U.S. coal usage below 40%; Arkansas at 48%

Cheap shale-produced natural gas, a relentless anti-coal campaign and tight federal regulations have helped to cancel or retire dozens of coal-fired plants across the U.S., while putting Arkansas at ground zero in the fierce debate about the nation’s future power needs.

And although coal is still the largest single fuel for electricity generation, its share of monthly power generation in the United States is declining fast — dropping below 40% for the first time in nearly 35 years in November and December. The last time coal's share of total generation fell below 40% for a monthly total was March 1978, according to the U.S. Energy Information Administration.

Overall, the EIA expects electricity generation from coal to decline by about 10% in 2012 as generation from natural gas increases by about 17%.

James Bradbury, senior associate in the climate and energy program at the World Resources Institute, said U.S. electric power system is gradually shifting toward cleaner forms of generation.

“One sign of this transition is the declining use of coal for electric power production,” Bradbury said in a recent report for the Washington, D.C.-based think tank.

Bradbury also explained that current evidence does not support the notion that regulations are the primary driver behind recent coal plant retirement announcements.

“These business decisions are heavily influenced by such market forces as lower natural gas prices, declining growth in electricity demand, rising coal prices, and increased cost-competitiveness of renewable,” Bradbury said in a note to The City Wire.

CLEAN COAL PUSH
Still, coal power supporters put the blame largely on federal Environmental Protection Agency’s energy policy, saying current and past rules have a broad, negative effect on the industry.

Lisa Miller, spokeswoman for the American Coalition for Clean Coal Electricity (ACCCE), did not return phone calls and email queries seeking comment for this story.

However, the ACCCE has widely criticized the EPA’s new rules to limit greenhouse emissions for first-time U.S. power plants. If approved, newly built coal-fired power plants would be limited to about the same emissions as a natural gas-fired plant.

“Unfortunately, the EPA continues to ignore the real impact their rules will have on American families and businesses by driving up energy prices and destroying jobs,” ACCCE President Steve Miller said on March 27, the same day the EPA’s new emission rules were announced.

The ACCCE also says in press materials it will soon be virtually impossible to build new coal-fueled power plants, and the new EPA regulations will prematurely close many more coal-fueled power plants operating today. Federal rules are already responsible for the announced closure of more than 140 electricity generating units in 19 states, the coal trade group says.

BANKRUPTING COAL?
Patrick Michaels, senior fellow in environmental studies at the Cato Institute, says the proposed rulemaking on emissions from coal-fired power plants fulfills President Obama’s campaign promise that his administration would “essentially bankrupt” anyone who had the audacity to hope to build a new generation facility.

“By essentially prohibiting the production of new plants, the administration is again picking winners and losers in our energy economy, something which is best done by the market,” Michaels said in a recent post at the Cato-at-Liberty blog called “EPA and The Necessary Bankrupting of Coal.”

In an interview with The City Wire, Michaels said massive layoffs are already taking place in Kentucky’s Appalachian region due to current energy policy. However, he believes even if Republican presidential candidate Mitt Romney wins the 2012 election, he doesn’t expect a coherent energy policy to emerge.

“Mitt Romney seems bent on recycling George W. Bush’s global warming muddle, a hodgepodge of subsidies and policies that did nothing but waste money,” Michaels said, sharing a quote he wrote for upcoming column at Forbes.com.

Glen Hooks, spokesman for the Arkansas Sierra Club, downplays the criticism of the coal industry supporters. He says the coal industry has been on a long, slow decline, and argues that the new EPA rules are simply “leveling the playing field” and allowing new forms of clean, renewable energy to come to the forefront.

But Hooks gladly credits the Sierra Club’s “Beyond Coal” campaign for playing a major role in the coal’s industry decline, boasting that the decade-long push has cancelled more than 150 proposed plants, and is responsible for 106 older coal-fired facilities on schedule to be mothballed.

“That’s gigantic,” Hooks said, adding that the Sierra Club’s main goal is to move American “beyond coal” by 2030.

COAL OR NATURAL GAS?
Meanwhile, natural gas prices have dropped significantly this winter, leading the generators in some states like as Ohio and Pennsylvania to significantly increase the share of natural gas-fired energy. 

The end result is that nearly every major coal power benchmark in 2012 is down across the board — from production, consumption and demand levels to the size of railcar deliveries and the current market price of the nation’s most popular power source.]

For example, coal consumption by the U.S. electric power sector in 2012 and 2013 is expected to fall below 900 million short tons for the first time since 1995. Total U.S. carloads of coal by rail during the first quarter of 2012 fell to 1.55 million carloads, the lowest level for any quarter since 1994, the EIA projects.

Also, the decline in coal demand for power generation has put downward pressure on coal prices and contributed to the shut-in of higher-cost production. Several U.S. coal companies have recently announced the curtailment of operations, particularly in Appalachia, where production costs at some older mines are high.

The average delivered coal price in 2012 will be about 1% lower than the 2011 average price, the EIA forecasts. It predicts the 2013 average delivered coal price to be $2.30 per MMBtu, or 3.2% lower than this year’s price.

ARKANSAS: COAL COUNTRY
In Arkansas, however, coal-fired plants still supply nearly 48% of state’s electricity demand — relying entirely on coal deliveries via railcar from Wyoming, the EIA’s latest statistics show. Still, coal’s share of the state’s power generation is down 12.7% from a healthy 55% share in 2000.

Arkansas has also found itself in the middle of the national debate on the shutdown and shuttering of coal-fired power plants. In December 2011, the Sierra Club touted a major victory when the environmental group’s Arkansas chapter reached a deal with LS Power to cancel the proposed 665 megawatt Plum Point II coal plant near Osceola.

But the Arkansas coal controversy that has garnered the most national attention has been the industry’s rare victory earlier this year to build the highly-touted John W. Turk “clean coal” power plant in Fulton. In January, Southwest Power Co. (SWEPCO) reached an agreement with the Sierra Club and Audubon Arkansas to drop legal challenges to allow the proposed Turk plant to move forward.

When that Turk plant comes online in late 2012, Arkansas will have a total of five coal-fired plants that produce nearly half of the state’s electricity.

“That is a still dirty, dirty situation,” complained Hooks, who also serves as a senior official for Sierra Club’s nationwide anti-coal campaign.

Still, Hooks is proud that SWEPCO pact includes the permanent retirement of an older 558 megawatt coal plant in Pittsburg, Texas. The deal also promises that the utility giant will purchase 400 megawatts of new wind or solar energy for Arkansas and surrounding states over the next 20 years.

“While were not able to stop the Turk plant from being built, we were able to stop prevent dirty air from Texas to blow into Arkansas,” Hooks said. “And we will be able to bring more wind and renewable energy into Arkansas.”

Meanwhile, coal industry supporters are hoping to gain momentum with the Turk win. Some of ACCCE’s marketing touts the 600 megawatt power plant in Hempstead County as “one of the most environmentally friendly coal-based power plants in the country.”

The ACCCE also points out in its Arkansas “fact sheet” that state residents have the sixth-lowest electric retail prices in the U.S., averaging 7.5 cents per kilowatt hour.

“In The Natural State, coal helps residents see low energy prices,” the group says.