, the President indicated that we shouldn't regulate
carbon dioxide because it is not a pollutant under the Clean
Air Act. Well, under this logic, President Bush's father would
not have signed the Clean Air Act amendments of 1990, because
most toxic air pollutants were not regulated prior to that
legislation. Besides, under current law carbon dioxide is
specifically listed as a pollutant under Section 103(g).
Third, the President claims that we don't know the causes
of and solutions to global climate change. This outmoded
rhetoric has been eclipsed by recent scientific consensus and
flies in the face of recent reports from the National Academy
of Sciences and the Intergovernmental Panel on Climate Change.
And, last, the President cites electricity problems in
California as reason not to address the carbon dioxide
emissions. This is a red herring. We can seek carbon dioxide
reductions over reasonable time periods without disrupting
energy production.
The earth climate is changing and the impacts of these
changes are dramatic. Temperatures are increasing, and sea
levels are rising, and glaciers are retreating, arctic sea ice
is thinning. Rainfall patterns are changing, and the El Nieno
phenomena is becoming more frequent, persistent, and intense.
The decisions that we make today about how we address or don't
address climate change will have a profound impact on the lives
of our grandchildren and their children.
We cannot afford to risk the planet's well-being by
refusing to address global warming. Mr. Chairman, I have a
longer statement which I would like to put in the record.
Mr. Walden. Yes, Mr. Waxman.
[The prepared statement of Hon. Henry A. Waxman follows:]
Prepared Statement of Hon. Henry A. Waxman, a Representative in
Congress from the State of California
Our country needs coal as part of our energy future. But our
country also needs to continue to deal with the fact that coal is the
dirtiest fuel in widespread use in the United States, and poses the
most significant environmental threats, from acid rain and urban smog
to global warming.
In politics, too often we like to talk about tough choices but
never do anything about them. Yesterday President Bush faced one of the
first tough choices of his Presidency, and he struck out.
During last year's Presidential campaign, George Bush tried to
convince voters that he would responsibly address the threat of global
warming. In fact, on September 29, 2000, he promised that as President
he would work for legislation requiring powerplants to clean up their
air pollution and said:
``With the help of Congress, environmental groups and industry,
we will require all powerplants to meet clean air standards in
order to reduce emissions of sulfur dioxide, nitrogen oxides,
mercury and carbon dioxide within a reasonable period of
time.'' Then Mr. Bush went even further and released a detailed
policy proposal that stated that he would ``Establish mandatory
reduction targets for emissions of . . . carbon dioxide.''
And in his debates with Al Gore, President Bush went on the attack
on this issue, highlighting his support for mandatory reductions.
In short, George Bush promised the American people that as
President he would seek a bipartisan agreement that would protect the
environment while giving industry some needed regulatory certainty.
Yesterday, in a letter to Senator Hagel, President Bush broke that
promise.
While the President gives several reasons for his reversal, none of
these reasons appear to hold up to scrutiny.
First, the President cites a single report to explain that
electricity prices would increase significantly if we address carbon
dioxide emissions. The report he mentions is a highly flawed report
from the Energy Information Administration that analyzes a proposal
that isn't being advocated by anyone. Other studies published in the
last six months by the Department of Energy, Harvard University, the
Environmental Law Institute and Resources for the Future, and U.S. EPA,
all conclude that the costs of a multi-pollutant strategy will be quite
reasonable.
Second, the President indicated that we shouldn't regulate carbon
dioxide because it is not a pollutant under the Clean Air Act. Under
this logic, President Bush's father would not have signed the Clean Air
Act Amendments of 1990 because most toxic air pollutants were not
regulated prior to that legislation. Besides, under current law carbon
dioxide is specifically listed as a pollutant under section 103(g).
Third, the President claims that we don't know the causes of, and
solutions to, global climate change. This outdated rhetoric has been
eclipsed by recent scientific consensus. Global warming no longer faces
serious scientific doubt. The National Academy of Sciences has stated
that global warming is ``undoubtedly real.'' The Intergovernmental
Panel on Climate Change recently estimated that global temperatures are
anticipated to increase by up to 10 degrees in the coming century and
stated that "most of the warming is attributable to human activities."
Last, the President cites electricity problems in California as
reason not to address carbon dioxide emissions. This is a red herring.
We can seek carbon dioxide reductions over reasonable time periods
without disrupting energy production. If the President is genuinely
concerned about the price of electricity in California, there are a
number of things he can do and should do--starting with granting the
request to restrain wholesale electricity prices submitted by the
Governors from California, Oregon, and Washington just last week.
The President's broken promise is not only a broken promise to the
American people. It is a betrayal to Administrator Whitman, who appears
to be taking her role seriously and has been advocating carbon dioxide
reductions, believing that she had the support of the President.
Administrator Whitman has a difficult job ahead of her, and President
Bush has just made it much harder.
The earth's climate is changing and the impacts of these changes
are dramatic. Temperatures are increasing. Sea levels are rising.
Glaciers are retreating. Arctic sea ice is thinning. Rainfall patterns
are changing, and the El Nino phenomena is becoming more frequent,
persistent and intense.
The decisions we make today about how we address climate change
will have a profound impact on the lives of our grandchildren and their
children. We cannot afford to risk the planet's well-being by refusing
to address global warming.
Mr. Walden. I recognize Mr. Ganske. He is not here. Mr.
Shadegg. He is not here.
Mr. Bryant of Tennessee.
Mr. Bryant. Thank you, Mr. Chairman, and I want to thank
you also for scheduling the hearing on the national energy
policy and this particular hearing which focuses on coal.
Coal is an abundant natural resource, and its recoverable
U.S. coal reserves total more than 296 billion tons, which is
enough to last over 300 years at current levels of use. Coal is
among the least expensive energy options that are available to
us.
The wide-spread availability and wide-spread transportation
infrastructure make the use of coal common in my home State of
Tennessee, as well as all across the Nation. The majority of
electric power in Tennessee is generated at coal-fired plants,
and so my constituents have a particular interest in today's
proceedings.
Such a large reliance on coal-fired generation, some
chemical emissions are inevitable. Coal-fired generators face
numerous environmental regulations aimed at reducing power
plant emissions.
These include at least 11 regulatory programs affecting
nitrogen oxide controls, and 8 programs affecting sulfur
dioxide emissions by 2004. The Environmental Protection
Agency's proposed regulations to further restrict coal-based
emissions are duplicate, contradictory, complex, financially
wasteful, and create a great deal of uncertainty.
Any national energy policy needs to include a comprehensive
examination of the implementation of environmental regulations
in order to reduce compliance costs and regulatory uncertainty.
Any national energy policy should also emphasize fuel
diversity. We have learned from the recent price spikes and
shortages that our Nation cannot afford to put all of its stock
in natural gas. We must continue to explore various clean coal
technologies and renewable fuels for the future.
Our national energy policy must also balance the need for
low-cost, reliable power with a sensible approach toward
protecting our environment.
In closing, I believe that the sustained development of our
coal resources will certainly be an important part of our
national energy policy. And again I thank the chairman for
holding this hearing.
Mr. Walden. Thank you, Mr. Bryant.
Mr. Markey, you are recognized for 3 minutes.
Mr. Markey. Thank you, Mr. Chairman. In a September 29
speech, Candidate Bush pledged that if he was elected President
that he would require, quote, all power plants to meet clean
air standards in order to reduce emissions of sulfur dioxide,
nitrogen dioxide, mercury, and carbon dioxide, within a
reasonable period of time.
He rejected the notice of voluntary reductions. He said in
Texas that we have done better with mandatory reductions, and I
believe the Nation can do better. But the election is over. But
Christy Todd Whitman didn't get the word.
So last month, she said that George Bush was very clear
during the course of the campaign that he believed in a multi-
pollutant strategy, and that includes CO2. She
explained to the extent to which CO2--that
introducing CO2 to the discussion is going to have
an impact on global warming, and that is an important step to
take.
But now it appears that Administrator Whitman was out of
the loop. George Bush has no intention of carrying out his
pledge to the American people to curb carbon dioxide emissions.
According to press reports, this campaign promise is being
broken as a result of back room lobbying by the coal industry,
the electric utility industry, and their Congressional
supporters.
The electric utility industry presently accounts for 40
percent of all U.S. emissions of carbon dioxide. Of that, more
than 88 percent of power plant CO2 emissions comes
from older, dirtier coal-fired facilities.
The way to deal with coal is to give incentives to replace
the inefficient and dirty old baseline power plants with new
and more efficient plants to produce more power and emit fewer
pollutants while using coal. It is not to avoid the fact that
they are creating this great problem.
Apparently the Bush Administration's explicit campaign
promises made to the American people to clean up the air we
breathe, and to avert the threat posed by global warming means
little in the face of big business opposition.
Apparently in the Bush Administration, King Coal still
rules. To paraphrase the old song, you burn 16 tons and what do
you get? No clean air protections from Bush just yet. So St.
Peter don't you call me 'cause they can't go, they have sold
our air to the company store. Tennessee Ernie Ford, huh?
Big business is in the driver's seat, and the consumers,
workers, and environment are just getting the door slammed in
their face once again. The administration reportedly claims
that they are abandoning plans to curb carbon dioxide emissions
because it would drive up energy prices, but that is a false
choice.
We do not have to choose between a healthy economy and a
healthy environment. We can have both. The country has
repeatedly demonstrated its ability to develop and exploit new
technologies to meet our energy needs in affordable and
environmentally responsible fashion.
There is no reason why we can't do it again. Mr. Chairman,
I invite you to invite Administrator Whitman and Secretary
Abraham to testify before our committee at the nearest possible
moment in time so that we can understand this raging debate
that is going on in the administration, and what it was that
caused President Bush to do a 180 degree switch.
Mr. Walden. Mr. Markey, thank you for your effective
statement. I am glad that you did not sing all of it. At this
time, I recognize Ms. Bono for 3 minutes.
Ms. Bono. Thank you, Mr. Chairman. I was wondering if Mr.
Markey might know a few bars of ``I've got you, Babe,'' and I
will do Sonny's part if you will do Cher's. I have no opening
statement other than to thank Chairman Barton for holding his
series on energy that he has been holding.
Just to say that I am here to learn more about the issue
and to yield my 5 minutes plus to the experts, and thank you
all for being here, and I yield back.
Mr. Walden. Thank you. Ms. McCarthy, we recognize you for 3
minutes for an opening statement.
Ms. McCarthy. Thank you very much, Mr. Chairman, for
continuing the series of hearings on important matters for the
subcommittee. The energy industry is changing rapidly, and it
really is helpful to hear about recent developments.
With respect to today's topic of coal, we have some very
important decisions to make about our continued use of this
fuel source, with a broader national and global energy and
environmental policy in mind.
Coal is clearly the predominant fuel used for electric
generation in my State of Missouri, powering nearly 85 percent
of the generation, far more than the national average. Because
of very important air quality concerns, there are few new coal
plants being planned anywhere in the country, except in Kansas
City. Kansas City Power and Light has rebuilt the Hawthorne-5
plant after a fire 2 years ago, with the latest clean coal
technologies that are available to the industry right now.
It will be the cleanest coal plant in the U.S. due to these
new technologies built for the plant. It is my understanding
that Kansas City Power and Light was able to work with the EPA
on meeting new source review requirements as they undertook
this work.
Mr. Chairman, we need to provide for streamline regulations
to utilities who want to undertake the installation of these
new technologies and update their plants, and I believe that is
something that we should explore, and hopefully our witnesses
today will provide us with some ideas of what we can be doing
to assist.
On the other side of the State, I learned just yesterday
that EPA has made a preliminary determination that the St.
Louis area will not meet the target national ambient air
quality standards by the appointed deadline. They are working
with the local officials before making the decision final.
With these types of developments in mind that I look
forward to hearing from all the witnesses, but especially about
how we can strike the proper balance for coal within our set of
fuel resources. I am interested in learning more about the
clean coal technology program, and making sure that all sectors
of the energy industry can avail themselves of the latest
technologies that are available.
It is necessary to utilize all our resources in as an
efficient and clean manner as possible as we work to ensure
adequate energy supply, within a framework of environment
responsibility, and I think, too, national security.
Thank you, Mr. Chairman, and I look forward to the
testimony from the experts today.
Mr. Walden. Thank you, Ms. McCarthy. I recognize Mr.
Norwood for 3 minutes.
Mr. Norwood. Mr. Markey, I knew Tennessee Ernie Ford, and
sir, you are no Tennessee Ernie Ford. Mr. Chairman, I thank you
for conducting our hearing today on the subject of coal and its
critical importance as part of our national energy policy.
I applaud you for your leadership on this issue, and your
straightforward comments recently when you stated that the
United States is to coal what Saudi Arabia is to oil. Indeed,
the United States has tremendous natural resources of coal,
providing the most abundant domestic source of energy in our
country.
Utilization of these resources is a key component to
achieving what I believe is everyone's primary goal, which is
U.S. energy interdependence. Frankly, turning our back on coal
is not very realistic, nor economical.
Being ever mindful of the environment, we must continue to
find ways to improve the environmental performance of coal-
fired power plants. Much has been done under the Federal Clean
Air Act and more will be done in the future.
Sound, fact-based science, fact-based science is critical
to maintaining a balance approach between U.S. energy security
concerns, and the environment. Continuous improvements made
through technological investment and development of clean coal
technology affirms coal's viability as a fuel option for
electricity and for generators.
The development of such technology should continue to ease
environmental concerns, while allowing the United States to
utilize this precious resource. I am proud to say that the
Nation's premiere research facility for clean coal research is
located in the southeastern part of the United States, and
operated by Southern Company, the parent company to Georgia
Power, who serves many of my constituents.
This plant is an important research facility in the
Department of Energy developing new and cost-effective ways of
converting coal into gas, which would be used, in-turn, to
generate electricity.
The processes being developed in this facility will remove
significant amounts of the byproduct pollutants generating
roughly one-third less carbon dioxide per unit of energy than a
current typical coal-fired plant.
Proven research leading to valuable technologies will
ensure that coal will continue to be an essential contributor
to the future energy needs of our country.
Mr. Chairman, I truly thank you for this opportunity to
hear the testimony of respected officials within the coal
industry today, and appreciate your continued leadership on
these issues. I look forward to working with you and other
members of this subcommittee as we strive to craft
comprehensive and coherent energy policy.
Mr. Barton. Thank you, Congressman Norwood. We would now
like to recognize Congressman Luther for an opening statement.
And I want to apologize that I missed Congresswoman McCarthy's
opening statement, which I wanted to hear. And I apparently
missed Mr. Markey's serenade, which I want to get in.
Mr. Walden. You did not want to hear it.
Mr. Barton. Congressman Luther.
Mr. Luther. Thank you. Thanks, Mr. Chairman, and thanks for
holding this hearing today. I am especially interested in the
initiatives where environmental and energy policymakers are
coming together with promising new technologies.
As this committee works to develop a national policy, it is
time--if not Mr. Markey's singing--that we at least take
various seriously the points made by Mr. Markey and Mr. Waxman
today in their opening statements, and have a very strong focus
on the development and application of new ideas that can reduce
harmful effects on the environment.
Once again, Mr. Chairman, I want to thank you for
assembling a diverse panel, representing a wide range of
interests. It is something that I appreciate very much, and I
yield back the balance of my time.
Mr. Barton. I think the gentleman. The gentleman from
Illinois, Mr. Shimkus, is recognized for an opening statement.
Mr. Shimkus. Thank you, Mr. Chairman. In response to my
friend, Congressman Markey, I think it is John Denver who sang,
``Take Me Home Country Road,'' and it extolled the virtues of
West Virginia, which those of us in the Republican Party really
appreciate the benefit that West Virginia did to help us get
back on a national energy strategy.
And I am also very thankful to have, and recognize Mr.
Cecil Roberts, who I have been working with to keep a mine open
in my district, and I have good news for you, Cecil. In about
1\1/2\ hours, Cilco is going to do a press release, and they
are going to keep Crown-2 open.
They negotiated in good faith, and that is late-breaking
news, and in fact that is why I was late trying to get people
informed and to be prepared to receive that; and saving
Illinois' miner's jobs, and saving another opportunity as we
address a national energy policy, and the fact that we still
have another mine open to address our pressing needs.
And it will be interesting to--and this is a bipartisan
issue. You are going to hear support for your industry and your
workers on both sides of the aisle, and that is always
important to remember as we address the needs of working men
and women in the coal fields, because you have a lot of support
from our side of the aisle to keep these mines open.
Illinois coal is huge to Illinois economy. It is our third
largest industry, and 20 Illinois mines employ about 3,700
miners, and generate about 25,000 spin-off jobs. Only 9 years
ago, we had 27 mines, employing over 5,000 miners, and we have
decreased.
And I am not going to read the whole statement, and I will
submit it for the record. But what I want to say is that in the
debate--and this is nothing new for those who have followed
these committee hearings--in the debate on a national energy
policy, we have to have a diversified portfolio of fuels, just
like people should have a diversified portfolio in investments.
That is the safest way to make sure that you are not swung by
the winds of the market forces. [The statement appears at pg.
98.]
Too long this country and the past administration has
relied on one fuel of choice, and that has been natural gas.
And my citizens have taken a beating on natural gas prices
because of that. Natural gas is a good product, but we need to
have multiple choices of multiple fuels, and allow the market
to choose the best fuel for the best use.
That is what we are going to get to, and I know that the
chairman is focused on a national energy policy that will
encourage a great diversification, and allowing the market to
choose.
And I am excited about it, and I am excited about the
future of Illinois coal. We have just got to keep these coal
mines open until we have a time to address a national policy,
and then we will have a growing industry in southern Illinois.
And I welcome you, and I welcome the panel, and I yield
back my time, Mr. Chairman.
Mr. Barton. I thank the gentlemen from Illinois, and would
recognize the gentleman from Pennsylvania, Mr. Doyle, for an
opening statement.
Mr. Doyle. Mr. Chairman, I want to thank you for scheduling
this hearing on coal as part of an ongoing series of
discussions on a national energy policy. It will be reiterated
numerous times during the course of the hearing that coal
continues to play a pivotal role in meeting our Nation's energy
needs, and thus should be appropriately incorporated into any
energy legislation worthy of consideration.
It is my hope that today's discussion will help facilitate
a better understanding about the importance of examining coal
use and production from a number of perspectives, including
short and long term needs, trends in energy consumption,
emerging technologies, and environmental regulations.
According to the Energy Information Agency, Pennsylvania is
the fourth top coal producing State in the country, and
Pennsylvania is among the top three States that contribute to
coal mine employment.
Coal has played an undeniable role in shaping Pennsylvania,
its people, and its economy, but the influence that coal has in
Pennsylvania is not simply isolated to the mountain mining
towns of Southwestern Pennsylvania. It can be found in the
Pennsylvania steel industry, research facilities, and waterway
commerce.
While I appreciate having the opportunity to stress the
fact that coal is a valuable resource that should and cannot be
ignored, it is critical that we do not lose sight of keeping
our discussion within the context of electricity deregulation.
A concern I do have about increased electricity
deregulation is that in response to limits placed on emissions,
it will be necessary for almost all coal-fired plants to
undergo extensive retrofitting. As a result, I fear that
utilities will decide that it will not be cost effective to
continue to operate these plans.
This means confronting a choice between finding alternative
sources of electricity, or further developing a new generation
of clean and efficient burning plants. If coal's contribution
is minimized, we would have to rely on natural gas to an even
greater extent to meet our growing electricity needs.
Now, while natural gas has a significant role to play in
our Nation's energy future, we must be realistic about the
infrastructure challenges that must be met to the extent
necessary for natural gas to fulfill so significant a role.
Thus, there continues to be a great interest in developing
cleaner, more efficient, coal combustion technology. Not only
will this type of technology benefit the environment and
influence the nuisances of electricity deregulation, that it
will also bolster our economy on a number of fronts.
Specifically, our domestic steel industry.
I am particularly proud of the coal oriented projects under
way at DOE's national technology laboratory, which is located
in my Congressional district. NATL has been working in
partnership with members of steel and iron industries, and
their coal suppliers, for nearly two decades.
Through NATL's collaborations with industries, advanced
technologies have been developed that make energy production
and use more efficient, cost effective, and environmentally
friendly.
Mr. Chairman, I will submit the rest of my statement for
the record, and thank you, and I yield back.
Mr. Barton. I thank the gentleman from Pennsylvania. Before
we recognize Congresswoman Wilson, I want to make an
introduction of my own. I have two of my Congressional district
staff members from down in Texas up this week.
They wanted to see if I ever did real work. They are
standing in the back of the room; is Deborah Rollins, and Ms.
Linda Gillespie. So we welcome them to the subcommittee. You
can go home and say I do work up here.
Mr. Burr. Is that why the chairman did not start this until
one o'clock?
Mr. Barton. It may be one of the reasons. The gentlelady
from New Mexico is recognized for an opening statement,
Congresswoman Wilson.
Mrs. Wilson. Thank you, Mr. Chairman. I would only make two
comments. The first is that I am very interested to hear what
you all have to say about the role of coal in a comprehensive
national energy policy. And if there is anyone who doubts or
who doubted a year ago that we need an energy policy, I don't
think there is anybody who doubts it today.
Natural gas prices are at all time highs, and rolling
blackouts in California, and the failure of Federal Agencies to
work together to make regulatory decisions that favor American
independence or energy independence, rather than just to bring
their own narrow constituencies, and we need to fix that.
The only comment that I would make with respect to coal is
that the State of New Mexico is not only a coal-producing
State, but 70 percent of our electric power comes from coal,
and the remainder comes from a small percentage of natural gas,
and the rest from nuclear energy from the Palo Verde Plant.
But one of the things that I worry about is the effect that
regulations have, and it is the law of unintended consequences,
where we try to put in place regulations and rules that will
encourage clean air with--I guess them call them the best
available control technology requirements, that actually
discourage incremental improvements in both efficiency and air
quality.
And as a result, what we are doing is not getting the most
that we can of megawatts out of the coal that we produce. Those
kinds of things, the law of unintended consequences or
regulations, are some of the things that I think you need to
address in a national energy policy.
We have had hearings in this committee which have shown how
hydropower is going down the spillways in this country because
of a regulatory process that discourages the development of
hydropower, and now we are going to hear the same thing I think
today with respect to coal.
That we are not getting the most out of our coal supply
because of regulations that discourage the incremental
improvements which would not only improve the efficiency of the
power plants, but would reduce the noxious emissions from those
power plants.
The Federal Government needs to stop regulating in that
way, and provide flexibility to those who supply power to the
American consumers, and encourage protection of the environment
at the same time. Thank you, Mr. Chairman.
Mr. Barton. I thank the gentlelady, and I now recognize the
gentleman from Louisiana, Congressman John, for an opening
statement.
Mr. John. Mr. Chairman, I have a official statement that I
would like to be reflected in the record. I just want to say
thank you for not only this committee hearing today, but also
the series of committee hearings that you have held that I
believe will have a profound impact of what I hope will be the
top priority of this subcommittee and our full committee
putting together an energy policy for this country.
And obviously coal and the future of this industry is
important; coal is a natural resource and as a fuel source, it
is abundant. It also has a cost advantage over other fuels that
is very, very important, and coal will and should play a very
important part, and be a component of what I think any energy
strategy that we have in this country.
So thank you for having this hearing, and I really
anxiously await the panelists' comments. Thank you very much.
[The prepared statement of Hon. Chris John follows:]
Prepared Statement of Hon. Chris John, a Representative in Congress
from the State of Louisiana
Thank you Mr. Chairman for holding this hearing on the role of coal
in a comprehensive national energy policy. I will be brief with my
remarks.
As the nation's single largest energy source for electric power
generation, and with an abundant domestic supply, coal is and will
continue to be a critical resource in meeting our nation's growing
energy needs.
I support the coal industry. Too often, Americans take for granted
the contributions of our domestic mining industry and its hardworking
employees.
I support coal-fired generation of electricity. It is in our
nation's best interest to have a diverse mix of fuel sources since over
reliance on any single source jeopardizes our domestic energy security.
I support further research and development into clean coal
technology. Fossil fuels will be the cornerstone of any energy policy
for the foreseeable future, so we must continue advancing research into
higher efficiency and reduced emissions.
As a high emissions producing fuel source, coal-fired generation
raises a legitimate issue in this subcommittee regarding the
relationship between competing demands for cheap, reliable power and
cleaner air. I do not hear from any constituents who wants dirty air.
But I also do not hear from any constituents who want higher
electricity bills or less reliable service. We must develop an energy
policy that reflects a sensible balance, and I believe this committee
can find common ground on these important issues.
Mr. Chairman, I thank you for calling this hearing and I look
forward to the testimony of today's witnesses.
Mr. Barton. I thank the gentlemen from Louisiana.
I would recognize the gentleman from Oregon, Mr. Walden,
for an opening statement.
Mr. Walden. Thank you, Mr. Chairman. I want to thank you
for this hearing and I don't plan to sing to the panel. I plan
to listen to the panel, and with that I will return my time.
Mr. Barton. All right. We would now go to the gentleman
from Wisconsin, Mr. Barrett, for an opening statement.
Mr. Barrett. Thank you, Mr. Chairman, I, too, shall be
brief. I want to thank you for convening this hearing as part
of a series of hearings on energy in the United States. I also
want to thank the witnesses for being here today to discuss
what role coal can play in meeting the Nation's overall energy
supplies.
I think all of us recognize the soaring natural gas and oil
costs, combined with the surging demand for energy, suggests
that we can't abandon coal as an important power source.
Therefore, we must work to lessen coal's impact on the
environment by enhancing clean coal technologies.
I am especially pleased that Dick Abdoo is here from the
Wisconsin Energy Corporation to share his company's power the
future plan with the committee. This innovative plan, developed
in close consultation with consumer protection groups, calls
for the construction of three new coal-fired power plants in
Wisconsin.
It has been greeted and applauded as environmentally sound,
fiscally efficient, and hopefully will ensure that residents
and utilities in Wisconsin will have energy needs filled for
the long haul. I am hopeful that if it works out as it is being
touted that it will serve as a model for the Nation.
So I look forward to hearing your testimony, as well as the
testimony of the others here today. Thank you, Mr. Chairman.
Mr. Barton. I thank the gentleman. The vice chairman of the
subcommittee, the gentleman from Oklahoma, Mr. Largent, is
recognized for an opening statement.
Mr. Largent. Mr. Chairman, thank you for holding today's
hearing to examine what role the use of coal has in a national
energy policy. Traditionally, coal has been the electricity
generation source of choice for many of our Nation's utilities.
According to the Energy Information Administration, coal
accounted for about 52 percent of all generation by electricity
producers and co-generators in the year 2000. During the
1990's, government regulations and mandates discouraged the use
of coal as an electricity generating source, largely due to the
detrimental health impacts associated with the burning of coal.
The power industry needed to find a cleaner, more efficient
generation source. Natural gas seemed like a natural fit.
Natural gas is energy efficient, produces lower sulfur dioxide,
and nitrogen oxides, and up until last year was relatively
cheap.
The need for natural gas became so great that current
supplies are not sufficient to keep up with present demands.
Consequently, natural gas prices spiked nearly $10 in MCF late
last year, and now coal looks as though it could be the
electricity generation of choice for many utilities.
I will be interested in hearing our witnesses' perspective
on the advances of clean coal technology and the associated
environmental benefits, and how the utilities plan to retire
many of these 40 year old coal-fired base load plants as base
load demands continues to rise.
How much will it cost utilities who own coal-fired plants
to comply with the new source permitting review process; and
finally, how will those costs impact consumers. Mr. Chairman, I
look forward to an informative hearing.
Mr. Barton. I thank the gentleman from Oklahoma. The
gentleman from Ohio, Mr. Sawyer, is recognized for an opening
statement.
Mr. Sawyer. Thank you, Mr. Chairman. I will submit a longer
statement for the record, but I wanted to join our colleagues
in thanking you for this series of hearings, and for the
recognition that whatever the source of energy, the fuel--
natural gas or coal, or oil, or nuclear--there are tensions
among benefits and costs, and needs, and risks, and evolving
technologies that are a part of the evolving business of
developing a national energy strategy.
With a short-term crunch and growing long-term needs, it is
clear that with about a quarter of the world's coal that it
will continue to be a critical component in any solution to our
energy shortfalls.
But the increased use of coal obviously brings serious
environmental questions. So we need to recognize that while
coal may be less costly as a resource, its responsible use is
more expensive than it first appears. That is what we are here
to talk about today I think in no small part.
The kind of hopes that we have had for a combination of
technologies that is every bit as diverse as the fuel
portfolio, and we think in terms of post-combustion treatment,
a variety of different burn technologies that have been worked
on over the last several decades, and the many decades-old
struggle toward practical liquification or gassification of
coal is really a part of what we are here to hear about today,
and I look forward to doing that, and once again thank you for
the hearing, and I gave back the balance of my time.
Mr. Barton. I thank the gentleman from Ohio. The
distinguished vice chairman of the full committee, who has been
somewhat under the weather this week, but is looking more
chipper, the gentleman from North Carolina, Mr. Burr.
Mr. Burr. I thank the chairman, and I also ask unanimous
consent to enter my statement into the record, Mr. Chairman.
Mr. Barton. Without objection.
Mr. Burr. And applaud the chairman for his work on an
energy policy that is long overdue. Mr. Chairman, let me
mention at this time, that when I heard of the President's
change as it related to his stated campaign promise, I actually
applauded it.
I want to read a statement from his letter. He said, ``At a
time when California has already experienced energy shortages,
and other Western States are worried about price and
availability of energy this summer, we must be very careful not
to take action that could harm consumers.''
Good leadership is making tough decisions. Sometimes it is
turning to the public and saying I was wrong. It is not going
to please everybody. There are individuals that would like to
see that in granite.
I think that the challenge in front of this committee is to
have a long term energy strategy that fulfills both
obligations; protection of this planet, and at the same time an
energy policy that allows generation to grow with the demand
and with the population of this country.
I believe it is possible to reach both of them. It is
impossible to reach it without a long term energy policy, and
my hope is that through this we are able to do that very
quickly. I thank the chairman.
[The prepared statement of Hon. Richard Burr follows:]
Prepared Statement of Hon. Richard Burr, a Representative in Congress
from the State of North Carolina
Mr. Chairman, I wanted to thank you for holding this hearing on our
national energy policy which will focus today on the coal industry. As
we have watched over the past year the volatility of the natural gas
and petroleum markets, it has become increasingly apparent that our
nation's domestic energy policy have a multi-dimensional portfolio of
energy sources. If we continue down a path of relying on one or two
sources of energy to fuel our nation's homes, schools, and economy in
general, we will continue to be held hostage to fluctuating prices as
demand continues to outweigh supply.
Therefore, it is necessary that until we can further expand our
energy portfolio to include new AND AFFORDABLE non traditional energy
sources like wind, biomass, geothermal and other renewable energy
sources, we must continue to develop our existing traditional sources
like coal. The most recent numbers show that nationwide, some 52% of
all U.S. generating capacity is coal-fired. The most recent numbers for
North Carolina show that in 1999, 61% of utility generation in our
state came from coal-fired facilities.
However, the trends show that, because of various government
regulations, lawsuits and potential international agreements, coal-
fired generation will decrease by 2020 to around 44%, with the 8%
difference to be made up by natural gas-fired generation. Couple this
with estimated growth of consumption to increase by 48% in the same
time period and our supply problem becomes much more worrisome.
There are in place several R&D programs aimed at the Clean Coal
technology that will address controls on Sulfur Dioxide
(SO2) via the use of scrubbers as well as controlling the
amount of NOX. Unfortunately, these programs were kept on
life support during the previous Administration while regulation upon
lawsuit upon regulation led many, save our friend from Wisconsin who is
here to testify today, to flee the construction of coal fired plants
during the 1990's.
The Bush Administration, by contrast, is planning on aggressively
pursuing these R&D projects. It makes no sense that we can sit on a
supply of energy larger that the WORLD'S KNOWN OIL RESERVES, which
could supply our country with almost three centuries worth of energy,
without putting forth an aggressive effort to efficiently and
responsibly use it to make sure every American has affordable and clean
energy. I look forward to the panel's testimony and plan on offering
questions to the panel at the appropriate time.
Mr. Barton. Thank you.
All members of the subcommittee present have had a chance
to make an opening statement.
The Chair would now recognize the distinguished member of
the full committee, who is a past member of the subcommittee,
Mr. Pallone, for a brief opening statement.
Mr. Pallone. Thank you, Mr. Chairman. I do appreciate the
opportunity to joint the subcommittee today, and I want to say
that I am happy that the subcommittee has been proactive with
regard to the Nation's energy policy.
I have to say though, Mr. Chairman, that I have to express
my disappointment in President Bush's decision to back down
from the campaign promise to regulate carbon dioxide from power
plants. I believe if the Bush Administration is serious about a
balanced energy policy that improves air quality, curbing
carbon dioxide emissions has to be part of that solution.
In spite of the administration's recent statements, I
remain dedicated to passage of a multi-pollutant emissions
reduction bill, a bill that addresses carbon dioxide and
nitrogen oxide, sulfur dioxide, and mercury.
And I will be reintroducing my four pollution emissions
reduction legislation within the next 2 weeks. I mention this
legislation because I think it is important, because coal power
plants emit about a third of the U.S. carbon dioxide emissions,
and I have never been among those who favor shutting down all
our coal-fired plants.
But I do believe that we should make our plants as clean
and efficient as possible. Coal needs to be a part of our
energy plan, but we must be sure that before any new coal
generating facilities are built that we address emissions from
existing facilities.
Emission pollutions from many coal-burning plants are
typically transported by air currents to the northeastern
States, like my home State of New Jersey, and then we bear huge
health and environmental costs of the pollution, and the
economic costs of cleaning up.
In downwind States, pollution effects are mitigated by
installing ever more pollution control equipment on local
smokestacks, building expensive mass transportation systems,
and using oxygenated fuels to reduce car emissions.
Additionally, recent studies show that people who live
within 50 miles of coal-fired plants face the most significant
health impacts. If we expect increases in coal-generating
units, we need to establishing environmental standards today so
that any new plants that are built can be engineered with long
term investment security.
Now, aside from a strong four pollutant bill, I believe we
must pursue greater investment in the research and development
of clean coal technologies. Such efforts will help reduce
harmful emissions that contribute to smog, as well as greater
atmospheric concentrations of greenhouse gases.
In drafting my bill, I worked with utilities, clean coal
groups, and environmental groups to create comprehensive and
realistic legislation, and my legislation provides a market-
based solution to mitigate the impact that emissions have on
the environment, including carbon dioxide, by establishing a
cap for the trade system.
Mr. Chairman, in conclusion, I just want to stress that I
think we need to recouple energy and environment policy. First,
the Federal Government must guarantee that our environment is
not degraded as a result of any increased use of coal
generation.
Second, no State, town, or company, should unfairly bear
the environmental costs of a national energy policy or the
economic costs for environmental protection. And, third, we
must ensure that clean and renewable energy technologies are
not unfairly disadvantaged.
And we should not let the administration's ideology stop us
from implementing what is right for the American people. And
again I want to thank you, Mr. Chairman, for the opportunity to
speak and join you this afternoon.
Mr. Barton. I thank the gentleman from New Jersey, and we
look forward to his full participation when our legislative
package begins to move to the full committee, and you are
always welcome at the hearings of the subcommittee.
Seeing no other member present who has not had an
opportunity, the Chair would ask to make an opening statement,
and the Chair would ask for unanimous consent that all members
not present have the requisite number of days to put their
official opening statement in the record.
Is there objection? Hearing none, so ordered.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Ed Whitfield, a Representative in Congress
from the State of Kentucky
Thank you Mr. Chairman. Coal in Kentucky is a $2.7 billion a year
industry and helps to keep our electricity rates among the lowest in
the country.
Over half of the electricity generated in the United States comes
from burning coal. Forecasts from the Energy Information Administration
tell us we will continue to rely on coal for approximately half of our
electricity needs for at least the next two decades. Meanwhile, by
2020, the consumption of electricity in the U.S. is expected to grow
35% and world-wide consumption is projected to grow by 70%.
Fortunately, the U.S. possesses close to 25% of the world's total
recoverable reserves of coal. Coal constitutes approximately 85% of our
fossil fuel resources here in the U.S.--enough to last more than 250
years at current rates of consumption. Since 1970, overall emissions
from U.S. coal-based generating plants have been reduced by one third
while electricity produced from coal has tripled.
Although I think we should continue to develop renewable sources of
power, we cannot ignore the present day reality that coal-generated
electricity is indispensable to warming our homes and running our
businesses. Instead, this Congress should work to develop more
environmentally-friendly methods of using coal to generate electricity.
The Department of Energy's Clean Coal Technology Program has been
working with industry for over 15 years to resolve this challenge. I
would like to congratulate President Bush for pledging $2 billion over
ten years for clean coal technology. While this program has helped
develop advanced coal-based generating technology, we must also do more
to encourage the application of this technology within the time frames
envisioned by our environmental laws. Therefore, I intend to introduce
bipartisan legislation with my colleagues Rick Boucher and Al Mollohan
to create a comprehensive coal-based technology program to reduce
emissions and improve efficiency in existing coal-based generating
plants and stimulate deployment of advanced technologies to further
reduce emissions and improve efficiency in new generating facilities.
The environmental benefits of this legislation are clear. One of
the goals is further reductions in emissions from the retrofit of
systems for continuous emission control and repowering. Nitrogen oxide
emissions are projected to be reduced by over 740,000 tons per year, a
24% reduction from 1999 levels. Sulfur dioxide emissions are projected
to be reduced by over 2,457,000 tons, a 28% reduction from 1999 levels.
And in spite of the fact that the installation of systems of continuous
emission controls decreases unit efficiency and increases carbon
dioxide emissions by 2%, the reduction in carbon dioxide emission from
the repowering applications are projected to result in a net reduction
of over 11,722,000 tons.
I look forward to hearing from the witnesses and hearing the
opinions of my colleagues.
______
Prepared Statement of Hon. Greg Ganske, a Representative in Congress
from the State of Iowa
Mr. Chairman--I appreciate the opportunity for the committee to
hear from these upcoming witnesses on the role of coal in our national
energy generation needs. It is predicted the United States will set a
record by consuming 1.085 billion tons of coal this year, which is 21
million more tons than were used in 2000. Obviously, it is an important
part of our national energy strategy. I am also very interested in
developments in the area of clean coal technology. According to the
Energy Department there are now 38 Clean Coal Technology projects
around the country, 25 of which are currently operating. I look forward
to hearing more about that subject this afternoon.
I would also like to take this opportunity to raise the option of
combining the use of biomass with the burning of coal. We have a
facility in Iowa which I visited earlier this year that is exploring
this concept right now. The generating station at Ottumwa, Iowa is
currently cofiring switchgrass with coal to create 35 megawatts of
generation capacity. This is currently only about 5 percent of the
plant's 650 megawatt generation capacity, but it has many benefits. The
Chariton Valley Biomass Project use of switchgrass to displace just
five percent of its coal use is projected to reduce carbon dioxide
emissions by nearly 177,000 tons per year.
The use of biomass crops such as switchgrass also has other
benefits. The grass can be planted on highly erodible land in my state,
which helps prevent soil erosion and water contamination and also
provides for additional wildlife habitat. Their process of using
switchgrass is also projected to reduce sulfur dioxide emissions by as
much as 113 tons per year. Using the current values of tradable
emission credits that could potentially be derived from a shift to
switchgrass cofiring, the reductions in greenhouse gases and sulfur
dioxide emissions could be worth an estimated $420,000 annually.
This is just one example of the benefits of cofiring biomass and
coal. I think it is a creative solution and an example of the type of
innovative approaches and combination of practices that our country
needs to help deal with our expanding energy demands. I look forward to
hearing more about the current coal situation in our nation from
today's witnesses. Thank you Mr. Chairman.
______
Prepared Statement of Hon. John Shadegg, a Representative in Congress
from the State of Arizona
Today's hearing on the role of coal in national energy policy is
very timely. Last week's hearing on the energy situation in California
and the Western United States helped to educate Members on the very
tight supply of electric generation capacity in much of the West. While
we are moving forward to address this shortage in the only way which
will actually produce long-term results, namely the construction of new
generation, there is a devil in the details. Almost all of the planned
generation capacity is natural gas.
I strongly support the use of natural gas for generation because of
its relatively low cost, its ability to provide peaking power, its
clean burning qualities, and the rapidity with which a natural gas
plant can be constructed. I am proud that my state of Arizona has plans
to more than double its generating capacity by adding as many as 20 new
natural gas fired plants. However, I am worried that this may create an
over-reliance on natural gas.
Investors realize the importance of putting their financial assets
into a diversified and well-balanced portfolio. Likewise, makers of
energy policy should realize the importance of diversified sources of
generation.
Diversification means that electricity supply and price are not
dependent upon the prices and shortages of a single resource. It means
greater independence for the United States from foreign sources of
supply and the vagaries of public policy. It means that each type of
generation can be used for what it does best; nuclear and coal for base
load, hydropower and natural gas for peaking power.
Coal is an absolutely vital element of this diversified energy
portfolio. It currently produces slightly more than half of the
electricity generated in this country and will continue to play a vital
role. Coal is an extremely abundant resource; a fact which keeps the
price low. Its use increases our energy independence since
approximately one quarter of the world's estimated coal reserves are in
the United States. Since it can be economically moved by train and
truck, it is unaffected by shortages in pipeline capacity.
Two key issues are going to affect the ability of utilities to
fully utilize this resource. First, the effects of coal fired
generation on air quality must be addressed through both the continued
development of new affordable technology to reduce emissions and
through the intelligent application of environmental regulations.
In this regard, I welcome yesterday's decision by the
Administration to refrain from imposing new restrictions on carbon
dioxide emissions from coal fired plants. At a time when states
throughout the West are faced with major electricity shortages, it
would have been foolish to further reduce generation capacity by
targeting a substance which does not have a direct negative impact on
human health.
The second issue which must be addressed is access to clean-burning
coal deposits on federal lands in the West. Approximately one third of
coal reserves in the United States are located on federal land. Much of
this coal is low in sulfur and produces relatively small levels of
nitrous oxide when burned in generating plants. Unfortunately, the
previous Administration pursued a myopic policy towards federal lands
which ignored the benefits to energy supply and air quality from making
this coal more readily available. It did so by declaring an oversized
national monument in southern Utah which put off limits 23 billion tons
of recoverable low sulfur coal. To put that in perspective, 23 billion
tons is enough to meet U.S. demand, if demand holds at current levels,
for about twenty years.
Future coal production on federal land was also restricted by
interpreting such land use laws as the Federal Land Policy Management
Act in ways which prevent mining in large areas. Hopefully, current
electricity shortages will help more policymakers to understand the
importance of taking a broad view of the impact of environmentally
based restrictions.
Let me close by thanking Chairman Barton for focusing today's
hearing on the place of coal in America's energy policy and for
scheduling a hearing in two weeks on nuclear power. Both coal and
nuclear are vital elements in our energy strategy and, despite the
vilification which some have directed against these two energy sources,
will remain essential to our electricity supply for the foreseeable
future.
______
Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee
on Energy and Commerce
Mr. Chairman: I want to thank you for conducting an informative
series of National Energy Policy hearings, and especially for today's
hearing on coal. Chairman Barton and I realize that an effective,
coherent national energy policy can be developed only after looking at
the complete picture, instead of a haphazard, piecemeal approach. Coal
is a part of that big picture. Today, over half of the electricity in
the United States comes from coal. For the foreseeable future, coal
will continue to supply a significant amount of our energy. In the
current energy market, with many States facing supply shortages and
lack of sufficient new generation, it would be foolhardy to shut off
half of our electricity supply. Nor, as the California situation has
demonstrated, would we be well advised to put all our eggs in one
basket with regard to a fuel supply.
This does not mean, however, that the environment must suffer. We
will hear today about clean coal technology that is in use now, and
additional technological advances that will be used in the near future.
Moreover, new coal-fired power plants must meet strict air pollution
standards that ensure the protection of our children and the
environment. The technology is available to meet or exceed these
standards, and I am excited to hear about some of the power plant
projects that our witnesses will discuss today.
Finally, I'd like to thank our witnesses for their testimony. We
have a distinguished panel that will cover all aspects of the issue,
from coal production to power generation, from labor issues to
environmental impacts, from clean coal technology to consumer impacts.
Mr. Chairman, I welcome the opportunity to hear more about this
important energy policy issue, and I yield back my time.
Mr. Barton. Lady and gentlemen, we welcome you to the
subcommittee. We are here to hear from you. Your testimony is
in the record in its entirety, and I want to compliment each
and every one of you. We got it in on time. That is the first
time this year that everybody has gotten their testimony in on
time. So we thank you.
We are going to start with our administration witness, and
we will hear from you for 6 minutes, and then we will just go
right down the row. There are several of our witnesses that
members of the subcommittee wish to introduce in a little bit
more detail. So when we get to you, we will let the members
introduce you. Welcome to the subcommittee.
STATEMENT OF MARY J. HUTZLER, DIRECTOR, OFFICE OF INTEGRATED
ANALYSIS AND FORECASTING, ENERGY INFORMATION AGENCY, DEPARTMENT
OF ENERGY
Ms. Hutzler. Mr. Chairman, and members of the subcommittee,
I appreciate the opportunity to appear before you today to
discuss the current and future utilization of coal in the
United States.
The Energy Information Administration is an autonomous
statistical and analytical agency within the Department of
Energy. We are charged with providing objective, timely, and
relevant data analysis and projections for the use of the
Department of Energy, other government agencies, the U.S.
Congress, and the public.
The projections in my oral testimony are from the Annual
Energy Outlook 2001, which provides projections and analysis of
domestic energy consumption, supply, and prices. These
projections are not meant to be exact predictions of the
future. They represent a likely energy future given
technological and demographic trends, current laws and
regulations, and consumer behavior.
Coal is our Nation's most abundant fossil fuel resource,
with total resources estimated at nearly 4 trillion short tons.
The demonstrated reserve base for coal, roughly equivalent to
the discovered resource base, totals more than 500 billion
short-tons, of which estimated recoverable reserves is 275
billion short tons.
U.S. production was 1,087 million short tons in 2000, a 1.2
percent decline from 1999. This represented the second straight
year of production decreases following a 1.6 percent decline
between 1998 and 1999.
Consumption, however, rose by 3 percent between 1999 and
2000, with the additional demand being met from supplier and
consumer stocks. About 90 percent of our coal is used for
electricity generation as you see depicted in this first chart.
You also have copies of these charts with my submitted
testimony. The remainder is used in industrial boilers and co-
generators, coke plants, and for heating in the building
sector. We expect domestic coal demand to increase to 1,297
million short tons in 2020 because of projected growth in coal
use for electricity generation, resulting from increased
utilization of existing coal-fired generating capacity and
expected new coal plants.
Although coal is projected to maintain its fuel cost
advantage over other fossil fuels, gas-fired generation is
expected to be the most economical choice for construction of
new power generating units when capital, operating, and fuel
costs are considered.
New natural gas fired-generation has higher efficiencies,
lower capital costs, better load following, and shorter
construction lead times than coal, and is favored under
electricity markets that are undergoing deregulation.
Even though coal plants are expecting to remain competitive
and be used more intensively, coal is expected to lose market
share in electricity generation as new natural gas-fired plants
are added.
Between 2000 and 2020, coal-fired generation is expected to
increase about 20 percent, but its share of generation falls to
44 percent. In contrast, gas-fired generation is expected to
increase its share from 16 percent today to 36 percent in 2020,
as you can see from this chart.
National coal production is expected to increase to 1.3
billion tons by 2020, with the largest gains coming from low
sulfur, sub-bituminous mines in the west, especially Wyoming.
Western surface mines are less labor intensive than eastern
deep mines, resulting in the industry producing higher
quantities of coal from western mines, with fewer miners. The
older mining areas in the east and midwest are projected to
show declining projection through 2020, which is depicted in
the chart before you.
Due to the increasing productivity, coal mine mouth prices,
the price of coal at the point of production, have steadily
declined for the past two decades, now costing about $16.50 per
short ton.
Prices are expected to continue falling as productivity
continues to improve, although at a slower pace than recently,
reaching $12.70 per ton in 2020 in real 1999 dollars. As you
can see from this chart, in nominal dollars, coal prices are
relatively flat.
A major challenge to coal is the growing trend toward laws
and regulations to reduce emissions associated with its use.
These include Phase Two of the Clean Air Act Amendments of
1990, proposals to address ozone formation, fine particulates,
regional haze, and mercury; and proposals to reduce carbon
dioxide emissions, such as the Kyoto protocol, and multi-
pollutant strategies that also reduce sulfur dioxide, nitrogen
oxide, and mercury emissions.
In conclusion, while coal provides more than half of
today's electricity generation, that share is expected to
shrink over the next two decades, as natural gas is expected to
greatly increase its proportion of electricity generation.
Nevertheless, under current laws and regulations, coal
consumption and production is expected to grow about 1 percent
per year between now and 2020.
Thank you, Mr. Chairman, and members of the subcommittee. I
will be happy to answer any questions you may have.
[The prepared statement of Mary J. Hutzler follows:]
Prepared Statement of Mary J. Hutzler, Energy Information
Administration, Department of Energy
Mr. Chairman and Members of the Committee: I appreciate the
opportunity to appear before you today to discuss current and future
coal supply, demand, and prices in the United States.
The Energy Information Administration (EIA) is an autonomous
statistical and analytical agency within the Department of Energy. We
are charged with providing objective, timely, and relevant data,
analysis, and projections for the use of the Department of Energy,
other Government agencies, the U.S. Congress, and the public. We do not
take positions on policy issues, but we do produce data and analysis
reports that are meant to help policy makers determine energy policy.
Because we have an element of statutory independence with respect to
the analyses that we publish, our views are strictly those of EIA. We
do not speak for the Department, nor for any particular point of view
with respect to energy policy, and our views should not be construed as
representing those of the Department or the Administration. However,
EIA's baseline projections on energy trends are widely used by
Government agencies, the private sector, and academia for their own
energy analyses.
The Committee has requested information about current and future
utilization of coal for electricity generation, statutory and
regulatory provisions that impact the supply of coal, the prospects for
using coal to meet future generation needs, and the role of coal in a
comprehensive national energy policy. EIA collects and interprets data
on the current energy situation, and produces both short-term and long-
term energy projections. The projections in this testimony are from our
Annual Energy Outlook 2001, released late last year. The Annual Energy
Outlook provides projections and analysis of domestic energy
consumption, supply, and prices through 2020. These projections are not
meant to be exact predictions of the future, but represent a likely
energy future, given technological and demographic trends, current laws
and regulations, and consumer behavior as derived from known data. EIA
recognizes that projections of energy markets are highly uncertain and
subject to many random events that cannot be foreseen, such as weather,
political disruptions, strikes, and technological breakthroughs. In
addition, long-term trends in technology development, demographics,
economic growth, and energy resources may evolve along a different path
than assumed in the Annual Energy Outlook. Many of these uncertainties
are explored through alternative cases.
EIA also performs special studies at the request of the Department
of Energy, the U.S. Congress, and other government agencies. In late
2000, EIA performed an analysis of strategies for reducing multiple
emissions at power plants, at the request of then-Representative David
M. McIntosh, Chairman, Subcommittee on National Economic Growth,
Natural Resources, and Regulatory Affairs of the Committee on
Government Reform. The results of this analysis were published in
Analysis of Strategies for Reducing Multiple Emissions from Power
Plants: Sulfur Dioxide, Nitrogen Oxides, and Carbon
Dioxide.1 This report projects the impact on coal markets of
such proposals, and I have included it in my testimony as an
illustration of the challenges faced by the coal industry in responding
to potential environmental policies. In an upcoming report, we will
also provide projected impacts of including a cap on mercury emissions
and a national Renewable Portfolio Standard to this analysis, both
separately and in fully integrated cases with sulfur dioxide, nitrogen
oxides, and carbon dioxide.
---------------------------------------------------------------------------
\1\ Energy Information Administration (EIA), Analysis of Strategies
for Reducing Multiple Emissions from Power Plants: Sulfur Dioxide,
Nitrogen Oxides, and Carbon Dioxide, SR/OIAF/2000-05/APPS-2
(Washington, DC, December 2000), http://www.eia.doe.gov/oiaf/
servicerpt/powerplants/index.html.
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the current situation
Supply, Demand, and Prices
U.S. coal production, continuing a recent trend, declined by 1.2
percent between 1999 and 2000, to 1,087 million short tons. This
represented the second straight year of production decreases, following
a 1.6 percent drop between 1998 and 1999. While consumption rose
slightly to an estimated 1,078 million short tons, about a 3 percent
growth from 1999, more coal was supplied from producer and consumer
stocks, reducing the need for an increase in production. On a regional
basis, most of the decline in 2000 was in the Interior section of the
country, made up primarily of the Illinois Basin, Texas lignite
production, and other smaller deposits in the Midwest. Illinois Basin
coal, mainly high sulfur, declined 15 million short tons, or almost 15
percent, from 1999 levels as electricity producers demanded more low-
sulfur coal to meet the sulfur dioxide caps of Phase II of the Clean
Air Act Amendments of 1990. Appalachian coal production declined
slightly, as its older mines continued their long-term loss of market
share, while Western coal--dominated by low-sulfur subbituminous
production in Wyoming's Powder River Basin--continued to increase
production, although at a lower rate than in recent years.
Some 978 million short tons, more than 90 percent of the total
consumption, were used by the electric power sector to produce almost
52 percent of total electric generation from all energy sources. Coal
use for electricity generation grew by 3.3 percent in 2000, more than a
percentage point higher than the growth in total generation. Coal use
in the non-electric power sector grew about 2 percent in 2000, to just
over 100 million tons. While consumption of coking coal used in steel
production grew slightly, steam coal use for general industry showed
the largest 1-year increase in over a decade. With the vigorous economy
fueling industrial demand, and rising natural gas prices, a 3-year
decline in industrial usage of coal was reversed.
Coal prices through the end of 2000 continued the downward trend
that started in the early 1980s. On a delivered basis, the average
utility coal price dropped to $1.20 per million Btu in 2000, about a 2
percent decline from 1999, or about 4 percent in real (inflation-
adjusted) terms. The minemouth price of coal also is estimated to have
declined about 4 percent in 2000. Contributing to the decline in prices
over the last two decades has been a persistent growth in labor
productivity, attributable both to technology improvements such as
longwall mining, and to a long-term shift to Western surface mining,
which requires far less labor input than the older underground mines of
the East. From 1985 through 1998, coal mining productivity improved at
an annual average rate of 6.5 percent. This in turn was accompanied by
a reduction in coal mining employment from 169,000 to 81,000 workers
nationwide, or a decline of 52 percent.
Although coal is the only fuel for which the U.S. is a net
exporter, coal exports have fallen precipitously in recent years. From
a high of 109 million tons in 1991, exports fell to 59 million tons in
both 1999 and 2000. The 2000 level, however, represented at least a
temporary halt in the recent decline, which saw annual exports decrease
over 30 million tons from 1996 through 1999. Fierce competition from
other coal-exporting nations, especially Australia and South Africa,
along with a strong U.S. dollar, has greatly reduced U.S.
competitiveness in world coal markets, compared to a decade ago.
However, U.S. exports still represent about 5 percent of U.S.
production.
Coal is the nation's most abundant fossil fuel resource. The
Demonstrated Reserve Base, which is a broad measure of available coal
resources, is estimated to be about 500 billion short tons. Of this
amount, approximately 275 billion short tons are estimated to be
recoverable. As of the end of 1998, about 19.3 billion tons of coal
were available for recovery at the nation's active coal mines. The U.S.
has the world's largest quantity of ultimately recoverable coal
reserves.
Legislative and Regulatory Issues Affecting Coal
While coal is expected to continue to play a major role in meeting
increasing U.S. electricity demand, there are a number of challenges
the industry must face in light of current and future environmental
policy goals. The Clean Air Act Amendments of 1990 and related State
regulations have placed increasingly stringent requirements on
electricity generators to reduce emissions of sulfur dioxide and
nitrogen oxides. These requirements have affected coal-fired generators
more than other sources of electricity generation (except for
petroleum-based generators) because of the higher levels of these
pollutants emitted by coal-fired plants.
The greatest challenge to maintaining or increasing use of this
domestic energy resource is regulatory uncertainty regarding future
environmental policies, especially those dealing with carbon dioxide.
Proposed revisions to address ozone emissions, fine particulates,
regional haze, and mercury emissions could necessitate additional
control measures for coal electricity generation. Water quality
regulations related to cooling water intake structures, and total
maximum daily loadings on streams may be expanded. Climate change
concerns could affect the future use of coal, given the uncertainty
surrounding whether and when the U.S. might require reductions in
carbon dioxide emissions. Because coal-based electricity generation
emits about 70 percent more carbon dioxide per unit of production than
natural gas electricity generation, any effort to control carbon
dioxide emissions will almost certainly have an impact on coal power
plants, which emit about one-third of U.S. carbon dioxide emissions.
Because there are currently no economically viable technologies to
eliminate carbon dioxide emissions from coal combustion, power
producers may need to turn to alternative sources to meet the nation's
increasing need for generating capacity.
One issue currently before the courts regards emissions from a
number of existing coal plants. The Department of Justice, on behalf of
the U.S. Environmental Protection Agency (EPA), filed lawsuits in
November 1999 against seven electric utility companies in the Midwest
and South, charging that 17 of the companies' power plants had
illegally released significant amounts of pollutants for two decades
2. At the same time, the EPA issued an administrative order
against the Tennessee Valley Authority (TVA), charging the Federal
agency with similar violations at another seven power plants. In
addition to the lawsuits and administrative order, the EPA issued
notices of violation, naming an additional eight plants owned by other
utilities as sites of similar violations of the Clean Air Act. The
dispute in these lawsuits centers around whether certain modifications
or capital improvements performed at the plants named in the action
were ``major''--specifically, whether the actions were aimed at
increasing capacity, regaining lost capacity, or extending the life of
the units. Any such major modification, under the provisions of the
Act, would trigger the New Source Review permitting process, forcing
the plants to adopt technology to meet more stringent SO2
and NOx emission standards. At this time one of the suits
has been resolved, and pending settlements have been reached with two
other companies accused of similar violations. The remaining cases have
yet to be resolved. If the result of these and similar future actions
is that a large number of older coal-fired power plants will be
required to add state-of-the-art emissions control equipment in the
near future, some of them may instead choose to retire or repower as
natural gas plants, thus reducing overall demand for coal.
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\2\ In December 1999 a similar suit was also filed against Duke
Power.
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Other regulatory issues facing the industry include the status of
mountaintop mining, which is a method of surface mining used primarily
in West Virginia. This procedure enables the operator to remove the
``overburden'' covering a coal seam, making the entire deposit more
easily available for extraction. Because the removed material must be
deposited into adjacent valleys, there is concern that streams and
other natural features could be affected by the material, known as
``valley fill.'' In October 1999, the U.S. District Judge for the
Southern District of West Virginia issued a ruling that had the effect
of eliminating the issuance of surface coal mining permits for certain
projects in West Virginia using mountaintop mining methods. The order
has currently been stayed pending appeal. The 4th Circuit Court of
Appeals heard the case on December 7, 2000. A decision is expected to
be made between three to six months from that date. Future projects in
Appalachia could be adversely impacted depending upon the final outcome
of the case.
Finally, the Department of Labor has issued regulations which would
have the effect of increasing eligibility for medical claims arising
from Black Lung Disease, an occupational hazard of coal mining. The new
regulations were effective on January 19, 2001. However, in response to
a challenge from the National Mining Association (NMA) and others, the
U.S. District Court for the District of Columbia issued an injunction
on February 9, 2001, suspending many sections of the new rules. Oral
arguments on the NMA lawsuit are scheduled for May 21, 2001. If
approved, these rules could raise insurance rates for mining companies,
as well as the excise tax supporting the Black Lung Disability Trust
Fund, currently set at $0.55 per ton of surface-mined coal and $1.10
per ton of underground-mined coal. The industry has stated that the
regulations could have a severe impact on profitability, especially for
smaller operators, while miners have argued that too small a proportion
of medical claims related to the condition are currently being
approved.
Although each of these issues is important to the future of the
coal industry, they are far less likely to have a major impact than
would the possible imposition of carbon dioxide limits on power plants.
Because there is no commercially-viable technology for reducing or
eliminating carbon dioxide emissions from the production of
electricity, the only plausible alternatives are to improve efficiency,
switch to lower-emitting sources such as natural gas, nuclear, or
renewables, or reduce electricity production. All of these options
imply lower coal consumption and, consequently, production.
the outlook
The Annual Energy Outlook 2001 (AEO2001) reference case projects
U.S. energy supply, demand, and prices through 2020. It assumes a
continuation of current laws and regulations, but does not include in
its reference case the impacts of proposed policies such as the Kyoto
Protocol provision for reduced carbon dioxide emissions or multi-
emission reductions from power plants. The following summarizes the
reference case outlook for coal markets, then discusses how those
results might change under a multi-pollutant strategy.
Annual Energy Outlook 2001
Coal is projected to continue to play a major role in meeting
electricity generation requirements through 2020 under the assumptions
of the AEO2001 reference case. Total purchased electricity consumption
is projected to increase at an annual average rate of 1.8 percent
between now and 2020, reaching 4804 billion kilowatt-hours (bkwh)
(Figure 1). In order to meet this demand, electricity producers and
cogenerators will need to increase total generation to 5294 bkwh by
2020, after accounting for on-site consumption by cogenerators and
transmission and distribution losses. Of this total, coal-fired
generation is expected to contribute 2350 bkwh, or 44 percent of the
total (Figure 2). While this represents continued growth in coal-based
generation, it also indicates a decline from the share (52 percent) of
generation provided by coal-fired capacity in 2000. The decreased share
of generation from coal is expected to be made up mainly by increased
use of natural gas, which is expected to increase its share of total
generation from 16 percent in 2000 to 36 percent by 2020. Despite the
higher fuel cost, natural gas is expected to make inroads in the
electricity generation sector due to lower capital costs for new
natural gas generating capacity, shorter construction lead times,
easier permitting and siting of such plants, higher efficiencies than
coal-based plants, and lower sulfur dioxide and nitrogen oxide
emissions, helping to meet the requirements of the Clean Air Act
Amendments of 1990. While coal-fired capacity is currently at 312
gigawatts, about 40 percent of the nation's generating capacity, only
about 22 gigawatts are expected to be added through 2020, with 15
gigawatts of today's capacity retiring by that time. Thus, by 2020
coal-fired capacity is expected to make up just 28 percent of total
generating capacity, with natural gas-fired combined cycle and
combustion turbine units accounting for most of the needed growth
(Figure 3). Figure 4 illustrates the kilowatt-hour cost comparisons
between new coal- and natural gas-fired generating capacity in 2005 and
2020, showing the advantage expected for natural gas-fired combined
cycle capacity to meet future electricity needs.
In order for coal to meet the increasing demand for electricity,
production will need to grow at an average annual rate of 0.9 percent
through 2020, with total production reaching 1331 million short tons.
All of the growth in production, however, is expected to come from
Western mines, which are expected to increase their production from 518
million short tons in 2000 to 787 million short tons by 2020, a 2.1
percent annual growth rate. Production in the older mines of Appalachia
is projected to decline from the 2000 level of 422 million short tons
to 392 million short tons by 2020, while Interior production will
remain about the same (Figure 5). Western coal is dominated by the low-
sulfur, surface-mined production of Wyoming's Powder River Basin, which
in just a couple of decades has become the leading source of U.S. coal,
both because of its low cost and low sulfur content. Production in the
Interior region tends toward high-sulfur coal, which is less valuable
due to the provisions of the Clean Air Act Amendments of 1990. While
Appalachia has both low- and high-sulfur coal deposits, mining costs
are higher because most of the mines are underground, and the lowest-
cost reserves have already been mined.
As additional quantities of coal are produced, current reserves of
coal at active mines will decline. Active mines' coal reserves at the
end of 1998 totaled about 19.3 billion tons, roughly 19 years' worth of
reserves at today's production levels. By 2020, only about 2 billion
tons of today's reserves would remain, necessitating major investment
in the industry to expand reserves at existing mines or open new mining
capacity (Figure 6). This is particularly true of the East, where
virtually all of today's reserves must be replaced in order for the
industry to operate at projected levels of production. In the West,
mine operators are maintaining a higher reserve-to-production ratio,
since a large proportion of overall reserves is closer to the surface
and thus cheaper to acquire than the older underground reserves in the
East. The Demonstrated Reserve Base for coal--roughly equivalent to the
discovered resource base--totals more than 500 billion tons of coal, by
far the largest of the fossil fuel resource bases in the U.S., and the
largest coal resource base of any country in the world.
The increasing demand for electricity generation is the key driver
that affects coal consumption. Consumption by the electricity sector is
expected to increase from 964 million short tons in 2000 to 1186
million short tons in 2020, a 1.0 percent annual average growth rate,
about half the growth rate of the last decade. Both a lower rate of
growth in electricity demand, and a shift to natural gas-fired
generation, account for the lower expected growth in coal consumption
by electricity producers over the next 20 years. Non-electric
consumption is expected to remain about the same, at about 110 million
short tons, in 2020, as the long-term decline in metallurgical coal
consumption used in the production of steel is offset by slight growth
of steam coal for use in general industry (Figure 7).
Minemouth coal prices declined by $6.45 per ton (in 1999 dollars)
between 1970 and 2000, and they are projected to decline by 1.2 percent
per year, to $12.70 per short ton, by 2020 (Figure 8). Both
productivity improvements--which are expected to continue but at a
lower rate throughout the forecast horizon (Figure 9)--and the long-
term shift to lower-cost Western coal, contribute to the continued
decline in minemouth prices. Delivered prices to electricity generators
are expected to decline, but at a somewhat lower rate. From an
estimated $24.16 per short ton (real 1999 dollars) in 2000, prices are
expected to decline to $19.45 a short ton by 2020, an annual average
decrease of 1.1 percent. While minemouth prices fall at a faster rate,
higher transportation costs associated with long shipments of greater
quantities of Powder River Basin coal are expected to partially offset
the lower cost of coal at the mines. There has been some recent
reversal of this trend in spot coal markets over the past six months,
with coal prices delivered to utilities up by as much as a third in
some areas; but we believe prices will resume their decline in the
longer term, as prices of competing energy sources, especially natural
gas, return to their long-run equilibrium levels.
Coal exports, once a growing share of production, have declined
over the past decade, and are expected to continue to erode through
2020, although at a lower rate. From a 2000 level of about 59 million
short tons, U.S. exports are expected to decline to 56 million short
tons by 2020. Continuing competition from Australia and South Africa,
new competition from Colombia, Indonesia, and China, and a reduction in
coal demand in our traditional European markets, mitigate against
growth in coal exports over the next two decades.
Analysis of Multi-Pollution Strategies
In its recent Service Report for the House Government Reform
Committee, EIA analyzed the impact of various policies to reduce
multiple emissions at power plants, concentrating on emissions of
sulfur dioxide (SO2), nitrogen oxides (NOx), and
carbon dioxide (CO2). While a number of congressional bills
have been introduced with varying levels and timing of emission
reductions, EIA was asked to provide analysis of proposals to reduce
SO2 and NOx by 75 percent from 1997 levels, and
CO2 to either 1990 levels or 7 percent below 1990 levels,
similar to the general requirements of the Kyoto protocol, but
restricted to emissions by electric generators. It was assumed that a
cap-and-trade system similar to that developed for SO2 under
the Clean Air Act Amendments of 1990 would be used for each pollutant.
The main points of the analysis were as follows:
--When emissions caps are examined for each emission individually,
power companies are projected to invest primarily in emission
control equipment to comply with the NOx and
SO2 caps; however, to comply with the CO2
cap they are expected to shift dramatically away from coal to
natural gas and, to a lesser extent, renewables.
--The stringency of the emission targets influences the projected
impact on electricity and natural gas prices.
--The impacts of meeting the NOx and SO2 caps are
not projected to have a large effect on electricity prices--
generally 1 percent or so above the prices expected in the
reference case.
--The projected price impacts of meeting the CO2 cap are
much larger than those of meeting the NOx and
SO2 caps, as much as 25 percent over reference case
electricity prices.
--The CO2 allowance prices (expressed in dollars per metric
ton carbon equivalent) projected in this analysis are generally
lower than those projected in comparable studies of efforts to
meet the target from the Kyoto Protocol over the whole economy
rather than just in the power sector.
--When emissions caps are examined together, actions taken to meet the
CO2 cap are expected to overshadow those taken to
reduce NOx and SO2 emissions.
--Using an integrated approach--setting caps on power sector
NOx, SO2, and CO2 emissions at
the same time--is projected to lead to somewhat lower total
costs than addressing each emission one at a time.
--If existing coal plants are required to add emission control
equipment, NOx and SO2 emissions would be
dramatically reduced.
--There is considerable uncertainty about whether the changes projected
in this analysis could be accomplished in the relatively short
time periods assumed--particularly to meet 2005 CO2
emission targets. The increased production required from the
U.S. natural gas industry could be especially difficult to
attain in this time frame.
conclusion
While coal provides more than half of today's electricity
generation in the U.S., that share is expected to shrink over the next
two decades as natural gas is expected to greatly increase its
proportion of electricity generation. Nevertheless, under current laws
and regulations, coal consumption and production would continue to grow
about 1 percent per year between now and 2020.
The major challenge to coal is the growing trend toward laws and
regulations to reduce or eliminate emissions associated with its use.
These include Phase II of the Clean Air Act Amendments of 1990,
proposals to reduce carbon dioxide emissions similar to the
requirements of the Kyoto Protocol, ``multi-pollutant'' strategies that
further reduce sulfur dioxide and nitrogen oxide emissions and add new
restrictions on mercury and carbon dioxide, and emission control
technology retrofits that could be required if current lawsuits
alleging violations of the Clean Air Act's New Source Review provisions
against a number of coal-fired generating plants are successful. Coal
also faces significant competition from natural gas as a fuel source
for generation due to its higher efficiency, lower capital cost, and
lower construction lead times, which makes it more attractive in
competitive electricity markets. Of these challenges, by far the
greatest is the potential for reductions in carbon dioxide emissions.
Thank you, Mr. Chairman and members of the Subcommittee. I will be
happy to answer any questions you may have.
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Mr. Barton. Thank you, Ms. Hutzler, we appreciate your
attendance.
We want to welcome Mr. Richard Abdoo, who is Chairman,
President, and CEO, of Wisconsin Energy Corporation. And I
believe that Congressman Barrett wishes to give him a little
bit more of a formal introduction.
Mr. Barrett. Well, I am just happy that he is here, and he
has done an excellent job in really working with consumer
groups, and other energy groups, and Wisconsin is in a unique
geographic location, and has some unique energy needs, and he
has been very creative in trying to meet them, and I am very
pleased, Dick, that you are here today.
Mr. Abdoo. Thanks, Tom.
STATEMENT OF RICHARD A. ABDOO, CHAIRMAN, PRESIDENT AND CEO,
WISCONSIN ENERGY CORPORATION
Mr. Abdoo. Mr. Chairman and members of the subcommittee,
good afternoon. I am Richard A. Abdoo, Chairman, President, and
Chief Executive Officer of Wisconsin Energy Corporation, a
Milwaukee-based holding company with subsidiaries in the
utility and non-utility businesses.
In our utility operations, our companies serve more than 1
million electric and nearly 1 million natural gas customers in
Wisconsin and Michigan's Upper Peninsula. And I am really
pleased to appear today to testify on energy issues and the
role that coal-based electric generation has in a national
energy policy.
I also commend the chairman and the subcommittee for
holding these hearings on this extremely important subject. The
time has arrived for a coherent, cohesive, and comprehensive
national energy policy to allow the electric industry to
achieve improved reliability, greater reserves, and more stable
prices.
In my view, a national energy policy concerning power
generation should be based on four principles. First, it should
balance our need for a strong economy, a clean environment, and
stability in the electricity prices. Overemphasizing one would
shortchange another. We need approaches that recognize the
importance of all three.
Second, America needs fuel diversity in generating power to
ensure flexibility in meeting future energy needs. Flexibility
through diversity allows us to meet electricity demand in a way
that enhances the economy and the environment.
A diverse fuel mix should include coal, nuclear, natural
gas, renewables, and hydro. Conservation also is part of a
diverse approach to balance the economy and the environment.
Such diversity helps protect consumers from fuel shortages and
price volatility that occur when one fuel dominates the mix.
Third, we need a commitment to long term solutions for
expanding energy supply. Short term fixes simply cause chaos in
the infrastructure industries. In recent years, we have seen
the impact of relying almost exclusively on natural gas based
plants for new generation: tight gas supply, higher prices, and
backlogged projects for natural gas based plants. We need
solutions that preserve coal-based generation as an option.
Fourth, our national energy policy should take advantage of
energy resources available in the U.S. One of the most
plentiful is coal. This valuable, but under-utilized asset, can
help meet the Nation's projected energy needs for more than 250
years.
In the recent past natural gas has become the fuel of
choice for new power plants. The primary reason is that natural
gas, like nuclear, has little environmental impact. As
environmental restrictions grew more stringent, coal fell out
of favor and natural gas became the fuel of choice.
But it is hard to keep a good fuel down, and because of new
technology, coal already has staged a comeback in Asia and
Europe, and now Wisconsin Energy is poised to launch coal's
return to prominence in America.
We have proposed construction of three 600 megawatt coal-
based plants as part of our power of the future plan. We are
committed to using the latest technology to reduce emissions of
nitrogen oxide, sulfur dioxide, mercury, and carbon dioxide,
while gaining higher efficiency and lower costs.
Our plan also includes two natural gassed based units, and
a significant investment in renewables and conservation. But
electricity from coal is the most prominent feature of our
approach for a sustainable and affordable power supply in the
great State of Wisconsin.
Modern coal-based plants generate electricity with
dramatically less environmental impact than the coal plants
built a generation ago. The new generation of plants already in
use in other parts of the world demonstrate the emissions
reductions for sulfur dioxide and nitrogen oxide, placing them
well within current environmental regulations.
Further, clean coal technology reduces greenhouse gases,
primarily through more efficient combustion. Use of this
technology is a clear example of how economic and environmental
goals can be met.
Those of us in the power industry and those of you in
government must share a commitment to advance technology and
policymaking that secures America's power supply.
As a Nation, we must work together to identify and remove
the obstacles that block us from achieving our goal. We must
develop a coordinated approach to environmental and energy
regulation, and we must keep options open for all fuel sources,
especially coal, the dark mineral that offers a light for our
energy future.
Thank you for your attention to this vital concern, and for
your support in pursuing a long term national energy policy
that improves our ability to grow our power supply. In summary,
you asked about incentives that I would respectfully suggest
for your consideration to further the development of coal.
I recall about 30 years ago, 25 years ago, that we had an
investment tax credit program, and a trace out program, and I
believe it was enacted in 1974. That would help because of the
higher capital costs associated with coal.
A new coal plant, about half of it is for the generating
part, and half of the capital investment is for environmental
protection. We can streamline the regulations so that we sort
of get one-stop shopping, and can get on with a yes or no
answer.
Second, I would ask you to remember the big three Es. We
need energy. We need an economy, and we need a clean
environment, and those three are inextricably linked. The
economy grows, and we have an impact on energy, and an impact
on the environment.
If energy grows, we impact the environment and the economy.
And finally, and respectfully, but vigorously, please focus on
the long-term nature of the problem. Getting distracted by the
current problem of the day, or crisis of the day, whether it is
California or the article that appeared in the Post today about
the President, just distracts from what we need to do.
We need a long-term strategy to power the U.S. economy and
environment into the future. You can do it. I have great
confidence in you, and please stick to the task. It is not
easy, but we desperately need a policy. Thank you.
[The prepared statement of Richard A. Abdoo follows:]
Prepared Statement of Richard A. Abdoo, Chairman, President and CEO,
Wisconsin Energy
Mr. Chairman and Members of the Subcommittee: Good afternoon. I am
Richard A. Abdoo, chairman, president and chief executive officer of
Wisconsin Energy Corporation, a Milwaukee-based holding company with
subsidiaries in utility and non-utility businesses. The company serves
more than one million electric and more than 950,000 natural gas
customers in Wisconsin and Michigan's Upper Peninsula through its
primary utility subsidiaries Wisconsin Electric, Wisconsin Gas and
Edison Sault Electric. Its non-utility subsidiaries include energy
services and development, pump manufacturing, waste-to-energy, and real
estate businesses.
I am pleased to appear before you to testify on coal issues and the
role coal-based generation has in a national energy policy. I also
commend the chairman and the subcommittee for holding these hearings on
this important subject.
The time has arrived for a coherent, cohesive and comprehensive
national energy policy to allow the electric industry to achieve
improved reliability, greater reserves and more stable prices. In my
view, energy policy concerning power generation should be based on four
principles:
A balance of economic, environmental and energy supply goals.
A need for fuel diversity.
A commitment to long-term solutions.
An emphasis on domestic resources--particularly coal.
The fourth principle is the basis for most of my testimony because
one of our most abundant domestic resources is coal--the subject of
today's hearing. Part of my testimony will focus on the environmental
aspects of coal-based generation, the most controversial consideration
in more fully tapping this valuable resource.
the u.s. power supply problem
The major reasons the United States faces a power supply dilemma is
its aging electric infrastructure and a changing environment that
hampers development of new sources of generation. Like highways,
bridges, airports, pipelines and other infrastructure, many power
plants are growing old. Many will be retired in the next two decades.
Some will be nuclear, but most of it will be coal-based.
Solutions exist, but time is short. We stand at a crossroads for
meeting our nation's future energy needs. We could continue on our
present path--relying almost exclusively on natural-gas-fired power
plants to meet growing demand--or we can take a diversified approach--
pursuing a variety of energy sources to power our nation. Our current,
natural-gas-dependent path contains potholes of high prices and
uncertain supply. A smoother route includes not only natural gas but
also sources such as uranium, wind, water and the backbone of our
nation's power supply--coal, which provides more than half of America's
power today.
Despite its historic prominence, coal was neglected as fuel for new
plants over the past decade, primarily for environmental reasons. But
new developments give this dark-colored mineral a bright future in
restoring balance for future power supply.
Today, I will discuss key principles for power generation in a
national energy policy, and coal's important role in meeting current
and future energy needs. In particular, I will focus on Wisconsin
Energy's Power the Future plan, which has electricity from coal as a
centerpiece in addressing the growing demand of our customers.
power generation principles in a national energy policy
1. Balancing Economy, Environment and Energy Supply
The first and most important principle for a national energy policy
is an approach that balances the economy, the environment and the
energy we need. Because all three are important, coordination is needed
to ensure that all three remain strong and improve together at roughly
the same pace. If one receives primary consideration, it may come at
the detriment of one of the others.
For example, environmental considerations are driving demand for
natural-gas-fired power plant projects. But if we replace existing
coal-based and nuclear capacity with more gas or renewable projects, we
jeopardize reliability and increase costs. On the other hand, if
economics is the most important consideration in the future,
environmental quality could be compromised.
Nobody wants to see the environment do anything but improve, and
nobody wants to see the economy do anything but grow stronger. A
balanced approach can contribute to both while maintaining energy
supply reliability. As we have seen with natural-gas-fired generation,
single-source solutions add cost, diminish national security and hamper
reliability.
2. Emphasizing Fuel Diversity
The second principle emphasizes the need for fuel diversity. We
need electricity from coal and nuclear in the mix along with natural
gas, hydroelectric power and renewables to ensure flexibility in
meeting future energy needs--meeting them in ways that enhance the
economy without degrading the environment. A diverse fuel mix helps
protect companies and consumers from impacts of fuel shortages, price
fluctuations and regulatory changes. Diverse fuel and technology
options contribute to a stable, reliable and affordable energy supply
over the long term.
3. Committing to Long-term Solutions
The third principle is a commitment to long-term solutions to grow
the nation's energy supply. Short-term solutions skew the focus and
cause imbalance that disrupts a healthy mix of power supply sources.
For example, almost every new generating plant being built in the
United States is fueled by natural gas. The focus on gas is a short-
term response to meeting supply shortages in an environmentally
acceptable way. Because of the perceived ability to get natural-gas
units up and running quickly (as well as the perceived environmental
advantages), our country is relying on them as the sole solution. But
gas equipment orders have soared, which strains equipment suppliers and
raises questions about gas supply and delivery. Such short-term
approaches are an invitation for long-term trouble.
A long-term solution requires coordinated generation planning among
utility and non-utility generators that emphasizes a mix of sources. It
also requires a means to relieve constraints or at least minimize
uncertainties associated with building new plants. We're in a position
today where we have a clear need for supply and an environmentally
acceptable means to provide it--but constraints that prevent us from
building it when it is needed the most.
Most of the constraints we face are rooted in a general disdain for
power plants of any kind--especially when it comes to siting issues.
Nobody wants them in their neighborhood. Given such an atmosphere,
long-term solutions to the nation's future energy needs must consider
the difficulty that exists in siting power plants and related
infrastructure for power delivery.
4. Taking Advantage of Coal and Other Domestic Resources
The need for a long-term energy supply solution leads directly into
the fourth principle. We need a national energy policy that takes
advantage of energy resources available within our country. One of the
most plentiful energy resources is coal. More than 90 percent of U.S.
coal usage is for generating electricity. This valuable but
underutilized asset can meet the nation's energy needs for about 250 to
350 years. Nuclear power also is a plentiful resource with a virtually
unlimited supply potential. On the other hand, the known supply of
natural gas reserves looks adequate only for 40 years, based on current
consumption. And when you consider the multiple uses for natural gas,
especially for heating, it's reasonable to question its use for
generating substantial amounts of power when electricity from coal is
available to do the same work.
We have seen dramatic increases in natural gas prices just this
past year. Projections suggest the cost will continue at high levels in
the near term. Over the next 15 years, gas consumption is expected to
rise by nearly 10 trillion cubic feet. For gas to remain a cost-
effective, long-term option, the nation will soon need to face the
issue of opening more areas to exploration.
Best estimates show future natural gas prices settling in the $4 to
$5 range per million Btu if all available supplies are tapped. If not,
higher prices can be expected, which makes other energy sources even
more cost effective. Coal-based capacity additions, which already look
attractive, will look even better as technology drives down their
costs.
clean coal technology
As the nation's electricity reserve margins continue to decrease--
from highs of 26 percent to lows of 11 percent just in the past
decade--we must take a new look at coal in a renewed role of prominence
in the United States energy mix. The combination of this old source of
energy and new technology is an important part of the solution to
meeting America's energy needs, which are projected to grow 34 percent
by 2020.
New technology puts coal-based plants in position to clear today's
environmental hurdles. Although Germany and Japan have built generating
plants using clean coal technology in the past decade, no such plants
have yet been built in the United States--other than subsidized or
demonstration projects.
Modern coal-based plants generate electricity with dramatically
less environmental impact than traditional coal-based plants. The lower
emissions and higher efficiency of new coal-based plants go beyond
current environmental requirements for sulfur dioxide and nitrogen
oxide. Clean coal technology also addresses greenhouse gases. Because
of increased efficiency, new technology coal plants produce
significantly less carbon dioxide per megawatthour than old plants. The
units that we propose to build likely would result in a 30 percent
reduction in the fuel needed to generate the same amount of
electricity. In other words, the fuel once used to power three homes
would power four. Consequently, the fourth home would be powered with
virtually zero environmental impact, and the other homes would be
served with less environmental impact than before.
Several types of clean coal technology are available. Among the
most prominent are:
Supercritical Pulverized Coal Plants that boost efficiency by
operating at higher pressures and temperatures. They also use
state-of-the-art equipment for nitrogen oxide and sulfur
dioxide emissions control.
Integrated Gasification Combined Cycle Plants that use a
combination of chemical processes and a variety of fuels to
create a gas fuel cleansed of sulfur and mercury. These plants
also employ selective catalytic reduction to reduce nitrogen
oxide emissions; the thermal efficiency also minimizes carbon
dioxide emissions.
Pressurized Fluid Bed Combustion Plants that capture sulfur
dioxide and reduce nitrogen oxide emissions through a
combustion process at elevated pressures and remove particulate
emissions with mechanical devices.
Such technologies and others make coal-based generation viable from
both an environmental and efficiency perspective.
wisconsin energy's power the future plan
Wisconsin Energy made a decision in 1999--before natural gas prices
jumped and California's misery began--to shape its future direction and
better serve customers' needs by pursuing a reliable energy future
rather than a deregulated one. We believe it makes sense to build first
and deregulate later.
In Wisconsin, not a single base-load plant has been built since the
mid-1980s. Nearly all of the generation built recently has been fired
by natural gas. Typically, these plants are less expensive to build,
easier to site and environmentally friendly. But these plants are
costly to run--extremely costly when natural gas prices are as high as
they have been in recent months. Consequently, they are used primarily
during short periods of peak demand. Such plants do not provide a
viable long-term solution.
Wisconsin Energy announced its Power the Future plan last year to
address the power supply situation in Wisconsin in a way that uses the
diversified fuel approach we advocate for the entire nation. Our plan
puts coal technology prominently back in the picture for new capacity.
We see Wisconsin's electricity demand growing by almost 3 percent
per year. By 2010, we conservatively estimate a statewide power deficit
of 4,000 megawatts. Our situation is even more dire when you consider
the age of the state's plants. The majority of the state's base-load
coal plants are more than 40 years old. Though they probably should be
retired sometime soon, load growth makes it nearly impossible to do so.
Like the rest of the country, nearly all of the generation built in
Wisconsin in the 1990s was gas-fired, and another 2,300 megawatts
planned in Wisconsin between this year and 2003 also are gas-fired.
Our state's aging fleet of base load plants, rising demand fueled
by a strong economy, and increasing use of air conditioning and
electronic devices prompted our Power the Future plan. To ensure
reliable, affordable and quality electric energy supplies in Wisconsin,
we propose an aggressive program to build 2,800 megawatts of new
generation in the state over the next decade.
Our plan envisions construction of three 600-megawatt coal-based
units at our existing power plant site in Oak Creek, and two 500-
megawatt combined-cycle natural-gas-fired units--one (and maybe both)
at our Port Washington Power Plant site. The total cost of this program
through 2011 is estimated at $3 billion. This does not count a $1.3
billion investment to improve our existing plants.
As part of this plan, we will retire older, less efficient coal-
based units--some in the next two to four years and others 10 to 20
years from now. We also will significantly increase our use of
renewable energy sources. The impact on prices for customers is
expected to be about the same as the rate of inflation. If we don't
build, costs will increase faster and reliability will be less certain
as we face the higher costs and uncertainties of the power markets.
Demand also will necessitate operation of units we would prefer to
retire.
We propose coal and natural gas for these new units because a fuel
mix enhances long-term price stability. With natural gas at $4 per
million Btu and coal at $1 per million Btu, coal has an economic
advantage--especially at higher capacity factors. In fact, our
projections indicate savings of more than $1.6 billion for our
customers over a 25-year period when compared with exclusively relying
on gas-fired capacity additions.
Power the Future complements Wisconsin Energy's balanced approach
to serve its customers--a blend of conservation and energy efficiency
measures along with continued emphasis on diversified generating
sources. While a mix of coal, nuclear, natural gas, hydroelectric and
renewables offers the best long-term stability for energy prices, it
also offers environmental benefits. Re-powering our oldest coal-based
power plant in Port Washington with a high-efficiency gas-fired unit
will, of course, reduce emissions. But equally as important, the high-
efficiency coal-based units planned at Oak Creek will incorporate the
latest proven emissions technology from the United States, Germany and
Japan. This means that overall emissions will go down, and energy
output will go up. Though we have not yet determined the technologies
we will use, we are considering the clean coal technologies I've
already described: advanced pulverized coal, coal gasification and
fluidized bed combustion. In addition, we plan to spend about $10
million for carbon dioxide mitigation.
Our interest in taking a leadership role in commercial application
of clean coal technology continues our company's tradition of strong
environmental performance and commitment to state-of-the-art emissions
technology for new construction.
Wisconsin Energy's commitment to the environment is strong, and we
have a long history of working successfully with regulators and other
organizations on environmental initiatives. Last year, our Wisconsin
Electric subsidiary and the Wisconsin Department of Natural Resources
filed a proposal under the Environmental Protection Agency's Project
XL. Project XL stands for ``eXcellence and Leadership,'' targeting
innovative ways to achieve superior environmental performance. Our
proposal, which is the first of its kind for the electric industry, is
designed to reduce nitrogen oxide emissions by 65 to 70 percent, sulfur
dioxide by 35 to 40 percent and mercury by 40 percent over the next 10
years. Our Power the Future proposal enhances such environmental
initiatives because of the clean coal technology we plan for our new
facilities and the planned retirement of our oldest plants.
Wisconsin Energy's comprehensive approach provides an excellent
example of how environmental and economic goals can be met at the same
time. Though some say it is time to deregulate the electric industry
and introduce retail competition in Wisconsin, we believe we need to
focus on the needs of customers first. Reliability is our number one
priority. We need a concerted effort to strengthen our supply and
infrastructure before discussing any significant regulatory changes to
make the industry more competitive in Wisconsin. That's where Power the
Future comes in. Nobody disagrees with the need for the additional
power. We believe we have the right plan at the right time to lead to
breakthroughs rather than breakdowns for Wisconsin's energy future.
Power the Future is gaining the support of a growing number of
investor-owned utilities, cooperative and municipal utilities, labor,
employees, financial analysts, elected officials and consumer groups
who understand the benefits of our 10-year plan. We believe the
economic health of Wisconsin hangs in the balance and await an
endorsement of our plan by the Public Service Commission of Wisconsin.
The commission must approve the financial arrangements. Our plan
includes the formation of a non-utility subsidiary to finance, build
and own the plants. The new subsidiary would then lease the plants for
20 to 25 years to our utility, which would operate the plants. The
commission also would approve plant construction plans.
We expect the commission to issue a decision on our basic concept
in a month or two. If the commission agrees with the concept, we will
file detailed plans for regulatory analysis later this year. If
progress continues as planned, the capacity additions would be added to
our system beginning in 2005. When all the new plants are completed in
2011, our percentage of electricity from coal in our capacity mix would
be about the same as it is today--around 50 percent.
powering the nation's future
Our work is cut out for us. Our nation's electricity supply margin
is dwindling, new projects are few, transmission is pushed to its
limit, existing plants are aging and restrictions on siting and
construction are increasing. This combination has put our nation's
energy supply and economy at risk. While uncertainty and constraints
make it tougher to add supply, growth continues at a steady rate of 2
to 3 percent per year and much more in some places. The warning signs
are in front of us and more are appearing each day.
While our Power the Future plan aims to help solve Wisconsin's
future energy needs, we also believe that our leadership in placing the
latest coal technology into commercial operation can help chart a new
path for the rest of the nation. The United States and other leading
nations have a responsibility to develop and model new technology for
the rest of the world to produce more cost-effective, efficient and
cleaner energy sources.
Those of us in the power industry and those of you in government
must share a commitment to advance technology and policy-making that
secures America's power supply. As a nation, we must work together to
identify and remove the obstacles that block us from achieving our
goal. We must develop a coordinated approach to environmental and
energy regulation. And we must keep options open for all fuel sources,
especially coal--the dark mineral that offers a light for our energy
future.
We don't have much time. Waiting won't give us any more. As we
learn to use coal in more environmentally friendly ways, we need to
give it a more prominent place in America's energy future. Thank you
for your attention to this vital concern and for your support in
pursuing a long-term national energy policy that improves our ability
to grow our power supply and elevates the role of coal.
Mr. Barton. Thank you, and we had not thought of a long-
term energy policy until you just said it. So, we are so glad
to get that on the record. We appreciate that. You are exactly
right. I should not make fun of what you said. You are exactly
right, and we intend to do that on a bipartisan basis.
We want to welcome Mr. Brett Harvey, who is CEO and
President of CONSOL Energy, Incorporated, in Pittsburgh.
I have had the pleasure of having lunch with you, sir, and
I believe Congressman Doyle wishes to give you a more formal
introduction to the subcommittee.
Mr. Doyle. Well, thank you, Mr. Chairman. We all on the
subcommittee are pleased to welcome J. Brett Harvey, a fellow
Pittsburgher. In addition to being President and CEO of CONSOL
Energy, I want to tell you a little bit about Mr. Harvey.
He was President and CEO of Pacific Corp Energy and began
his business career in 1979 with Kaiser Steel Company as a long
law supervisor, and quickly rose to the position of Vice
President and General Manager.
He went on to join Utah Power and Light Company, and served
in the capacity of Vice President of Fields of Mining. Mr.
Harvey is a member of the Board of Directors of the National
Mining Association, the World Coal Institute Executive
Committee, and the National Mining Hall of Fame and Museum.
Mr. Harvey, welcome to the subcommittee.
STATEMENT OF J. BRETT HARVEY, PRESIDENT AND CEO, CONSOL
ENERGY, INCORPORATED
Mr. Harvey. Thank you, Mr. Doyle, and thank you, Mr.
Chairman. CONSOL Energy is the Nation's largest producer of
underground coal, and I am here today on behalf of the National
Mining Association representing the producers of over 80
percent of the coal mined in the U.S. today.
Thank you for holding these hearings on our need for a real
national energy policy. As we all know, available, affordable
energy underlies the economic prosperity of our country. Recent
problems of high prices of natural gas, and the problems of
lack of energy in the west have occurred because of the demand
for energy has outstripped the supply.
The demand for energy, especially for electricity, will
continue to increase. But government policies have discouraged,
if not outright prevented, investment in the energy
infrastructure needed to meet these new demands. We need to
focus on a strategy that supports the expansion of domestic
energy, whether it is coal, natural gas, petroleum, uranium, or
renewable energy.
Coal is the largest domestic fuel source in the United
States. Between 90 and 95 percent of all of our fossil fuel is
coal. One-third of our domestic production of energy is coal at
this point in time. Our industry produces over 1.1 billion tons
of coal per year, and more than 90 percent of it goes to the
making of electricity.
I have discussed these details in my statement that I
submitted. My focus today is on making certain that the
electric generation industry, our customers, can use coal in
the future, because the bottom line is that if coal cannot be
used, coal will never be produced, and coal is solid
electricity.
DOE forecasts the need for almost 400 gigawatts of new and
replacement capacity over the next 20 years. This will require
an investment much larger than the U.S. has made in the past
two decades.
Although the future generating mix must be fuel diverse,
just as it is today, the largest share of new base load
capacity should be based on the use of reliable domestic and
new advanced technologies increasingly with clean coal
technology.
Unfortunately, at least 15 separate regulatory actions
dealing with SO2, and NOX, and mercury,
are now either pending at the EPA or in litigation. These
proposals, combined with the uncertainties associated with
deregulation of power generation, have effectively prevented
consideration of new coal plants or modification of existing
plants, to meet environmental regulations.
These proposals are based on the premise that more coal
means more emissions; that coal and environmental protection
are incompatible. This is not true. Coal used for electricity
is greater than any time in our history, but overall emissions
of the criteria pollutants are lower than what they were in
1970, when coal for electricity was only at 320 million tons
per year.
And we have the technology to increase coal while
continuing to reduce emissions. In the short term, the
challenge is two-fold. Not to expand the use of advanced
NOX and SO2 controlled technologies in
existing plants, and to move newer demonstrated clean coal
technologies to commercialization.
In the long term, the challenge is to develop and
commercialize zero emission coal-fired plants. The coal
industry supports legislation to meet these twin challenges.
First, expand DOE programs for research and development of
technology for both new and existing coal-based generation.
Second, provide incentives through an investment tax credit
for retrofitting new emission control technology on existing
boilers. Third, establish a risk-sharing program for a limited
number of early commercial applications of advanced clean coal
technology.
Finally, I would like to speak briefly to the climate
change issue itself. If not carefully considered, climate
change policy will work at odds with the goal of affordable,
reliable energy to all the people of our Nation.
Mandatory reduction of carbon emissions automatically will
mean higher costs of energy. Let me say unequivocally that
CO2 is not a pollutant, and it should not be defined
as such. I understand, Mr. Chairman, that this has been a
strongly held view of yours and we appreciate that.
I also note that yesterday the President offered his view
on the issue as well, and we agree with that. There are better
ways to approach this issue on an international basis and to
have short term reductions, and short-sidedness as the Kyoto
protocol lays out.
We would propose the following principles be a part of the
discussion on the climate. America should recognize its vast
land and water resources, and encourage greater development of
natural carbon consumption methods or carbon sinks.
The Federal Government should greatly enhance research
funding to promising mechanical and chemical carbon
sequestration technologies. New technologies targeting
efficiency and emission improvements should be developed and
deployed through Federal and private funding.
An aggressive, voluntary reporting and reduction program
should be initiated, building upon the experience of previous
voluntary actions. America's energy and economic needs mandate
that CO2 emissions not be arbitrarily capped, taxed,
or regulated.
Mr. Chairman, we look forward to working with you in the
coming weeks, and the Congress, and the administration, to
develop a real national energy policy. Thank you.
[The prepared statement of J. Brett Harvey follows:]
Prepared Statement of J. Brett Harvey, Consol Energy, Inc. on Behalf of
The National Mining Association
Mr. Chairman, I am Brett Harvey, President and CEO of CONSOL
Energy, Inc. I am appearing here on behalf of the National Mining
Association (NMA) to testify on the role that coal can and indeed,
must, play in meeting our nation's future energy requirements. We would
like to commend you Mr. Chairman for recognizing the importance of this
valuable domestic fossil energy resource and for holding this hearing
specifically on coal. Coal makes up over 90 percent of our domestic
energy reserve. And, coal is electricity. It is the fuel for over 50
percent of the electricity that our citizens use to run our businesses
and support our everyday lives. Coal is and must continue to be one of
the cornerstones of our nation's energy strategy. Our statement today
will focus on the potential of coal to meet a growing portion of our
nation's future energy needs and the policies that must be in place to
allow coal's potential to be realized.
general introduction
CONSOL Energy Inc., founded in 1864, is the largest producer of
high-Btu bituminous coal in the United States, the largest producer of
coal by underground mining methods, and the largest exporter of U.S.
coal. CONSOL Energy has 23 bituminous coal mining complexes in six
states and two Canadian provinces. In addition, the company produces
approximately 90 million cubic feet per day of coalbed methane gas. The
company has a substantial technology research program focused on energy
extraction technologies and techniques, coal combustion, combustion
emission abatement and combustion waste reduction. CONSOL Energy is a
publicly held company (NYSE:CNX) with 6,750 employees.
The National Mining Association represents producers of over 80
percent of America's coal, a reliable, affordable, domestic fuel used
to generate over 50 percent of the electricity used in the nation. Our
members also produce another form of energy--uranium. NMA represents
companies that produce metals and non-metals, companies that are
amongst the nation's larger industrial energy consumers. In addition,
NMA members include manufacturers of processing equipment, machinery
and supplies, transporters, and engineering, consulting and financial
institutions serving the mining industry.
energy in the united states--and the need for a balanced energy policy
Energy, whether it is from coal, oil, natural gas, uranium or
renewable sources, is the common denominator that is imperative to
sustain economic growth, improve standards of living and simultaneously
support an expanding population. The significant economic expansion
that has occurred in the United States over the past two decades, and
especially over the last five years, was in no small measure due to
reliable affordable energy, much in the form of electricity, much in
the form of coal-fired electricity. The United States quite literally
drove the developed world's economy during the last part of the 20th
Century. The average annual rate of real economic growth in the US was
4.4 percent while that of all OECD nations was 2.8 percent. The amount
of electricity generated by coal in 1999, indicative of the experience
over the last 5-year, was 51.7 percent in the US but only 36.5 percent
in the OECD as a whole. The cost of electricity averaged 4 cents per
Kwh in the US, but was 6.6 cents per Kwh when considering all OECD
countries. Energy in the United States is more affordable. And, energy
in the United States is more electrified.
According to the Energy Information Administration 1,
the trends experienced in the US over the last 20 years--economic
growth, greater efficiency and a move to electricity--are expected to
continue over the next two decades. Economic growth is forecast to
increase by an average 2.3 percent per year. Reflecting greater
efficiency, the use of energy will grow by an average 1.3 percent per
year or by a total of 32 percent to 127 quadrillion Btu. Consumption of
all sources of energy will increase: petroleum by 33 percent, natural
gas by 62 percent, coal by 22 percent and renewable energy by 26
percent. The economy will become even more dependent upon electricity
over the next 20 years: consumption of electricity will increase by an
average 1.8 percent per year, or by 45 percent, and, if the past is a
guide, this electricity forecast is conservative.
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\1\ Annual Energy Outlook 2001, Energy Information Administration,
December 2000.
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Many policies will have to change, however, to make this forecast a
reality. There is a growing gap between the expected demand for energy
and the nation's capacity to supply that energy on a reliable,
affordable basis. While consumption of energy has increased over the
past twenty years (by 20 quadrillion Btu or by 25 percent), production
of energy in the United States has not kept pace (increasing by a mere
5 quadrillion Btu or by only 7.6 percent). Only two sources of domestic
energy have increased since 1980: coal and nuclear power. Coal is
domestic. The nuclear generating industry, which relied on domestic
uranium 20 years ago, is increasingly dependent upon foreign sources
for uranium.
The fact that demand has outstripped supply is reflected in the
overall increase in dependence on often politically unstable foreign
sources, especially for petroleum. Dependence on imports is reflected
in higher costs for gasoline and heating oil. The failure to invest in
domestic energy is reflected in the recent sharp increases in the
prices for natural gas, and in the increase in cost of electricity--at
times actual shortages of electricity--in some regions of the country.
The increase in the cost of energy and the scarcity of affordable
electricity have, at least in part, caused the economy, as measured by
real GDP, to slow in the fourth quarter of 2000 to only a 1.1 percent
growth rate.
The energy policies of the past eight years, or lack thereof, have
exacerbated the US demand--supply imbalance. Domestic policies have
actively discouraged, and even prevented, investments in domestic
energy production capacity, in our electrical grid, in our nation's
energy delivery infrastructure. The increase in energy use in the
United States during this time was fueled in large part on an increase
in imports. The increase in the generation of electricity was possible
because generating capacity had been over built in the 70's and 80's
giving the US substantial reserve margins. Simply put, the US has been
living off previous investments made in our energy infrastructure and
the benefits of these investments have about run out. The energy supply
industry has not been able to make the investments or develop and
maintain the infrastructure that is necessary for the future.
The US is fortunate to have a large domestic energy resource within
our borders and an established, although aging, energy delivery
structure. To meet future demands however, our national energy policy
direction must be redirected to one that encourages efficient,
environmentally sound development of our nation's vast energy resource
base and the use of technologically advanced methods to process,
transport and use that energy.
coal in the energy mix--at present and in the future
Coal reserves, which are geographically distributed throughout the
US, comprise the greatest share of the nation's energy resource base.
The demonstrated coal reserve is over 500 billion tons with
economically recoverable reserves of over 275 million tons. This is a
reserve large enough to support a growing coal demand for over 200
years.
Coal is the only domestic energy resource to INCREASE production
levels over the last two decades. In 1980, coal production was 830
million tons. In 2000, 1.1 billion tons of coal were produced in mines
located in 26 states and by 2020 the EIA projects coal production of
1.3 billion tons. During the past two decades average productivity in
the coal industry has increased by nearly 250 percent reflecting in
part shifts from underground to surface production and in part
technological advances in mining operations. The average price of a ton
of coal at the mine has declined in both real and nominal terms. The US
coal industry is proud to pay wages to our miners that are among the
highest of any industrial worker in the country. The US industry is the
safest coal industry in the world, a record of which we are all proud,
but a record on which we will not rest as the goal of the industry is
zero injuries and fatalities. We expect this statement to continue to
be true into the future.
Coal, or electricity generated from coal is used in all 50 states.
The coal industry contributes some $161 billion annually to the economy
through payroll and purchases of goods and services and coal industry
tax revenues add at least $2 billion annually to state and local
government revenues. The industry directly and indirectly employs
nearly 1 million people.
The market for coal is the electric generator. Last year 1.026
billion tons of coal were used to generate over 50 percent of all
electricity used in the US. The industrial market, at approximately 32
million tons per year and the domestic market for coking coal of 28--29
million tons is very important, but small in comparison. The United
States also exports coal, approximately 57 million tons in 2000
At the bottom line, coal is electricity.
The Energy Information Administration forecast referenced above
shows that by 2020 electricity use will increase by 45 percent over
today's levels. Coal use for electricity will total at least 1.25
billion tons in 2020, some 250 million tons or 20 percent more than is
currently burned.
The reasons are straightforward: coal is domestic, coal is reliable
and coal is affordable. To illustrate, in 2000, electric rates in
regions dependent upon coal for electricity are, on average at least
one-third lower than rates in regions dependent upon other fuels for
electricity.2
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\2\ According to the Energy Information Administration electric
rates in the New England and Middle Atlantic States averaged 9.9 cents
per Kwh through October 2000, 9.0 cents in California. As comparison,
electric rates in the East South Central region (dependent upon coal
for over 70% of generation) averaged 5.2 cents per Kwh in the same time
frame.
---------------------------------------------------------------------------
And, coal is increasingly clean. Although coal use for electricity
has tripled since 1970, emissions are lower by more than a third. New
advanced clean coal technologies will enable this trend to continue and
to accelerate, allowing greater use of coal with increased efficiency
and lower emissions of the regulated criteria pollutants
(SO2, NOX, and PM) as well as lower emissions of
carbon dioxide both overall and per unit of electricity generated.
Coal serves an indispensable role in the United States energy
equation and not only can, but will, provide a major part of the
nation's energy requirements in the future.
us uranium is also an important part of the us energy mix
The United States uranium recovery industry is also to the Nation's
energy independence and is essential to national security. Today,
nearly 23 percent of America's electricity comes from clean nuclear
power, which translates into the consumption of about 45 million pounds
of uranium each year. However, the collapse in uranium prices since
1980 has produced a sharp decline in the viability of America's uranium
mining industry. America's remaining uranium miners produce only about
3 million pounds--or just 6 percent of nuclear utilities' needs--of
uranium annually. The balance of the uranium comes from rapidly
declining inventories in the hands of the utilities, the federal
government and foreign entities.
Under the current policy direction, the amount of electricity
generated by nuclear plants is expected to decline over the next twenty
years. However, this forecast may prove to be incorrect. Licenses for
nuclear plants are being renewed and it is expected that almost all
nuclear plants operating in the US today will apply for, and obtain,
renewals to allow operation for an additional 20 years. There is some
consideration of construction of at least one new nuclear plant. Thus,
demand for uranium for will not decline but is likely to increase.
Historically, the United States was the world's leading producer of
uranium and still has extensive proven reserves of natural uranium that
offer the potential for secure sources of future supply. Only a strong
domestic uranium recovery industry can assure an adequate long-term
supply of uranium for the nuclear power component of the Nation's long-
term energy policy and preclude threats of foreign supply disruptions
or price controls that could adversely affect the Nation's common
defense and security. Therefore, the federal government must foster
energy policies that ensure a strong and viable domestic uranium
recovery industry and must remove barriers to domestic production of
existing sources of uranium.
a change in policy direction is required
A change in policy direction is required if affordable energy is to
be reliably available in the future. At the core, American's energy
strategy must be grounded in market-based policies that lead to
adequate, diverse and secure energy supplies. A balanced energy policy
will be anchored in economic efficiency, will promote new energy
technologies, and will limit use of regulation and support use of
incentives. A responsible energy policy will achieve a balance between
the benefits of energy use with the benefits of responsible
environmental protection.
Polices are needed to: enhance energy supply and encourage use of
ALL energy sources; promote energy efficiency and conservation; assure
free and competitive energy markets that in turn work to provide energy
at affordable costs; promote energy technology development and long-
range R&D initiatives; and, balance energy production and use with
environmental concerns. Energy policy will include tax and fiscal
policies, trade policies environmental policies and land use policies.
Finally an energy policy needs to be predictable and must make certain
that policies and activities of the various government agencies are
coordinated and complementary rather than contradictory with
conflicting goals.
Although many policies will be similar or even identical for all
fuel sources, many will be fuel specific. It is the intent of this
statement to focus solely on policies that will promote the production
and use of coal.
coal production issues
Coal production totaled 1.1 billion tons in 2000 and is forecast to
increase to over 1.3 billion tons in 2020. The United States has the
reserve base to meet this forecast production level and more. However,
government policies affecting the production of coal and as importantly
the use of coal have discouraged or even prohibited investments in coal
production infrastructure. As a result, a 1.3 billion ton annual
production level or more cannot be reached without significant new
capital investment to expand existing production capacity and to
develop new reserves.
There are a number of policy changes that are required to ensure
that coal production capacity will be sufficient to meet future
demands.
Access to coal reserves is being limited, not by depletion through
mining, but by government action. Declaration of large areas of land as
``National Monuments'' coupled with initiatives such as the recent US
Forest Service Roadless regulations have removed large blocks of land,
and many millions of tons of coal reserves, from potential exploration
and development. Removal of the largest domestic fossil resource from
use is directly contrary to any energy policy that is directed toward
increasing energy self-sufficiency and making energy available to all
at affordable prices.
Failure of the Federal government to act in a timely manner on
lease applications has prevented expansion of many existing mines. This
will exacerbate any shortage of supply in the not too distance future.
(These and other land use policies are discussed in more detail in a
March 7, 2001 statement of the National Mining Association provided for
the record.)
Interpretation of the Clean Water Act as it relates to mining is
prohibiting expansion of mining operations especially in Appalachia.
Indeed, production at some operations is being curtailed or the
operations closed because reserves are being effectively sterilized or
taken off line by prohibitive environmental regulations.
These issues must be addressed in the National Energy Policy as it
is being developed by the Congress, as should tax policies such as
retention and extension of the depletion allowance and elimination of
the alternative minimum tax.
The National Energy Policy should also support the Department of
Energy's coal production research program. At present the funding for
mining research is very low despite the critical importance of our
mineral resources to national energy security and the economy. Support
for research, with a specific program tailored to provide funding for
mining research by academic institutions, would contribute to two
important administration goals: a viable energy future and enhanced
educational opportunities for those that will be the future leaders of
our nation.
Finally, no discussion of policies required to assure the future
availability of coal would be complete without a statement about the
need for investment in the coal delivery system. Coal is shipped from
the mine to the consumer by rail and by water. While investments are
required to expand production capacity, investment to maintain and
expand our rail and waterway systems will also be required to move coal
to the market on a reliable, timely basis.
policies are needed to encourage greater use of coal
Coal is electricity. Nearly 95 percent of the coal used in the
United States goes to generate over 50 percent of all the electricity
that is used by industry, businesses, governments, schools and homes.
But, just as investments have not been made in coal production capacity
(or other energy production capacity), investments have not been made
in base load generating plants. Evidence of the lack of generating
capacity has surfaced over the past two years in brownouts in the
Midwest and in the volatile, and extremely high, prices for electricity
during periods of peak demand. And, nowhere has this generating crisis
been more evident than in the past winter in California where citizens
of the northern part of that state were subjected to an almost
continual threat of rolling blackouts.
Base load generating capacity has not been built when and where it
is needed. Coal plants are base load, and coal plants have not been
built over the last decade as illustrated in Chart One.
[GRAPHIC] [TIFF OMITTED] T1503.022
``The U.S. has consumed much of its available electric generating
capacity margin over the past 20 years and the consolidated capacity
margin available today above peak level demand has not been this low
since the late 1960's.'' 3
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\3\ ``Got Coal?'' James F. Wood, President, Babcock & Wilcox Co.
Global Energy Business, January 2001
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New base load plants must be built--both to meet new electricity
demands and to replace capacity that will be retired. According to the
Department of Energy by 2020, 65 percent of all base load plants in the
United States will be more than 40 years old. Nearly 400GW of new and
replacement capacity will be required by 2020--the equivalent of 1,300
plants at 300 MW each. This capacity is not being built. According to
DOE, construction of only 14 MW of new capacity is planned. Some 378 MW
of the needed capacity, a full 96 percent, is still in the
``unplanned'' category.4 Over the last few weeks
announcements have been made about some new generating capacity, coal
and gas. But these are announcements only, not firm construction plans.
The National Energy Strategy must address this problem and address it
quickly.
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\4\ Annual Energy Outlook, 2001. Energy Information Administration,
December 2001
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Although the future generating mix must be fuel diverse, just as it
is today, the greater share of new base load generating plant should be
based on the use of reliable, domestic and increasingly clean coal. The
policies of the last eight years that have discouraged construction of
any generating capacity, but especially coal capacity, must change
direction. Coal based generation needs to be preserved to ensure a
diversity of fuel supply and affordable and reliable electricity that
in turn is necessary if we are to maintain a strong economy.
advanced clean coal plants can make a difference
A stated concern about coal fired capacity, whether in existing or
new coal fired power plants is the level of emissions of
SO2, NOx and particulate matter from coal
generation. Emissions of both, along with emissions of particulate
matter are controlled under the Clean Air Act and the standards of the
Clean Air Act as amended in 1990 are being met. As shown in Chart Two,
even though coal use by generators is greater today than at any time in
history, emissions of the listed pollutants are lower.
[GRAPHIC] [TIFF OMITTED] T1503.023
Despite proven trends, the previous administration attempted to
promulgate regulations that would require emission levels that are
lower than the Clean Air Act currently requires. At least 15 separate
regulatory actions dealing with SO2, NOx, and
mercury are now either pending at the Environmental Protection Agency
or are in litigation. These regulatory actions, coupled with the move
towards competition within the electric sector, have combined to
effectively prevent consideration of new coal generators or the
modification of existing plant. To cite just four examples:
In December 2000, the EPA announced its decision to regulate
mercury emissions. National Mining Association urges Congress
to review the basis used by the EPA for its regulatory
decision, and determine if all relevant scientific evidence was
give appropriate and equal weight. The government should
support the development and demonstration of cost-effective
mercury control technology for existing coal-fired power
plants.
Also in 2000, the EPA made an effort to regulate coal
combustion solid byproducts as hazardous wastes. This had no
sound scientific basis, and was strongly and successfully
opposed. The EPA should abandon this effort. As a proactive
alternative, the DOE, through its Fossil Energy program, should
put high priority on developing and demonstrating technologies
that allow reuse of coal combustion solid byproducts (such as
fly ash and SO2 scrubber products) in a manner that
meets environmental goals.
The EPA is reviewing the ambient air standard for airborne
particulate matter. The DOE should receive adequate funding to
support its ongoing research on the composition and
concentration of particulate matter, its impacts on ambient and
indoor air quality.
The EPA has been aggressively assailing existing coal-fired
power plants by asserting that routine, ordinary maintenance
places a plant under the New Source Review provisions of the
Clean Air Act. This has made many utilities reluctant to
conduct demonstrations of new technologies that can help meet
environmental goals, but could trigger EPA enforcement action.
Congress should ensure that electricity generators who are
willing to demonstrate new environmental technologies are not
subject to New Source Review.
A cost effective way to improve environmental performance is to
increase power plant efficiency, which can be done using developing
technologies, such as Integrated Gasification Combined Cycle and
Ultrasupercritical systems. Ultimately, advanced concepts, such as that
of the DOE's ``Vision 21'' program, offer the advantages of clean,
efficient power, with simultaneous production of liquid transportation
fuels to reduce our dependence on imported petroleum.
Whether installation of emission control technologies through the
retrofit of existing plants, repowering at existing plants or
construction of new capacity at greenfield locations, use of new
advanced technologies mean that electricity can be produced from coal
more efficiently and with lower emissions.
In the shorter term the challenge is twofold: to expand the use of
newer more advanced NOx and SO2 control
technologies in existing plant through retrofits and to move new
advanced clean coal technologies that have been proven at the
demonstration stage to, and through, commercialization.
The National Electricity and Technology Act (NEET) was developed to
meet this challenge. NEET, which has been introduced in the Senate and
is being considered for introduction on this side of the Congress
includes short, medium and long term programs designed to improve
efficiency and reduce emissions while at the same time ensuring that
the nation will have the coal fired generating capacity needed to meet
current and future demands for electricity. NEET has three important
programs designed to work together to preserve the reliable, affordable
and clean, coal fired option.
First, NEET creates a financial incentives program through an
investment tax credit to cushion the financial burden faced by
existing generators that must retrofit with emission control
technology in order to meet new emission regulations. This
program will improve both the operational and the environmental
performance of existing boilers.
Secondly, NEET establishes a financial and risk sharing
program for a limited number of early commercial applications
of advanced clean coal technologies. The investment tax credit
for new units or units that are repowered coupled with an
efficiency based production tax credit will off set the risks
inherent in building the ``first of a kind'' technology that
has been demonstrated by that is not yet commercial. These
advanced power systems are still regarded as having a higher
technical risk than conventional technology and are more
expensive to build and operate. NEET will offset enough of the
risks to make commercialization of these technologies--
important for the future use of coal but equally important to
promote fuel diversity for economic, environmental and energy
security reasons--possible.
Finally, NEET focuses on research and development technology
for new and existing coal-based generation establishing cost
and performance goals and authorizing the research necessary to
meet those goals.
In the longer term, we need technologies to use coal that are even
more advanced than those developed under the Clean Coal Program and now
awaiting commercialization. A generation of cleaner, more efficient
plants must be available for the eventual replacement of the existing
fleet.
The Department of Energy's ``Vision 21'' program should be
accelerated. One of the goals of the program is to develop a coal fired
plant with ``near zero emissions of sulfur and nitrogen oxides,
particulate matter, trace elements, and organic compounds; 40-50
percent reduction in CO2 emissions by efficiency
improvements; 100 percent reduction with sequestration.'' 5
National Mining Association would suggest that these goals should be
met no later than 2025.
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\5\ ``Vision 21: fossil Fuel Options for the Future'', Committee on
R&D Opportunities for Advanced Fossil-fuel Energy Complexes, Board on
Energy and Environmental Systems, Commission on Engineering and
Technical Systems, National Research Council. December 2000.
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Despite much uncertainty about the extent and impact of climate
change, the Department of Energy's program on carbon management should
be given high priority. Emphasis should be placed on developing and
demonstrating technology options for CO2 capture and
sequestration. It is particularly important to gain a full
understanding of the technical potential, cost and timing of the
various options as a guide to policy analysis.
Coal has the potential to provide the fuel for an ever-growing
demand for electricity. New technologies are available to allow coal
use with even lower emissions that today, and research must be
conducted to bring those emissions to near zero levels over the long
term.
the climate change issue and the control of carbon emissions
The subject of a National Energy Strategy cannot be addressed
without a discussion of climate change and proposals to require a
reduction in carbon emissions. Since 1993 United States climate policy
has been driven by events in the international arena, first by the
requirements of the 1992 Framework Convention on Climate Change
ratified by the US in September 1992 and, since December 1997, by the
terms of the Kyoto Protocol, an agreement that has yet to be ratified
by any developed nation.
National Mining Association would submit that the singular focus on
implementation of the Protocol's short term mandatory emission
reduction requirements to the exclusion of all else has prevented a
responsible debate on the climate issue and on potential long term,
technology driven, global solutions to carbon reduction should those
reductions be necessary.
Internationally, the Administration has the opportunity to advance
the debate on climate beyond the Protocol to a more responsible level
that addresses climate as a global issue. Countries have begun to
realize that the short term legally binding targets of Kyoto are not
feasible from an economic standpoint nor would they prevent a rapid
increase in carbon emissions as the targets are limited to developed
countries only. The global issue has not been addressed from a global
standpoint and it is time to move beyond Kyoto. If an international
agreement is needed, it should focus on development and global
deployment of energy efficient technologies along with the developing
countries requirements to expand their economies and build their
educational and technological capacity.
From a domestic standpoint, energy policy must address carbon
emissions, as climate policy is energy policy. Over the past few months
the suggestion to develop simultaneous reduction targets or caps for
SO2, NOx, mercury and CO2 has gained
some currency. This suggestion is called the ``multi-pollutant
approach'' to emissions control and is being suggested as a way to give
electric generators a more consistent, comprehensive and certain
regulatory environment in which they can plan.
The National Mining Association is opposed to a ``multi-pollution
approach'' to the control or regulation of CO2.
Fundamentally CO2 should never be termed a pollutant
because it is essential to our cycle of life: It triggers our desire to
breathe; it enables photosynthesis growing the very first link in the
planet's food chain. CO2 is ubiquitous and good. In the
history of the world cycling from ice ages, glaciers, to more
hospitable climates, we are experiencing a continual grown in
atmospheric CO2. While the human involvement in this growth
represents less than one percent of greenhouse gas emissions, being
emissions from motor vehicles, power plants, factories, homes, disposal
sites, and, yes, even mines, it is appropriate for a national energy
policy to examine further what might be done to mitigate greenhouse gas
emissions and at what cost to the nation's economy. Clearly research
into mechanisms of gas sequestration is a wise policy in view of the
potential policy choices that may have to be made in the future.
CO2 is not an air pollutant and does not warrant
regulation in an integrated multi-pollutant approach. Including
CO2 in a multi-pollutant program would be extremely
costly,6 and would undercut the goals of a National Energy
Strategy --affordable and reliable energy for all American consumers.
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\6\ A December study by DOE's Energy Information Administration
found that emissions reduction of SO2 or NOx
(reflecting the proposals introduced in the 106th Congress) would have
little impact on the nation's electricity costs. By contrast, including
CO2 would result in significant costs for the nation and
American energy consumers within ten years including: raising the
electricity ``resource cost of service'' by $70-90 billion annually;
increasing national electricity prices by 29-42 percent; raising
natural gas prices by 31-55 percent and lowering US economic activity
by $60--80 billion in 2010 alone. EIA--Analysis of Strategies for
Reducing Multiple Emissions from Power plants. December 2000.
---------------------------------------------------------------------------
Inevitable increased energy use is simply inconsistent with
reducing carbon dioxide emissions. We propose the following as to begin
the discussion on an alternative public policy approach to climate
change.
America should recognize its vast land and water resources and
encourage greater development of natural carbon consumption
methods (carbon sinks).
The federal government should greatly enhance research funding
for promising mechanical and chemical carbon sequestration
technologies.
New technologies targeting efficiency and emissions
improvements should be developed and deployed through federal/
private funding and incentives.
An aggressive voluntary reporting and reduction program should
be initiated, building upon the experience of previous
voluntary actions.
America's energy and economic needs mandate that carbon
dioxide emissions cannot be limited, taxed or otherwise
regulated.
Appropriate measurements of success for a common-sense carbon
program would compare carbon dioxide emissions levels through
voluntary actions against reference-case benchmarks profiling
the likely effects of no action.
Continued additional research into climate, both through
private and public means, is appropriate and necessary.
This concludes my statement Mr. Chairman, I would be happy to
answer any questions.
Mr. Barton. Thank you. If we didn't have four more
witnesses, I liked your testimony so much that I would ask you
to repeat it, but we do have others. We now want to welcome Mr.
Cecil Roberts, who is President of the United Mine Workers of
America.
Every Democrat wanted to personally introduce you. So we
are not going to let any of them. Let me simply say as a
Republican that I am very glad that you are here and that you
have never been on the other side insofar as I know in any of
my races. So I welcome you to the subcommittee. Your testimony
is in the record in its entirety, and we recognize you for 6
minutes to elaborate on it.
STATEMENT OF CECIL E. ROBERTS, PRESIDENT, UNITED MINE WORKERS
OF AMERICA
Mr. Roberts. First of all, Mr. Chairman, thank you for the
invitation to come here today, and I want to thank the entire
committee for the opportunity to voice the concerns of coal
miners who are involved in this debate.
I have had the wonderful opportunity to work with the
ranking Democrat on this committee on many occasions to protect
coal miners, and invest in coal mining in this country, and to
see that it remained a viable part of our economy.
I have also had the opportunity to work with Congressman
Strickland for many, many years, and I wanted to thank
personally today Congressman Shimkus from Illinois for his help
in saving the coal mine that he alluded to previously.
For 111 years the United Mine Workers of America have
played a vital role in coal field communities. One of the
things that I would ask that we do today is not forget about
those communities as this debate rages. Too often Congress acts
and then someone else has to figure out the consequences for
that action.
In 1990, for example, with the passage of the Clean Air
Act, the United Mine Workers did not oppose the passage of that
Act. We did engage in pointing out to Congress that without
some reasonable approach to the Clean Air Act that many coal
field communities in Appalachia were going to be devastated.
And I think the last 11 years, unfortunately, has proven
that to be factual. Areas of southwestern Pennsylvania,
northern West Virginia, parts of Ohio, Indiana, Illinois, as
the representative from the administration pointed out on her
chart, have been devastated.
The objectives of the 1990 Clean Air Act in our opinion
could have been met through the utilization of technologies, as
opposed to fuel switching. That fuel switching transferred many
jobs out of Appalachia to the western part of the United
States.
And I think as all of us are aware with me being from
Appalachia, I think I can speak directly to this. Appalachia
could not afford to lose those high-paying jobs. I am here
today to speak on behalf of those coal miners from Appalachia.
We represent about 110,000 people, many of whom are retired
already. We represent a hundred-thousand pensioners who depend
on the viability of the coal industry to see that pension
checks are delivered to these coal field communities on a
monthly basis.
About a 110 to 115,000 people who are already retired,
counting their dependents, depend on health care from the coal
industry to see that they are able to go to the clinics, and
hospitals, and the doctors, and the pharmacies in Appalachia.
We also represent about 25,000 unemployed coal miners who
have unfortunately seen their mining careers come to an abrupt
end sooner than what they should have. And we also represent a
significant number of working miners.
What is this debate about to me? It really isn't a
Democratic issue or a Republican issue. A few months ago, and
in fact during the Presidential campaign, I made a statement
that we had not had an energy policy in the United States of
America that I could recall since Jimmy Carter was the
President.
And someone asked me does that include Democrats, and I
said, well, have we had any Democrats who were President since
Jimmy Carter left, and I said that I think it is factual. That
it is time for this Nation to come to grips with the situation
that we find ourselves in.
And quite often costs are attached to this question of
having a viable energy policy in the United States of America.
But I think it is incumbent on this country not to be so
dependent on others in different parts of this world to see if
we can have energy that we need to have our economy grow.
And I speak directly to the many consequences of having to
provide military support in these areas of the country, and
American young men having to go off to war to see that that
energy has continued to flow into the United States.
There is an abundance of coal in this country, and coal
miners have improved productivity astronomically.
Unfortunately, many of those coal miners have been rewarded
with losing their jobs, because coal has become a dirty word in
this country when we talk about where we are going into the
future.
We should remember that we have approximately 275 years
worth of available coal that is minable in this country. We do
not have to be dependent on anyone else in the world to supply
our energy needs.
And I want to speak one more time if I might to the vital
role that coal plays in some of these economies, like in
Southern West Virginia, Eastern Kentucky, Southwestern
Pennsylvania, Ohio, parts of Illinois, Indiana.
We need to keep in mind that there are hard working coal
miners out there doing their part to see that this Nation does
not have to fall victim to some other parts in the world, and
their desires to hurt America, or to increase the cost to
American consumers.
We believe that coal can provide a low cost fuel into the
future, and the one thing that I would want to point out is
that there has been about a 200 percent increase in the
utilization of coal since the original passage of the Clean Air
Act in 1970.
But there has been a dramatic decrease in the amount of
emissions coming from those coal-fired facilities in America
since 1970. So we have had a 200 percent increase in the
utilization of coal, and at the same time a decrease in the
amount of emissions going into the atmosphere.
On the issue of carbon, the one thing that I must say to
this subcommittee is that there is no one technology presently
available to sequester carbon from a coal-fired plant. So if
you are talking about reduction of carbon from utilities in
this country, you are really talking about the reduction of the
burning in coal in America. You are not talking about anything
else.
Mr. Barton. We have broken that code, sir. Most of the
members of the subcommittee understood that.
Mr. Roberts. In closing, I would just submit to you and
suggest to you that we should not pass regulations that outrun
our technology, and I believe if you look at some of the recent
studies that have been done that technology can be developed,
but it is probably going to be around the year 2015, perhaps
sooner.
But 2015 is a realistic date for technology to exist to
reduce carbon from the burning of coal in utilities. So I think
it is important to note that many coal miners in this country--
not only working coal miners, but retired coal miners, laid-off
coal miners, and disabled coal miners--are extremely dependent
on this industry, as well as the American consumer, to have a
cheap source of electricity.
And with that, I thank you for this opportunity.
[The prepared statement of Cecile E. Roberts follows:]
Prepared Statement of Cecil E. Roberts, President, United Mine Workers
of America
Mr. Chairman, members of the subcommittee, I want to thank you for
the opportunity to discuss the role of coal in U.S. national energy
policy. I am Cecil E. Roberts, president of the United Mine Workers of
America (UMWA). The UMWA has represented coal miners and other workers
in the United States and Canada for over 111 years. Our members work in
all facets of the coal supply chain; they include underground coal
miners, surface coal miners, preparation plant workers, barge workers,
truck drivers, mine construction workers, utility workers and coal
technology workers. In addition to active workers in the coal industry,
the UMWA represents the interests of over 100,000 retired coal miners
and widows who look to the UMWA for the protection of their health and
retirement benefits.
As an institution, the UMWA is very interested in the subject of
today's hearing. We believe that every American citizen should be
concerned about our energy situation and the role that coal can play in
our national energy policy. It has been difficult to pick up a
newspaper in the last year without reading about energy issues. We all
know that the people of California have been struggling for some time
with an electricity crisis. Last summer, gasoline prices spiked to
about $2 per gallon. And this winter many people have struggled to pay
for natural gas and heating oil as the price of those essential
commodities has skyrocketed.
At the same time we are becoming more dependent on foreign sources
of energy. Indeed, we are much more dependent on foreign oil today to
run our economy than we were during the oil shocks of the 1970s. In
1973, the U.S. consumed nearly 35 quadrillion Btus of petroleum
products to operate our economy. Petroleum imports totaled about 13.5
quadrillion Btus, meaning that the U.S. depended on foreign suppliers
for about 39% of domestic oil consumption. Today, our economy consumes
nearly 38 quadrillion Btus of petroleum, an increase of slightly more
than 8% above 1973 levels. However, our reliance on imported oil has
grown substantially; today we import about 22.5 quadrillion Btus of
crude oil, indicating a reliance on foreign suppliers of about 60%. At
the same time our imports of natural gas have increased from less than
5% of consumption to more than 16% in recent years.
u.s. coal reserves
Coal is an indispensable part of America's energy supply and the
United States is blessed with an abundance of coal. The latest
estimates indicate that the U.S. has a demonstrated coal reserve base
of over 500 billion tons, with an estimated 275 billion tons of
recoverable reserves. At current production rates, this represents
about 275 years of recoverable coal reserves. Coal represents about 95%
of all U.S. fossil fuel energy reserves. About one-quarter of all the
world's known coal reserves are found in the United States. U.S.
recoverable coal reserves have the energy equivalent of about one
trillion barrels of oil. That is comparable to all of the world's known
oil reserves.
While we are blessed with an abundant supply of coal, we are
challenged in its use because of our national concern about the
environment. First, coal is not easily extracted from the earth. One
must either sink shafts to access the coal seam in underground mines or
remove the overburden to expose the coal seam in surface coal mining
operations. These activities temporarily disturb the environment and
reclamation must occur at the end of the mining cycle in order to
ensure that the land is as productive after mining as it was before
mining. Coal contains sulfur, nitrogen, mercury and carbon, among many
other mineral components. When coal is burned in its raw state, these
elements combine with oxygen and are emitted into the atmosphere. The
potential environmental impacts of mining and consumption of coal have
led some to conclude that coal should be removed from our energy mix.
We think this is an unwise conclusion, but it does point out the
challenge that those of us who advocate the use of coal have before us.
The nation demands a cleaner environment at the same time that it
demands low-cost, reliable and available energy. For coal to continue
to play the vital role that it can and should play in our energy mix,
we must ensure that coal is mined in environmentally acceptable ways
and that it is burned with the minimum amount of emissions that
technology will allow. This means that we must continue to develop
highly advanced technologies to convert coal to a usable form of energy
more efficiently and to capture any harmful emissions before they
escape into the atmosphere.
coal production
Coal accounts for about one-third of total domestic energy
production, making coal the largest single source of domestically
produced fuel. Coal currently accounts for about 23% of U.S. energy
consumption, with the vast majority of coal being used in the
production of electricity. However, coal is also vital in the
production of steel and cement, and is a major fuel or feedstock in
chemicals, paper manufacturing and food processing. In addition, U.S.
coal plays an important role in world coal exports, ranking third in
world coal shipments with about 60 million tons.
In 2000, the U.S. coal industry produced about 1.1 billion tons of
coal. Coal is produced in 26 states across the United States. The major
coal producing regions are Appalachia, stretching from Pennsylvania to
Alabama; the Illinois Basin, with mines in Indiana, western Kentucky
and Illinois; and the West, with coal production in the Rocky Mountain
states of Arizona, New Mexico, Colorado and Utah and the northern Great
Plains states with production in Wyoming, Montana and North Dakota. The
top three coal producing states are Wyoming, West Virginia and
Kentucky. These three states account for nearly 60% of total U.S. coal
production. In terms of employment, the top three states are Kentucky,
West Virginia and Pennsylvania, which account for about 55% of U.S.
coal mine employment. The reason that the top three producing states
are not the same as the top three employment states is that Wyoming
produces coal from large scale surface mines that require much less
labor to produce a ton of coal than other states. For example, Wyoming
mines typically produce coal at a rate of about 40 tons per worker
hour, while the average productivity in Appalachian mines is about 4
tons per worker hour.
coal employment
The U.S. coal industry provides direct employment for about 80,000
workers. These workers include production and maintenance workers who
work in underground and surface mines and in preparation plants.
Employment has declined significantly in the last twenty-five years
from a peak of nearly 250,000 workers in 1978 to less than 80,000
today.
coal transportation
Coal is transported by railroads, barges, trucks, overland belts,
and slurry pipelines. The dominant form of coal transportation on a
national basis is railroads, which account for about 62% of all coal
movement. In 1999, coal accounted for 41% of all freight tonnage moved
by U.S. rail carriers. Barges carry about 14% of all coal that is
distributed in the U.S. while trucks haul about 12%. The remaining 12%
is carried by Great Lakes and tidewater barges, conveyors and slurry
pipelines. On a regional basis, barges and trucks take on a more
important role. For example, in the Middle Atlantic and East South
Central regions, which have access to river transportation on the Ohio
and Mississippi rivers, barges account for about one-quarter and one-
third of coal shipments, respectively. In addition, truck
transportation historically has accounted for about one-quarter of coal
shipments in these regions due to the close proximity of the coal mine
to the power plant.
coal consumption
Coal consumption is dominated by electric utilities which consume
nearly 90% of all coal production. Industrial users, such as cement,
chemical and paper manufacturers, typically consume about 70 million
tons of coal each years. Steel mills and coke ovens consume about 30
million tons per year to make steel. In addition, coal exports account
for about 60 million tons of coal demand.
coal and electric utilities
The U.S. coal industry has become inextricably linked to the
electric utility industry over the past few decades. Recent declines in
the use of coal in the domestic steel industry and in export markets
make that dependence even greater. For example, fifty years ago,
electric utilities accounted for only about 20% of U.S. coal demand.
Since that time, coal use has steadily grown in the electric utility
sector and declined in the residential and commercial sector, in the
transportation sector and among coke plants and other industrial users.
By 1970, electric utilities accounted for about 60% of U.S. coal
demand. Today, demand from the electric utility sector accounts for
about 90% of all U.S. coal consumption. Because of the dominance of the
electric utility demand, the viability of the coal industry is linked
to the ability of the electric utility industry to continue to burn
coal. Thus, the national efforts to control sulfur dioxide
(SO2), nitrogen oxides (NOx) and particulates
over the last three decades have been of concern to the coal industry.
Likewise, emerging efforts to control mercury and carbon dioxide
(CO2) emissions will have an effect on coal production.
While electric utility demand dominates the coal industry, coal is
the single largest source of fuel for generation of electricity,
accounting for more than half of electricity production in the U.S.
This is more than double the share of any other fuel source. This
reliance on coal-based electricity generation results from an abundance
of supply and low costs. According to the U.S. Energy Information
Administration, coal-fired electricity generation per kilowatt-hour
costs about half that of natural gas-fired generation.
While the share of coal-fired electricity generation nationwide is
impressive, a look at the regional share of electricity generation
shows that coal is the dominant fuel in the West North Central region
(76%), the East North Central region (73%), and the Mountain and East
South Central regions (70%). Some states are even more dependent on
coal for electricity generation.
The largest states in terms of generation of electricity from coal
are Texas, Ohio, Indiana, Pennsylvania and West Virginia. Together
these five states account for nearly one-third of national electricity
production from coal.
coal and the environment
Coal use has grown steadily over the last 30 years. When the Clean
Air Act was passed in 1970, U.S. electric utilities burned 320 million
tons of coal. This year they are expected to consume nearly 950 million
tons, an increase of nearly 200%. At the same time, emissions of sulfur
dioxide, particulates and nitrogen oxides from the electric utility
sector have declined substantially. These gains, however, have not come
without a cost. Indeed, UMWA members in northern Appalachia and the
Midwest paid a very high price in lost jobs as a result of the Clean
Air Act amendments of 1990. That law required utilities to reduce
emissions of sulfur dioxide in order to address the problem of acid
rain. Although we have proven, reliable technology that can remove 98%
of SO2 emissions from the utility smokestack, many utilities
opted to switch fuel supplies from high-sulfur to low-sulfur coal.
Indeed, about half of the emission reductions in Phase I (effective
1995) were achieved through fuel switching. This caused significant
disruptions in traditional utility coal markets as utilities moved away
from northern Appalachian and Midwestern high-sulfur coal suppliers to
low-sulfur coal suppliers. Thousands of coal miners lost their jobs as
a result of this fuel switching. Most of the displaced eastern
production moved to western production, primarily in the Powder River
basin in Wyoming. Indeed, Wyoming coal production has nearly doubled
from 184 million tons in 1990 to about 340 million tons today. As noted
earlier, Wyoming coal mines enjoy extremely high rates of productivity,
so the jobs lost in northern Appalachia and the Midwest were not gained
in Wyoming.
While the coal communities of the Midwest and northern Appalachia
have been struggling to cope with the loss of jobs resulting from the
1990 Clean Air Act amendments, electric utilities have been faced with
new demands from regulators to further reduce emissions. The U.S.
Environmental Protection Agency (EPA) has issued rules calling for
reduction of nitrogen oxides in a 22-state region (the SIP call),
revised the National Ambient Air Quality Standards (NAAQS) for ozone
and fine particulate matter, and has set the stage for regulation of
mercury. In addition, EPA in 1999 filed suit against a number of
eastern utilities, charging them with violation of new source review
requirements at plants that comprise about 10% of U.S. coal-fired
capacity. In the international arena, the United States has signed, but
not ratified, the Kyoto Protocol, which calls upon the U.S. to reduce
emissions of greenhouse gases, including CO2, by 7% from
1990 levels by 2008-2012.
While technologies exist to deal with emissions of SO2,
NOx, fine particulates and mercury, there currently are no
technologies (other than efficiency improvements) available to deal
with demands for carbon reductions. The U.S. Department of Energy
recently embarked on a program to research and develop technologies to
capture and sequester carbon gases, but the expectation is that these
technologies will not be available until 2015-2020 at the earliest. It
is widely recognized that efforts to reduce greenhouse gas emissions
before such technologies are available are likely to lead to
significant reductions in domestic coal use.
the role of coal in coal mining communities
Although coal employment has declined substantially in the last
twenty years, coal is still an important economic engine in coal field
communities. Coal mining tends to occur in isolated rural areas with
little alternative employment opportunities. The primary jobs at coal
mining companies, railroads and coal-burning utilities tend to be among
the highest paying jobs in the community. These jobs not only provide
high wages, but tend to have full benefits, including health care and
retirement benefits. Coal provides an important source of state revenue
in major coal producing states, but the effect of coal on government
financing is felt most in counties that are heavily reliant on coal.
Coal, as a basic industry, ripples through the economy providing
economic benefits to workers and businesses that directly relate to the
coal industry, such as equipment manufacturers, materials suppliers,
utilities and transportation companies. In addition, coal wages ripple
through the economy providing revenue and jobs in unrelated service
industries as the workers spend their income to provide for their
families.
Nationwide, the coal industry generates revenues of about $20
billion per year. Using conservative economic multipliers developed by
the U.S. Department of Commerce, we estimate that the coal industry
generates over $10 billion in household earnings and nearly $38 billion
in output for all businesses. The industry generated 361,204 jobs in
all industries, including 81,516 jobs in the coal industry. The impact
of these economic benefits are even more pronounced when viewed on a
state level. I have attached an analysis of major coal producing states
for 1998 (the latest year that detailed data have been published). This
shows the huge impact of the coal industry on states such as West
Virginia and Kentucky. Nearly 42% of total coal industry revenues were
generated in those two states. The total business output derived
directly and indirectly from the coal industry in West Virginia and
Kentucky was over $15 billion, and coal provided over 150,000 jobs. In
rural Appalachia, it is difficult to imagine what would happen to local
and regional economies if the coal industry were to disappear.
I said that these are conservative numbers because they only
measure the first round impacts of coal mining on the local economy. A
study done by economists at Penn State University about a decade ago
showed that the impacts are even greater when successive rounds of
economic stimulus are measured. That study concluded that the
employment effect was closer to 6 direct and indirect jobs for every
coal mining job (rather than the 3-4 jobs implied by the Commerce
Department multipliers) and that the overall economic output in all
businesses derived from coal mining was more than twice the amount
estimated by the Commerce Department multipliers.
conclusion
It is obvious that coal, though a small industry, is a critically
important industry in America. It is our largest reserve of fossil
fuel, comprising about 95% of America's total fossil fuel reserve. We
have the energy equivalent of a trillion barrels of oil, more than the
world's entire oil reserve. We use it to produce over 50% of our
electricity nationwide and some of our major manufacturing regions and
states use coal to generate 70% or more of their electricity. And coal
provides much-needed high wage jobs in areas of the country that do not
enjoy a diverse economy. The economic benefits of coal to the coal
mining communities are enormous.
It is clear, however, that environmental challenges must be met in
the future in order for coal to retain its rightful place as a keystone
of U.S. energy policy. While billions of dollars have been invested
since 1970 to clean up emissions from coal-fired power plants, we must
continue to invest in new technologies to improve the efficiency of
power plants and to remove harmful pollutants. But we should avoid
energy and environmental policies that outrun our technological
abilities and tend to move coal out of our energy mix. That would be
very costly in the short-run and foolish in the long-run.
Mr. Chairman, I thank you for the opportunity to appear before the
subcommittee. I hope that my presence here is helpful to all the
members as they debate our energy future. I would be happy to answer
any questions you may have.
Mr. Barton. Thank you, sir. Now we want to recognize Dr.
Roe-Hoan Yoon, and Mr. Boucher wishes to more formally
introduce you to the subcommittee.
Mr. Boucher. Well, thank you very much, Mr. Chairman. I am
pleased that we are joined today by one of my constituents, Dr.
Roe-Hoan Yoon, who has a global reputation for the leading edge
work that he has done in precombustion coal technologies from
his laboratories at Virginia Tech, which I would add have
enjoyed Federal support in their work.
Dr. Yoon has produced technologies that have enabled coal
companies to produce coal at a lower cost, and has been able to
produce technologies that beneficiate the coal through
precombustion coal cleaning technologies.
And Dr. Yoon is here today to suggest to us the proper
research and development role that will make coal more useable
still in the electricity generating market. Dr. Yoon, we are
delighted to have you here.
Mr. Barton. Welcome. Your testimony is in the record, and
we would ask you to summarize it in about 6 minutes, sir.
STATEMENT OF ROE-HOAN YOON, DIRECTOR, VIRGINIA CENTER FOR COAL
AND MINERALS PROCESSING, VIRGINIA TECH
Mr. Yoon. Thank you, Mr. Chairman, and members of the
subcommittee, and thank you, Congressman Boucher, for your kind
words. I appreciate the opportunity to present my views on the
need to develop advanced separation technologies for producing
cleaner coal.
In the year 2000, coal accounted for approximately 56
percent of the electricity generated utilities. According to
the annual Energy Outlook 2001, the price of electricity should
decline from 6.7 cents per kilowatt power in 1999, to 6 cents
in the year 2020.
This prediction was in-part based on an assumption that the
coal price at the mine mouth would continue to decline by 1.4
percent per year due to increased productivity, but we may have
a problem with this assumption.
In Southwest Virginia where I live, some of the world's
best coals are produced. However, the cost of producing coal
increases each year as mines go deeper underground. In
addition, part of the coal mine at high costs is being
discarded due to the difficulty in cleaning fine coal.
In the industry today run-of-the-mine coals are washed in
water to remove non-combustible mineral matter from coal. The
cost of cleaning the coal particles finer than approximately
0.15 millimeters in size are substantially higher than the
costs of cleaning coarse coal.
Therefore, many coal companies discard the fine coal, along
with the water, to fine coal impoundments. In general, 5 to 10
percent of the coal mines in the Eastern U.S. is too fine to be
cleaned efficiency, and therefore perhaps more than 50 percent
of the fine coal is being discarded.
According to a recent survey conducted by DOE, 2.5 to 3
billion tons of fine coal has been discarded in various
impoundments. Exhibit 1 shows a photograph of a coal slurry
impoundment located in Virginia.
The coal discarded in this impoundment represents, one, the
money that the coal company has already spent for mining. Two,
a waste of valuable national resources; and, three, an
environmental concern. Because of the last point, the Sierra
Club called for a national commitment to eliminate all high-
risk impoundments.
There are two objectives in a coal cleaning operation. One
is to separate mineral matter from coal, and the other is to
separate water from the cleaned coal. Availability of advanced
separation technologies in these two areas would enable coal
companies to recover fine coal rather than discarding it to
impoundments.
Exhibit 2 shows a solid-solid separation technology
developed at Virginia Tech, and installed at the same pond
shown in Exhibit 1. The coal company who took a risk in using
this new technology for the first time has been rewarded
handsomely.
The profit margin from the re-mining operation was
substantially larger than that from mining fresh coal in deep
mines. In effect, the high profit margin gained from the
remining operation more than offset the high costs associated
with deep mining operations.
Exhibit 3 shows the results of another solid-solid
separation method developed at Virginia Tech. It shows that
this new process can improve the removal of many different
impurities from coal, such as ash, inorganic sulfur, and
various trace element, including mercury.
The most difficult part of cleaning fine coal is to
separate the water from cleaned coal. To solve this problem, we
have been working hard for the past 6 years to develop
efficient solid-liquid separation processes. I am pleased to
report to you that some of these processes will be tested in
operating plants as part of a research project currently funded
by DOE.
The advanced separation technologies noted above need
further development for commercialization. If successful, they
can be used not only for cleaning fine coal, but also for
producing high value mineral concentrates.
In the year 2000, the U.S. mining industry produced about
$60 billion's worth of raw materials, which made the U.S. as
the largest mining country of the world.
Canada was the distant second with $36 billion; and
Australia is the third with $28 billion.
I would like to conclude my testimony by saying that there
is a need to develop advanced solid-solid and solid-liquid
separation technologies for the U.S. coal industry. They can be
used to produce cleaner and lower cost solid fuels for power
generation. Thank you, Mr. Chairman.
[The prepared statement of Roe-Hoan Yoon follows:]
Prepared Statement of Roe-Hoan Yoon, Director, Center for Coal and
Minerals Processing, Virginia Polytechnic Institute and State
University
Mr. Chairman and Members of the Subcommittee. I appreciate the
opportunity to present my views on the need to develop advanced
separation technologies for producing cleaner coal.
introduction
In 2000, coal accounted for 56% of the electricity generated in
utilities. According to Annual Energy Outlook 2001, the price of
electricity should decline from 6.7 cents per kWh in 1999 to 6.0 cents
per kWh in 2020. This prediction was in part based on an assumption
that the coal price at the mine mouth would continue to decline by 1.4%
per year due to increased productivity.
problems
In southwest Virginia, where I live, some of the world's best coals
are produced. However, the cost of producing coal increases each year,
as mines go deeper underground. In addition, part of the coal mined at
high cost is discarded due to the difficulty in cleaning fine coal. In
industry today, run-of-the-mine coals are washed in water to remove
noncombustible mineral matter from coal. The costs of cleaning the coal
particles finer than 0.15 mm are substantially higher than those for
cleaning coarse coal. Therefore, many companies discard them along with
water to fine coal impoundments. In general, 5 to 10% of the coal mined
in eastern U.S. is too fine to be cleaned efficiently, and perhaps more
than one half of it is being discarded. According to a recent survey
conducted by U.S. Department of Energy, approximately 2.5 to 3 billion
tons of fine coal has been deposited in various impoundments. Exhibit 1
shows a photograph of a coal slurry impoundment located in southwest
Virginia.
The coal discarded in this pond represents:
the money that the company has already spent for mining,
a waste of valuable national resources, and
an environmental concern.
Because of the last point, Sierra Club called for a national
commitment to eliminate all high-risk impoundments.
technology development
There are two objectives in a coal cleaning operation. One is to
separate mineral matter from coal (solid-solid separation), and the
other is to separate water from cleaned coal (solid-liquid separation
or dewatering). Availability of advanced separation technologies would
enable companies to recover fine coal rather than discarding it to
impoundments.
a) Solid-Solid Separation
Exhibit 2 shows a solid-solid separation technology developed at
Virginia Tech and installed at the same pond shown in Exhibit 1. The
coal company who took a risk in using this new technology for the first
time has been rewarded handsomely. The profit from the re-mining
operation was substantially larger than that from mining fresh coal in
deep mines. In effect, the high profit margin gained from the re-mining
operation offset the high costs associated with deep mining operations.
Exhibit 3 shows the results of another solid-solid separation
method developed at Virginia Tech. It shows that this new process can
improve the removal of many different impurities from coal, such as
ash, inorganic sulfur, and various trace elements including mercury.
b) Solid-Liquid Separation
The most difficult part of cleaning fine coal is separating water
from cleaned coal. To solve this problem, we have been working hard for
the past six years to develop efficient solid-liquid separation
processes. I am please to report to you that some of these processes
will be tested in operating plants as part of a research project
currently funded by the U.S. Department of Energy.
cross-cutting technology initiatives
The advanced separation technologies noted above need further
development for commercialization. If successful, they can be used not
only for cleaning fine coal but also for producing high value mineral
concentrates.
In 2000, the U.S. mining industry produced $59.7 billion's worth of
raw materials, which placed the U.S. the largest mining country of the
world. Canada was the distant second with $36 billion (in 1997), and
Australia the third with $27.6 billion (in 1998).
conclusions
There is a dire need to develop advanced solid-solid and solid-
liquid separation technologies for the U.S. coal industry. They can be
used to produce cleaner and lower cost solid fuels for power
generation.
Mr. Barton. And now I would like to welcome Mr. Billy Jack
Gregg, who is the Director of the Consumer Advocate Division of
the Public Service Commission of West Virginia. Your testimony
is in the record, and we would recognize you for 6 minutes to
elaborate on it.
STATEMENT OF BILLY JACK GREGG, DIRECTOR CONSUMER ADVOCATE
DIVISION, PUBLIC SERVICE COMMISSION OF WEST VIRGINIA
Mr. Gregg. Thank you, Mr. Chairman. May it please the
committee. I am Billy Jack Gregg, Director of the Consumer
Advocate Division of the Public Service Commission of West
Virginia, charged with the responsibility of representing West
Virginia consumers in utility proceedings in State and Federal
forums.
As you all know, West Virginia has been a reliable energy
source for the Nation. West Virginia is the second leading coal
producing State in the Nation, mining approximately 170 million
tons of coal per year. Since West Virginia became a State in
1863, we have mined and sent to national and international
markets 13 billion tons of coal.
The West Virginia Geologic Survey estimates that we have
remaining reserves of 53 to 54 billion tons of coal in West
Virginia, approximately half of which is low sulfur coal.
West Virginia can continue to be a reliable energy source
for the Nation for hundreds of years. West Virginia is also the
leading electricity exporting State in the Nation. We have
installed generating capacity of 14,400 megawatts of power,
approximately 98 percent of which is coal based.
Each year, approximately 38 million tons of the coal
consumed is consumed in West Virginia power plants, producing
90 billion kilowatt hours of electricity, and over 70 percent
of this electricity is exported to other States, principally
those to our east.
In fact, it is highly likely that the power generating the
lights in this hearing room today was generated in West
Virginia. Customers within West Virginia benefit from this
coal-based power by having the ninth lowest electric rates in
the Nation.
Our residential customers pay between 6 and 7 cents per
kilowatt hour for a total rate. In January of 2000 the West
Virginia Public Service Commission adopted a plan to
restructure the electric industry in West Virginia and
deregulate the generation of electricity.
Since that time over 5,000 megawatts of new capacity has
been announced in West Virginia. I have shown these new plants
on an attachment to my testimony. These plants represent a 37
percent increase in our existing base of capacity, and while
most of this new capacity is gas-fired, there are also plants
that utilize wind, as well as coal, and coat waste.
Given that most of the new and planned generating plants in
the United States in the past 10 years have been gas-fired,
many have despaired over the future of coal. I do not share
this pessimism. If the wholesale electricity market remains
open and continues to develop reliable and transparent price
signals, coal will continue to play a major role in our
Nation's overall electricity supply.
While we recognize that coal will be required to
internalize more and more of the costs caused by the mining and
burning of coal, coal will continue to enjoy a substantial
price advantage over other energy sources, including gas.
Coal currently delivers for $1 to $1.50 per million Btu's
in West Virginia. While due to increases in demand, gas now
sells for $5.30 per million Btu's. Even though it costs more
and takes longer to build a coal plant, the tremendous savings
in running costs make coal a cheaper alternative for base load
power in almost any life-cycle cost analysis.
If coal is the cheaper alternative, why aren't more coal
plants being built? There are several reasons. First, in many
areas of the country there is a need for peaking capacity;
capacity that runs for only a short time at the highest
demands, rather than new base load capacity.
Even at current high prices gas remains particularly well
suited for use in peaking facilities. Second, there is great
uncertainty concerning the ultimate environmental restrictions
which will be placed on coal burning generation plants.
Construction of a new coal plant already carried more risk
because of the longer permitting and construction phases, and
this uncertainty concerning environmental requirements
translates into additional risks and additional costs.
No investor wants to sink a billion dollars into a new coal
plant, only to find at the end of 7 years that additional
investment is required because emission requirements have
changed. Nevertheless, coal will stay and coal will come back
stronger than ever.
The Energy Information Agency has recently increased its
estimates of electricity demand growth in the United States
from 1.7 percent per year to 2.3 percent per year. As the
capacity factors of existing plants gets higher, and the
underlying base demand for electricity continues to grow.
There will be a need for new base load generating plants in
the future. Given a level playing field, coal will remain an
attractive choice as a fuel choice for new base load
generation. From a consumers point of view, the Nation will be
better off if we have a wide range of generation options and
let the market work out the most cost effective solution to
supplying our energy needs over time.
The Congress should not mandate market outcomes, but
instead should ensure that regional markets are truly open and
transparent, and not subject to manipulation. The Congress, and
State environmental agencies should also establish
environmental rules which are stable and reliable.
This will create an atmosphere which is not only cleaner,
but which is conducive to rational investment decisions. If
Congress wants to encourage one type of generation over
another, it should do so through research and tax policy, and
not through restructuring legislation.
States, however, should be allowed great flexibility in
encouraging generation portfolios appropriate for their
particular regions. In West Virginia, I have taken the position
that we should not distort the market by mandating purchases or
establishing set asides for any type of generation.
Other States, however, may require purchases from specific
types of generation. So long as regional electricity markets
are truly open and communicate reliable price signals, policy
mistakes by any one State should soon become apparent.
Given such a framework, I am confident that the environment
will continue to improve and that consumers will pay the lowest
long term price for energy in any fair market competition, and
coal will continue to play a significant role in meeting our
Nation's energy needs. Thank you.
[The prepared statement of Billy Jack Gregg follows:]
Prepared Statement of Billy Jack Gregg, Director, Consumer Advocate
Division, Public Service Commission of West Virginia
My name is Billy Jack Gregg and I am the Director of the West
Virginia Consumer Advocate Division. My office is charged with the
responsibility of representing utility ratepayers in state and federal
proceedings which may affect rates for electricity, gas, telephone and
water service. As part of this responsibility the Consumer Advocate
Division routinely participates in fuel purchasing cases of electric
utilities in West Virginia. My office is also a member of the National
Association of State Consumer Advocates (NASUCA), an organization of 42
state utility consumer advocate offices from 39 states and the District
of Columbia, charged by their respective state statutes with
representing utility consumers before state and federal utility
commissions and before state and federal courts. I greatly appreciate
the opportunity to testify at this legislative hearing.
i. introduction
First, I would like to commend Chairman Barton, the members of the
Subcommittee, and your staffs for your consistent recognition
throughout your careful deliberations that it is the impact of your
actions on consumers of energy services that is of paramount
importance. I and other members of NASUCA truly appreciate your
continuing efforts to seek out the views of consumers and consumer
representatives. We look forward to continuing to work with you in
developing energy policies and legislation that benefit all consumers
and the nation as a whole.
ii. background
West Virginia has been a reliable energy source for the nation.
West Virginia is the second leading coal-producing state in the nation,
mining approximately 170 million tons of coal per year. Since West
Virginia became a state in 1863, we have mined 13 billion tons of coal
to supply national and international markets. The West Virginia
Geologic Survey estimates that we have remaining mineable reserves of
53 to 54 billion tons, of which roughly half--23 to 24 billion tons--
are low sulfur coal. With these reserves, West Virginia can continue to
provide a reliable energy supply throughout the next 100 years.
West Virginia is also the leading electricity exporting state in
the nation. West Virginia has installed electric generating capacity of
14,412 megawatts. Each year approximately 38 million tons of coal is
consumed at West Virginia power plants, producing 90 billion kilowatt-
hours of power. Over 70% of this energy is transmitted to other states,
principally to our east. In fact, the lights in this hearing room today
may very well be powered with electricity generated in West Virginia.
Customers within West Virginia receive the advantage of our coal-based
power in the form reliable service and low electric rates. West
Virginia customers pay the ninth lowest electric rates in the nation,
with residential rates averaging 6 to 7 cents per kilowatt-hour.
In January 2000 the West Virginia Public Service Commission adopted
a plan to restructure the electric industry in West Virginia and
deregulate the generation of electricity. Since that time over 5,000
megawatts of new generating capacity has been announced in West
Virginia. These plants are shown on Attachment A. These new plants
represent a 37% increase over our existing base of capacity. While most
of this new capacity is gas-fired, there are also new plants which
utilize wind as well as coal and coal waste.
iii. the future
Given that most of the new and planned generating plants in the
United States in the past ten years have been gas-fired, many have
despaired over the future of coal. I do not share this pessimism. If
the wholesale electricity market remains open and continues to develop
reliable and transparent price signals, coal will continue to play a
major role in our nation's overall electricity supply. While we
recognize that coal will be required to internalize more and more of
the costs caused by the mining and burning of coal, coal will continue
to enjoy a substantial price advantage over other energy sources,
including gas. Coal currently delivers for $1.00 to $1.50 per million
Btu's in West Virginia. Due to increases in demand, gas now sells for
$5.30 per million Btu's. Even though it costs more and takes longer to
build a coal plant, the tremendous savings in running costs make coal a
cheaper alternative for base load power in almost any life-cycle cost
analysis.
If coal is a cheaper alternative, why aren't more coal plants being
built now? There are several reasons. First, in many areas of the
country, there is a need for peaking capacity--generation plants that
run for only a short period, at times of peak demand--rather than new
base load generation--plants that run around the clock. Even at current
high prices, gas remains particularly suited for use in peaking
facilities. Second, there is great uncertainty concerning the ultimate
environmental restrictions which will be placed on coal-burning
generation plants. Construction of a new coal plant already carries
more risk because of the longer permitting and construction phases.
This uncertainty concerning environmental requirements translates into
additional risk No investor wants to sink a billion dollars into a coal
plant, only to find at the end of seven years of construction that
additional investment is required because emissions requirements have
changed.
Nevertheless, coal will come back. The Energy Information Agency
has recently increased its estimates of electricity demand growth in
the United States from 1.7% per year to 2.3% per year. As the capacity
factors of existing plants gets higher and the underlying base demand
for electricity continues to grow, there will be a need for new base
load generating plants in the future. Given a level playing field, coal
will remain an attractive choice as the fuel source for new base load
generation.
iv. recommendations
From a consumer's point of view, the nation will be better off if
we have available a wide range of generation options, and let the
market work out the most cost-effective solution to supplying our
energy needs over time. The Congress should not mandate market
outcomes, but should instead ensure that regional markets are truly
open and transparent and not subject to manipulation. The Congress and
state and federal environmental agencies should also establish
environmental rules which are stable and reliable. This will create an
atmosphere which is not only cleaner, but which is conducive to
rational investment decisions.
If Congress wants to encourage one type of generation over another,
it should do so through research and tax policy, not through
restructuring legislation. However, states should be allowed great
flexibility in encouraging generation portfolios appropriate for their
particular regions. In West Virginia, I have taken the position that we
should not distort the market by mandating purchases or establishing
set-asides for any type of generation. Other states may require
purchases from specific types of generation. So long as regional
markets are truly open and communicate reliable price signals, policy
mistakes by any one state should soon become apparent. Given such a
framework, I am confident that the environment will continue to improve
and that consumers will pay the lowest long-term price for energy. In
any fair market competition, coal will continue to play a significant
role in meeting our nation's energy needs.
New Electric Generating Plants In West Virginia
[Since January 2000]
----------------------------------------------------------------------------------------------------------------
Year in Fuel
Plant County Company Size (MW) Service Source
----------------------------------------------------------------------------------------------------------------
12 Pole Creek.................... Wayne.............. Columbia........... 500 2001 Gas
Big Sandy........................ Wayne.............. Constellation...... 300 2001 Gas
Culloden......................... Cabell............. Panda.............. 1,100 2003 Gas
Pleasants........................ Pleasants.......... Dominion........... 335 2002 Gas
Polecat Hollow................... Pleasants.......... Cogentrix.......... 1,100 2004 Gas
Graysville....................... Marshall........... Cogentrix.......... 810 2003 Gas
Cameron.......................... Marshall........... Cogentrix.......... 810 2003 Gas
Backbone Mtn..................... Tucker............. Atlantic Renew..... 90 2001 Wind
Horseshoe Run.................... Preston............ Megaenergy......... 10 2001 Gas
Middle Fork...................... Barbour............ Anker Energy....... 300* Coal/Gob
-------------
TOTAL............................ ................... ................... 5,355
EXISTING GENERATION.............. ................... ................... 14,412
INCREASE......................... ................... ................... 37%
----------------------------------------------------------------------------------------------------------------
* Has not yet filed for certificate.
Mr. Barton. Thank you, Mr. Gregg.
We now would like to hear from Mr. Armond Cohen, who is the
Executive Director of the Clean Air Task Force. Your statement
is in the record, and we would ask that you summarize it in 6
minutes. Welcome.
STATEMENT OF ARMOND COHEN, EXECUTIVE DIRECTOR, CLEAN AIR TASK
FORCE
Mr. Cohen. Thank you very much, Mr. Chairman, and members
of the committee. The Clean Air Task Force, just by way of
introduction, works with groups throughout the United States,
concentrated in the midwest and the southeast--Illinois, Ohio,
Virginia, other places, North Carolina, Georgia.
We have very strong relationships with environmental groups
in those States that are working on this issue of how to
reconcile energy production for fossil fuels and environmental
cleanliness. On the national level, we work with a coalition
called ``Clear the Air,'' which includes the National
Environment Trust, and the United States Public Interest
Research Group, and we work in cooperation with Environmental
Defense, Natural Resources Defense Council, and others.
However, today, mostly because of the limitations of time,
I am speaking on behalf of the task force alone. I am here with
a message that may surprise you a little bit. I believe and I
agree with the members of this panel that coal-fired electric
production is likely to remain a very significant part of the
Nation's electric generating supply in the coming decades.
What I do want to do though is underscore that in order for
that to happen that we are going to need to shrink the
environmental footprint of this energy source significantly,
and that is due to a lot of scientific evidence, as well as
technology improvements in the last decade.
There has been a lot of science since the last round of
amendments to the Clean Air Act. First in the area of fine
particulate from coal-fired energy. A study was put out late
last year indicated that as you look across the Nation about
30,000 premature deaths per year can be attributed to fine
particulate matter from coal-fired energy plants.
Interestingly, if you look at the pattern of distribution--
and this is in the testimony that I submitted--you will see
that the impacts are really more densely concentrated in the
midwest and the southeast, as opposed to the northeast.
And Mr. Yoon made the point earlier about drift into the
northeast. The reality of coal-fired energy health impacts is
that they are dominantly concentrated where the coal-fired
energy is, and that is in those regions. You also see that
States like--in fact, coal mining States like West Virginia,
Kentucky, Virginia, Tennessee, Alabama, dominate the rankings
of deaths per hundred-thousand citizens from coal-fired energy
emissions.
In addition, a study put out in late 1999 indicated that
about 6 million asthma attacks per year, 200,000 emergency room
and hospital admissions, come from ozone smog. About a quarter
of that toll is due to coal and other fossil-fired energy
plants.
If you look at ecological effects, we have seen a
significant amount of research on acid rain, on nitrogen
saturation of soils. There is a lot of research that has come
out in the last decade indicating that while we have made some
improvements in the acid rain emissions from the power sector,
the ecosystems of the southeast and the northeast are still
very much in trouble, and recovery is going to be substantially
delayed without significant additional cuts in sulfur dioxide
from the power generating sector.
Visibility in our national parks is appalling. It is about
20 percent of natural background levels. Parks like the
Shenandoah, the Great Smokey Mountains; where you could see 80
or 90 miles on an average summer day 30 or 40 years ago, now
you are down to maybe 8 or 9, 10, 12 miles.
This has been documented to be very closely linked to at
least half of those effects to coal-fired energy emissions,
particularly fine particulate matter. Mercury is another
pollutant of concern. A recent report from the Center for
Disease Control earlier this month indicated that about 6
million women nationally have elevated levels of mercury in
their blood that are above EPA's safe reference dose.
We have talked about climate change a little bit, and it
just does bear mentioning that the power sector is the big
actor in that area, accounting for about 40 percent of domestic
CO2 emissions.
Now that's the bad news. The good news is that we do have
the technologies to move on a number of these fronts. The last
decade-and-a-half has shown an increasing availability of, and
commercialization, and lowering costs of pollution control
devices to reduce NOX, to reduce SO2.
There have been demonstrations of mercury reduction
technologies. Every day there seems to be in the trade press
another announcement of another technological breakthrough.
CO2 is clearly going to be more difficult. It
probably in the near term will require some reduced reliance on
coal. Over the long term, however, it does appear that many of
the technologies that Dr. Yoon spoke of appear to be promising
and separation of CO2 from the feed stock may be
feasible within the next decade to decade-and-a-half.
My message to you really is that there really is the need
to move forward. If we are going to move forward, let's burn it
cleanly. Let's also align our national policy in a way that
allows utilities like Mr. Abdoo's to move forward to plan.
In recent months, in the last year, you have seen a lot of
moment at the State level. In States like Illinois, for
example--and in fact in cooperation with the local UMW--we have
seen proposals to reduce emissions from local power plants
significantly.
In Texas, Government Bush in 1999 signed a State bill that
would have shrunk the NOX and the SO2
emissions of East Texas plants significantly. We are seeing
similar movement in New Hampshire, New York, Massachusetts,
Connecticut. This is moving at the State level, and we have
also seen Senator Smith on the Senate side take lead on this
issue, although I understand that CO2 is the
controversy of the day.
There is broad commitment and support it seems from the
administration to move forward a coordinated policy. So my
message to you really is that I think we can do this. I think
if we can come together around a common set of timeframes and
targets, we can have coal as part of the U.S. generating mix,
and we can preserve jobs, but we can also have a much cleaner
environment, which we desperately need. Thank you very much.
[The prepared statement of Armond Cohen follows:]
Prepared Statement of Armond Cohen, Executive Director, Clean Air Task
Force
introduction
Mr. Chairman, and Members of the Subcommittee: My name is Armond
Cohen, and I am Executive Director of the Clean Air Task Force, or
CATF. I appreciate the opportunity to testify before you today.
CATF is a national environmental organization that works at the
state and federal level in the courts, agencies and other venues to
advocate policies to reduce air pollution. At the state level, we work
with state environmental and public health organizations and state
officials; at the national environmental level we also work as part of
``Clear the Air,'' a campaign aiming a reform of federal power plant
emissions policy, and with other national environmental organizations
such as Environmental Defense, Natural Resources Defense Council and
others. Today, however, due to the hearing schedule, I offer testimony
on behalf of CATF alone.
scope of testimony
Today's hearing focuses on coal as part of the nation's energy
policy. My testimony will focus more specifically on what environmental
concerns must be considered as part of coal's future role in the
nation's electric generation, and will recommend policies to address
those concerns. My testimony will address, in order:
Recent scientific evidence supporting additional air emissions
and solid waste controls on coal fired power plants;
Technology and market changes in the last decade that suggest
these controls are becoming increasingly feasible and cost-
effective;
Problems in the current structure of environmental regulation
of coal fired power plants, and how those problems might be
addressed in the context of improved emission controls; and
The emerging state and federal bipartisan consensus that this
should be done.
recent scientific evidence on coal plant air emissions
Since the enactment of the 1990 Clean Air Act Amendments, an array
of scientific evidence has emerged to support significantly lower
emission limits in the nation's coal-fired power plants. This body of
work includes the following:
Fine particulate matter. A succession of studies during
the 1990s, starting with work out of Brigham Young University, began to
link so-called ultrafine particulate matter with premature death and a
range of other sub-lethal but negative health impacts. This body of
work underlay EPA's 1997 fine particulate standard that was recently
upheld by the U.S. Supreme Court. More recently, studies have focussed
on the relationship of fine particulate matter impacts to fossil-fired
electric plants specifically. The Harvard School of Public Health, for
example, in two recent studies, found hundreds of annual deaths per
year linked to coal fired plants in Massachusetts and Illinois due to
fine particulate matter, and significant sub-lethal impacts leading to
asthma attacks and respiratory hospitalizations.
On a national scale, Abt Associates 1 recently found
that more than 30,000 premature deaths per year are caused by fine
particulate precursor emissions from coal- and oil fired power plants,
as well as 27,000 emergency room visits and hospitalizations, 600,000
asthma attacks and an astonishing 5.1 million lost work days per year.
Notably, the densest concentration of particulate related health
impacts was not in the Northeast U.S.--which has typically been the
more vocal complainant in national air pollution policy debates--but in
the Midwest and Southeastern U.S., where the bulk of the nation's coal
fired electric generation is located. For example, cities in Alabama,
Tennessee, Virginia, Kentucky and West Virginia dominated the rankings
of coal plant-related death tolls per 100,000 residents.
---------------------------------------------------------------------------
\1\ Abt Associates, The Particulate-Related health Benefits of
Reducing Power Plant Emissions (October 2000).
---------------------------------------------------------------------------
Another issue raised by these studies is that mortality and
morbidity impacts are related to distance for coal plant smokestacks.
The Harvard Massachusetts study I referred to above, for example, found
that about 30% of the mortality risk associated with the studied plants
fell within 35 miles of the plant. These findings will influence how we
design future emission trading policies for this sector.
Ozone smog. During the last decade, scientists have also
begun to further understand the far reaching health effects of ozone
smog, and its spatial relationship to power plants. A study by Abt
Associates in 1999 2, for example, found that in the
Central, Southern and eastern U.S., ozone smog was responsible each
year for more than 150,000 emergency room visits and hospitalizations,
as well as more than 6 million asthma attacks. Fossil-fired power
plants account for about 25% of ozone smog precursor emissions--
although a greater proportion in the Midwest's lower Ohio Valley. As
with fine particulate matter, ozone smog emissions from power plants do
their greatest damage close to the source; one study last year by a
researcher at the Harvard School of Planetary and Earth Sciences
demonstrated that ozone smog exposure in the Ohio Valley is often worse
than similar exposures in the Northeast, due largely to the dense
concentration of coal-fired power plants in the area.3
---------------------------------------------------------------------------
\2\ Abt Associates, Adverse Health Effects Associated with Ozone In
the Eastern United States (October 1999).
\3\ Ohio Environmental Council, Ohio Valley: Ozone Alley (February
2000).
---------------------------------------------------------------------------
Acid rain. From Canada through the Southeastern US, there
is increasing evidence in the last decade that points to the need for
at least a 75 percent sulfur cut beyond current Clean Air Act
requirements to support recovery from sulfur damage. In one sense, the
1990 Clean Air Act Amendments have been successful: sulfur cuts to date
have resulted in less sulfate in precipitation. But these cuts have not
been deep enough for acidity levels in sensitive water bodies to return
to levels that can fully support recovery of aquatic life and allow
soils to recover from loss of base cation nutrients.
To illustrate:
Sensitive watersheds in central Ontario and Quebec have not
responded to reductions in sulfate deposition. At the current
sulfur deposition levels, roughly 95,000 lakes will continue to
be damaged by acid deposition. Atlantic salmon in Nova Scotia
have become extinct in 14 rivers and severely impacted in 20
rivers. In Quebec, studies have shown the nutrient status of
sugar maple seedlings declined as soil acidification levels and
soil base saturation decreased. At current deposition levels,
these effects will likely be sustained or increased causing
reduction in nutrient uptake and decline in forest ecosystem
productivity. Additionally, exposure to precipitation with low
pH prevents germination of pollen in white and mountain paper
birch. It also reduces a tree's frost hardiness. To reverse and
recover from acidic deposition impacts, Canadians in the
Acidifying Emissions Task Group have recommended a 75 percent
reduction in US sulfur emissions from current Clean Air Act
levels.
Similarly, in New York, the combination of site sensitivity
and high levels of acidic deposition makes the Adirondacks and
Catskills the most sensitive regions to acid inputs in the U.S.
Forty-one percent of Adirondack lakes are either chronically or
episodically acidic. Here, despite reductions in sulfur dioxide
emissions and sulfate deposition, water quality at affected
lakes and streams continues to be a problem; there has been no
improvement in the ability of these waters to neutralize acids.
Indeed, concentrations of aluminum in Adirondack waters are
increasing, with toxic effects: nearly 25 percent of surveyed
lakes in the Adirondacks do not support any fish.
Western Pennsylvania receives some of the highest levels of
sulfur deposition in the U.S. and as a result suffers from
ecological problems associated with acidic deposition, such as
poor seedling regeneration of sugar maples and red oaks on
forested sites throughout the region; deterioration of tree
health and excessive mortality of mature sugar maples and red
oaks; and loss of fish species and species diversity in
streams.
The West Virginia Department of Natural Resources has
identified hundreds of miles of streams that are chronically
acidic and is currently liming 60 streams to offset the damage
from acidic deposition.
The Virginia Trout Stream study with 13 years of data on 60
streams predicts that even cuts of 40-50 percent beyond Clean
Air Act will not support recovery of chronically acidic streams
and will cause transitional streams to worsen. According to the
study, the predominant trend in stream acid neutralizing
capacity over the past 12 years has been downward, indicating
continuing acidification. Two different models indicate sulfate
deposition reductions greater than 70% are needed to prevent
additional stream alkalinity reductions and brook trout stream
losses in Virginia.
In the Great Smoky Mountains National Park, streams are
experiencing chronic and episodic acidification caused, in a
large part, by acidic deposition. Acidic deposition is also
causing forest ecosystems to experience chemical imbalances
that contribute to tree stress. Two separate ecosystem models
concur that SO4 reductions of 70% are needed to
prevent acidification impacts from increasing in the Great
Smokies' ecosystems. Deposition reductions beyond are needed to
improve degraded aquatic and terrestrial ecosystems.
Overall, in the Southeast, the chronic loading of sulfate and
nitrate has made already Calcium-deficient soils in the region
more Calcium-deficient. Analyses at forest sites in the region
suggest that within 80 to 150 years, soil calcium reserves will
be inadequate supply the nutrients to support the growth of
merchantable timber.
Visibility and haze. Our national parks and wilderness
areas have suffered significant declines in visibility in the last
several decades. Regional haze has reduced annual average visibility in
these areas to about one third of their natural levels in the West, and
to one quarter of their natural levels in the East. For example, the
average natural visual range in Virginia's Shenadoah National Park and
in the Great Smoky Mountains of Tennessee and North Carolina is about
80-90 miles, while average summertime visibility has been reduced to a
paltry 12 miles.4 This pervasive haze makes the park and
wilderness experience far less attractive and enjoyable to the 287
million people who visit these areas annually. A recent study indicates
that visibility damage to our national parks, based on surveys of
visitors, can be estimated at $4.3 billion dollars per
year.5
---------------------------------------------------------------------------
\4\ Clean Air Task Force, Out of Sight: Haze in Our National Parks
(September 2000)
\5\ Note 4, above.
---------------------------------------------------------------------------
The last decade of research has also shown the link between haze
and power plant sulfate more clearly. Recent light extinction studies
by Colorado State University, for example, have shown that on poor
visibility days in Eastern parks, power plant sulfate emissions account
for roughly half of total park visibility losses.6
Importantly, this research has also shown that visibility increases
geometrically at higher levels of fine particulate reduction--in other
words, deeper power plant cuts will yield disproportionately longer
vistas in the parks.
---------------------------------------------------------------------------
\6\ Malm, Wiliam C., Spatial and Seasonal patterns and temporal
Visibility of Haze and its Constituents in the United States, Colorado
State University, Fort Collins, CO (May 2000).
---------------------------------------------------------------------------
Toxic emissions. Coal- and oil-fired power plants are
responsible for a wide array of toxic air emissions, including, most
notably, mercury, as well as other metals such as arsenic and
beryllium; and acid gasses such as hydrochloric acid and hydrogen
sulfate. All of these substances have known toxic, neurotoxic or
carcinogenic effects.
In September of last year, a committee of the National Academy of
Sciences estimated that over 60,000 children are born each year at risk
for adverse neurodevelopmental effects due to in utero exposure to
methylmercury.7 These children will likely have to struggle
to keep up in school and might require remedial classes or special
education. As noted below, however, and in an attachment to this
testimony, there is some indication that mercury and other toxic
emissions may be significantly controlled as a co-benefit from
controlling nitrogen and sulfur emissions that contribute to fine
particulate deaths, ozone smog, acid rain, and haze.
---------------------------------------------------------------------------
\7\ Toxicological Effects of Methylmercury, National Academy Press,
Washington, DC, 2000. http://www.nap.edu
---------------------------------------------------------------------------
Climate change. The nation's power plant fleet accounts
for approximately 40% of the nation's man-made CO2
emissions. In addition, recent research has pointed to the role of
tropospheric ozone, another by-product of coal combustion, in climate
change.8 While the debate over climate change science will
no doubt continue, it has narrowed substantially with the latest IPCC
report. Many policymakers have increasingly concluded that some initial
steps toward greenhouse gas emission control is the prudent course.
Many utilities have concluded, in any event, that some policy action is
inevitable.
---------------------------------------------------------------------------
\8\ James Hansen et al., Global warming in the twenty-first
century: An alternative scenario, NAAS Proceedings, August 2000.
---------------------------------------------------------------------------
Fossil fuel combustion waste. Combustion wastes are the
solid and liquid waste left over from burning coal and oil to make
electricity--ash, sludge, boiler slag, mixed together with a dozen or
so smaller volume wastes. Every year, over 100 million tons of these
wastes are produced at nearly 600 coal- and oil-fired power plants.
Seventy six million tons are primarily disposed of at the power plant
site in unlined and unmonitored wastewater lagoons, landfills and
mines. These wastes are highly toxic, containing concentrated levels of
contaminants like arsenic, mercury, chromium and cadmium that can
damage the nervous systems and other organs, especially in children.
Analyses performed for EPA show that some of these pollutants will
eventually migrate and contaminate nearby groundwater--in some cases
posing cancer risks thousands of times higher than EPA's standard risk
thresholds.
Despite these high toxic risks, there is no direct federal
regulation of these wastes; they were exempted from such regulation by
Congress, leaving it up to EPA to decide. Last year, EPA declined to
directly regulate these wastes. Instead, these disposal units are
operating under state rules that are frequently less protective than
those applying to household trash.9
---------------------------------------------------------------------------
\9\ Citizens Coal Council and Clean Air Task Force, Laid to Waste
(February 2000).
---------------------------------------------------------------------------
Technological and market changes. At the same time as we have
expanded our knowledge of the environmental impacts of coal fired
generation, the last decade has also brought increased demonstration of
the efficacy and cost-effectiveness of emission controls and
alternative combustion technologies that could reduce these impacts.
Key developments include:
Commercial demonstration of sulfur dioxide scrubbing.
Commercial demonstration of selective catalytic reduction and
selective non-catalytic reduction to control nitrogen oxides.
Development of hybrid control technologies such as Powerspan
that are promised to control nitrogen, sulfur and mercury
emissions.
Initial demonstration of sorbent injection technologies to
control mercury emissions.
Initial indications, from EPA data, that sulfur and nitrogen
controls, combined with particulate controls, may result in up
to 90% removal of mercury from flue gasses. In addition, it
appears that acid gasses such as hydrocholoric acid are also
effectively removed from flue gas with wet scrubbing.
Advances in the efficiency of natural gas combined cycle
generation.
Increased attention to and optimism concerning the possibility
of CO2 separation and sequestration in the process
of advanced coal gassification.10
---------------------------------------------------------------------------
\10\ See, e.g., U.S.D.O.E., Vision 21 Program Plan: Clean Energy
Plants for the 21st Century, April 1999.
---------------------------------------------------------------------------
All of these developments make it feasible to contemplate
significant reductions from the nation's fossil power plant fleet in
the coming years, at increasingly lower costs.
Indeed, as the chart attached indicates, existing coal boilers
licensable today are roughly four times cleaner than older coal plants
for sulfur and nitrogen. The minimum foundation of any federal power
plant emissions policy must be the eventual ``de-grandfathering'' these
older plants--making them meet modern emissions requirements.
a comprehensive approach to emissions reductions
All of the above environmental imperatives must be addressed.
Indeed, in piecemeal fashion, many of them are already being addressed
by the current regulatory structure. However, that structure leaves
much to be desired. For example, by fragmenting emissions control of
nitrogen and sulfur under more than dozen programs, each with different
goals, time frames, standards and litigation opportunities, the current
structure both delays needed emission cuts and produces uncertainty and
inefficiency for the owners of coal-fired generation, who find it
difficult what plants to retrofit, which to retire, which to run less,
and which to build, and when. The following diagram illustrates some of
the overlap and conflict in the present scheme:
[GRAPHIC] [TIFF OMITTED] T1503.024
The solution is clear, and has been widely discussed: federal
legislation creating aggressive, comprehensive, hard-wired emissions
targets for all four of the key emissions from power plants--sulfur,
nitrogen, mercury, and carbon dioxide. As part of such legislation,
industry has called for ``safe harbors'' from certain further actions
by EPA under existing agency authority to provide a stable investment
horizon to generation owners.
an idea whose time has come
Leaders of both major parties at the state and federal level have
increasingly embraced this idea of comprehensive power plant emissions
control policy.
At the state level, the following developments have occurred:
Texas: In 1999, then-Governor Bush signed into law an electric
market competition bill that required previously
``grandfathered'' East Texas generating units to reach tight
nitrogen oxide emission standards equivalent to those met by
new plants built today, and that required 25% reductions in
sulfur dioxide beyond current federal law.
Illinois and other Midwest States: Last week, state
legislators of both parties in the Great Lakes states announced
they would soon propose comprehensive, multi-emission power
plant legislation. In Minnesota and Illinois, such legislation
has been seriously debated in the last year and may well be
enacted in this session.
New Hampshire: Governor Shaheen and New Hampshire Republican
leadership have jointly proposed power plant cuts of all four
key emissions, including a reduction in state power sector
CO2 to 7% below 1990 levels.
Connecticut: Governor Rowland has issued an Executive Order
requiring nitrogen and sulfur emission cuts in state power
plants, with emissions credit trading limited by discounting
the value of out-of-state credits obtained. The Connecticut
legislature is presently considering even steeper cuts.
Massachusetts: Governor Paul Cellucci has proposed new rules
to require coordinated emissions cuts of nitrogen, sulfur and
CO2 from the state's power plants, with minimum on-
site emissions reductions required as a predicate to allowing
emissions trading; issuance of the rules is imminent.
New York: Governor Pataki has pledged cuts in New York power
plant sulfur and nitrogen emissions of at least 50%, and the
state environmental agency is reportedly considering including
cuts of mercury and CO2 in proposed rules as well.
Movement on this issue outside the Beltway--and especially in the
Midwest and Southeast--should not be surprising. As discussed earlier,
the wide-ranging environmental and health impacts of power plant
emissions are often felt most severely in those regions. And, as the
many Midwestern editorials and news stories attached to this testimony
indicate, opinion leaders in those states are beginning to understand
the local impacts of coal-fired plants, and are demanding action.
At the federal level, convergence on the wisdom of comprehensive
power plant emissions control legislation has been equally widespread.
President Bush promised to propose such legislation during his
campaign, and reaffirmed his support in the budget sent to Congress. In
recent weeks, EPA Administrator Whitman has affirmed this
Administration's commitment to enact such legislation. Senator Smith
has also pledged to develop and introduce such legislation with his
Senate colleagues. And it is likely that, on the House side, there will
again be introduced bi-partisan legislation to control power plant
emissions.
And key coal-fired plant owners have supported comprehensive
legislation as well. Last May, in hearings before the Senate
Environment and Public Works Committee, Cinergy CEO Jim Rogers and New
Century (now Xcel) CEO Wayne Brunetti spoke in favor of this approach
as way of providing certainty for future investments.
Comprehensive emissions control for the power sector is clearly an
idea whose time has come.
conclusion
Returning to the theme of this hearing--the future of coal-fired
generation in the nation's energy policy--let me conclude with a
headline taken from an editorial in the Akron Beacon Journal earlier
this year, included as an attachment to this testimony:
``The lesson after 30 years? Pollution controls and coal-fired
power plants have a future together.''
The converse is also true, however: without aggressive and
comprehensive power plant pollution targets, the future is grim,
indeed: for our children, for our communities, for our natural
environment, and for owners of coal assets themselves. We have the
knowledge of why to clean up. We have the technical means. We simply
must summon the will to make this important step forward.
I thank you for your attention and look forward to your questions.
Mr. Barton. Thank you, Mr. Cohen, and I would agree with
what you said, that we can do this. So we are in agreement and
we appreciate your testimony. Our last, but not our least,
witness is Mr. Edwin Pinero, who is the Director of Program
Operations for the Pennsylvania Department of Environmental
Protection, Office of Pollution and Compliance Assistance, in
Harrisburg, Pennsylvania.
That is the longest title I think of the year. So I would
love to see your business card. It is probably about 6 inches
long. Welcome. Your testimony is in the record, and I would ask
you to elaborate on it for about 6 minutes.
STATEMENT OF EDWIN PINERO, DIRECTOR OF PROGRAM OPERATIONS,
PENNSYLVANIA DEPARTMENT OF ENVIRONMENTAL PROTECTION, OFFICE OF
POLLUTION AND COMPLIANCE ASSISTANCE
Mr. Pinero. Good afternoon, Mr. Chairman and members of the
subcommittee. Actually, my title is so long I actually have two
business cards that I carry around. Again, my name is Edwin
Pinero, and I am the Director of the Bureau of Environmental
Sustainability in the Pennsylvania Department of Environmental
Protection, and I am also the Director of State Energy
Programs.
I am also a board member of the National Association of
State Energy Officials or NASEO. NASEO represents 49 States,
territories, and the District of Columbia on energy matters. I
am honored for the opportunity to be here representing the
Commonwealth of Pennsylvania and NASEO, at this discussion of
national energy policy, and specifically the role of coal and
other energy sources in such policy.
The systematic approach that the committee is taking toward
developing energy policy is to be applauded. Coal has paid an
integral part in Pennsylvania's growth and economic history.
Currently, approximately 60 percent of the power generated in
Pennsylvania comes from coal.
Nationally, coal accounts for over 50 percent of the
electricity generation, and will remain a key part of the
energy picture for the foreseeable future. But other sources of
energy make up our energy portfolio as well. Natural gas,
nuclear, hydroelectric, wind, solar, and geothermal all
generate electricity, along with fuel oil, propane, and natural
gas as residential heating fuel.
This diversity provides for options in times of shortages
and high prices, and reduces the dependency and associated
risks that come with relying on any one source of energy.
Let's briefly discuss the connection of energy policy to
environmental policy. As implied by my title, or titles, in
Pennsylvania, we see a strong relation between energy and the
environment. And in 1995, we merged our energy office into our
Office of Environmental Protection.
We felt that it was neither practical nor prudent to talk
of energy without considering the environmental implications.
Now, in the interest of time, I am not going to discuss a lot
of the very innovative programs that we are doing in
Pennsylvania.
I will refer you to the written testimony and I will be
happy to answer questions about it at the end, and maybe with
time permitting I might cover a couple of those examples.
We are actively participating in a variety of national
initiatives and activities where environment and energy
policymakers are coming together. In addition to bringing
together the State Agencies, NASEO, the Environmental Council
of States, the National Association of Regulatory Utility
Commissioners, the State Territorial Air Pollution Program
Administrators, and Association of Local Pollution Control
Officials, and air quality directors are all coming together to
share their ideas and develop integrated solutions for energy
in the environment.
The recent meetings of these groups in St. Louis was
representative of the potential for cooperation. Also, the
United States Environmental Protection Agency, the United
States Department of Energy, the National Governor's
Association, and the National Conference of State Legislators,
are all organizations that States, including Pennsylvania, are
working with to develop comprehensive strategies and
approaches.
We are also trying to develop pilot program in individual
States and regions. In other States, such as in New Jersey, and
as Mr. Abdoo of Wisconsin Electric mentioned in Wisconsin,
agencies have taken a flexible approach to looking to achieve
results, while not necessarily concerned with the specific
means.
And we are continuing in this effort, which is being
conducted on a non-partisan basis. A comprehensive and flexible
national energy policy will allow States and regions to develop
unique and appropriate strategies that will capitalize on the
unique variations across the Nation.
Pennsylvania is working closely with other States in our
own region, as well as our colleagues across the Nation, to
leverage experience and ideas, and because so many States use
energy program fundings to carry out these program, a clear and
consistent linkage between energy policy and energy budgets is
prudent, and will ensure success in meeting State and national
goals.
In late year 2000, our Governor, Tom Ridge, created the
multi-agency energy task force, bringing together the many
Commonwealth Agencies that interact on energy related issues,
so we could work together and strategically help shape
Pennsylvania's energy strategy and policy, and align our
activities and overall goals.
In summary, I trust that these brief comments and more
detailed written testimony, show that we strongly believe that
a sound energy policy needs to recognize the importance of a
comprehensive and flexible national policy; clear and
consistent linkages between budget and policy, a diverse
portfolio of energy sources, realizing the important of both
the supply side and demand side.
And the need to work together on developing, testing, and
applying new and innovate ideas. And let me just share with you
a couple of idea. And let me just share with you a couple of
examples of what we were doing in Pennsylvania to show the
successes of this strategy and working together.
In 1999 alone, we reclaimed over 6,000 acres of abandoned
mine land. The scrub grass generating company is using an
innovative technology burning waste coal material for
electricity, and at the same time with advanced air pollution
control equipment, reducing 146 tons of nitric oxide per ozone
season.
Over the last 3 years, 175 winners of our Governors
environmental excellence award through energy efficiency and
renewable energy technology shave reduced 56 million kilowatt
hours of electricity usage.
In 1990's, greater than 99 percent of sites permitted for
coal mining had no post-mining discharge problem. And finally
the Edison Mission Energy Company has just invested $200,000 on
air pollution control equipment to upgrade coal burning
facilities in the Eastern part of Pennsylvania.
I thank you for your time and attention and the opportunity
to share these thoughts with you, and I would be happy to
answer any questions you may have. Thank you.
[The prepared statement of Edwin Pinero follows:]
Prepared Statement of Edwin Pinero, Director, Bureau of Environmental
Sustainability, Pennsylvania Department of Environmental Protection
Good afternoon. My name is Edwin Pinero and I am the Director of
the Bureau of Environmental Sustainability in the Pennsylvania
Department of Environmental Protection, and a Board Member of the
National Association of State Energy Officials.
NASEO represents 49 states, territories, and the District of
Columbia on energy matters.
I am honored for the opportunity to be here representing the
Commonwealth of Pennsylvania and NASEO at this discussion of national
energy policy, and specifically the role of coal and other energy
sources in such policy. The systematic approach that the committee is
taking towards developing energy policy is to be applauded.
Coal has played an integral role in Pennsylvania's growth and
economic history. Currently, approximately 60 percent of the power
generated in Pennsylvania comes from coal. In addition, coal helped
power the industrial revolution, including the steel industry, so
prominent in our Commonwealth's history.
Nationally, coal accounts for over 50 percent of electricity
generation, and will remain a key part of the energy picture for the
foreseeable future. But other sources of energy make up our energy
portfolio--nuclear power, hydroelectric, wind, solar, and geothermal to
generate electricity along with fuel oil, propane, and natural gas as
residential heating fuels.
This diversity provides for options in times of shortages and high
prices, and reduces the dependency and associated risks that come with
relying on any one source of energy.
Although abundant, coal is a finite natural resource that must be
used wisely and in conjunction with other energy sources so that it is
consumed at a reasonable, sustainable rate. We also use other finite
resources for energy, such as petroleum products, including natural
gas. Currently, there are plans for new smaller scale power plants in
Pennsylvania that will use natural gas. We must approach these as well
with the mindset of optimal consumption rates.
One way to optimize the rate of consumption of these finite
resources is to introduce a mix of renewable energy sources, or those
that are not depleted with use. These include hydroelectric energy,
solar energy, wind energy, and geothermal energy. However, these
renewable energy sources are relatively new arrivals on the energy
market scene, and commercialization and technology development costs
can make them too expensive for the average American.
National and state energy policy can provide for the introduction
and demonstration of these other sources so with time they become an
integral part of the market. In Pennsylvania we have several projects
and initiatives underway to demonstrate the value and applicability of
these technologies.
One of the largest wind farms in the east is in western
Pennsylvania and several others are under construction or are planned.
We have numerous schools and other commercial buildings that utilize
ground source heat exchange for heating and cooling, and solar energy
applications are seen in many places in the Commonwealth.
Through Gov. Tom Ridge's Green Government Council, we intend to set
an example of leadership by improving the way government does business.
We have applied solar and geothermal technology, along with overall
green building design at our newest district mining office in Cambria
County in Western Pennsylvania. In addition, we now have a procurement
requirement of a five percent environmentally preferable energy
component to our Commonwealth power purchases.
The rate, at which we use coal, and any other energy source, is a
function of both supply side and demand side management. Our utility
infrastructure generates energy and distributes the energy to the
users.
Energy policy needs to provide for the supply side infrastructure
to be able to have the fuel sources needed to generate the energy, and
the mechanisms to deliver the energy. Pennsylvania is characterized by
a network of power generation using a suite of energy sources such as
coal, nuclear and hydroelectric, supported by a nationally recognized
transmission and distribution system. As a result, Pennsylvania has a
strong energy base and is actually a net exporter of electricity.
But demand side issues are equally important in the energy policy
picture. It is the amount of energy that we need, the demand, that
drives how much energy must be produced. The best way to address demand
side issues is to educate and support the public on the value of energy
conservation, energy efficiency, and distributed generation, or the
ability of the end user to generate their own energy.
State and national energy policy can provide the framework for the
outreach and catalyzing of the energy efficiency movement. We have
realized in Pennsylvania a heightened awareness and interest by our
general population on the subject of saving energy and helping to
reduce costs.
Using the State Energy Program funding and our own funds, we are
working closely with schools to not only implement energy saving
measures, but to start the education process early, in the K to 12
environment, to instill the concept of energy efficiency as a way of
life.
We apply a great deal of our energy related funding to this
outreach and education effort. This effort includes use of the media,
highlighted last year by the Emmy Award-winning ``GreenWorks for
Pennsylvania'' television series, which includes segments on energy
efficiency, and the GreenWorks Gazette newspaper insert.
These outreach efforts are bearing fruit. Over the last three
years, the winners of the Governor's Award for Environmental Excellence
Awards--175 organizations in all--collectively saved more than 56
million kilowatt hours of energy.
We also help those in need to first realize safety and an improved
standard of living through use of Low Income Home Energy Assistance
Program or LIHEAP and Weatherization funding.
Let's briefly discuss the connection of energy policy to
environmental policy.
As implied by my title, in Pennsylvania we see a strong relation
between energy and the environment, and we have merged our energy
office into our department of environmental protection. It is neither
practical nor prudent to talk of energy without considering the
environmental implications.
Energy use includes the use of non-renewable natural resources and
the emissions of solid waste, wastewater, and air emissions. Cleary
then, any policy that integrates energy and environment, will be able
to relate saving in energy use through efficiency, conservation, and
renewables, as not only increasing energy stability and reasonable
costs, but also reduced impacts to the environment. In that light,
Pennsylvania implements a strategy that considers environmental impact
of energy decisions.
We are actively participating in a variety of national initiatives
and activities where environment and energy policy makers are coming
together. In addition to bringing together state agencies, NASEO, the
Environmental Council of States or ECOS, and the National Association
of Regulatory Utility Commissioners or NARUC, the State Territorial Air
pollution Program Administrators/Association of Local Pollution Control
Officials-Air Quality Directors (STAPPA/LAPCO) are coming together to
share ideas and develop integrated solutions.
The recent meeting of these groups in St. Louis was representative
of the potential for cooperation. U.S. Environmental Protection Agency,
U.S. Department of Energy, the National Governors Association, and the
National Conference of State Legislatures are also organizations that
states, including Pennsylvania, are working with to develop
comprehensive strategies and approaches. We are trying to develop pilot
programs in individual states and regions.
In other states, such as New Jersey and Wisconsin, agencies have
taken flexible approaches looking to achieve results, while not
necessarily as concerned with the specific means. We are continuing
this effort, which is being conducted on a non-partisan basis.
We do realize that using coal results in environmental impacts.
However, it is unrealistic to expect that coal will not be part of our
economy and energy picture for the foreseeable future. Therefore, the
public and private sector must work very hard to find ways to utilize
coal and other fuel sources while at the same time reducing the related
environmental impacts.
National plans to invest in clean coal technologies to improve
efficiency and reduce environmental impact is a promising strategy that
we look forward to hearing more about and providing input.
From a regulatory standpoint, state and federal clean air laws
affect coal use by addressing emissions of gases released in coal
combustion. The Pennsylvania Clean Streams Law and federal Clean Water
Act address water pollution from mining operations known as acid mine
drainage. Finally, mining and solid waste laws address operations, and
handling and disposal of mining materials and post-combustion materials
such as ash from power plants.
We are proud to say that in Pennsylvania this commitment to
environmental protection has been very successful. Through the
Governor's ReclaimPA and Growing Greener Initiatives, we are working on
reclaiming many acres of abandoned mine lands for future use.
The goal of ReclaimPA is to further increase reclamation of our
abandoned mineral extraction sites. Since Gov. Ridge announced
ReclaimPA in October 1998, we have made great progress by encouraging
volunteer involvement and providing incentives for remining, which
continues to be the most effective means of reclamation.
And since the inception of ReclaimPA, reclamation has steadily
increased.
In 1997, approximately 4,500 acres were reclaimed through re-mining
operations and government-funded projects. The number of acres
reclaimed in 1999 rose to nearly 6,000. Through the further
implementation of ReclaimPA program initiatives, the numbers will
continue to rise.--
With the passage of the ``Growing Greener'' Program in December
1999, we reached another historic milestone in this effort. The nearly
$650 million it makes available over five years includes funding for
abandoned mine and oil and gas well reclamation.
In the last year alone, more than $170 million in Growing Greener
projects were funded--$80 million with state funds and another $90
million from other project partners.
These Growing Greener projects will clean up 389 miles of streams,
restore 4,079 acres of wetlands and plant 137 miles of streamside
buffers. And 5,226 acres of abandoned mine land will be reclaimed and
472 oil and gas wells will be plugged by watershed groups, DEP and mine
operators.
The philosophies of ReclaimPA--partnerships, new technology,
expanding financial resources--are captured in ``Growing Greener.''
Pennsylvania also looks to innovative use of waste coal materials.
Scrubgrass Generating Company is generating electricity from waste
bituminous coal, including using innovative burning and air pollution
control devices. Not only do they put waste coal material to use, but
they are reducing air emissions through cleaner burning, including 146
tons of nitrous oxide reductions per ozone season. Another facility on
Schuylkill County is converting waste refuse piles from coal operations
to diesel fuel. We also have a successful history of addressing acid
mine drainage.
Due to advances in acid mine drainage prevention and prediction,
less than one percent of sites permitted in the 1990's resulted in
post-mining discharge problems. We are working to develop and
commercialize technologies that will improve the way coal is used to
reduce the environmental emissions and increase efficiency.
In 1999, Pennsylvania's largest power generating companies made
major investments in state-of-the-art air pollution control equipment.
Edison Mission Energy voluntarily spent $200 million to install air
pollution control equipment at its Homer City Power Plant. PPL also
installed new equipment and made improvements at two of its coal
burning plants.
Comprehensive and flexible national energy policy will allow states
and regions to develop unique and appropriate strategies that will
capitalize on the unique variations across the nation. Pennsylvania is
working closely with other states in our region, as well as our
colleagues across the nation to leverage experiences and ideas. Because
so many states use energy program funding to carry out these programs,
a clear and consistent linkage between energy policy and energy budgets
is prudent, and will ensure success in meeting state and national
goals.
In late 2000, Gov. Tom Ridge created the multi-agency Energy Task
Force to bring together the many Commonwealth agencies that interact on
energy related issues to work together and strategically to help shape
Pennsylvania's energy strategy and policy, and align our activities
with overall goals. As a result of this Task Force, we have created a
website--www.PaEnergy.state.pa.us--where Pennsylvanians and others can
come to for a full range of information and resources regarding energy
efficiency, energy conservation, and pollution prevention.
In summary, I trust that these comments show that we strongly
believe that sound energy policy needs to recognize the importance of:
a comprehensive and flexible national policy, clear and consistent
linkages between budget and policy, a diverse portfolio of energy
sources, realizing the importance of both supply side and demand side
management, and the need to work together on developing, testing, and
applying new and innovative ideas.
Coal has been, is, and will be a key part of Pennsylvania's
economy, but it will be one of the many tools and resources we will
bring to bear on the growing energy needs of our commonwealth and
America in the years to come.
Thank you for your time attention, and the opportunity to share
these thoughts with you. I would be happy to answer any questions you
may have.
Mr. Barton. Thank you. We are now going to start our
question period. The Chair would recognize himself for 4 to 5
minutes. My first question is a very freshman question. I want
to ask somebody to tell me what a short ton is of coal, as
opposed to a long ton or a regular ton. I there a difference or
is that just terminology?
Mr. Harvey. I will answer that since it is economics to me.
A short ton of coal is 2,000 pounds, and a long ton is 2,200.
Mr. Barton. So there is such a thing as a long ton?
Mr. Harvey. Yes, on the international markets, and a lot of
times they will say short and long.
Mr. Barton. So you say short and long instead of light and
heavy or something?
Mr. Harvey. But in the United States a short ton. So Europe
is a long ton and the United States is a short ton?
Mr. Barton. How many short tons does it take, if you know
this, to make up what we call a quad of energy? We record
everything at EIA on an annual basis by quads of energy. So how
many short tons in a quad, and if you don't know, just say you
don't know, or you will just get back to the record.
Mr. Harvey. We will just get back to you on that.
Mr. Barton. Okay. Doctor, if we were not going to have to
regulate CO2 as a pollutant, but if we wanted to
think about that, is there any existing technology that could
scrub out of a coal burning powder emissions, or do we just
have to burn less coal?
Mr. Yoon. Scientifically, yes. There is a technology, but
it is too expensive. So my answer is no. However, I have seen
some papers saying that they mine some minerals which can
absorb CO2 at higher temperatures. And if we can
develop this technology for them, we can make it economical,
and it is viable.
Mr. Barton. As Mr. Roberts said, we might be able to do
that in the year 2015. So there are some areas that we could do
some research?
Mr. Yoon. Yes, sir. I have seen some papers on that.
Mr. Barton. Okay. Mr. Abdoo, we have done the Clear Air Act
in the mid-70's, and we did the Clean Air Act Amendments in the
early 1990's. And in both cases we grandfathered a number of
existing coal-fired power plants on the thesis that eventually
they would become uneconomic, and they would go away, and they
would be replaced.
Well, that thesis has proven not to be true. People have
worked miracles in keeping older coal burning power plants in
existence. When we reopened the Clean Air Act in this
subcommittee next year, there is going to be a major debate
about existing grandfathered coal plants.
Do you or your association have any information or could
you develop information for the subcommittee to what the cost
would be to equipment the grandfathered coal burning power
plants with the latest technology for emissions; or to retrofit
the boilers themselves with new technology?
Mr. Abdoo. I could not do that, but I would suggest to you
that it is not practical to retrofit. I mean, many of these old
plants were built on a footprint, and that there is no room for
scrubbers. It would be like taking a 1957 Chevy and trying to
put state-of-the-art pollution control equipment on if there is
not the room, and there is not the systems.
But I would encourage you to consider the notion that we
are going to take a 1935 coal plant, and we are going to retire
that plant if we get our permits, and we are to replace them
with a combination of gas and coal, principally coal.
And the emissions, when we take 300 megawatts of 1935
vintage coal out of the system and replace it with 600
megawatts of clean coal, we still have fewer emissions of the
replacement than we had before and twice the power.
So if it becomes possible to actually replace older units
with clean coal technology and more efficient. I think
companies will do it. But right now it is extremely difficult
to do.
Mr. Barton. Well, I think the assumption that we have
operated on in prior Congresses when we have done Clean Air Act
amendments is that the older powder plants will eventually
close has proven not to be true.
And so we are not going to operate on that assumption next
year, and as Chairman, I am going to operate under the
assumption that they are going to stay open.
But I also want to meet our friends in the environmental
community half-way or more than half-way, and we want to reduce
the overall admissions. So I think I would ask the panel, but
especially those that represent the coal burning power plant
groups.
And what would you need to use the existing power plants,
and if the assumption is that they are going to stay open, what
Federal programs, in terms of tax credits, and/or direct
grants, to retrofit or to ask technology?
Because I don't think it is viable to say that we can
grandfather them, because if you look at the charts that the
Clean Air Working Group put in the record the older coal--fired
power plants, their admissions are just so much higher than
anything else, and I don't think politically or from just a
public policy standpoint that we can just continue that
assumption.
My time has expired and so I will recognize the gentleman
from Virginia for 5 minutes of questions.
Mr. Boucher. Well, thank you very much, Mr. Chairman. I
want to extend a thank you also to the members of this panel
who have presented carefully researched and gave articulate
testimony to us today.
We appreciate your time and your advice. The chairman in
his questions has focused on the older power plants and what
may need to be done in terms of assuring their continued
longevity consistent with our existing belief and environmental
remediation.
I would like to talk a little but about what needs to be
done in order to encourage the electric utilities to build
coal-fired facilities to meet their new generation
requirements? And I would open this to anyone on the panel who
wants to respond. What is your recommendation for an addition
to our national energy strategy approach in terms of specific
steps that you would recommend that would incent electric
utilities to use coal in the generation of electricity for the
new demands that they have? Mr. Roberts?
Mr. Roberts. I think there is one thing that we have to
come to grips with from my observations over a number of years.
I believe that the thought process, for lack of a better way of
describing it, by utilities happens to be--you had better get
away from coal, and that you are not going to be allowed to
burn coal, and if you invest in a new coal-fired facility, that
investment may go down the tubes in 5, 6, or 7 years by new
regulation.
To the extent that Congress can give some comfort to that
fear, I believe you would see investment in new coal-fired
facilities. Now, what kind of comfort would that be? That is
obviously something that Congress is going to have to wrestle
with.
But the truth is that there is a belief out there amongst
not only the utilities, but I believe many in the country
believe that we do not burn coal now, unfortunately.
I have gone into different venues and spoken, and questions
like when did they stop mining coal, and I say, well, they
still do it.
Then I tell them that 56 or 57 percent of electricity in
this Nation is still comes from coal, and that actually amazes
people. Those of us in Appalachia, as you well know, realize
the important role that coal plays.
But I think that someone else on this panel may have
mentioned it as we went around here, that utilities do not want
to invest in a coal-fired facility with the understanding that
this may be a very short term investment that they make.
There has got to be some kind of comfort in my opinion
given to utilities that that investment once it is made is
going to bear the return that they believe that it will over 30
years.
Mr. Boucher. Well, the chairman has given us a certain
measure of assurance today that we will not have to worry about
CO2 regulations coming any time soon. It is almost
certain, however, that new regulations are on the way in some
other areas.
For example, just last week the United States Supreme Court
made certain that the NOX SIP call will go forward.
So we are going to have new regulations on NOX. It
is probable that the EPA in the not too distant future, in 2003
or 2004, will publish new regulations with regard to mercury
emissions, and we can see today the virtual certainty that
these new regulations are coming.
Given that fact, Mr. Abdoo, I would like to ask you,
because your electric utility is in fact planning some new
coal-fired facilities even with the certainty that these
regulations are coming, I would like to ask you what other
kinds of steps we can take in the Congress that might incent
your electric utility and others to opt for coal instead of
natural gas for new electricity generation?
For example, what about tax credits? That would help with
the compliance costs under the Clean Air Act. The existing
compliance responsibilities that you have, as well as
responsibilities that you may have for mercury, for
NOX, for fine particulate matter, et cetera.
And you mentioned in your testimony difficulty with regard
to siting new coal-fired facilities. I would assume that most
of those siting requirements are State in nature, but there may
be some Federal requirements that pose a burden also.
And my question in that regard is would it be beneficial to
you if there were some facilitation in the permitting process
for siting new coal-fired facilities, and if so, if you could
be specific about it that would be helpful.
Mr. Abdoo. Yes, sir. There is a couple of things that you
mentioned. In our particular case, our proposal to invest $3
billion in these new coal plants is predicated on a 20 or 25
year write-off of the investment, unlike the traditional 40
years that we get on a coal plant.
And it seems to us that the only way to protect our
investors for changing circumstances is not to have the billion
dollar investment out there for 40 years. So if you can write
it off in a 20 or 25 year period, you significantly reduce the
risk.
These gas plants that are built all have a 20 year life.
Now, at the end of 20 years, the plant will still operate, but
the risk of getting a return on your capital is minimized by
having a much shorter horizon.
With respect to the investment tax credit, I would strongly
support an investment tax credit for more capital intensive
solutions, such as coal burning plants. We did that in 1973
after the OPEC oil embargo.
Congress passed a tax credit, a provision investment tax
credit, and it stayed in effect for 5 or 6 years, and did
encourage at the time more nuclear and coal plants to be built.
And finally with respect to siting, we have proposed that
our new plants go on Brownfield sites, because we have existing
transmission infrastructure. We have existing rail
infrastructure, and we have existing water. And this goes back
to the chairman's point that if you have an older facility that
you hope would be retired, or sort of counted on it being
retired, we believe we can repower those existing sites.
But again there are difficulties in terms of getting the
permits to actually build on those sites, because they tend to
be in more populated areas. But I would encourage Brownfield,
and some consideration of Brownfield, and an investment tax
credit.
And then on the depreciation side, both tax and book.
Anything that you can do to shorten the life so that we are not
hung out there.
Mr. Barton. Thank you. The gentleman's time has expired.
The gentleman from Kentucky, Mr. Whitfield, is recognized for 5
minutes.
Mr. Whitfield. Thank you, Mr. Chairman. Mr. Roberts, you
mentioned the United Mine Workers in Appalachia and Illinois,
and I want you to know that there are a lot of them in my
district in Western Kentucky, and we are excited about Peabody
Coal Company being ready to open up a new mine, and also
entered with a consortium on a power plant also that will use
some local coal. So we are excited about that.
It is my understanding that since 1970 the use of coal has
doubled. I think that someone mentioned that. And yet every
criteria pollutant set out in the Clean Air Act has decreased
significantly. Is that true?
Mr. Roberts. That's correct.
Mr. Whitfield. Now, in an opening statement, someone
mentioned that carbon dioxide was a criteria pollutant under
the Clean Air Act. That was not my understanding. Do you all
understand that?
Mr. Roberts. No.
Mr. Whitfield. I know that there was some reference to
carbon dioxide in there, but I don't think it was designated as
a criteria pollutant. Mr. Cohen, carbon dioxide, of course, is
quite controversial, but we all recognize that there is a lot
of natural carbon dioxide out there, and then there is man-made
carbon dioxide.
And it is my understanding that each year about 200 billion
tons of natural carbon dioxide is generated, and that the man-
made portion is something like 7 billion tons a year. And yet I
hear a lot of people say that fossil fuels are generating 40
percent of the carbon dioxide.
Mr. Cohen. Man-made, 40 percent of the man-made. I think
that is the context in which you hear that statement.
Mr. Whitfield. But when you look at the totality of it, 7
billion versus 200 billion, 7 billion tons is a lot. But when
you take the total of 200 billion that is generated by natural
means, I mean, there is a lot of carbon dioxide out there.
Mr. Cohen. I am not a climate scientist, but I think any--
including Mr. Linzen--would tell you that the issue is not the
volume. It is the margin. What you have got with the carbon
cycle on the globe is a very delicately balanced cycle.
And the proposition that most people accept, most
scientists who have studied this, is that fluctuation in the
order of 7 billion tons could make a big difference in an
ecosystem that is otherwise pretty well balanced.
Mr. Whitfield. Now, it is my understanding that most of the
computer modeling on projections of global warming are
circulation--what is the word for it, circulation--well,
anyway, circulation motion models, I believe may be the name,
and that they are about 7 or 8 of them around the United
States.
And then when the data is put in, all of them will say in
the future, that at some point in the future that there is
going to be global warming. And yet it is my understanding that
when they went back to 1880 when our weather records were first
started, and they inserted these numbers into the models that
are used to project global warming in the future, that all of
them said that today's average temperature should be about 5
degrees more than it is, than it actually is.
Which would mean that there is a good possibility that some
of those computer modelings would be wrong for the future.
Would you agree?
Mr. Cohen. If you are asking me to concede whether there is
uncertainly in computer modeling of the climate change, I am
going to concede that. I think the question before the Congress
is to what extent are you going to take the risk that that
modeling--that some of the modeling is right, showing
potentially very large swings in climate, and what are the
costs of doing something about it.
I mean, I would hope that we could get to that debate
rather than try and talk theologically about whether
CO2 should or should not be regulated. The question
is when and how.
Mr. Whitfield. Well, I am glad to hear you say that,
because a lot of times--and as I mentioned in my opening
statement, there is a big difference of opinion about a lot of
this. But I have read a lot of mailings put out by groups, like
your group and others, who are responsible. And they use a lot
of scary techniques at times.
And I think what you have indicated, and I think that other
scientists, many scientists, agree that sometimes this may not
be quite as bad as we think, or we say. And that as we move
forward in trying to adopt an energy policy, if we can be less
strident in our differences, and try to agree to some common
sense approach, I think we have a chance.
Mr. Cohen. I would agree and happy to have that discussion.
Mr. Whitfield. Thank you. I guess my time is up.
Mr. Barton. Did you have one more question, or did you--it
seemed to me like you were right in the middle of something.
Mr. Whitfield. Well, I did have one other question.
Mr. Barton. Well, get one more question in and then we will
go to Mr. Luther. I mean Mr. Barrett.
Mr. Whitfield. The national acid precipitation assessment
program, which is a 10 year program, a $540 million study that
sent researchers to sample 7,000 lakes and hundreds of
woodlands, and it was said that this was one of the most
thorough studies where scientists actually went to sites. There
was not a lot of extrapolations or guesstimates, or computer
projections.
And in that they found that while it was true for about 240
lakes in the eastern United States, acid rain that was present
increased; and there was also about a same number of lakes that
the acid rain decreased.
And also it showed that most of the critically acidic lakes
were in Florida, and Florida is not in the main wind stream
from those midwest power plants that use coal.
Mr. Cohen. No, but they are in the mainstream of a heck of
a lot of southern power plants that utilize coal. Northern
Florida, I guarantee you, is right downwind of a massive amount
of coal-fired electric generation.
Mr. Whitfield. But in Ohio, where there was the same--I
mean, they are right in the midst of all of this as well, and
they didn't find any acidic lakes.
Mr. Cohen. Tall stacks blowing east.
Mr. Whitfield. And a number of scientists say that a lot of
this is caused from the soil and not so much from the
atmosphere.
Mr. Cohen. There are two factors that determine the
acidification of a soil, or a lake, or a water body. It is
going to be some combination of the inherent buffering capacity
of the soil, and the Northern Florida soils, as well as the
Northeast soils, and parts of the Appalachian soils, are very
weak in acid neutralizing capacity.
So you have an underlying weakness. However, I guarantee
you that any competent acid rain researcher is going to tell
you that the loadings of sulfur dioxide and nitrogen oxides
from up-wind sources made a very significant difference in
worsening underlying acidic conditions.
Mr. Barton. Thank you. Anytime you see a member who comes
with a textbook that he has personally earmarked. you know that
he is prepared for a serious series of questions, and so that's
why we gave you some extra time.
Mr. Whitfield. Can I have some more?
Mr. Barton. No. We are going to go to Mr. Barrett for 5
minutes.
Mr. Barrett. Thank you, Mr. Chairman. I actually didn't
know whether carbon dioxide was or was not included as a
pollutant until I saw the letter from President Bush. So I
would concur and accept Mr. Whitfield's statement that under
the Clean Air Act that carbon dioxide is not a pollutant.
But I think the question is bigger than that, and I
certainly heed your advice, Mr. Abdoo, that we should not be
distracted from California and the latter, and we should be
trying to focus on a long term view of how to deal with these
issues.
And I am curious from your perspective. Again, not to get
caught up on that issue in and of itself, but it appears that
the President favors basically a three pollutant approach;
sulfur dioxide, nitrogen oxide, and mercury, obviously carbon
dioxide not being a part of that.
Does this provide greater certainly for your industry than
the current regulatory regime, or how would you approach this
with these either different pollutants or not pollutants, but
obviously an issue.
Mr. Abdoo. I certainly believe that oxides, nitrogen,
sulfur, and mercury, should be regulated in the traditional
sense that we regulate it. Carbon dioxide is not a pollutant,
but given the science on global warming that is out there,
prudent avoidance I think is certainly something that ought to
be considered.
And so I continue to favor a comprehensive approach,
wherein we have more flexibility to determine how we are going
to do deal with all of these things. And as we look at building
coal plants, and replacing older coal plants with new efficient
clean coal technology, we are going to get significant
reductions in carbon with more output without having some hard
and fast regulation.
I continue to believe that American ingenuity is second to
none, and given a little guidance without a sledge hammer, we
will figure out ways to keep this country running strong
without having to have a specific regulation on a non-
pollutant.
Mr. Barrett. Mr. Cohen, do you want to comment on that?
Mr. Cohen. Yes. I think it is interesting, although I am
not sure Dick had said this publicly, there certainly are other
utilities, coal-fired utilities out there who made the point
that they would rather have a four emissions strategy--and
let's avoid the word pollutant for a second, but a strategy
that sets hard targets for NOX, SOX and
mercury, and CO2, because they want to nail down
their liabilities now, and figure out what the next decade
looks like, and then figure out what they want to build, and
retire, and run less or run more.
And I would submit, Mr. Boucher, in response to your
question that one of the things--if you really want to make new
coal-fired generation in this country work, is to give a clear
road map as to what the total emission targets are for all the
key emissions for the sector, including carbon dioxide.
And I think what you will find is that many utility
executives will say certainly privately that there is value in
having a sense of what the 10 year trajectory is on
CO2 nailed down. Now, we might debate what that is,
but they would like to see that as part of the package so that
they know where they are going.
Mr. Barrett. Would anybody else like to comment? Again, I
am curious as to the certainty. I would think as an investor or
as a business person that certainty provides me some solace one
way or the other, and if you are trying to determine where to
put investors' dollars, having some certainty would be helpful.
Mr. Roberts. I am confused about how we have reduced carbon
when there is not technology available to reduce carbon unless
you reduce the amount of coal that you are burning. I am
confused about that.
Mr. Barton. The chairman shares your confusion.
Mr. Cohen. Mr. Chairman, a decade ago people said there was
not technology to control nitrogen oxides from power plants to
the degree that we have now. We put out targets, and now we
find half the Nation's coal fleet is going to be scrubbing for
nitrogen oxide.
Mr. Barrett. Let me go back to Mr. Roberts. So your
position is then that we should do nothing? I am curious as to
what your position is with carbon dioxide.
Mr. Roberts. I don't think that is a fair characterization.
Mr. Barrett. I am just asking you what we should do,
because we don't know what to do.
Mr. Roberts. In my opening statement, I pointed out that
technology does not exist as we meet today, and I do not think
there is any disagreement on this panel or on the subcommittee,
to reduce carbon.
We all have advocated, I believe, and I know I have, that
we continue utilization of the burning of coal. And in the
conclusion of my opening statement, I said we should not pass
regulation that outruns technology, because technology
according to the experts will not be available until about the
year 2015.
I strongly support the continued use of the burning of coal
and investment in utilities that burn coal. But you can't say,
okay, we are going to pass a regulation that reduces the amount
of carbon that goes into the atmosphere from these utilities
starting next year because technology does not exist.
Mr. Barrett. But when it comes to us, the bottom line is
either we say, yes we are going to do it; or, no, we are not
going to do it. So I am trying to figure out what you are
advising us to do.
Mr. Roberts. My advice to you would be that there would be
incentives for the continued investment and development of
technology to reduce carbon, which does not yet exist.
An encouragement of that technology, development by those
who have expertise in that field, and if the question today is,
well, let's reduce the amount of carbon coming from coal-fired
utilities, that is impossible unless you just say we are going
to burn less coal.
Now, we have to come to grips with that, too, and we can't
as I pointed out in my opening statement, we can't camouflage
this.
If we are talking about reducing the amount of carbon
coming from coal-fired facilities, we are really talking about
burning less coal. So we can't say, oh, let's add carbon to
this mix. You can do that, if that is Congress' desire, but
remember what you are doing.
You are saying let's take coal out of the mix into the
future because no one in my opinion--and I applaud Mr. Abdoo
here for the investment that they made. But very few utilities
are going to make investments in new coal-fired utilities or
facilities with the understanding that they have got to figure
out how to reduce carbon in the atmosphere. And they can't do
it, and so they are going to go to natural gas or some other
fuel.
Mr. Barton. The gentleman is 2 minutes over. We may do
another round if you want to stay. Let me make a statement
before I recognize Mr. Shimkus. I am the subcommittee chairman
of this subcommittee, which doesn't mean anything
intellectually.
But it does mean something procedurally. I am a registered
professional engineer, and I used to work for utility. I have
talked in Texas to some of the people that are most expert in
this area, and if you want to reduce CO2 right now,
and the people that I have talked to, in the future, you have
got two choices.
You can burn less coal, or you can burn the existing amount
of coal cleaner so that you get a little bit higher output from
the input. But you can't scrub it, and you can't clean it, and
you can't chemically combine it.
Now, having said that, without the announcement from the
White House yesterday, my assumption is that President Bush is
going to be President for at least 3 years and 11 months
longer, and I hope for 7 years and 11 months longer, although
that will be determined 4 years from now.
So any mandatory regulation of CO2 is off the
table for at least 3 years and 11 months, and hopefully for 7
years, 11 months, and as long as I am subcommittee chairman, it
is off the table indefinitely. I don't want there to be any
uncertainty about that.
Mr. Barrett. Mr. Chairman, what if President Bush changes
his mind again?
Mr. Barton. Well, if he changes his mind, that does not
change my mind. Some of us have discussed this with the person
who changed his mind, and I would argue that he did not change
his mind. He was not as fully informed before some of the
initial announcements were made last summer.
Mr. Walden. Mr. Chairman, I am sure that he thought it was
a pollutant and was covered under the Clean Air Act when he
made that statement.
Mr. Barton. Quite possibly, because a lot of people did.
So, anyway, having said that, the gentlemen from Illinois is
recognized for 5 minutes for questions.
Mr. Shimkus. Thank you, Mr. Chairman. You have kind of
taken some of the--have redirected some of my questions and
comments, because I was going to follow along on the debate of
the CO2, and if you decrease coal, then the big
picture, and the national energy policy.
If coal use declines because of CO2, then we
have an increased demand for natural gas, an increased demand
for nuclear, an increased demand for renewables and higher
costs. And that is the bottom line, and we faced it all over
this country, especially with the natural gas and the whole
debate of ``the fuel of choice'' deemed appropriate by the
politicians for the past 8 years.
So what I would like to do, Mr. Chairman, is submit for the
record a document from the Illinois Coal Industry White Paper
from 1999.
Mr. Barton. We will have to show that to the minority, but
assuming that there is no objection from their side, it will be
received.
Mr. Shimkus. And in there, there is--and just to talk about
the cost of compliance and what it has done to Southern
Illinois coal. And in there on page 13 of the power generating
done in Illinois, 25 million tons comes from Colorado because
it is low sulfur coal; and 12.1 tons come from Illinois,
because we have high sulfur coal.
There is a cost incurred by cleaning or getting to
admissions standards appropriate. And so the debate on tax
credits, research and development, clean coal technology, every
year in our appropriation battle, clean coal technology comes
under assault for all a lot of good reasons.
We have a vote every year on the floor that we ought to
strip clean coal technology out, and we ought to go to LIHEAP,
or weatherization, or some other debate, and sometimes we win
that vote on the floor, and sometimes we are able to strip it
out during the conference report.
But I want to continue to focus as a national energy policy
on clean coal technology. I wanted to also--it was interesting,
Ms. Hutzler, that you mentioned Brownfields, because that is
another area or another committee that I serve on.
And the terminology based upon a couple of hearings that we
focused down to was legal finality was the buzzword. How do we
encourage people to go into Brownfields so that they can reuse
these sites. Well, what they need is legal finality. They need
to know that they are not going to incur any other additional
costs if they clean up a Brownfield site.
And am I right in asking that that is kind of what industry
is looking for on clean air regulations, is some legal finality
so that you all know, and it is legal finality on emissions;
and for you, Mr. Abdoo, it is legal finality and the ability to
move to a Brownfield site. Is that correct?
Mr. Abdoo That is absolutely correct, and I think in
fairness that the shorter the life, the easier it is to give
more assurance on the legal finality as you describe it. So
those are the factors that we look at in terms of we are going
to go to investors, and we are going to ask them to put up a
good share of this $3 billion.
And as custodians of that capital, we cannot take an undue
risk that somewhere down the road we are going to get beat up
over that investment. So we want some certainty, and I think
you are absolutely correct. If I could go back to this question
about reductions on carbon.
I think that there is some semantics here about whether we
are talking absolute tons, or CO2 per unit of
output. And in my comments, I am talking about the latter,
because if I take a coal plant that has a heat rate of 12,000
Btu per KWH, and I replace it with a 9,000 Btu open KWH, I may
indeed burn fewer tons of coal, but the carbon per unit coming
out of that is going to be less because the efficiency is
higher.
And yet as I expand coal in my mix to supply more and more
of my requirements, I burn more coal, but the per unit is less.
So I concur completely with the chairman in his assessment, but
mine was on a per unit basis rather than the aggregate.
Mr. Shimkus. Well, I have got tons of questions, but let me
go to the Energy Information Agency and ask about this chart
again. The electricity generation by fuel on some of these
charts, were they created after the large natural gas price
spikes that we have seen over the last couple of months? How
current are these?
Ms. Hutzler. Actually, they were created last fall, and at
that time we were expecting a price spike, but we were thinking
that it would max out at about $3.30 per thousand cubic feet.
Mr. Shimkus. And what is it now?
Ms. Hutzler. Well, in 2000, it turned out to be about $3.60
per thousand cubic feet. So we were only about 20 cents off in
2000. But now in 2001, we are actually expecting it to go up
and be in the $4 to $5 range on average.
Now, the difference that it would make in those forecasts
is that we were expecting the price spike to come down by the
year 2004, and then go back up on its long term trend. Now we
think it is going to take a few years longer to get back down
because the market has been so tight.
But given that we still see the long term trend reaching
somewhere around $3.00 or $3.25 per thousand cubic feet, we
would still indicate quite a bit of natural gas builds.
Mr. Shimkus. And Mr. Chairman, I will just finish by saying
another issue in this whole portfolio of energy and the
reliance on natural gas has been the development of peaher
plants for the precise reason that was mentioned here.
They are perfect for peak demand. The reality is that they
are not perfect for basic load, and what we have right now
because of the high demand, we are having these peaker plants
running as if they are supplying for basic load. They are not
designed to run all that time.
That turnover is going to be quicker, and that there is
going to be a more higher demand for natural case, and that is
why this whole basic load function, and nuclear, and coal, are
so critical in the national energy debate, and I yield back my
time.
Mr. Barton. The gentleman from Ohio, Mr. Strickland, is
recognized for 5 minutes for questions.
Mr. Strickland. Thank you, Mr. Chairman. I was sitting here
wishing that we had had this kind of discussion 30 years ago,
and if we would have focused on these issues 30 years ago, we
may not be in the situation that we are in today.
And I promise you that I am not going to take more than my
5 minutes. But I do want to say a word about diversity of
energy sources in this country. I think we need to think of two
D's, domestic and diversity; and I would just like to take 30
seconds of my time to point out once again, Mr. Chairman, as I
have at other times, that in this country today we are looking
at the possible demise of the uranium enrichment industry, an
industry that provides about 23 percent of all the electricity
in this country.
And I say to you once again that if Saddam Hussein was
cutting off an oil pipeline that was producing 23 percent of
the oil generating electricity in this country, we would be
mobilizing and going to war. And yet this administration and
the past administration, and especially the past
administration--and I think this Congress--is sitting here
allowing this to happen.
And with all respect to my colleague from Kentucky, we are
allowing the only plant in this country that currently has the
capacity to produce a finished nuclear fuel to be closed in
June of this spring before my colleague's plant in Paduka,
Kentucky, has demonstrated the capacity to take up the slack.
And that is happening now, and it is a developing crisis,
and I just wanted to get those sentiments on the record.
Mr. Barton. We are going to have a hearing on nuclear
power. It is coming. I mean, I am sure that the gentleman is
aware of that. And we never have enough time, but we will have
more time at a future hearing to focus on that issue.
Mr. Strickland. Great. And I hope that we do it soon, and I
want to thank you for this hearing. So much of what I do, and I
think we do here in the Congress, is kind of meaningless. This
is important stuff, and we ought to spend more time on it.
Mr. Barton. Speak for yourself.
Mr. Strickland. We ought to spend more time focusing on
these kinds of issues. Mr. Cohen, you said something that I
think is relevant. You said the question is when and how, and I
think that is related to Mr. Robert's statement that we should
avoid energy and environmental policies that outrun our
technological abilities and intent to move coal out of the mix.
That would be very costly in the short run and foolish in the
long run.
And I think the when and how is related to what Mr. Roberts
has said here, and then I get back to the modeling question
that we all know as we look at these models regarding global
warming, we are concerned, but we understand that there is a
lack of preciseness.
And no one is arguing, I think--are we--that we should not
pursue the technology and the research, and that at some point,
hopefully sooner rather than later, we will be able to deal
with this issue.
But does it make sense to impose regulations now when the
technology does not exist, and when we need the energy? And I
would just like for you to respond to that, the when and how
question. Are we trying to impose regulations that we are not
imposing in a wise and in a timely fashion?
Mr. Harvey. In any given energy policy, you have to look at
your resources, and if you look at this country, its resources
are very vast in coal. Now, if we take the pollutant approach
and say that CO2, which we don't have the technology
to take care of it today, and you throw coal right out in
front, then your resources are gone, and you have to have a
different energy policy.
And you have to ignore the resources that you have that are
domestic and abundant. Now, if we are willing to do that as a
society, I guess that is our choice, but it is not the answer.
If you look at the history of how we regulated coal from 1970
on, we tripled the production of the use of coal, and dropped
the emissions by 21 percent, and followed the law the way
Congress laid it out.
So if the technology is there, we will follow it. The
utilities were followed, but give us some guidance, because we
have not had an energy policy. We have had an anti-energy
policy, and we are to the point where it is critical. That is
my response to it.
Mr. Cohen. I have to begin by responding to what the
gentleman before me said. This figure has been cited several
times and we have seen coal utilization increase dramatically
and criteria mission drop. That was over the bitter objections
of the coal utility industry.
That is not a product of a bunch of folks just deciding to
do this. This is the result of legislation putting in place
stringent caps.
Mr. Strickland. But Mr. Cohen, that does not change the
fact that it has happened does it?
Mr. Cohen. That's right. My point is that if you set
targets--I mean, in 1988, a significant portion of that
industry was saying we can't meet a 9 million ton target. It is
technologically infeasible. We just can't do it, and we are
doing it.
And so my point is that you have to be wary of statements
that we can't put in place a target until we have absolutely
every piece of technology nailed down. The history is to the
contrary.
Mr. Strickland. Can you bring me any scientific evidence
that it is possible to do what Mr. Roberts says is not
currently possible to do?
Mr. Cohen. To strip carbon out of the flew gas?
Mr. Strickland. Yes.
Mr. Cohen. No, I can't say that we can do that today, and I
was very up front when asked what this means. If you say that
you have to drop CO2 from the power sector in 2
years by X percent, that will implement some reduced
utilization of coal, and I was very explicit about that.
Mr. Strickland. And I like the fact that Mr. Cecil Roberts
says that we ought to be up front about what we are doing, and
what we mean when we say these things.
Mr. Cohen. Sure.
Mr. Strickland. And given our energy crisis, and given our
abundance of coal, given the fact that I think we have got some
time to make the necessary changes, we ought to be prudent in
the decisions that we make. Thank you.
Mr. Barton. Before I recognize Mr. Burr, I want the record
to show that Mr. Strickland comes to all the hearings. He comes
to most of our working group sessions. He is a very informed
member of the subcommittee, and is doing meaningful work.
In spite of his own characterization, he is a meaningful
member of this subcommittee. The gentleman from North Carolina
is recognized for 5 minutes.
Mr. Burr. Ditto.
Mr. Barton. Who is also a meaningful member of the
subcommittee.
Mr. Burr. Mr. Harvey, is it safe to say from your testimony
that we have got over 200 years of coal inventory out there?
Mr. Harvey. We have 200 years of reserves. Access to those
reserves are every day becoming more limited by regulation, and
I call it a de facto withdrawal of resources from access. But,
yes, if we had access to it, at today's use, that's how much
coal we have.
Mr. Burr. Ms. Hutzler, can you possibly tell us how many
years worth of coal was designated off-limits as a result of
the previous administration's monument designation specifically
in Utah?
Ms. Hutzler. I'm sorry. I do not have that statistic.
Mr. Harvey. I have it. I worked for a company that had coal
resources in the Caparariz plateau. There is 2.5 billion tons
there. Probably the lowest cost energy for the future for
California was taken out of that. There were 2.5 billion
recoverable tons in that area right there without debate.
Mr. Burr. Tell me, is that something that the energy
information agency should know?
Ms. Hutzler. About the resources in each of the States,
yes, I just did not have the statistic in my head as to how
much was there.
Mr. Burr. But is that significant? I mean, does that have a
significant impact on what our energy policy would be?
Ms. Hutzler. Well, if we are talking about needing 1,000
short tons of coal a year, we are able to produce that much
right now with accessible resources. You are talking about
needing to get to reserves much beyond the forecast horizon
that we are talking about in the Energy Information
Administration.
Mr. Burr. Let me ask you, Mr. Harvey, we can go into the
23rd Century with the coal supply that we have got out there if
we can get to it, and if it is not put off-limits. How can we
use this domestic resource to reduce our dependence on imported
energy products, and as a follow-up, can we become independent
if in fact we take coal off the table, or do we significant
restrict its use?
Mr. Harvey. Well, there is no way that we can become
independent. As I said, 90 percent of our fossil fuel,
including oil and gas, is coal. So if you take it off the
table, you are down to 10 percent. So all of our energy has to
come from somewhere else, or nuclear power.
So you have to have it in the mix, or otherwise we are
going to drastically change where we are going.
Mr. Burr. Do you personally have an opinion on the DOE's
clean coal technology program? Does it work?
Mr. Harvey. I do. I think if you look at what they have
done in the past with the funding that they have had, they have
influenced SO2, and NOX, and they are
looking at mercury. There are a lot of good things going on
with that technology.
But remember that is new technology. Every generation of
electricity, every 40 years that we put new generation in, it
has different technology. We are looking at the next generation
now, and that is funding and that research is going to be the
problem-solving research of what we do in the next 40 years.
Mr. Burr. Mr. Cohen, let me ask you something about your
testimony if I could. You referred to the North Carolina and
Tennessee mountains, one of the most beautiful places in the
country.
Mr. Cohen. And most heavily polluted I'm afraid to say.
Mr. Burr. You stated that very well. You said that a recent
study indicates that the visibility damage to our national
parks based on surveys of visitors can be estimated at $4.3
billion per year. Was it the visitors that told you that?
Mr. Cohen. I will be happy to give you the report or submit
it for the record. It is actually a survey methodology based on
people who would use those parks and asking them to value the
monetary damage.
Mr. Burr. So the visitors that you surveyed valued----
Mr. Cohen. The increased clean air, or dis-valued if you
want to use the economist's term, the pollution levels, and
they assigned dollars values to that.
Mr. Burr. Is that like I would only stay 3 hours because I
can only see 12 miles, and I would have stayed 4 hours if I
could have seen 16 miles?
Mr. Cohen. I don't have the exact methodology in detail,
but it is along the lines of----
Mr. Burr. Well, you said earlier that it is really
important to understand the methodology that we are using to
come to some of the numbers that we are quoting.
Mr. Cohen. Sure.
Mr. Burr. And you are quoting a number of $4.3 million per
year.
Mr. Cohen. I would be happy to submit the report to you. It
is done by Apt Associates, which is a well-recognized research
firm that is used by a number of Federal Agencies to value
environmental damage.
Mr. Burr. Is a survey by a visitor a scientific survey do
you think?
Mr. Cohen. Yes. It is a well known methodology in social
science to use----
Mr. Barton. Would the gentleman yield?
Mr. Burr. I would be happy to yield.
Mr. Barton. Do you think that those people that did that
survey didn't go anywhere, or you think that even assuming they
didn't go to that place, maybe they went to Texas and spent
that $4.3 billion in Texas, or maybe they went to West
Virginia. I mean, do you think they just stayed home and
pouted?
Mr. Cohen. The point is that it is a natural resource that
has been degraded, and I think if you look at my testimony that
you will see repeated headlines where politicians in
Tennessee--Senator Thompson and Senator Friss--have recognized
this is a significant problem that needs to be addressed.
And I think that survey methodologies are one way to get at
it, but there is a perception that is based on reality that
there is an air quality problem that is leading to the
degradation of scenic values, as well as public health in North
Carolina and Tennessee.
Mr. Barton. I don't think that the subcommittee is
disputing that air quality is a serious problem and that this
subcommittee is going to address it in a serious fashion, but
some of the so-called methodology, at least in my opinion,
overstates the monetary value, and I think the gentleman from
North Carolina question is on point when he questions this $4.3
billion number.
In political terms, we would not call that a hard dollar.
We would call that a soft dollars.
Mr. Cohen. Well, I would be happy to have the experts who
prepared the report come and testify before you, Mr. Chairman.
Mr. Barton. Does the gentleman have another question?
Mr. Burr. No, I would only make the statement, Mr.
Chairman, that if it were a $4.3 billion loss to North
Carolina, trust me, we would be screaming. We are concerned,
but our tourism business is not screaming yet about the problem
as to $4.3 billion a year.
Mr. Barton. The gentlemen from Pennsylvania, Mr. Doyle, is
recognized for 5 minutes.
Mr. Doyle. Thank you, Mr. Chairman. Mr. Chairman, I share
the frustration that many of us have on this committee as we
realize that fossil fuels are going to be supplying our energy
needs for decades to come, and that coal is one of the most
abundant that we have.
And every year since I have been here, since 1994, I have
stared at very disappointing numbers in the DOE's fossil energy
R&D budget, only to come to the floor of the House and watch
members try to cut it even further.
It just seems shortsighted and wrongheaded that if the goal
here is to take our fossil fuels and burn them cleaner, and
make them more efficient that we should be increasing our R&D
efforts and not cutting them every year.
And from what I have seen from this year's DOE budget, the
initial numbers that I have seen, they are equally
disappointing. And it looks like we are going to start this
process all over again.
Mr. Harvey, I have had a chance to tour CONSOL's R&D
facility and library, and I am aware of some of the exciting
work that you are doing there, and I want to congratulate you
by the way for being awarded a new DOE grant to further support
your coal bed methane production technology, known as slant
holed drilling.
Maybe you could give the committee a short overview of that
project and its relevance to the coal industry. And then,
second, you talked about the importance of R&D in your
testimony, and could you elaborate on the emerging R&D needs
facing the coal industry, and those who burn coal, and how
significant an issue is like Section 29 tax credits and in
meeting some of those needs.
Mr. Harvey. Okay. Thank you. We do have an extensive R&D
facility, and we are the only coal group that spends its own
private money on coal research. It has been a declining thing
over the years. We have seen the Bureau of Mines and other
things go by the wayside, but we have held that in place.
In terms of our research on the degassification of coal,
the No. 1 thing is that we did it for safety reasons. We did it
so that the miners we put under ground that work for us, and
that we want to get the gas out of the mine, because it is very
volatile.
It became a byproduct for us and we have learned technology
now to extract that gas way ahead of the mining process and
make it much safer, and now it is a product, of course, with
new natural gas prices, and is a product that creates value for
the company.
If you look at Section 29 credits and those kinds of
things, it actually gives incentives to companies to look for
new ways of taking energy that might have been a waste product,
or just vented into the atmosphere, and bring it into a useable
energy source for the Nation. And that is one of the big steps
that has happened with Section 29 credits on gas, as well as
coal.
Mr. Doyle. Thank you. Mr. Pinero, by the way, I didn't get
a chance to welcome you from our Pennsylvania Department of
Environmental Protection. You said in your testimony that in
Pennsylvania that some of the largest power generating
companies made major investments in state-of-the-art pollution
control equipment.
Edison spent some $200 million in PP&L. I am curious if the
Bureau of Environmental Sustainability played any role in the
decisionmaking process of industry in Pennsylvania?
Mr. Pinero. Well, with those particular projects and others
similar to it, our role has been championing the importance of
sustainability of thinking about environmental impact, energy
efficiency, and the effect it has on the economy. With those
particular projects, I am not aware of any specific incentive
or contribution to it.
Mr. Doyle. Thank you. Mr. Abdoo, I was pleased to read
about your interest in the pressurized fluid bed construction.
It is an interest of mine as well. I am actually working to try
to establish a demonstration project on a Brownfield site in my
district that would house a greenhouse there. Can you give us a
better sense of the potential benefits of embracing fluid bed
combustion technology?
Mr. Abdoo. There are actually three new technologies that
we believe will facilitate the cleaner burning of coal, a
fluidized bed being one. But I am not technically competent to
give you specifics, but I would be happy to provide a written
response to that question.
Mr. Doyle. Thank you very much. Mr. Chairman, I see that my
time has expired.
Mr. Barton. I thank the gentleman, and I would recognize
the gentlemen to your right from Ohio for 5 minutes for
questions.
Mr. Strickland. Thank you very much, Mr. Chairman. I
apologize for having to leave the hearing and come back.
Mr. Barton. I am glad that you came back.
Mr. Strickland. The question that I wanted to ask about was
exactly the one that you just said that you don't have
technical competence to talk about. I am very much interested--
fluidized beds have been around for a long time.
It has always been a problem with scaling them to meet the
needs of real world generating capacity, and coal
gassification, I mean, it has been this dream for decades and
decades. Can you at least talk to us a little bit about the
state of play, in terms of development of the applicability of
the technology?
Mr. Abdoo. We identified three technologies that are being
used in Europe, as well as Asia, that we believe have great
promise, and given the timeframe, we believe that the first of
these 600 megawatt coal plants that we would build would be
pulverized coal, higher pressure, higher temperatures, to gain
additional efficiency.
And in that plant we would hope to have on line by about
2007, but the 2009 and 2011 plants, we believe that the other
technologies that we have cited, particularly the fluidized
bed, pressurized fluidized bed, may be able to be sufficiently
along at the risk profile of using that technology will in fact
work.
With respect to coal gassification, we believe that also
has promise, but we are talking about a Brownfield site that
has limited space, and we just don't think that we could put
that on that site.
But if we went to a Greenfield site, that would probably
rise in prominence to the top of the pile.
Mr. Strickland. What do we know about precombustion and
combustion technologies, and how they fit with post-combustion
treatment technologies?
Mr. Abdoo. My sense is that in terms of the pre versus
post, that the pre is more focused on the carbon, on the
Greenhouse gases, because there is technology that is available
that is very efficient on the NOX side, and on the
sulfur side, and we believe on the mercury side, and the fine
particulate.
But on the carbon side that is where the difficulty lies,
and in coal gassification, for example, there is budding
technology that will allow you to strip the carbon from the
coal in the process of converting the coal to a clean gas that
you can burn. Now, whether or not at this point we would invest
money in that, we would not. We believe that is still risky and
unproven.
Mr. Barton. We have one of the world renowned scientists
with us. Would you like to comment on his question, Dr. Yoon?
Mr. Yoon. You mean the impact of pre-combustion technology,
versus post-combustion?
Mr. Strickland. Yes, and their compatibility with current
post-combustion cleaning technology.
Mr. Yoon. Regarding CO2?
Mr. Strickland. Yes, or anything, anything.
Mr. Barton. We don't hold it against you that you are an
expert.
Mr. Yoon. I am not an expert in the post-combustion
scrubbing technologies, but my common sense tells me that if
you start with cleaner coal before you burn it that you can do
a lot of things. For example, you can increase the combustion
temperature without slagging and following problems.
And then all this heat transfer, and all these efficiencies
will go up or should go up in the power generation. If the
efficiency goes up, CO2 per unit of power that you
are generating should go down.
So it is a win-win situation in my opinion. The other thing
that I would like to mention is that if the U.S. develops a
pre-combustion technologies, we can export it to China, to
India, where they do burn coal without cleaning.
When you do that, the efficiency goes way down, and then
globally, if you look at the global situation as a bubble, then
as a whole we are generating a lot more CO2. So I
think we should invest in pre-combustion technologies.
Mr. Barton. Whether it is a pollutant or not?
Mr. Yoon. Yes.
Mr. Strickland. Thank you very much, and I yield back my
remaining time.
Mr. Barton. We are not going to have a formal second round
of questions, but we are going to just kind of have a general
free for all for a few minutes. We will start with Mr.
Whitfield. He said that he had one final thing.
Mr. Whitfield. Thank you, Mr. Chairman. I just wanted to
make a reference to my good friend from Ohio about the
capability for domestic production of enriched uranium, and I
do share your concerns, even though the Duke plant is open now.
But you and I know that gas diffusion and technology really
can't compete in the long term. So that is something that we
need to get into in the nuclear side. Another comment that I
would make which is self-evident, and as Mr. Cohen said, we may
not have the technology now, but we can develop the technology
to do anything.
But ultimately the American people are going to have to
decide how much are they willing to pay for it, and right now
at least my constituents are not willing to pay the price of
natural gas that they are paying right now for the long term.
So ultimately the American people are going to have to decide
how much do they want to pay for electricity.
Mr. Barton. Good point. Congressman Boucher has a comment.
Mr. Boucher. Mr. Gregg, I would like to ask you a question
in a different area. You mentioned in your testimony that as
long as we have a reliable and efficient market for wholesale
power that it would be possible to utilize coal to a higher
degree in places like West Virginia, and perhaps in places like
my district in Virginia, and export that power, utilizing the
transmission grid, and making wholesale transactions to places
where that power is in demand.
Do you perceive that we have a problem with the reliability
and the efficiency of the wholesale market today, and I guess
that question relates primarily to the reliability of
transmission, and whether there are problems in that area?
Mr. Gregg. Well, obviously there are transmission
bottlenecks throughout our country. The transmission system was
not designed for long distance bulk transfer. It was designed
for reliability and interconnection between adjacent utilities,
and only over time did it become used for long distance
transmission.
Now we are starting to have a more rationalized wholesale
market. We are recognizing bottlenecks, and in fact the
emerging regional transmission organizations that are coming
about because of the Federal Energy Regulatory Commission's
Order 880 will end up developing pricing mechanisms that will
bird dog those bottlenecks, and give financial incentives to
solve them.
For example, one of the most critical bottlenecks existing
in the Eastern United States today is in Southwestern Virginia
on the AEP system. There is a 765,000 volt power line that has
been proposed for the past 12 years.
Mr. Boucher. I am quite familiar with that.
Mr. Gregg. We have approved our segment in West Virginia
for several years now, and we are waiting for the final word
from Virginia. That, when completed, will alleviate at least
that bottleneck, but there are others.
And the continued evolution of regional transmission
organizations and regional power exchanges, hopefully without
the restrictions that California imposed on its power exchange,
will lead to a more rational pricing structure. It will give
the proper signals so that the cheapest, most efficient
producers, which in our region are base load coal producers,
can complete on a level playing field.
Mr. Boucher. My question really relates more to problems
that exist with the existing transmission network in terms of
assured access to the network, and so that, for example, firm
transmission pricing can be awarded as a component of a futures
contract for the sale of power on the wholesale market.
Mr. Gregg. And once again these are----
Mr. Boucher. And let me finish my question before you
answer if I may. Do you perceive that there are regulatory
problems with regard to that circumstance that could not be
addressed by the Federal Energy Regulatory Commission within
the constraints of current statutory law?
So in other words, do we need to do anything legislatively
that would begin to address any such problem that you perceive?
Mr. Gregg. I think it goes without saying that there is a
split on the Federal Energy Regulatory Commission and among
players in the electricity market, as to whether FERC has or
does not have sufficient authority to mandate regional
transmission organization structure.
And that is why FERC has taken a more or less hands off or
a conjoling type of attitude in trying to get them developed.
Obviously a clear delegation of authority by this Congress to
FERC to have the last word in establishing regional
transmission organizations would be very helpful and would
clear the air.
Mr. Boucher. Thank you.
Mr. Barton. Does the gentleman from Arizona wish to make a
comment or ask a question?
Mr. Shadegg. Mr. Chairman, I was here for some of the
opening statements of some of the members of this panel. I want
to thank them for their time, and I want to thank you for
holding the hearing.
We produce some coal in Arizona, in Northern Arizona, and
it produces some good inexpensive electrical power, and we
scrub it and keep it clean, and we are very glad to be able to
do so. I understand that most of the questions that I would
have asked of this panel have been asked, and I just want to
thank them for their time and thank you for holding the
hearing.
Mr. Barton. Well, let me wrap it up then. I want to make a
statement and then make an announcement. We have 6,000 quads of
energy in coal reserves in this country. That is more
recoverable reserves at today's prices then every other
domestic resource in this country combined; uranium, oil,
natural gas, renewable, hydroelectric, solar, wind, you name
it.
You combine all of those and they are slightly more than
half of what we have in coal. Coal is the only resource that we
are a net exporter of. We import natural gas, and we import
oil, and we import hydroelectric, and we import uranium.
So if you really want a comprehensive national energy
policy, you have to include coal in it. You have to. You cannot
not do it and be rational. So this subcommittee, as we put
together our policy on a bipartisan basis with the
administration, is looking for innovative ways, common sense
ways, to increase the use of coal in an environmentally
acceptable fashion.
So whatever group you are representing, if you have got
some ideas, get them to the members on either side of the aisle
that you feel most comfortable working with, because we are
going to look at this near term.
Having said that, our next hearing next week, we are going
from globally looking at a domestic resource like coal, to a
very specific series of hearings on the electricity crisis in
California.
On Tuesday, we are going to have the FERC Commissioners to
give us their view, next Tuesday, on March 20. Then on
Thursday, March 22, we are going to have some California
officials and private sector official representatives to tell
us their view.
And to go to Mr. Gregg's comment, if in fact there needs to
be a legislative solution or clarify for anything to help in
California this summer, this subcommittee has got to act on
that very quickly, and I mean like within this month or the
early part of next month.
So after our California hearing next week, we are going to
sit down and look to see what and if there is any legislative
solution that needs to be moved, and if there is, I have
already got the commitment of the full committee chairman that
we will do that very, very quickly.
So this week's hearing is a little bit more global, but
next week's two hearings are very specific, and very short
timeframe, if in fact we are going to try and act to try to
help our people, not just in California, but in the entire
Western Region, because it is not just a State problem. It is a
regional problem.
With that, I want to thank this panel. Your testimony has
been very helpful, and again you all were very forthcoming in
preparing it and presenting it, and I appreciate the dialog.
The hearing is adjourned.
[Whereupon, at 4:01 p.m. the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Wisconsin Energy Corporation
April 12, 2001
The Honorable Joe Barton
Chairman, Energy and Air Quality Subcommittee
House Energy and Commerce Committee
Washington, DC 20515
Dear Chairman Barton:
First, I would like to express my appreciation for the opportunity
to testify recently before the Energy and Air Quality Subcommittee
Hearing on a National Energy Policy and Coal. Let me commend you again
for holding the hearing on such an important issue.
During the hearing you invited me to respond with my ideas and
thoughts regarding tax incentives to support the construction of needed
generation.
As I noted in my remarks, America needs fuel diversity in
generating power to ensure flexibility in meeting future energy needs.
A diverse fuel mix helps protect businesses and consumers from fuel
shortages and price volatility. We need long-term solutions for
expanding energy supply.
The electric industry is one of the most capital-intensive
industries in this country, requiring nearly four dollars in investment
for each dollar of annual revenue. Thus, cost recovery--including the
federal income tax rules providing for depreciation and amortization of
assets--is of vital importance. The present 15-20 year depreciation
requirement for generating assets discourages badly needed investment
in the construction of new electric generation facilities.
There is an urgent need for new electric generation to support a
sound economy. Price volatility and power shortages will only worsen
until adequate generation is available to support the growing demand
for electricity. We believe Congress needs to consider legislation to
foster capital formation. We also believe shorter depreciation lives
and an investment credit should be adopted. This is not unlike other
times in the history of our country when Congress recognized the need
for capital formation incentives and acted accordingly. The post WWII
period and the OPEC oil embargo of the 1970's are examples of times
when Congress responded appropriately.
Specifically, we support the following tax law changes:
To encourage investments in generation, depreciable lives
should be reduced from their current cost recovery period of 15
or 20 years to 7 years. The current electric industry
depreciable lives are longer than those of any manufacturing
segment.
To encourage fuel diversity and cleaner, more efficient
electricity generation from clean coal technologies a 10%
investment credit should be passed. As part of this credit, an
additional 1% should be allocated to labor along the lines of
the old TRASOP credit.
Finally a credit for replacing older, less efficient plants
with new, cleaner and more efficient plants or a credit for
retrofitting older plants should be adopted.
Congressional action is needed to cure the power supply emergency
facing our country. We encourage you to modernize the tax treatment of
new electric generating capacity to reflect the technical,
environmental and economic realities of the current structure of the
electric industry. Doing so would greatly advance the public interest
by insuring against the dire economic consequences that necessarily
accompany electricity shortfalls.
Mr. Chairman, thank you again for the opportunity to testify before
your subcommittee and to provide additional information on our ideas
for tax incentives. I have attached a more detailed description of the
suggested tax law changes outlined in the bullet points. I would be
pleased to provide additional information on any of these issues.
Sincerely,
Richard A. Abdoo
Chairman of the Board, President and Chief Executive Officer
Attachment
Electric Generation Tax Incentives
Seven Year Cost Recovery
With regard to depreciation, the recovery periods permitted under
current law for assets used to produce and distribute electricity are
much longer than the recovery periods allowed for other capital
intensive industries. As in every other instance of a heavily regulated
industry undergoing deregulation, new technology is being developed and
deployed at a much more rapid pace and makes obsolete many prior
investments in property, plant and equipment. With most of our
industry's assets placed in the 15-year and 20-year recovery period,
the present cost recovery system unjustly penalizes investors in
electric generation and makes raising necessary capital much more
difficult at a time when the need for additional generation has become
critical. Shorter depreciation lives will help to mitigate the economic
risk being assumed as companies build new generation.
By contrast to the 15-20 year depreciation lives for electric
generation assets, depreciation lives for other capital intensive
manufacturing processes, such as pulp and paper mills, steel mills,
lumber mills, foundries, automobile plants, and shipbuilding
facilities, are depreciable for Federal income tax purposes over just 7
years. Chemical plants and facilities for the manufacture of electronic
components and semiconductors can be depreciated over only 5 years. The
power plants that generate electricity have useful lives that are
similar to this production equipment that have recovery periods in the
7-year range.
Investment Credit and TRASOP
In order to encourage fuel diversity, an investment credit should
be directed to the cleaner coal technologies. We need electricity from
coal in the mix along. with natural gas to ensure flexibility in
meeting future energy needs--meeting them in ways that enhance the
economy without degrading the environment. And when you consider the
multiple uses for natural gas, especially for heating, it's reasonable
to question its use for generating substantial amounts of power,
especially when considering that the known supplies of natural gas
reserves look adequate for only 40 years, based on current consumption.
If gas is to be used for new capacity as well as replacing existing
coal and nuclear, we are inviting a long-term problem.
As part of the investment credit, we should consider providing an
additional 1% credit to employees. In the past this credit has taken
the form of a TRASOP (Tax Reform Act Stock Ownership Plan). Under this
plan a fund was set aside at the rate of 1% of net new investment and
allocated to employees who then could purchase stock in the Company for
which they worked. The proceeds from the sale of the stock provide
additional capital to help fund the construction of needed generation.
Investment Credit for Clean Power
A special credit for replacing older, less efficient plants with
new, cleaner and more efficient plants or a credit for retrofitting
older plants should be adopted. In addition to allowing for fuel
diversity, such a credit would provide the added benefit of reducing
multiple emissions.
Conclusion
Given the current twenty year recovery and the enormous capital
requirements of new construction, utilities have a preference for
nursing along their older facilities rather than committing enormous
amounts of capital, the recovery of which would face an uncertain
economic, technological, and regulatory future. A seven year recovery
would tip the balance in countless decisions to add new facilities and
replace or retrofit older, inefficient plants.
Congressional action is needed to cure the power supply emergency
facing our country. Congress should modernize the tax treatment of new
electric generating capacity to reflect the technical, environmental
and economic realities of die current structure of the electric
industry. Doing so would greatly advance the public interest by
insuring against the dire economic consequences that necessarily
accompany electricity shortfalls.
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