NewEnergyNews: SENATOR BYRD AND THE COSTS OF COAL

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    Anne B. Butterfield of Daily Camera and Huffington Post, is a biweekly contributor to NewEnergyNews

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT)

    November 26, 2013 (Huffington Post via NewEnergyNews)

    Everywhere we turn, environmental news is filled with horrid developments and glimpses of irreversible tipping points.

    Just a handful of examples are breathtaking: Scientists have dared to pinpoint the years at which locations around the world may reach runaway heat, and in the northern hemisphere it's well in sight for our children: 2047. Survivors of Superstorm Sandy are packing up as costs of repair and insurance go out of reach, one threat that climate science has long predicted. Or we could simply talk about the plight of bees and the potential impact on food supplies. Surprising no one who explores the Pacific Ocean, sailor Ivan MacFadyen described long a journey dubbed The Ocean is Broken, in which he saw vast expanses of trash and almost no wildlife save for a whale struggling a with giant tumor on its head, evoking the tons of radioactive water coming daily from Fukushima's lamed nuclear power center. Rampaging fishing methods and ocean acidification are now reported as causing the overpopulation of jellyfish that have jammed the intakes of nuclear plants around the world. Yet the shutting down of nuclear plants is a trifling setback compared with the doom that can result in coming days at Fukushima in the delicate job to extract bent and spent fuel rods from a ruined storage tank, a project dubbed "radioactive pick up sticks."

    With all these horrors to ponder you wouldn't expect to hear that you should also worry about the United States running out of coal. But you would be wrong, says Leslie Glustrom, founder and research director for Clean Energy Action. Her contention is that we've passed the peak in our nation's legendary supply of coal that powers over one-third of our grid capacity. This grim news is faithfully spelled out in three reports, with the complete story told in Warning: Faulty Reporting of US Coal Reserves (pdf). (Disclosure: I serve on CEA's board and have known the author for years.)

    Glustrom's research presents a sea change in how we should understand our energy challenges, or experience grim consequences. It's not only about toxic and heat-trapping emissions anymore; it's also about having enough energy generation to run big cities and regions that now rely on coal. Glustrom worries openly about how commerce will go on in many regions in 2025 if they don't plan their energy futures right.

    2013-11-05-FigureES4_FULL.jpgclick to enlarge

    Scrutinizing data for prices on delivered coal nationwide, Glustrom's new report establishes that coal's price has risen nearly 8 percent annually for eight years, roughly doubling, due mostly to thinner, deeper coal seams plus costlier diesel transport expenses. Higher coal prices in a time of "cheap" natural gas and affordable renewables means coal companies are lamed by low or no profits, as they hold debt levels that dwarf their market value and carry very high interest rates.

    2013-11-05-Table_ES2_FULL.jpgclick to enlarge

    2013-11-05-Figure_ES2_FULL.jpg

    One leading coal company, Patriot, filed for bankruptcy last year; many others are also struggling under bankruptcy watch and not eager to upgrade equipment for the tougher mining ahead. Add to this the bizarre event this fall of a coal lease failing to sell in Wyoming's Powder River Basin, the "Fort Knox" of the nation's coal supply, with some pundits agreeing this portends a tightening of the nation's coal supply, not to mention the array of researchers cited in the report. Indeed, at the mid point of 2013, only 488 millions tons of coal were produced in the U.S.; unless a major catch up happens by year-end, 2013 may be as low in production as 1993.

    Coal may exist in large quantities geologically, but economically, it's getting out of reach, as confirmed by US Geological Survey in studies indicating that less than 20 percent of US coal formations are economically recoverable, as explored in the CEA report. To Glustrom, that number plus others translate to 10 to 20 years more of burning coal in the US. It takes capital, accessible coal with good heat content and favorable market conditions to assure that mining companies will stay in business. She has observed a classic disconnect between camps of professionals in which geologists tend to assume money is "infinite" and financial analysts tend to assume that available coal is "infinite." Both biases are faulty and together they court disaster, and "it is only by combining thoughtful estimates of available coal and available money that our country can come to a realistic estimate of the amount of US coal that can be mined at a profit." This brings us back to her main and rather simple point: "If the companies cannot make a profit by mining coal they won't be mining for long."

    No one is more emphatic than Glustrom herself that she cannot predict the future, but she presents trend lines that are robust and confirmed assertively by the editorial board at West Virginia Gazette:

    Although Clean Energy Action is a "green" nonprofit opposed to fossil fuels, this study contains many hard economic facts. As we've said before, West Virginia's leaders should lower their protests about pollution controls, and instead launch intelligent planning for the profound shift that is occurring in the Mountain State's economy.

    The report "Warning, Faulty Reporting of US Coal Reserves" and its companion reports belong in the hands of energy and climate policy makers, investors, bankers, and rate payer watchdog groups, so that states can plan for, rather than react to, a future with sea change risk factors.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    It bears mentioning that even China is enacting a "peak coal" mentality, with Shanghai declaring that it will completely ban coal burning in 2017 with intent to close down hundreds of coal burning boilers and industrial furnaces, or shifting them to clean energy by 2015. And Citi Research, in "The Unimaginable: Peak Coal in China," took a look at all forms of energy production in China and figured that demand for coal will flatten or peak by 2020 and those "coal exporting countries that have been counting on strong future coal demand could be most at risk." Include US coal producers in that group of exporters.

    Our world is undergoing many sorts of change and upheaval. We in the industrialized world have spent about a century dismissing ocean trash, overfishing, pesticides, nuclear hazard, and oil and coal burning with a shrug of, "Hey it's fine, nature can manage it." Now we're surrounded by impacts of industrial-grade consumption, including depletion of critical resources and tipping points of many kinds. It is not enough to think of only ourselves and plan for strictly our own survival or convenience. The threat to animals everywhere, indeed to whole systems of the living, is the grief-filled backdrop of our times. It's "all hands on deck" at this point of human voyaging, and in our nation's capital, we certainly don't have that. Towns, states and regions need to plan fiercely and follow through. And a fine example is Boulder Colorado's recent victory to keep on track for clean energy by separating from its electric utility that makes 59 percent of its power from coal.

    Clean Energy Action is disseminating "Warning: Faulty Reporting of US Coal Reserves" for free to all manner of relevant professionals who should be concerned about long range trends which now include the supply risks of coal, and is supporting that outreach through a fundraising campaign.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    Author's note: Want to support my work? Please "fan" me at Huffpost Denver, here (http://www.huffingtonpost.com/anne-butterfield). Thanks.

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    Anne's previous NewEnergyNews columns:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns

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    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

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    Your intrepid reporter

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  • Tuesday, June 29, 2010

    SENATOR BYRD AND THE COSTS OF COAL

    New report claims coal costs W.Va. taxpayers money
    Vicki Smith, June 22, 2010 (Bloomberg BusinessWeek)

    THE POINT
    In the last year of his life, Senator Robert C. Byrd (D-WV) taught, not for the first time, the most important lesson of his long and storied public service.

    Senator Byrd’s career demonstrates it is possible to – with integrity – change a publicly held position. In Byrd’s case there was in fact more integrity because he found the courage decades ago to reverse his racist position on segregation, denounce his affiliation with the Ku Klux Klan and become one of the stalwart defenders of civil rights.

    In December 2009, Senator Byrd made an equally profound shift. After fighting his entire life on behalf of West Virginia’s coal industry, he concluded in December 2009 that he and his state must prepare to move on. In Coal Must Embrace the Future, Byrd wrote “Change is no stranger to the coal industry. Think of the huge changes which came with the onset of the Machine Age in the late 1800’s. Mechanization has increased coal production and revenues, but also has eliminated jobs, hurting the economies of coal communities. In 1979, there were 62,500 coal miners in the Mountain State. Today there are about 22,000… [C]hange is undeniably upon the coal industry again…”

    Senator Byrd called for “…an open and honest dialogue about coal’s future in West Virginia…” After assuring his coal industry constituency that no “…effort to do away with the coal industry could ever succeed in Washington because there is no available alternative energy supply that could immediately supplant the use of coal for base load power generation in America…” he went on to warn them that to “…be part of any solution, one must first acknowledge a problem. To deny the mounting science of climate change is to stick our heads in the sand and say “deal me out.” West Virginia would be much smarter to stay at the table.”

    click to enlarge

    Though Senator Byrd did not have The Impact of Coal on the West Virginia State Budget, from Downstream Strategies, to base his remarks on, he certainly could see what was then quite evident and what the report makes abundantly clear. West Virginia’s economically accessible coal supply is dwindling and the costs of being a coal supplier are going up. The report calculates that when all the costs are compared with the benefits, coal costs West Virginia more –$97.5 million more in 2009 – than it benefits the state.

    The benefits are obvious: Direct and indirect jobs in the tens of thousands and tax revenues in the hundreds of millions. The costs are less obvious and often go uncalculated. For instance, the total tax revenues related to the coal industry’s direct jobs in 2009 was ~$125.5 million but the state expenditures in support of those jobs was ~$125.9 million.

    On the whole, it is true that the coal industry still generates a lot of money for West Virginia. But when things like the compromised health and work injuries that come from working in the industry and things like the wear and tear on the state's roads and infrastructure are paid off, the state comes out a loser from hosting its coal industry.

    In this season of graduations, it is worth noting that while so-called smart people continue to sneer that the New Energies can never be big enough to replace the Old and Dirty Energies, Senator Byrd showed that it is never too late to learn. Now that he has gone to his final graduation, perhaps it is time for his beloved state to pay close attention to his last strong advice about coal:

    “The future of coal and indeed of our total energy picture,” Byrd, one of West Virginia’s greatest champions, wrote, “lies in change and innovation. In fact, the future of American industrial power and our economic ability to compete globally depends on our ability to advance energy technology…West Virginians can choose to anticipate change and adapt to it, or resist and be overrun by it. One thing is clear. The time has arrived for the people of the Mountain State to think long and hard about which course they want to choose.”

    Lots of red ink. (click to enlarge)

    THE DETAILS
    The report is based on compiled West Virginia (WV) budget data, estimated tax revenues, and budget expenditures for Fiscal Year 2009 (July 1, 2008 to June 30, 2009).

    WV’s Northern and Central Appalachia coal basins produce ~one-third of U.S. coal. In 2008, the state produced ~164 million tons of coal and employed 22,493 miners, managers, and upper-level staff. Five counties produced 50+% of the state’s coal.

    Production levels fluctuate but WV's peak output was 177.5 million tons in 1997. It fell off 11% through 2007 before 2008’s slight uptick. Underground production has fallen 25% but the generally less expensive surface mining has increased 20%.

    While coal is already costing WV more than it brings in, coming changes are likely to make coal even more costly.

    click to enlarge

    Factors that are likely to make coal less cost-competitive: (1) The depletion of the lowest-cost reserves, (2) implementation of the Clean Air Interstate Rule, (3) climate legislation that prices greenhouse gas emissions (GhGs), (4) tighter restrictions on mercury emissions, (5) regulations of coal ash and other combustion wastes, and (6) pending restrictions on the valley fills that make mountaintop removal mining especially environmentally abhorrent.

    Net impact of the coal industry and employees on West Virginia without consideration of tax expenditures or impacts of indirect coal industry employment: +$193.2 million.

    Complete estimate of coal’s net impact on WV in FY 2009 including tax expenditures and indirect impacts: -$97.5 million.

    Direct revenues from West Virginia’s coal industry: The payment of taxes and fees to the state’s General Revenue Fund and State Road Fund was ~$307.3 million (the coal severance tax, corporate net income tax, business franchise tax, and other taxes). This was ~8% of the General Revenue Fund and less than 1% of the State Road Fund.

    click to enlarge

    State budget direct expenditures for West Virginia’s coal industry: ~$113.7 million for FY 2009, spent entirely because of the coal industry and paid for with general revenue and state road funds. Examples: Units of government within the Department of Commerce and Department of Environmental Protection and expenditures for the repair of the state’s coal haul roads.

    Net benefit to WV from direct jobs and budget expenditures (FY 2009): + ~$193.6 million.

    Direct WV off-budget expenditures for the coal industry (FY 2009): ~$173.8 million, in the form of foregone revenues from the tax exemptions, credits, and reduced or preferential tax rates that reduce the money available for other government programs and services.

    Revenues from direct and indirect jobs (FY 2009): 21,012 West Virginia residents were directly employed by coal. Tax revenues from those jobs were ~$125.5 million. There was also about ~$167.9 million in state revenues from indirect coal industry jobs.

    click to enlarge

    Expenditures from direct and indirect jobs (FY 2009): Supporting the direct jobs cost the state ~$125.9 million. Supporting the indirect jobs cost the state ~$284.8 million.

    The net loss to West Virginia on direct jobs in FY 2009 was $0.4 million. The net loss to the state from indirect jobs in FY 2009 was ~$116.9 million.

    Coal’s legacy costs, 1: When coal mine operators leave mines incompletely reclaimed, the state bears the cost of polluted drainage, drinking water contamination, and health and safety threats. West Virginia had 4,391 abandoned mine lands in 2009. $464 million has been spent on them. $1.5 billion of work is still necessary. The main funding mechanism to reclaim bond forfeiture sites is insufficient and will expire in 2022. If no action is taken to impose the cost of reclaiming these sites on the coal industry, a further substantial burden will fall to the state.

    Coal’s legacy costs, 2: The virtually non-stop caravanning of coal carrying trucks has a devastating impact on the state’s roads and bridges. The cost for dealing with what is done by overweight coal trucks is ~$4.0 billion. If the state spends ~$200 million per year to repair and replace infrastructure and all coal trucks stop now, it would take 20 years to bring the state's roads and bridges back.

    click to enlarge

    Coal’s legacy costs, 3: West Virginia’s “Old Fund” covers workers’ compensation debt accumulated prior to 2005 for unfunded liabilities from coal industry injuries and deaths. It cost the state ~$115.5 million of coal’s revenues in FY 2009.

    When all revenues and expenditures are considered, the coal industry cost West Virginia ~$97.5 million in FY 2009. The numbers are the numbers. Senator Byrd was entirely right. It is time to think about innovation and change.

    Recommended policy changes to insure that coal industry costs are paid from revenues from the coal industry and not by the taxpayer:
    (1) Maintain the workers’ compensation coal tax revenues and create a Permanent Economic Diversification Fund.
    (2) Increase the coal severance tax rate and distribute the monies to coal-producing counties.
    (3) Restructure the thin-seam tax credit.
    (4) Match funding of reclamation and water treatment to present and future needs.
    (5) Increase the per-ton fee on coal haul trucks to match road repair needs.
    (6) Increase fines for exceeding permitted haul weights to match the harm it does to roads.

    Because mining is expected to produce less revenue and cost more, it is vital to be sure the industry provides not only for its yearly costs but for its legacy costs as well. New policies may be needed.

    click to enlarge

    Bottom line: The impacts of coal go far beyond traditional accountings of revenues and expenditures, especially when legacy costs from past and future coal industry activity are considered. It is vital for West Virginia to attend to having funds available for such impacts on the local and state economies, on the environment, and on the health of West Virginia residents.

    And it is time for West Virginians to start thinking about the immense and barely-tapped potential of their state's New Energy assets.

    click to enlarge

    QUOTES
    - From the report on the costs of WV coal: “Coal plays a significant role in West Virginia’s economy, contributing hundreds of millions of dollars in state and local revenue and providing well-paying jobs to tens of thousands of West Virginians. However, the size of the coal economy, while substantial, is not as considerable as previous accounts suggest. Further, such accounts have only presented coal’s benefits; our estimates provide an initial accounting of both benefits and costs. As estimated in this report, the industry itself—including its direct and indirect employees—actually costs West Virginia state taxpayers more than it provides. Such an accounting is important, for projected declines in production, should they prove accurate, will further diminish coal’s contribution to state revenues, while the negative impacts resulting from coal industry activity will result in ongoing costs to the state and its citizens.”

    1 Comments:

    At 9:21 AM, Blogger Beth Wellington said...

    Herman, thanks so much for framing Rory's report with this acknowledgment of Senator Byrd. Here's the piece I wrote:
    http://bethwellington.blogspot.com/2010/06/senator-byrd-did-not-give-coal-free.html
    and another one by Think Progress: http://pr.thinkprogress.org/2010/06/pr20100629/index.html

     

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