The skin continues to come off the cat. President Obama’s wish of a cap-and-trade plan to reduce greenhouse gas emissions would have bankrupted the coal industry, but the legislation failed to make it through the Senate. The frustrated President then said that cap and trade was only one way of skinning the cat and that he would look for other avenues to curb greenhouse gas emissions. Unfortunately for ratepayers and the American economy, the President is making good on his promise.
Georgia Power is the latest company seeking approval from the state’s regulators to close 15 power units at four different plants, many of which are coal-fired plants, and is blaming current and future environmental regulations as one of the major reasons why.
The retirements, scheduled for 2015 and 2016, will affect 480 employees and more than two gigawatts of electricity–approximately enough power for 1.5 million homes.
A host of Environmental Protection Agency (EPA) permit requirements have delayed construction of new coal plants, led to fuel switching, or resulted in withdrawn permit applications. Georgia Power’s decertification of most of its units is expected to come before the effective compliance date of the Utility Mercury and Air Toxics Standards, one of the more egregious regulations coming down on the coal industry.
The EPA hopes to finalize new mercury and air toxics standards by March that would force utilities to use maximum achievable control technology (MACT) standards to reduce mercury emissions and other hazardous air pollutants. The EPA estimates that this rule could cost more than $10 billion per year by 2015, but the Electric Reliability Coordinating Council estimates that it could cost as much as $100 billion per year.
The EPA claims that this rule would produce $53 billion to $140 billion in annual benefits, but the mercury reductions would produce at most $6 million in benefits. The EPA exaggerates the environmental benefits by including estimated benefits from reducing particulates (co-benefits) already covered by existing regulations. Those co-benefits account for 99.996 percent of the agency’s estimated benefits. Even the $6 million benefit might be an exaggeration, because the EPA ignores clinical studies that demonstrate the human body’s ability to protect itself against high levels of mercury.
But Utility MACT is just one of the many daggers of costly, ineffective, and duplicative regulations that the coal industry is facing and will face over the next few years. The EPA and other agencies have promulgated a host of new rules that will increase the costs of mining coal, building new plants, and operating existing plants.
Georgia Power did not give a cost estimate on complying with the environmental regulations, but they did cite a sluggish economy and cheap natural gas prices as partial reasons for the announced retirements. A utility company retiring coal-fired power units for economic reasons is completely legitimate. If it makes sense to fuel-switch to generate new capacity that will be cheaper, consumers will be served better in the long run. But those economic reasons should not be skewed by unnecessary regulations that artificially drive up the price of one source over another.
The Obama Administration is using a number of regulatory avenues to reduce coal’s portion of American energy production by creating an environment in which coal production’s decline is inevitable. Congress needs to intervene and reverse the regulatory assault on coal.
Nicolas Loris is a Policy Analyst at The Heritage Foundation . http://www.heritage.org/ Roe Institute for Economic Policy Studies. Loris researches and writes about energy, environment and regulation issues such as the economic impacts of climate change legislation, a free market approach to nuclear energy and the effects of environmental policy on energy prices and the economy.