Coal: The Unsung Cheap Energy

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WASHINGTON-Pity coal. Although it's in plentiful supply and produces 45% of U.S. electricity, the coal industry is in the crosshairs of the Obama administration, under attack simultaneously from both the Environmental Protection Agency and the Labor Department.

And pity American consumers. They face higher electricity prices as natural gas replaces coal in power plants and generators, even as President Obama wants one million electric vehicles on the road by 2015.

Last week EPA proposed regulations to tighten emissions of mercury and other substances from coal- and oil-fired power plants and boilers. This is just the start of a series of regulations affecting coal.

Over the next year EPA will develop regulations to restrict coal ash; tighter standards for nitrogen dioxide, sulfur dioxide, and other particulates; and new standards for water and carbon.

Meanwhile, by coincidence or design, the Labor Department has been ratcheting up safety standards for miners. EPA regulations will discourage coal from being used, but it can be mined and exported. Labor Department regulations will discourage coal from being produced at all.

The administration appears to have a strategy to force coal mines out of business by adopting new public health and safety standards that are far more restrictive and expensive than the present criteria. Energy Secretary Steven Chu signaled that approach when he said last month, referring to coal mines, that "we're going to see massive retirements within the next five, eight years."

Back in January 2008, Candidate Obama indicated that he was prepared to see at least some coal-fired power plants go out of business under the weight of regulatory goals he thought had overriding importance. He told the San Francisco Chronicle, "So if somebody wants to build a coal-powered plant, they can; it's just that it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas that's being emitted."

EPA's new rules would make electricity generation far more complex and expensive. The restrictions would apply to power plants' and boilers' emissions of "heavy metals," including mercury, arsenic, chromium, and nickel, and acid gases, such as hydrogen chloride and hydrogen fluoride.

The rules require Maximum Achievable Control Technology, meaning that plants have to use the most stringent methods possible to get the heavy metals out of the air.

Mercury and arsenic are well-known to the public as toxic, and in certain doses can be lethal. At issue is whether EPA rules would push emissions caps unnecessarily low, driving up generating costs and the price of power to industry and households, and forcing some boilers and plants to shut down.

EPA estimates its new rules would cost households and businesses $11 billion a year in 2016. Industry groups have estimated the costs at $40 billion to $120 billion for full compliance, with many older plants forced to close. Hardest-hit would be Illinois, Ohio, Indiana, Missouri, and Michigan, because they are home to the oldest plants with the fewest emissions controls.

These additional costs would come on top of those to be imposed, starting around 2015, by EPA's other planned standards for carbon, water, coal ash, and particulates. But, EPA assures, Americans should not worry about negative economic effects of the emissions restrictions, because, astoundingly for a rule of this magnitude, compliance would be, in EPA's view, "economically-feasible." That, in my view, is doubtful.

Specifically, the EPA fact sheet states that "a range of widely-available, technical and economically-feasible practices, technologies and compliance strategies are available to power plants to meet the emissions limits."

EPA predicts the rule will create 31,000 short-term construction and 9,000 long-term utility jobs. But it doesn't mention lost jobs from displaced coal workers and higher energy prices, which could equal or exceed the purported gains.

The benefits, calculated at $60 billion to $140 billion in 2016, supposedly come from improvements in Americans' health, specifically from less cancer and asthma, and fewer premature deaths from heart attacks. But these projected benefts are iffy "guesstimates," gains that are hard to specify given that other factors, such as obesity and lack of exercise, are in play. And childhood asthma has been rising over the past two decades, even as the air has been getting cleaner.

Acting separately, the Labor Department has proposed rules to make mining safer-and more expensive. At least 31 new future rules for mines are listed on the Labor Department's regulatory agenda.
One proposed rule would lower miners' exposure to coal mine dust from 2 milligrams to one milligram per cubic meter of air, change the sampling method, and require the use of continuous personal dust monitors. Comments on the proposed rule are due by May 2.

The Mine Safety and Health Administration, in a preliminary economic analysis found here, estimates that the rule would cost $40 million annually when phased in, with benefits ranging from $99 million to $197 million per year. But the on page 194 the benefits are described as "incomplete and highly uncertain because they do not include the potential impacts of other provisions of the proposed rule and because MSHA does not have the data necessary to either a) calculate benefits to those with historical exposures and pre-existing conditions or b) estimate how long into the future it will be until the benefits of this regulation might begin to accrue."

This is a damning indictment of the benefit-cost process, and runs counter to President Obama's January 2011 executive order requiring a cost-benefit analysis of agency rules and regulations.

Another proposed rule would limit the amount of quartz, known as crystalline silica, in mine dust. The Department wants to halve the amount of silica allowed, from 100 micrograms to 50 micrograms per cubic meter. The goal: to reduce the incidence of silicosis, a lung disease.

MSHA's Web site states that it is preparing a benefit-cost analysis. If such analysis is not already done, how did the agency decide to halve the amount of silica allowed? Why not reduce it just a quarter? Or leave the amount unchanged?

Let us assume that these new rules do lead to shutting down some coal-fired plants. Where would replacement power come from?

Building new nuclear power plants is clearly a non-starter after the disaster ongoing in Japan. Solar, wind and biofuels remain technologies in gestation, and cannot be counted on for big increments of power, despite Mr. Obama's hopeful target that 80% of electricity will come from renewables by 2035. That leaves oil and natural gas, both slated for tax increases under the president's 2012 budget.

At the same time that Mr. Obama is trying to encourage electric cars and the "smart grid," two of his agencies are trying to put the coal industry out of business and increase the cost of electricity. It makes no sense.


Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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