EPA Proposal on Carbon Emissions Sparks Controversy, Sends Coal Stocks Lower
Coal stocks are slipping in Friday trading following a news release from the U.S. Environmental Protection Agency proposing Clean Air Act standards to reduce carbon pollution from new power plants, the source of nearly 50 percent of the electricity produced in the country. While generating the energy, coal-fired plants cumulatively account for about one-third of all domestic greenhouse gas emissions, according to the EPA.
The technology, known as carbon capture and storage (CCS), exists, but the coal industry says that it is too expensive to incorporate, thus not a single commercial coal-fired power plant in the U.S. uses it to date. The coal industry and pundits argue that the new regulations will hinder construction of new coal-fired power plants. CCS being unproven on a commercial scale at this point is surely an arrow that opponents of the legislation will fire, arguing that an unproven technology cannot become mandated. Currently, there are two plants being built in North America with the new, more expensive (but greener) technology and three more planned.
“Climate change is one of the most significant public health challenges of our time. By taking commonsense action to limit carbon pollution from new power plants, we can slow the effects of climate change and fulfill our obligation to ensure a safe and healthy environment for our children,” newly-appointed EPA Administrator Gina McCarthy said in a statement today. McCarthy assumed the top EPA position in July.
Under the proposal, which is the first attempt to revise the standards under President Barack Obama’s Climate Action Plan unveiled in June, new coal-fired turbines would have to meet a limit of 1,100 pound of carbon dioxide per megawatt-hour. The maximum amount could be averaged over multiple years if the operator chooses that option. The logic behind the “averaging” seems to be to provide time to incorporate new emissions technologies over seven years (i.e. run a little high now, but lower later).
Today’s plants average about 1,800 pounds of CO2 per megawatt-hour.
New natural gas-fired plants couldn’t exceed a limit of 1,000 pounds of carbon dioxide per megawatt-hour. Smaller, less efficient natural-gas turbines couldn’t exceed 1,100 pounds of CO2 per megawatt-hour.
In 2012, the EPA presented a proposal that didn’t separate standards for coal-fired plants and natural gas-fired plants, which have an easier time meeting lower emission standards. The EPA says that it factored-in more than two million public comments on the proposal to draft the new one.
Public comments are being opened-up again following the latest proposal.
Opponents view the proposed standards as a war on coal. Democratic West Virginia Senator Joe Manchin III sees it as job killing. “Today’s announcement of the EPA’s new source performance standard is direct evidence that this Administration is trying to hold the coal industry to impossible standards,” he said in a statement today. “Forcing coal to meet the same emissions standards as gas when experts know that the required technology is not operational on a commercial scale makes absolutely no sense and will have devastating impacts to the coal industry and our economy,” Senator Manchin added. West Virgina is a large coal producer.
Meanwhile, Kentucky Republican and Senate Minority Leader Mitch McConnell vows to fight passage of the new regulations, standing behind his Saving Coal Jobs Act that he wants to see passed, but has faced opposition, notably from Majority Leader Harry Reid (D-Nevada).
The battle has impacted coal stocks heading into the weekend. Arch Coal, Inc. (ACI) is down 4.2 percent at $4.78. James River Coal Company (JRCC) is lower by 3.76 percent at $2.05. Alpha Natural Resources Inc. (ANR) has dropped 5.2 percent to $6.29. Peabody Energy Corp. (BTU) has given back 3.4 percent to $18.10. All four of these coal companies have seen substantial depreciation in share value since the start of the year (ACI, -32%; JRCC, -35%; ARN, -35%; BTU, -31%).
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