EPA Plays ‘The Hunger Games’ with Coal

Environmental Protection Agency Seal

Environmental Protection Agency Seal (Photo credit: DonkeyHotey)

The US EPA proposed new rules March 27, 2012 that limit the amount of carbon dioxide that may be emitted at new US power plants.  The notice of proposed rulemaking was careful to point out that the proposed rules would not apply to existing power plants, modified plants or those under construction. The practical effect of the proposed rules on carbon emissions would be to ban new coal plant construction unless the new plant reduces its emissions output to the level of a natural gas fired combined cycle plant.  Doing that is not achievable without an installing a carbon capture and sequestration system which is uneconomic.

Why this new rule?  Why now?

“We’re putting in place a standard that relies on the use of clean, American made technology to tackle a challenge that we can’t leave to our kids and grandkids.” — Lisa Jackson, US EPA Administrator.

That statement from EPA Administrator Lisa Jackson’s ‘feel good’ press release and the timing of this notice of proposed rulemaking tell us that there is as much politics as substance to this proposal.

In truth this rule is unnecessary because the marketplace is savaging coal market share because low natural gas prices are effectively undermining the economics of both new coal and nuclear baseload capacity additions. Add to that reality, the cumulative impact of the recently proposed or adopted EPA rules that apply to existing operating power plants and the effect is not only to stop new coal plant construction but to force into retirement more than 33GW or about 10% of the existing coal-fired generation fleet.

Just like the new movie The Hunger Games has captured the box office with its ruthless blood sport, the proposed carbon emissions rule is the EPA equivalent for the hunger games of the 2012 election providing the environmental base constituency for President Obama something to cheer about and a reminder to vote for him or else.

Timing is everything!

The timing of the notice of proposed rulemaking is no coincidence since going through the motions of asking for comments, reviewing them and offering revisions to the proposed rules means that the final rule for carbon emissions is unlikely to be promulgated before the November 2012 election. This is a not so subtle reminder to the environmental base that may be upset with Obama for digging himself out of the Keystone XL pipeline swamp by favoring the project in segments so he can take credit for each of them—that the final carbon emissions rule could be rejected by a new administration after the election.

Low natural gas prices made possible by the growth in unconventional natural gas E&P is the biggest threat to coal’s future.  But the natural gas industry should not be too smug about it. Today the US EPA today is coming after coal with its carbon emission rule. But after the election when the re-elected President has more ‘flexibility’ and the environmental lobby starts clamoring about the harm low gas prices are having on wind and solar by driving down the grid parity price to beat—-then US EPA may suddenly discover the need to further reduce the allowable level of carbon emissions so that the growth natural gas-fired generation is limited and renewable energy is favored.

The games have already begun.

Gary L Hunt

About 

Gary Hunt is a global business executive with 20+ years experience as a “C’ level trusted adviser on corporate strategy, M&A, and recurring revenue business model strategies.

His focus is information technology and energy vertical “sweet spots” where IT and OT converge to offer scalable growth opportunities to leverage data and analytics into advanced predictive analytics solutions using recurring revenue business models.

Comments

  1. Great information… thanks for sharing..

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