Environmental Protection Agency Regulations Threaten Coal Industry

April 16, 2013

In his first presidential campaign, President Obama stated that he would bankrupt the coal industry through emissions and greenhouse gas taxes. Proposed regulations from the Environmental Protection Agency (EPA) may move closer to that goal through tougher air quality standards, says the Motley Fool.

  • Tougher air-quality standards would make 66 percent of the nation's coal-fired power plants more expensive to operate than natural-gas fired plants.
  • Advances in hydraulic fracturing and horizontal drilling have led to very low natural gas prices as the resources of America's vast shales are being tapped.
  • The coal industry is struggling to survive as energy producers have already been shutting down coal-fired plants in favor of the natural-gas plants that use the cheaper fuel.

The Energy Information Administration says that over the last year, the net generation of energy by coal producer fell 12 percent while natural gas soared 21 percent. In 2012, Duke Energy retired eight coal power plants representing 730 megawatts of capacity. Another large company, Dominion, took nine plants offline, which eliminated 1.1 gigawatts of capacity, and FirstEnergy decommissioned three plants for 500 megawatts. More than two dozen plants will stop burning coal to produce electricity in 2013 which represents almost three gigawatts of capacity.

  • In 2014, 50 plants are expected to close down, equaling more than 7 gigawatts of production capacity.
  • Since Obama took office in 2008, coal generation has fallen by 25 percent while gas production is up 39 percent.
  • Researchers found that only 9 percent of coal-fired plants are more costly to operate than natural gas plants.

Plants are closing down because the new EPA regulations will raise the costs of operating coal-fired plants to unprofitable levels. Though emissions have dropped to their lowest levels since 1992, any reduction in greenhouse emissions in the United States is likely to be offset by developing countries like China that are installing one new coal plant every day.

  • For investors and coal producers, developing countries might save the coal industry.
  • For the U.S. market, many companies are switching their production capacity to natural gas and exporting what coal they have.
  • While natural gas is cheap now due to overproduction, the price of natural gas is more volatile than that of coal and an increase in global natural gas prices may expose U.S. consumers to higher electricity prices in the long run.

Source: Rich Duprey, "Will Obama Put Coal out of Business?" Motley Fool, April 10, 2013.

 

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