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Facing coal's difficult future

By Nancy S. Grant from November 2013 Issue

Kentucky's Energy and Environment Cabinet Secretary Len Peters spoke to a meeting of Kentucky electric cooperative CEOs on August 21 in Lexington. His remarks covered the effects that environmental regulations are having on the state's coal mining industry, on manufacturing, and on electricity rates. He also described possible paths forward for energy policy in Kentucky.

Here are highlights from Peters' speech excerpted by Nancy S. Grant:

Kentucky's coal production peaked in 1990 at about 180 million tons. Since then we've seen a steady downhill slide. In less than 25 years, Kentucky's total coal production has declined by more than half.

Today coal production has stopped altogether in three former mining counties in eastern Kentucky. And Pike County is no longer number one in the state for coal production.

By the end of 2012 the leader was Union County in western Kentucky. Coal production in western Kentucky is stable to good, compared to the rest of the state.

About three years ago most of the states that bought Kentucky coal started switching to natural gas to generate electricity.

New environmental regulations are also affecting coal and its use.

So the outlook for coal is this: coal power plant retirements will continue. What you are going to see is the oldest, most difficult to modify coal power plants retired as new environmental regulations come into effect.

Affordable electricity's role in the economy
Coal is important to all of us in Kentucky. We have about 12,000 people employed in the coal industry and those are very good paying jobs.

But the industry that is the most substantial and most significant in Kentucky is manufacturing, which employs 220,000 people. We are a manufacturing state, and that is an important element of our economy that needs to be protected.

We build the cars that Californians drive, and we build the refrigerators that New Yorkers use. They are consumer states, and that is why they look at global climate change in a completely different way than we look at it here in Kentucky.

Kentucky's manufacturing companies want reliable and affordable kilowatts. That's the most important thing for them, and it is not a pro-coal or anti-coal stance. It is a stance we here in Kentucky have benefited from, with our low electricity rates because of coal.

But the day is gone when coal automatically meant the lowest-cost electricity generation.

Climate science and new rules
Climate science is not an easy thing to talk about, but we have to recognize that climate change is a political issue that we all have to face. We can argue over the science, but it is a political force and a political issue.

But when we talk about climate change and climate science, it doesn't mean that we should necessarily agree with the solutions or plans that have been laid out. We need to look at plans and solutions that are going to be meaningful for us and meaningful for our industries.

From our perspective there are some very disappointing things in President Obama's June 2013 proposals about climate change. And I think they should be disappointing not just to us as Kentuckians, but to all citizens. We don't know a whole lot about the rules right now but his proposals target carbon dioxide emissions from only one sector, from the electricity sector. We don't know what the standards are, or how much input the states will have, or how much flexibility there will be regionally and within each state. And the timetable is short.

The president's proposal is a very, very aggressive schedule for one of the most challenging environmental issues that we have faced in 50 years. I would say this is the most aggressive since the original implementation of the Clean Air Act of 1970.

Our Energy and Environment Cabinet analysis indicates this approach places most of the country's greenhouse gas burden on only a handful of states—with Kentucky assuming the greatest burden. Full implementation of the president's proposal affects only 20 of the 50 states. So it is an unfair implementation scheme.

Higher electricity prices
What we're going to see is an increase in electricity prices. Our competitive advantage here in Kentucky due to low-cost power is going to be challenged.

So how do we make that transition from the very, very good fortune we have had, and find a way to continue to support the manufacturing industry as we go forward?

We are trying to convince the Environmental Protection Agency that they have to consider the variability among the states in the interest of the whole nation. If we want to be a manufacturing nation, we really have to move forward.

We have to figure out, if we are going to continue to burn coal, how can we improve the efficiency of coal-fired generation? We have to figure out how we are going to do that. That is the reason we're doing a boiler efficiency study on the combustion side, as we also look on the post-combustion side for answers.

We also have to continue to support carbon capture and storage research and development. I'm not very optimistic that it will be a meaningful technology, but that doesn't mean we don't do the research and development. We might find a breakthrough that's really going to change that.

I didn't come here today to give you a good story. This is a big challenge, but I hope these challenges bring us opportunity. And that is going to depend on how we respond as a state, how we respond as individual companies, and as citizens, to this rather dramatic shock wave that's coming toward us.




KEYWORD EXCLUSIVE: KENTUCKY'S ENERGY LANDSCAPE

To read Secretary Peters' complete speech describing the connections between proposed new environmental rules and your electric bill, go to Kentucky's Energy Landscape.