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Fossil Fuel Politics: How the New Congress Might Change the Mix

How the New Congress Might Change the Mix
Fortnightly Magazine - February 15 2003

are not limited to tax expenditures. The Clean Air Act Amendments of 1990 (CAAA90) have greatly affected fuel choices for electric generation. CAAA90 added to the advantages of natural gas as the fuel for new generation because, compared to coal-fired generators, gas-fired generators emit SO 2 and NO X at far lower levels. 14 CAAA90 also provided an impetus for low-sulfur coal, because many coal-fired generators found it more economical to comply by fuel-switching instead of installing emissions control technology.

Between 1990 and 1995, 52 percent of the generating units mandated to lower sulfur dioxide emissions under Phase I of the CAAA90 switched to low-sulfur coal. Not coincidentally, during the overlapping period between 1986 and 1997, Western coal mine productivity (where one can find the highest concentrations of low-sulfur coal deposits) rose by 89.6 percent. 16 Low-sulfur coal production is expected to continue increasing by 2.5 percent annually for the next 20 years. 17

Electric restructuring initiatives (e.g., FERC Order No. 888) , while fuel-neutral, also affect fuel choices for new electric generation. Such initiatives have removed significant barriers to market entry and have increased reliance on competitive markets for cost recovery. These market conditions have favored the comparatively low capital cost and short lead time for installation offered by natural gas turbines.

  1. Powerplant and Industrial Fuel Use Act of 1978, Pub. L. No. 95-620, 92 Stat. 3289 (codified as amended at 42 U.S.C. § 8301-8484 and in scattered sections of 15, 19, 42, and 49 U.S.C.).
  2. 42 U.S.C. § 8302(6) (2001).
  3. Act of May 21, 1987, Pub. L. No. 100-42, 101 Stat. 310.
  4. Office of Energy Markets and End Use, Energy Information Administration, Department of Energy, , No. DOE/EIA-0206(00) at 79 (2002).
  5. Id.
  6. Office of Integrated Analysis and Forecasting, Energy Information Administration, Department of Energy, Federal Financial Interventions and Subsidies in Energy Markets 1999: Primary Energy, No. SR/OIAF/99-03 at 5 (1999) [hereinafter ].
  7. Id. at 13.
  8. Specifically, the law allows integrated oil companies to expense 70 percent of their intangible drilling costs for successful domestic wells, while amortizing the remaining 30 percent over the next 5 years. Independent oil producers can expense 100 percent of their intangible drilling costs for all domestic wells. at 64.
  9. Most of the Section 29 credits have been paid to coalbed methane producers. In 1992, 78 percent of all gas wells drilled for exploitation of gas were drilled in coal seams, tight sands, and shale oil. at 20.
  10. The credit is projected to amount to approximately $20 million to $30 million annually to qualified renewable energy facilities. at 75.
  11. at 42.
  12. at 11.
  13. at 11.
  14. Energy Information Administration, Department of Energy, Annual Energy Outlook 2002, No. DOE/EIA-0383 (2001) [hereinafter ].
  15. Id. at 12 (omitting footnote).
  16. Richard Bonskowski, Energy Information Administration, at 11-12 (1999).
  17. at 92.

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