Gas industry pains over cost of coal

Gas industry pains over cost of coal

Regulatory pressure to address coal emissions not only douses electric utilities’ enthusiasm for new coal plants, it also has utilities — and their customers — examining whether the cost of scrubbing emissions from its current coal fleet is worth the cost.

Even in Wyoming — the nation’s largest coal-producing state — industrial customers are insisting that their utility more carefully scrutinize the value of adding pollution controls to existing coal-fired power plants compared to spending that money on alternative sources of energy.

In its current rate increase request in Wyoming, Rocky Mountain Power is under scrutiny for having spent hundreds of millions of dollars in pollution controls for its fleet of coal-fired power plants — three of which are in Wyoming. The utility estimates it will spend an additional $1.3 billion over the next 10 years adding pollution controls to its multi-state coal-fleet.

“The cost is approaching the cost of brand new power plants,” said Bob Pomeroy, a Holland & Hart attorney representing Wyoming Industrial Energy Consumers. “At some point, you have to ask the question; Do these investments make sense compared to alternatives?”

In a rare alliance, major natural gas producers in Wyoming and local environmental groups championed a pollution-control provision in a proposed rate case settlement with RMP. If approved, RMP will be required to obtain a certificate of public necessity from the Public Service Commission by conducting a more holistic economic analysis of pollution control upgrades, including “a discussion of alternatives to the proposed environmental project(s), including, but not limited to, alternate emissions control technologies, fuel conversion, plant retirement and replacement or repowering,” according to the agreement.

“Looking to the future with regional haze requirements coming, for NOx (nitrogen oxides) and collective catalytic reduction — which is an expensive upgrade — we want PacifiCorp (Rocky Mountain Power in Wyoming) to have the right analysis about whether it’s worth it to keep pumping money into these old coal plants,” said Shannon Anderson of the Powder River Basin Resource Council, a landowner advocacy group that has challenged air quality permits for coal-fired power plants.

The PRBRC joined Wyoming Industrial Energy Consumers in pushing for the “Environmental Projects” measure in the settlement agreement with RMP.

Wyoming Industrial Energy Consumers includes 22 companies — mostly in natural gas extraction, trona and soda ash production. These are not exactly champions of the current march toward more stringent air quality regulations at the local and federal levels. But the increasing cost of electricity — in this case, from a coal-heavy utility — is a significant expense. (RMP’s fuel mix went from 72 percent coal in 2006 to 58 percent coal in 2010, while natural gas went from 13 percent of RMP’s fuel portfolio in 2006 to 21 percent in 2010.)

In 2010, 73 percent of the megawatt hours RMP sold in Wyoming went to “industrial” customers, according to the utility. Pomeroy estimated that rates for some industrial customers in Wyoming have jumped nearly 50 percent in the past six years. (RMP claims that that estimate is over-stated.)

“Our concern was, we’re only seeing the tip of the iceberg because they (RMP) earmarked another $1.3 billion (for pollution upgrades to coal-fired power plants),” said Pomeroy.

The natural gas industry faces an interesting dynamic in the western portion of Wyoming. Under pressure to curb emissions from oil and gas extraction activities in the Upper Green River Basin (metropolitan-type ozone pollution has become a major concern), EnCana Oil & Gas USA says it wants to “electrify” its proposed new gas field as opposed to relying on traditional, emissions-heavy gas- and diesel-fired engines.

EnCana submitted a request to RMP to supply 20 megawatts of power for its proposed “Normally Pressured Lance” field where it wants to drill 3,500 new gas wells.

A spokesman for EnCana told WyoFile that the company didn’t stipulate a dedicated power generation source for the 20 megawatts. But EnCana’s proposal does raise the question about the wisdom of reducing emissions in one “hot spot” locale by potentially adding emissions elsewhere and on a regional scale.

“There’s nothing to prevent anyone from attempting to calculate the emissions from that power source,” said EnCana spokesman Randy Teeuwen.

Without fully acknowledging its own production-side emission challenges, the larger natural gas industry is aggressively trying to wrest a large portion of the electric utility market from coal by championing natural gas as a cleaner alternative. And the industry has made gains.

Coal fueled 52.8 percent of the nation’s electrical generation in 1997, but slipped to just 45 percent in 2009, according to the U.S. Energy Information Administration. The use of natural gas to generate electricity is trending the other direction; from 21.4 percent of the nation’s electrical generation in 2008 to 23 percent in 2009.

The role of America’s natural gas industry on the energy and environmental fronts has become increasingly complicated. While arguing at the local level (RMP’s rate case in Wyoming) that utilities should conduct a more holistic economic analysis of meeting air quality regulations, it hasn’t exactly applied that same standard to itself in its national campaign.

— Contact Dustin Bleizeffer at 307-577-6069 or [email protected]

 

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