Coal is in for a Bumpy Ride and Final Decline

Submitted by Anne Butterfield on April 21, 2010 – 1:37pm

More coal miners have lost their lives from cave-ins, explosions and lung disease since 1900 than all the Americans who died in World War II. – Ralph Nader There is a moment in the progress of any high altitude flight when the engines let off and the craft pitches down slightly; that is the beginning of the long descent for landing. In the past three weeks, our nation crossed a line in how we think about coal, and it now seems coal’s long flight of dominating how we produce electricity has embarked on a final decline. A pivotal lightning strike hit the industry on April 5, in the probably avoidable explosion at the Upper Big Branch mine in West Virginia. Lit up in the glare of the news cycle was Don Blankenship of Massey Energy whose union busting and campaign of appealing safety violations has led, probably, to the explosion in his mine. That’s the view loudly proclaimed by AFL-CIO president and former president of United Mine Workers Richard Trumka, who can cogently claim the disaster was propelled by the lack of union vigilance in the mine in question. Preceded by 53 safety violations in March and over 450 the previous year, the accident launched two federal investigations sought by West Virginia Senators Rockefeller and Byrd — who are otherwise quite protective of the industry — and a campaign of inspecting all mines in West Virginia was ordered by Governor Joe Manchin. A Wall Street law firm has joined the pushback posse, seeking to know if Massey violated SEC regulations by failing to disclose risk properly to investors. Another investor group dubbed Change to Win is calling for the ouster of Blankenship. It’s been joined by New York State’s Comptroller, Thomas DiNapoli, who has direct control of over 300,000 shares of Massey stock through that state’s common retirement fund. There is nothing like a mass casualty incident to focus our politics, and the small chance of coal state pols voting for clean energy jobs and a climate bill is inching higher, especially as the national focus on coal’s danger may lead eyeballs to stumble upon a recent study by Downstream Strategies showing what Appalachians know in their guts that the region’s coal reserves are in decline and the region needs diverse economic development immediately. Severe local turbulence can lead to loss of altitude, but more distant control can call for descent, too, in the form of federal regulation. Just days before the Montcoal catastrophe, the Environmental Protection Agency issued new rules to curb the practice of mountain top removal mining that is poisoning waterways and flattening Appalachia. It was denounced by Friends of Coal as a big job-killer, their usual line, as the industry hates all job losses that they do not effectuate from their own corporate offices. Also, later this month the EPA is scheduled to release new regulations for the handling of coal ash waste, the long awaited comeuppance for the spill of biblical proportions that cloaked eastern Tennessee at Christmas of 2008. The regulations could impose serious costs on the industry. As forces of scrutiny and regulation converge on the coal industry to reduce some of its hazards, they will push the price of the black rock appropriately upward. And as celebrated environmentalist Lester Brown has said, the free market is fine so long as prices tell the truth about costs. We need coal to be priced according to it costs, and politics is moving in that direction, particularly as we look west. Citing the city’s home rule authority as their clout, Chicago’s City Council has joyfully presented an ordinance to regulate the emissions of two coal plants inside the city limits, and if that fails, to call for the plants’ retirement. Chicagoans suffer twice the asthma-related hospitalizations than the national average. Here in Boulder we too have home rule authority and are feeling a strong push to delay the signing of a new franchise agreement with Xcel Energy in favor of a new business arrangement crafted for decarbonization. This week all nine members of the City Council opined in a study session that times are changing and so must our energy production. Focusing on how coal is becoming less reliable, Councilwoman Susie Ageton put it forcefully: “We’ve got to make the shift – we’ve got to do it.” Maybe she knows that Colorado’s coal fields are faltering; the state hit peak production six years ago and “force majeure” has shut down mines four times since 2007. As for the motherlode of coal up in Wyoming, the most recent US Geological Survey assessment of coal in the Gillette Field of the Powder River Basin (which provides about 40 percent of our nation’s coal) found that only 6 percent was economically accessible. And The Bureau of Land Management has stated that major mines in the PRB have less than a ten year life span. Future mine expansions will face compelling geologic and other challenges. (For more on coal supply constraints go…..) So no one, especially the coal industry, should be surprised that Governor Ritter will sign legislation calling on Xcel Energy to reduce by 80 percent the nasty pollutants of key coal plants along the Front Range, with overt instruction to consider natural gas and low emitting sources as replacement for coal. We’re seeing the decline of coal. There may be air pockets to bump the industry back up and sharply down in its trajectory, but the fact is the 150 year flight is just plain running out of gas. And with Colorado in the forefront, many American communities are preparing for a smooth landing. A version of this column appeared in the Boulder Daily Camera.

Comanche 3–The Billion Dollar Mistake

Xcel has spent over $1 Billion to build the new 750 MW Unit 3 coal plant in Pueblo (which Xcel refers to as “Comanche 3”) and they are presently trying to bring the coal plant on line. Yet, there are a growing number of signs that the coal plant is a “Billion Dollar Mistake.”

The coal plant has been plagued by engineering and noise issues which are discussed in a recent report to the Colorado PUC here. There is a Powerpoint (starting on page 7 of 35) included in the “Verified Report” at this link which details the problems that Xcel has been experiencing with leaking steam tubes, boiler pumps that won’t work and a high pitched noise that is causing tremendous disturbance to local residents who are becoming depressed and distraught, with many of them moving into hotels (which at least Xcel is paying for) because they can not bear the noise any longer and the sleep deprivation has become too much. Of course moving into a hotel is also a tremendous disturbance to one’s life and the residents’ health issues are becoming exacerbated by the continuous noise that disrupts their sleep and creates serious additional stress.

You can read the comments of the local citizens who are being affected by the noise issue on the PUC website under Docket 10M-135E.

Operating the coal plant will cost approximately $1 billion per decade and add large amounts of CO2, mercury and other pollutants to the environment. Soon Colorado will have to decide whether it is worth putting good money after bad when it comes to the coal plant or whether the money spent operating the plant would be better spent building out the renewable energy infrastrucuture that will keep Colorado powered in the 21st century as coal and pollution control (and likely carbon) costs mount.

Here is a report detailing the history and the expected future costs of operating the coal plant attached.

Xcel has received three rate increases in the last four years totalling over $300 million dollars of additional annual revenue paid by Colorado rate payers and the largest driver in these back-to-back rate increases has been the Unit 3 coal plant.

More information is available on request.

Colorado’s Billion Dollar Mistake

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Colorado Coal Production Apparent Peak Was 2004–Most Other States Are Also Past Peak Production

Colorado is typically about the seventh largest producer of coal in the United States, producing less than 40 million tons of coal a year. By comparison, the top coal producing state Wyoming produces over 450 million tons–with many single mines in Wyoming producing more than the entire annual coal production of Colorado.

Coal production by state can be tracked in Table 1 of the Energy Information Administration’s annual coal report which can be found here.

Tracking Colorado’s coal production. it becomes clear that Colorado’s coal production hit a peak of just under 40 million tons in 2004. Since that time, Colorado coal production has declined significantly with Colorado coal production in 2008 being reported as 32.8 million tons.

Between 2004 and 2008, Colorado coal production declined by about 17%–and, as discussed below, 2009 production is lagging about 10% behind 2008 production. When final 2009 data become available, it is possible that between 2004 and 2009, Colorado coal production will have declined by 20% or more.

As of the third quarter of 2009, Colorado’s coal production was about 10% below 2008 levels. Quarterly coal production by state can be found on the Energy Information Administration coal data web page here.

The decline in Colorado coal production (and as discussed below a similar decline in most other coal producing states) is largely the result of geologic constraints. The easily accessible coal in the United States has largely been mined and turned into CO2 that now resides in the atmosphere and oceans.

While it is possible that Colorado (and other coal producing states that are past peak production) could open new mines and reach a new peak in production this doesn’t seem likely considering the considerable geologic, economic, legal and transportation constraints facing future coal production as discussed in detail here.

What About the Other Coal Producing States?

From EIA data on coal production, it is clear that all of the top 15 coal producing states have passed peak coal production except Wyoming and Montana. As of the third quarter of 2009, both Wyoming and Montana coal production declined in 2009 compared to 2008, but this could be due to the economy.

A careful analysis of existing life span of Wyoming mines and the geology of the coal in the Powder River Basin indicates that a peak in Wyoming coal production may not be too far in the future.

Montana is an unknown, but at about 40 million tons of coal produced a year, and strong local opposition to sacrificing the local agriculture and range economy for coal production, it appears unlikely that Montana coal production will increase dramatically in the future.

An extensive report on US coal supplies entitled “Coal–Cheap and Abundant, Or Is It? Why Americans Should Stop Assuming that the United States Has a 200 Year Supply of Coal” is available for free download from the Clean Energy Action website.

Additional information is available from the author upon request.

Xcel’s 2009 Coal Prices Match Price Predicted for 2035–Ooops…

In its last Resource Plan Xcel predicted that its coal prices would stay relatively flat–increasing about 2% a year for the next several decades. Historical prices back to 1998 can be seen in LWG 1-4, part (b).  Until Xcel’s long term coal contracts began expiring in 2005, the average price paid for coal was under $1/MMBTU (million BTUs).

Once the long term coal contracts expired, Xcel’s coal costs have been mounting significantly-averaging over 10%/year. In 2009, Xcel paid over $1.50/MMBTU. In Xcel’s 2009 Annual 10-k report submitted to the Securities and Exchange Commission, Xcel reported paying $1.52/MMBTU for its coal in Colorado. (See page 21 for Xcel’s Colorado coal costs.) In response to the Discovery Question LWG 5-3 (Docket 09A-772E), Xcel provided a 2009 coal cost of $1.61/MMBTU. The reason for the discrepancy is not clear–but either way this is a 50% increase in price in four years–way beyond the 2% per year price increase that was predicted in the last Xcel Resource Plan.

With a coal price in excess of $1.50/MMBTU in 2009, Xcel paid a price for coal in 2009 that it didn’t expect to pay until 2035. Ooops!

A careful assessment of production statistics and the geology of existing coal mines and an analysis of future constraints on coal production indicate that future price increases for coal are likely. While all fossil fuels are subject to complex forces of supply and demand and their price is volatile, the fact that coal is a solid, makes it difficult to work around the very real geologic constraints that exist on economically accessible coal.

More information on coal supplies is available in the extensive Clean Energy Action report issued in February 2009 entitled, “Coal–Cheap and Abundant–Or Is It?”

Let’s Start Our Diet Today–Not “Tomorrow….” Reductions in CO2 Emissions Needed Now–Not in 5-10 Years

Submitted by Leslie Glustrom on March 6, 2010 – 11:11am

Yesterday, March 5, 2010 was a red letter day for the climate and clean energy campaigns in Colorado.

First the State Senate passed a 30% by 2020 Renewable Portfolio Standard for the Investor Owned Utilities in Colorado and the bill is expected to be signed soon by Governor Ritter. This is a hugely important step forward and there are many that deserve credit for making it happen. Governor Ritter, Xcel, Environment Colorado led the way, with strong support from Colorado’s many climate and clean energy organizations, including of course, Clean Energy Action.

Then, late in the day yesterday news was released of a plan to retire or repower Front Range coal plants. Designed as a plan to reduce emissions of nitrogen oxide and address more stringent Clean Air Act requirements and issues of regional haze, the plan would include the evaluation of retiring, converting or replacing 900 megawatts of Front Range coal plants. This is likely to include an evaluation of the North Denver “Cherokee” coal plant as well as the Boulder Valmont coal plant, but this won’t be fully clear until further details become available.

Yesterday was indeed an historic day as Colorado worked to increase its commitment to developing its abundant wind and solar resources while at the same time agreeing to retire aging coal plants. It was enough to make this seasoned activist cry not once, but twice and everyone who cares about Colordo’s air and economy–to say nothing of the fate of the only planet we know of that supports life–should be cheering. Nonetheless, there is room for a sober assessment of where we are.

First, let’s begin by talking about the workers and families who depend on employment in coal plants. Much care must be taken to ensure that these workers are provided with a just transition as Colorado moves past its reliance on coal for electricity. This author has suggested a 0.05% surcharge on electric bills to fund a transition program for coal plant workers. This would be a very small surcharge–less than a dime a month on a typical residential utility bill–that would provide over $1 million a year to provide support and retraining for Xcel’s coal plant workers during the transition.

Secondly, it is critical that we speed up this process. Colorado is now in the position of a dieter or alcoholic that is committed to starting their diet or sobriety program–tomorrow. While this is a big improvement from where we’ve been, it is critical that we begin carbon dioxide (and mercury and arsenic and particulates and nitrogen oxide) reductions  now–not in the next 5-10 years.

The Unit 3 coal plant in Pueblo will increase our state’s carbon dioxide emissions significantly and Xcel intends to bring that coal plant on line in the next couple of weeks. The effect of the Unit 3 coal plant on Colorado’s carbon dioxide emissions can be seen in a number of places, but it is perhaps most clearly shown by the increasing purple line in the graph on page 11 of the Colorado Governor’s Energy Office REDI report issued in December 2009.

When you’re getting dressed you don’t put your pants and shirt on and then put on your underwear; you’d soon be taken in for a mental evaluation. Similarly, when it comes to carbon dioxide emissions, we should retire old coal plants first–and then decide what to do about the new coal plant in Pueblo. With approximately 14,000 MW of wind and solar projects awaiting development in Colorado, there is good reason to believe that we can both retire the Front Range coal plants, and not start up the 750 MW Unit 3 coal plant in Pueblo.

Colorado has made an excellent start–but let’s start our diet before we indulge in the carbon emissions of the new Unit 3 coal plant in Pueblo.

The last time I checked, we really did know of only one planet that supports life and a single typo in the midst of thousands of pages of IPCC reports does not change the seriousness of the science on climate change.

Accelerating the transition from fossil fuels to a clean energy economy