President Obama promised to send electricity prices skyrocketing, and his minions at the EPA are delivering on that promise. Americans for Tax Reform’s Chris Prandoni takes a detailed look at how Obama is using the power of the regulatory state to wipe out the coal industry.
Campaigning in San Francisco, California, in 2008, then-Senator Obama promised to send electricity costs “skyrocketing” by making life difficult for coal power plants. Since assuming office, President Obama has made good on that promise by methodically dismantling America’s coal industry.
Using the Environmental Protection Agency as its primary means of assault, the Obama administration has undermined every phase of the coal production process. This president doesn’t want Americans to mine coal, transport coal, or export coal. And they definitely do not want utilities burning it so you can turn on your lights.
At first blush, it might seem like these policies only affect the small mining towns in Western Kentucky or the South Carolina factory workers that make excavation equipment. But the implications of Obama’s War on Coal are far reaching: 300 of America’s coal plants will close due to EPA policies by 2025. That’s 44,000 megawatts of generating capacity in 33 states gone. Electricity rates will “necessarily skyrocket” and grid stability may be threatened. Most troubling, these dramatic changes to American energy policy are being implemented by lawyers and unelected bureaucrats in federal agencies. Congress has passed no new laws ordering Americans to consume less coal. In fact, the last time Democrats tried to legislate these anti-energy policies they were run out of town.
The Failed Legislative Front
When Obama assumed office in 2009, many feared that legislation designed to increase your electricity bills and gasoline prices was inevitable. Democrats had a huge majority in the House and a filibuster-proof 60 votes in the Senate. The White House, and even the 2008 Republican presidential nominee John McCain had endorsed a cap-and-trade program. Democrats calculated that a McCain-endorsed cap-and-trade style program represented their best chance to inflate the cost of energy; of course, such legislation was sold under different, false pretenses.
After carving out provisions for essential industries, thus gaining their support or silence, Democrats thought they had a bill that could become law. On May 15, 2009, months of negotiating and legislative bribery culminated with the introduction of the American Clean Energy and Security Act by Reps. Ed Markey (D-MA) and Henry Waxman (D-CA). On June 26, 2009, ACES passed the House of Representatives by a vote of 219 to 212.
Passage of ACES put enormous pressure on Senate Majority Leader Harry Reid (D-NV) to get the legislation out of the upper chamber and onto Obama’s desk. But then a funny thing happened, the 111th Congress came and went without the Senate voting on the House-passed ACES. Despite overseeing an astounding Democrat majority, Reid didn’t even have enough votes to bring the bill to the floor.
On November 6, 2010, the American people let Congress know what they thought about Washington D.C. trying to pick their pockets. Of the 19 freshman Democrats who voted for the Waxman-Markey legislation, 12 were sent packing. All in all, a total of 41 Democrats who voted for the bill lost their seat or retired. West Virginia Senate Democratic candidate Joe Manchin even ran a television ad where he literally shot the Waxman-Markey legislation and told viewers “I’ll take dead aim at the Cap and Trade Bill.” Candidate Manchin would go on to win his race as would 63 new House Republicans. The people had spoken; efficient, reliable energy was a voting issue. Politicians that embraced artificial scarcity and expensive electricity bills would be punished.
The Bureaucrats Strike Back
Days after President Obama’s agenda took a self-admitted “shellacking,” he revealed his intent to continue to push restrictive energy policies, saying “cap-and-trade was just one way to skin the cat. It’s not the only way.” Indeed, if Congress was not willing to drive up the cost of energy and unemployment rates, the EPA would. Following the president’s lead, this seemingly innocuous agency has been busy the past five years, amassing unprecedented powers through political maneuvering, increased regulation, and usurpation of congressional powers. And while many businesses have felt the weight of the EPA, none have been squeezed quite like America’s coal industry.
Front One: The War on Mining
In order for coal developers to begin extracting coal out of the ground, they are required to obtain a number of federal and state permits. One requisite authorization is the Clean Water Act’s 404(c) permit, which is officially granted by the Army Corps of Engineers but still requires EPA approval. Without this permit, miners cannot mine, construction workers cannot construct, and businesses cannot create jobs.
Mining is a complicated, expensive industry that requires years of preparation and investment. In the 1990s, Arch Coal identified a massive coal deposit in West Virginia, the Spruce Mine site. Officially beginning the burdensome permitting process, Arch received its first mining permit in 1998. Millions of dollars later, Arch received its 404(c) permit in 2007 and began mining. Then the Obama administration came to town and flexed its muscles by revoking Arch’s 404(c) permit. Never before had the EPA retroactively pulled a permit from a project in operation. In fact, in the past 40 years, it has only used its veto authority 12 times. But these are different times.
Arch immediately challenged the unprecedented move in court and won the support of a federal district court judge that wrote, “[EPA] exceeded its authority under section 404(c) of the Clean Water Act when it attempted to invalidate an existing permit by withdrawing the specification of certain areas as disposal sites.” Unfortunately, an appeals court sided with the EPA and wrote that the Clean Water Act “empowers [the EPA Administrator] to prohibit, restrict or withdraw the specification ‘whenever’ he makes a determination that the statutory ‘unacceptable adverse effect’ will result.”
Arch Coal and a number of other parties have petitioned the Supreme Court to take up this case. The outcome of this court battle is of paramount importance. Allowing the EPA to pull the rug out from any mining project, at any point during the production process, would freeze investment. What reasonable businessman would be willing to spend hundreds of millions of dollars procuring mineral rights, commissioning expensive geological studies, and go through the permitting process just to have the EPA swoop in and kill the project after production has begun?
Even scarier, this seemingly narrow assault on one mining project is not narrow at all. Nearly every construction project requires a 404(c) permit and 60,000 404(c) permits are issued annually.
Front Two: War on Exports
If coal producers can get coal out of the ground without EPA meddling, other Democrat interests are trying their best to ensure that miners cannot sell their product overseas. This is a shame because the U.S. has the largest coal repository in the world. More than one-fourth of the world’s economically recoverable coal reserves are located here in America.
This abundance has historically meant big profits for Americans. In 2011, coal exports contributed an estimated 141,270 jobs to the U.S. economy with more than 107 million tons being sent abroad to Europe and developing countries. Needing to fuel their growing economies, China and India are planning to build hundreds of new coal-fired power plants over the next 50 years. In order to supply this enormous expansion abroad, American companies have applied to build four coal export terminals in the states of Washington and Oregon.
You would think the governors of Washington and Oregon would cheer export terminals that provide jobs, not only onsite, but for coal miners whose livelihood depends on finding a market for coal. But no, in a joint letter to the White House Council on Environment and Quality Chair Nancy Sutley, Govs. Jay Inslee and John Kitzhaber (both Democrats) all but urged the White House to deny the export terminals requisite permits.
“It is hard to conceive that the federal government would ignore the inevitable consequences of coal leasing and coal export,” Kitzhaber and Inslee wrote. “We believe the decisions to continue and expand coal leasing from federal lands and authorize the export of that coal are likely to lead to long- term investments in coal generation in Asia, with air quality and climate impacts in the United States that dwarf those of almost any other action the federal government could take in the foreseeable future.”
Kitzhaber and Inslee are asking for new, never before considered material to be used as an excuse to kill coal export sites. If coal producers are not allowed to export coal, and utilities are not allowed to burn it, then mining it is fruitless, which is exactly what leftists want.
Front Three: War on Burning Coal
In order to really stifle American coal consumption, the EPA has to make sure that the American people cannot use it to power their homes. The genesis of the EPA’s recent power grab stems from a 2007 Supreme Court decision, Massachusetts v EPA. The suit against EPA, brought by several liberal state attorneys general and radical environmental activists including GreenPeace and Friends of the Earth, was intended to classify greenhouse gases emitted from vehicles as pollutants.
That these state attorneys general were so openly working with radicalized interest groups did raise some eyebrows, but nonetheless, the Supreme Court issued a 5-4 decision ordering the EPA to determine whether motor vehicles are covered under Section 202 of the Clean Air Act. Much like pushing over the first domino in a long line, categorizing greenhouse gases as pollutants would catalyze a series of disastrous actions.
On the heels of the Supreme Court decision, the EPA released the infamous “endangerment finding” in December of 2009. Using now thoroughly questionable scientific justification, the EPA declared that carbon dioxide, yes, the stuff you exhale, was a pollutant. Once the EPA ruled that CO2 and other GHGs endangered the public’s health and welfare, carbon was subject to numerous controls under the Clean Air Act. Now compelled to regulate GHGs, the EPA would unleash a torrent of new regulations.
EPA's Lawless Rewrite
Everything from factories to hospitals to restaurants to elementary schools all emit enough CO2 to be considered a “major source” of the gas under the Prevention of Significant Deterioration and Title V permit programs. The EPA is now required by law to regulate nearly everything. If this sounds untenable, it’s because it is. In order to enforce the EPA’s new findings, the EPA said it would need an additional $21 billion per year and hire 320,000 more bureaucrats. Instead, the EPA unilaterally redefined legal statute and directly amended the Clean Air Act by only regulating certain emission sources.
The EPA’s decision to avoid this self-made bureaucratic nightmare is referred to as the “tailoring rule.” The tailoring rule reveals the EPA’s hubris. Congress has the authority to amend laws, not the EPA. Imagine if every federal agency, staffed with political appointees, began tinkering with federal laws?
Simply put, the tailoring rule is indicative of the EPA’s selective enforcement of laws. When a law supports the EPA’s agenda, like regulating greenhouse gases, the agency enforces it to the fullest extent. But when a law, or in this case, a portion of a law, inconveniently undermines or hamstring the agency’s goals, it is immediately discarded. Impelled by radical environmentalist litigation, the EPA’s numerous advances led the agency to control and regulate greenhouse gases in America, authority Congress never intended the EPA to have.
Regulations for New Coal Plants
Now with the supposed authority to regulate carbon, the EPA promptly banned the construction of new coal-fired power plants by requiring them to implement carbon capture and storage technology. The EPA pushed forward with this rule despite the administration’s own interagency task force saying that CCS technologies “are not ready for widespread implementation.” And that is exactly the point. If the EPA is to stop construction of new coal-fired power plants, the agency had to write regulations that “are not ready for widespread implementation.”
The EPA’s new technology mandate is so untenable that there is currently no full-scale coal-fired power plant operating with CCS anywhere in the world. That’s because the capital costs of installing CCS are enormous, at least $1 billion.
While three CCS projects have been proposed in the U.S., only one is under construction. The anomaly that is the Kemper County, Mississippi CCS coal-fired power plant is proceeding due to a confluence of unique circumstances.
Taking some of the sting out of the enormous cost of CCS, the Department of Energy gave the plant a $270 million grant. The plant is also eligible for an additional $133 million in federal tax credits. The economics of the Kemper County CCS plant is predicated on the facility’s ability to sell its carbon emissions credits to a nearby oil production site. The other two CCS projects “under development” in the United States, should they actually be built, would each receive more than $400 million in federal grants and also sell their carbon emission credits to fertilizer producers. The EPA extrapolated on one coal plant, which is only viable because of federal grants and extraordinary geological circumstances, and is requiring all new coal-fired power plants to meet these standards.
The EPA is currently writing more GHG regulations for coal-fired power plants already in operation. It is likely that this regulation, expected later this year, will force even more coal plants to turn off the lights. Speaking about these regulations, Senate Minority Leader Mitch McConnell (R-KY) said, “It’s just the latest administration salvo in its never ending War on Coal. A war against the very people who provide power and energy for our country.”
Stepping up to the plate, McConnell has introduced a parliamentary tactic known as the Congressional Review Act to overturn the EPA’s GHG regulation for new power plants. The best part about the CRA is that Reid cannot block a vote on the floor, as he so often does. McConnell has ensured that the American people will know if their senator is for reliable, affordable electricity, or if they take their orders from the EPA.
Unfortunately, even if McConnell’s resolution is successful, it will require a Republican Senate and control of the White House to begin to roll back the damage done by Obama’s bureaucrats. The plight of the coal industry is symptomatic of the effects of an out-of-control regulatory state: lawyers and unelected bureaucrats by and large run the country. In 2008, when Obama was first running for president, he candidly announced that under his administration “if somebody wants to build a coal plant, they can. It’s just that it will bankrupt them.” Much to the detriment of the American people, President Obama has made good on that promise.