Category Archives: Economics

Updated Trends in U.S. Delivered Coal Prices: Volatility in U.S. Coal Prices Increases Pressure to Phase Out Coal Power

Clean Energy Action has questioned the practice of making long-term continued investments in coal-fired power plants for years. These concerns are driven by several factors including carbon dioxide emissions which in many states make coal plants the largest source of greenhouse gas emissions, emission of pollutants like mercury and sulfur dioxide, increasingly unfavorable economics, and the uncertainty of future coal prices and supplies.

The price of coal has changed greatly over the last two decades. This volatility puts continued investments in coal-fired power plants at risk of becoming stranded assets – assets that have suffered from unanticipated or premature write-downs, devaluations or conversion to liabilities. Rather than adding pollution control equipment or other investments to keep coal plants online, regulators and utilities should consider making plans to phase out coal power.

Coal plants can’t operate without a stable supply of coal over their entire lifetime, which means that the long-term stability of coal prices and supplies are essential to the solvency of a coal plant investment.­­ In 2013, CEA published a detailed analysis of historical coal prices in each U.S. state to gain insight into their stability. The study revealed that prices rose steadily over the preceding decade, thereby continually increasing costs for coal based utilities.

In light of the recent coal industry bankruptcies, we updated this report to include more recent data and found that instability in the coal industry was paralleled by decreasing coal prices and persistently rising production costs, resulting in dangerously low profit margins. Our analyses indicate that utility commissions, utilities, and political leaders should seriously consider the unpredictable nature of fossil fuel markets when making decisions about long-term energy investments. Our findings point to the long-term economic benefits of investing in “free fuel” renewable energy resources such as wind and solar that have stable and affordable prices.

Leeds School of Business: Xcel’s proposed wind project to add 7,000 jobs, over $1 billion to GDP

An analysis of the economic impacts of Xcel Energy’s proposed Rush Creek Wind Project indicates that the proposed investment in wind generation would produce net economic benefits for the state of Colorado.  The study was prepared by the Leeds School of Business and funded by Xcel Energy.

Investing in 300 wind turbines made in Colorado that collectively produce 600 megawatts of wind energy would reduce “future generation of electricity using gas-fired and coal-fired resources.” Along with investments “in purchasing and erecting the wind turbines, the project will include the creation of access roads, pouring of foundations, installation of transmission lines, and construction of substations.” In total, the study projects that these investments will result in a projected net increase of 7,136 jobs (Table 1, page 6) in Colorado.

Reductions in operating expenditures, “notably – fuel costs,” will result in lower revenue requirements for Colorado ratepayers as wind generation lowers the projected revenue required to generate electricity by 0.7% (Table 3, page 12). From 2016 through 2040, the study projects that the combination of these savings for consumers and investment in renewable generating capacity  will increase Colorado’s projected GDP by over $1 billion (Table 1, page 6).

You can access the full study here.


Nov. 8: Screening and Discussion of This Changes Everything

November 8th, 2:00 pm
The Alliance Center
1536 Wynkoop Street, Denver CO

Join CEA and the Climate Courage Resilience Circle for a film screening and discussion of This Changes Everything,  Naomi Klein’s brand new climate justice documentary. Throughout the film, Klein builds to her most controversial and exciting idea: that we can seize the existential crisis of climate change to transform our failed economic system into something radically better.

Join the event on Facebook!

Filmed over 211 shoot days in nine countries and five continents over four years, This Changes Everything is an epic attempt to re-imagine the vast challenge of climate change.

Directed by Avi Lewis, and inspired by Naomi Klein’s international non-fiction bestseller This Changes Everything, the film presents seven powerful portraits of communities on the front lines, from Montana’s Powder River Basin to the Alberta Tar Sands, from the coast of South India to Beijing and beyond.

Suggested donation: $7. No one will be turned away for lack of funds, but we gratefully accept contributions to support this initiative!

Seating is limited. Register here to attend the event.

A Massive Open (Money) Pit

As the nation’s 4th largest coal producer, Alpha Natural Resources, muddles through Chapter 11 bankruptcy proceedings, it has struck a deal with the state of Wyoming regarding land reclamation obligations left unpaid due to the inadequacy of relying on “self bonding” for reclamation of its massive open pit mines. Facing the prospect of losing its mining permits, the deal would allow Alpha to continue mining coal. While Alpha Natural’s reclamation obligations total $411 million to, the proposed agreement would put Wyoming first in line among creditors for $61 million, or less than 15% of its reclamation obligation. The deal raises many questions–chief among them: Who will pay for the remaining $350 million of reclamation costs beyond this $61 million?

It was supposed to be this way

In the 1960’s and early ‘70’s, strip mining had already devastated many Appalachian landscapes. Increasing demand for coal pushed devastating surface mining practices westward and, in the words of one Congressional report, threatened to turn huge tracts land into “.” Surface mining legislation to remedy these and other issues was repeatedly vetoed during the Ford Administration, but in 1977 President Carter signed the Surface Mining Control and Reclamation Act, with the intent to “reclaim surface areas as contemporaneously as possible with” the cessation of surface mining operations

Mining might cease when a mine plays out or when a mining company goes out of business. In the latter case, the Act required coal companies to put aside funds for reclamation to ensure that mines are cleaned up even if a company might go out of business. Critically, the Act left much of the details of implementation and enforcement with the states.

When a coal company begins surface mining, the company is required to provide financial assurance upfront – typically a type of insurance called a surety bond – that it will return the area to a usable condition. But in some states, like Wyoming, regulators allow coal companies to “self-bond.” If a company passes financial stress tests, it is allowed to simply promise to complete reclamation without requiring assurance upfront.

As the US reaches the end of coal that can be mined profitably, rising costs and competition from renewables and natural gas have pushed coal companies like Alpha Natural to file for bankruptcy. While others face potential bankruptcy, these self-bonding regulations have become seriously problematic. Who will cover the costs when coal companies, who have only promised to complete reclamation work, find themselves in bankruptcy? If asking coal companies to come up with reclamation funds only further degrades their financial situations, will the public be forced to choose between spending hundreds of millions to clean up mines or to simply leave the sites unreclaimed and hope for the best?

Too Late, Too Little

After years of warnings from environmental groups, in May, the Wyoming Department of Environmental Quality reviewed its self-bonding program and found that coal producer Alpha Natural Resources no longer met its financial stress . The financial outlook was so grim that Wyoming, one of the most fossil-fuel-friendly states, denied Alpha Natural, its self-bonding status. Wyoming demanded that Alpha Natural post a surety bond or collateral of $411 million for its outstanding reclamation work or cease mining in the state. These hundreds of millions of dollars are needed to reclaim refuse and slurry ponds, restore acres of pits from surface mines, and treat water contaminated from years of mining.

Alpha Natural failed the state’s financial stress tests for good reason. On August 3rd, Alpha Natural filed for Chapter 11 bankruptcy. According to the Casper Star-Tribune, as Alpha Natural negotiates with its creditors, it has struck a potential deal with Wyoming to continue mining in the state. If the bankruptcy court approves, Alpha Natural will put aside $61 million for Wyoming, less than 15% of what the state is owed, toward its reclamation obligations. Wyoming would get a “superpriority” claim on its $61 million: it would be first in line among creditors if Alpha Natural goes completely out of business.

While state regulators may be pleased to know that a small portion of reclamation work will now be completed, the outcome is a far cry from what is required by the federal Surface Mining Control and Reclamation Act (SMCRA) , which states that funds “shall be sufficient to assure the completion of the reclamation plan if the work had to be performed by the regulatory authority in the event of forfeiture” or bankruptcy. If Alpha Natural does go out of business, Wyoming will be first in line, but will only receive a small portion of what is needed to clean up Alpha Natural’s scars on Wyoming’s landscapes.

Enormous Risks

In the absence of a deal, it’s unclear how the courts would discharge of Alpha Natural’s reclamation obligations. As the Vermont Environmental Law Journal notes, the bankruptcy code gives no clear guidance here. Companies in Chapter 11 bankruptcy attempt to regain solvency by restructuring their debts. In some cases, this restructuring can mean reducing environmental obligations to just another debt that could receive “mere pennies on the dollar.”

Presumably, Wyoming’s Governor Mead would like to keep Alpha Natural in business and is seeking to lessen the company’s obligations until it might emerge from bankruptcy. If the company can emerge from bankruptcy, the company will be forced to comply with bonding requirements by purchasing costly insurance or by paying the full amount – if it can afford it. For now, it appears that Wyoming is willing to put its taxpayers and its ecosystems at enormous risk.

Public Banking: Supporting community Resiliency & Renewable Energy

An Evening with Gwen Hallsmith
Executive Director of the Public Banking Institute

January 29th
6:30 – 7 pm – Refreshments
7 – 8:45 pm – Discussion
Impact Hub, Boulder
1877 Broadway St.

Gwen Hallsmith
Gwen Hallsmith, the Executive Director of the Public Banking Institute will present on how public banking could play a role in financing a municipal electric utility and how Boulder can use public banking to enhance community wealth, resiliency, entrepreneurial participation and economic vitality. She will discuss the main advantage of public banking: lower-cost financing which enables states, counties and cities to better fund small business, infrastructure and projects such as affordable housing, libraries, farm-to-table agriculture, renewable energy, energy efficiency and public transportation. Each of these projects creates good local jobs. In these ways, public banks enable cities, counties, and states to better finance public priorities without relying on Wall Street or paying the high interest rates that pad big bank profits.

This presentation is part of Clean Energy Action’s Global Warming Solutions Speaker Series. Audience participation will be invited during discussion and Q&A. No RSVP required.

More About Gwen

Gwen most recently made national headlines with her work in Vermont to ask Town Meetings to consider public banking. On March 4th, 18 cities and towns in Vermont voted to endorse a resolution directing the state legislators to create a State Bank for Vermont. Thanks to the media expertise of William Boardman and Matt Stannard, the national media has picked up on the story, and there have been now over 20 radio interviews, print stories, and starting this week we’ll be on syndicated television with the story as well… Gwen has an interview with GritTV on Tuesday, and we understand that even bigger shows are working on the story – stay tuned.

Gwen is the author of several books on sustainable communities and economic reform, including her most recent book with Bernard Lietaer called Creating Wealth: Growing Local Communities with Local Currencies. She has been an advocate for economic reform for over 25 years, and implemented new currency projects on the local level in her recent position as the Director of Planning and Community Development for the City of Montpelier. Her work spans the globe – she has worked in all the major world regions at this point, and with cities, towns, regions, provinces, and states in the United States and Canada.

Her vision for the Public Banking Institute expands our horizons to include many other aspects of a public monetary system, everything from strengthening the possibilities for local investment that the new SEC regulations allow to fostering and supporting complementary currencies for local and regional means of exchange. Her deep commitment to local action matches our vision for the Institute as a source of technical assistance, training, and research for all the state, regional, and local initiatives underway to set up public banks and other currency and investment initiatives.