A Coal Caucus Look at the Impacts of an Over-Regulated Energy Market in Pennsylvania

On November 17, 2015, a bipartisan, statewide group of over 30 legislators participated in a hearing on the Impacts of the Clean Power Plan on Pennsylvania coal and related industries.

The outlook? Unnecessarily challenging. In 2015, as the trickle down impacts of compliance with the EPA’s Mercury Air Toxics Standard (MATS) were exhibited across the state, the industry was slapped with the newest and most costly regulation to date, the Clean Power Plan.

Photo by Chris Guerrisi

Emily Medine, Principal of energy consulting firm, Energy Ventures Analysis presented a study (view slides) on the EPA’s Clean Power Plan and the proposed impacts on Pennsylvania coal.

Medine cited competition from natural gas, the strength of the U.S. dollar making U.S. coal noncompetitive in the global market, the mild winter and power generator’s compliance with MATS as factors creating the “perfect storm” for today’s coal industry.

According to Medine, since 2010, Pennsylvania lost 10 -15 million tons of coal demand annually from Pennsylvania's coal-fired power fleet due to compliance with MATS (which has since been remanded by the Supreme Court of the United States) and capacity payments to PJM.

The study determined compliance could cause a decrease in coal utilization from 24 – 58% and an increase in wholesale electricity prices by 12 -20%.

Medine went on to state, “the flexibility of the Clean Power Plan is disingenuous as there is no way to comply without reducing coal generation.”

As a result of this unprecedented overreach into state energy policy, 27 states, 24 associations, 37 rural co-ops, 10 companies and three labor unions have filed suit and petitioned the U.S. Court of Appeals asserting that a stay is appropriate as it can be shown the final rule is in excess of the EPA’s statutory authority, goes beyond the bounds set by the United States Constitution, and is an arbitrary, capricious, an abuse of discretion and not in accordance with law.

John Pippy, CEO of the Pennsylvania Coal Alliance testified, highlighting the importance of DEP utilizing the available two-year extension and full three years to develop a compliance plan. (Click for Pippy's full testimony.)

“If Pennsylvania prematurely submits a SIP and the rule is overturned, you will win in court and lose in reality, specifically for your constituents,” Pippy said.

The Federal Implementation Plan and Clean Energy Incentive Program (integral parts of the Clean Power Plan) have yet to be published and are rumored to be finalized summer 2016. Significant infrastructure decisions would need to be made without knowing the rule in its entirety and by voluntary early compliance, Pennsylvania will be left with strict, federally enforceable guidelines for its energy policy, crippling the economy beyond competitive repair and disadvantaging it to other states that waited and weighed the cost of compliance.

Cliff Forrest, President of Rosebud Mining has already felt the effects of a curbed demand for coal. (Click for Forrest's full testimony.)

In testimony, Forrest pointed out that the EPA issued MATS in 2012, and like the CPP, it was immediately challenged by almost half of the nation. Despite the immediate challenge, it took three years for MATS to wind its way through the courts. When it finally did this past June, the Supreme Court sided with the 21 States that filed suit, finding that the EPA strayed beyond the bounds of reasonable interpretation of its authority under the regulation and failed to fully consider the cost of compliance.

Unfortunately, as EPA Administrator McCarthy stated prior to the court’s ruling, “Even if we don’t [win], it was three years ago. Most of the [plants] are already in compliance, investments have been made, and we’ll catch up.” This demonstrates EPA’s disregard for the due process by enacting regulations careless of whether they will be held up in court or not.

The CPP faces similar legal scrutiny and the cost of developing a compliance plan to meet the carbon emissions standard will be much higher, as this is not just retrofitting existing plants with available technologies, but taking offline existing power-producing plants, replacing them with less reliable and more costly new sources and building out the transmission infrastructure statewide.

“Presently there are only seven coal-fired power plants operating in our state. All of these plants have the state of the art environmental controls necessary to meet the very stringent EPA regulations under the Clean Air Act. If the CPP is implemented, it is estimated only two of these plants would survive resulting in several hundred if not thousand layoffs with my company,” Forrest said.

With over 36,000 jobs that rely on Pennsylvania coal, the impacts will be felt statewide and across industries. Photo by Chris Guerrisi: Cliff Forrest, President of Rosbud Mining

Just as the closure of coal-fired power plants due to the EPA’s ever-changing regulations directly impact Forrest’s coal sales, Walter Scroth, owner of Schroth Timber Industries in Indiana, PA testified on the continued rippling impact on his treated wood business. (Click for Schroth's full testimony.)

“When you sneeze, I catch pneumonia,” Schroth joked to Forrest.

With 80 percent of Schroth’s business coming from the coal industry, sales in mine timbers have dropped 10 percent from 2014.

“I am the third generation owner of this business,” said Schroth. “It is the generational ownership of these businesses that create the stability in our communities, that provide the economic development that we have in order to have the good places that we want to work and raise our children in.”

Kevin Moore is an example of just that. Born and raised in Waynesburg, Moore is a Senior Environmental Compliance Manager for Alpha Natural Resources.

“Every time a regulation has been forced upon this industry, we’ve been good at finding a way to overcome it,” Moore testified. “That is not the case anymore. Finally the environmental groups are getting what they want and coal companies are shutting down across Appalachia because the permitting and coal fee costs are so burdensome they can’t afford to mine or the market is such that they just can’t make money on it.” (Click for Moore's full testimony.)

Moore went on to note the industry progress as environmental compliance continues to evolve despite the changing political environment. That is, until the Obama Administration.

“I’m sitting here thinking will I have a job to go home to or which of my employees will I have to send home?”

Moore’s position with Alpha Natural Resources has enabled him to stay close to his family, the opportunity for his wife to stay home with their children and allowed him to complete an MBA program.

“I live in the same community, I drink the same water, I hunt and I fish and I am a proud supporter of this industry and the legacy that we leave.”

Rep. Snyder (D-50) echoed Moore’s sentiments stating, “We need to take our time with this. I don’t think there’s anyone here that doesn’t care about the environment. But I know for my district, there is a social environment to be considered. If the coal market continues to decline, it is going to create a social consequence in my district that really makes me fearful and people are going to be put in unemployment lines and poverty and that’s not what I want to see.”

Moore conlcuded by underlining the impacts on local communities of already realized regulations like MATS.

“The Obama administration is regulating the coal industry out of the energy market using the EPA and in the same breath disingenuously offering coal communities a fix to the problem he created and it is insulting.

If you have any doubt about the process being politically biased, over the last two to three months we have been presented with well over 3,000 pages of new rules and regulations from SPR offered by OSM and CPP by EPA with almost no time to review and comment. The answer is simple,” Moore stated. “The EPA doesn’t care what we think or about science or state primacy on these issues.”

Reinforced across the panel was the importance of DEP taking advantage of the available two-year extension in submitting a final compliance plan to EPA, the impacts of previous regulations and the consequences of rushed compliance with yet another costly regulation.

“This is the most critical moment in the energy business in my lifetime. Right now. The jobs that they’re talking about with the impact and the ancillary jobs, everything related to this industry is the backbone of where I live. I am asking that we in this room take responsibility and we push back with this Administration that seems to let EPA do their thing. We as a body have an obligation to unify,” Senator Don White (R-41).

Thank you to Senator Gene Yaw (R-23), a chair of the Senate Coal Caucus and Rep. Jeff Pyle (R-60), a chair of the House Coal Caucus for coordinating this hearing. You can view the hearing in its entirety here.


PLS: Coal Caucus Meets to Discus EPA's Final Clean Power Plan

PA Environment Digest: Senate, House Coal Caucus Hearing Examines Impacts Of EPA Clean Power Climate Plan

Observer Reporter: Coal Alliance CEO: Legislators shouldn’t rush compliance with Clean Power Plan

Law360: Clean Power Plan Will Devastate Pa. Coal, Lawmakers Say

StateImpact NPR: Coal pleads its case against the Clean Power Plan to state lawmakers

SNL: Pro-coal Pa. lawmakers frustrated state not suing over Clean Power Plan

E&E News: Coal backers in Pa. push to delay Clean Power Plan implementation