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The Untold Story Behind the Clean Power Plan

Energy

The media missed the real story on the Obama Clean Power Plan (CPP). Most outlets, like the New York Times, hail it as a ground-breaking major new initiative, which “could lead to the closing of hundreds of polluting coal-fired power plants, freeze future construction of such plants and lead to an explosion in production of wind and solar energy,” while Republicans blasted it as a huge example of Presidential hubris—precisely because it would accomplish those goals.

Political insiders like Politico and Slate claim it isn’t such a big deal. And at first blush the numbers seem to support the skeptics.

The new rule will require reductions in carbon pollution from the power sector by 770 million tons—32 percent against a 2005 baseline. But by the end of 2014 utilities had already cleaned up 350 million tons, and emissions were cut by another 15 percent in the first four months of 2015. As of last week power companies had also announced the future shut-down of additional plants which should lead to another 120 million tons—for a pre-CPP rule total of more than 470 out of the 770 million. So most of the cuts required have already taken place or been announced. Even Kentucky, the state whose Senior Sen. Mitch McConnell, seems willing to restart the Civil War over the U.S. Environmental Protection Agency (EPA) regulations, was already retiring or had retired 14 coal boilers—and these retirements will provide most of the emission cuts required under the CPP. What’s the big deal?

It’s true that the announcement of the final version of the CPP is more in the nature of a mopping up operation than the initial invasion of Normandy. But armies engage in mopping up operations only after they secure victory, and the CPP did not spring like Venus from the brow of President Obama last week—there’s a long history here. The CPP is the keystone of one of the most dramatic and fundamental economic restructurings in history.

To understand what’s happened, look back to the summer of 2008. Coal was generating more than half of U.S. electricity, Peabody stock was headed towards $84.05/share, up two-fold since its 2001 IPO. Export coal from Australia was selling for close to $200/ton on the back of Chinese demand. The U.S. utilities had proposed to add 150 new coal fired power plants to the 500 coal boilers the country already relied upon.

President George Bush had declared “clean coal” the key to American “energy independence” and had designated the 150 new coal plants as the key ingredient in the nation’s energy strategy.

Now look. As the New York Timesheadlined this week, "King Coal, Long Besieged, Is Deposed by the Market." In April, coal generated only 30 percent of U.S. electricity (less than gas). By August two of the nation’s biggest coal companies, Alpha and Murray had declared bankruptcy. Peabody stock closed at $1.10, and rumors of bankruptcy circulated widely. Indeed for the past three years one U.S. coal company announced for bankruptcy every month.

Asian coal prices had fallen to $62.86, and one sixth of Australia’s coal fields were in the red, with the Isaac Plains mine fire-selling for $1 after being valued at $624 million only three years ago. In the U.S., not only had 90 percent of those 150 new coal plants being proposed in 2008 been cancelled, but 200 of the 500 legacy plants in operating in 2008 had either closed down or had their shuttering dates announced. Brand new German coal generation facilities were being sold for one hundred Euros.

So in seven years the fuel that launched the industrial revolution went from the height of its magnificence to a tottering finale. How did it happen, and what is the role of the Clean Power Plant rule in the saga?

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Coal’s customers dug its grave and sealed its fate in 1990. Faced with revisions to the Clean Air Act designed to clean up acid rain, coal dependent electric utilities faced a choice. They could agree to modernize their aging coal burners by installing scrubbers and other pollution control equipment, thus removing not only the sulfur which caused acid rain but also a variety of other toxic pollutants like mercury and particulates. Or they could cling to the clean up exemption they had crafted for coal plants in the last revision of the Clean Air Act in 1977, and do the bare minimum clean up required to reduce acidification problems by shifting from local, but higher sulfur Appalachian coal to remote, but lower sulfur Wyoming coal stocks.

West Virginia Sen. Robert Byrd fought desperately to require scrubbers, battling to save the economic future of the higher sulfur Northern Appalachian coal fields, joined by his allies in the labor movement. Environmentalists divided; the Sierra Club supported Byrd’s plan, which would have significantly improved air quality, but the Environmental Defense Fund and Natural Resource Defense Council sided with Senate Majority Leader George Mitchell who wanted to compromise with the utilities and allow them to get by with fuel switching. Mitchell won on the Senate floor by one vote. Utilities switched from Appalachian to Wyoming Coal, sulfur emissions were significantly reduced at what turned out to be a bargain cost.

But America’s coal fleet, once again, avoided modernization.

As the fleet aged, and concerns over both pollution and climate grew, pressures mounted for clean up. George W. Bush, when he ran for President in 2000, promised to clean up pollution from these “grandfathered” coal power plants, including carbon dioxide. Once in office, his EPA Administration, Christy Todd Whitman prepared to fulfill the pledge. But in the first salvo of Big Carbon’s climate stonewall, the right wing of the Republican Party made it clear to Bush that action on climate pollution meant a serious renomination battle for a second term. Bush caved, allowed Vice President Cheney to put new coal plants at the center of his energy strategy, as coal and its customers doubled down on the past.

But if coal would not find the future, the future would find coal. Citizen resistance first flared up against the air pollution impacts of proposed new coal plants, and then mercury pollution became a hot button issue with fishing groups. Alliances were forged with beleaguered but deep-rooted movements in the coal fields against mountaintop removal mining.

A new president, Barack Obama, took on the climate challenge. Thwarted by coal and oil interests in their efforts to move national climate legislation, environmentalists did persuade a majority of the states to carve out guaranteed markets for wind and solar. As renewables scaled, their costs began to plummet. And beginning in 2005 new supplies of tight natural gas from shale fields brought prices down to the point where almost every state had some combination of wind, solar and gas which was cheaper than the proposed new coal plants. The Sierra Club aided by support from coal’s natural gas competitors, scaled up its Beyond Coal campaign and began to knock of proposed new power plants with stunning speed.

As Obama’s first EPA Administrator, Lisa Jackson, took on George Bush’s unfulfilled promise to clean up coal plants, beginning with mercury, particulates and sulfur, markets concluded that new coal made no sense. Only a dozen of the 150 modern coal burners that were to have been the black rock’s future were built; all turned out to be, in one way or another, white elephants—bankrupting their developers, triggering crippling rate increases, or being shuttered immediately on completion.

The window to modernize coal power, it turned out, had closed. The one vote lobbying victory of 1990 over the Byrd Amendment had been an unnoticed death knell for coal. Producers were left utterly dependent selling to the 500 legacy boilers, half more than 50 years old, most lacking modern pollution controls, all facing EPA’s new health requirements. And behind everything loomed Barack Obama’s determination to fulfill “W”s campaign promise—to clean up all the pollution from power plants, including carbon.

Bloomberg Philanthropies, impressed by the Sierra Club’s Beyond Coal success at blocking the new generation of coal plants, and appalled by the death and health costs of the outmoded legacy fleet, stepped in with a $50 million contribution to enable the Sierra Club and its allies to ensure the retirement of the first one-third of coal generators; and an additional $30 million to secure the retirement of a full half the U.S. coal fleet by 2017.

As utilities and their regulators looked at the costs of modernizing 50 year old boilers, the likelihood that President Obama would implement a clean up mandate for carbon pollution as well, and the increasingly cheap option of using wind, solar or natural gas, the option of modernizing no longer seemed appealing. In New Mexico, for example, PNM, the local utility, is seeking to spend hundreds of millions of dollars to install pollution control equipment on the San Juan Power Plant even though solar power is available at a much lower cost, a decision a hearing examiner determined it "is not fair, just and reasonable and in the public interest." The primary cities consuming the power oppose retrofitting the San Juan Plant because it will require huge increases in consumer rates.

Beyond Coal began racking up retirements—more than 200 in just four years. But the knowledge that the Clean Power Plant rule was coming framed and influenced many of these 200 decisions—just as the knowledge that communities would not tolerate being poisoned, that ratepayers would not accept being ripped-off and that wind and solar were just getting cheaper and cheaper informed these decisions, and the fact that so many power plants had already closed for health reasons made it easier for the president to be so ambitious.

That is the essence of the future—it changes everything. You can’t pick on one moment and one marker, and call it “the cause.” Once the coal industry and its customers decided to maximize their short term profits, they had, unknowingly, sealed their long term fate.

So, looking back, am I glad that George Mitchell beat Robert Byrd in 1990 by one vote that the Sierra Club (I was then leading) lost?

Not really. Because the defeat of the Byrd amendment changed a lot of the American political landscape. Without it, Al Gore would, almost certainly, have won the election of 2000—and other pathways to a better future would have opened.

But there is a lesson in that defeat, and this summer’s collapse of King Coal.

The future happens. We are better off if we embrace it.

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