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Good News for Coal

Resolving the climate debate gives coal a path forward.

Fortnightly Magazine - December 2008

I met Congressman Rick Boucher (D-Va.) in November. He was speaking to attendees at EEI’s Finance Conference in Phoenix, and after his speech many people remarked that they wished other members of Congress were even half as well versed about the utility industry’s issues as Boucher seems to be.

Boucher has his finger on the pulse of the U.S. utility industry for good reason. He represents southwestern Virginia, the heart of the Appalachian Basin coal fields, where the economy lives and dies on the fortunes of the U.S. coal-burning power industry. As such, Boucher has advocated coal’s interests in virtually every major piece of energy legislation arising before the House of Representatives during his 26-year term.

As chairman of the House Energy & Air Quality Subcommittee, Boucher is leading the charge on two pieces of legislation that might prove vital to the future of coal-fired power in this country. First, H.R. 6258, the Carbon Capture and Storage [CCS] Early Deployment Act, would levy a retail electricity surcharge to finance research, development and demonstration of CCS technology (see “Debating the Boucher Bill”) . Second, together with Rep. John Dingell (D-Mich.), outgoing Chairman of the Energy & Commerce Committee, Boucher is advancing cap-and-trade legislation aimed at reducing U.S. greenhouse gas emissions 80 percent below 2005 levels by 2050.

Despite today’s all-consuming economic worries, these pieces of legislation stand a good chance of being enacted in the new Congress. At the EEI conference, Boucher said climate legislation would be among Congress’s top priorities in 2009—an observation that seems especially believable now with environmental advocate Rep. Henry Waxman (D-Calif.) taking the gavel in the House Energy & Commerce Committee. Further, President-elect Barack Obama confirmed recently that climate change would be among the top priorities of his administration—second only to economic recovery.

On the surface, carbon regulation might seem like bad news for the coal-fired power industry—and bad medicine for a suffering economy. But protracted uncertainty about greenhouse-gas regulation has paralyzed many types of infrastructure investments—more so, in fact, than any politically and economically viable legislation likely would. Ironically, by clearing the logjam of regulatory uncertainty, enacting climate legislation now will get coal moving forward sooner.

“Carbon constraints are coming very quickly,” Boucher said. “We’ve designed a bill that can be economically digestible and will not dislocate any sector.”

Deseret Denied

To the degree coal suppliers and coal-based generators hoped climate concerns would simply go away, events during the past two years have dashed those hopes.

For example, in April 2007, the U.S. Supreme Court ruled in Massachusetts v. Environmental Protection Agency that carbon dioxide is a pollutant under the Clean Air Act, opening the door to federal regulation under existing law. In subsequent administrative decisions, EPA declined to issue such regulations, in some cases denying it has the authority to do so. But then, in mid-November 2008, EPA’s Environmental Appeals Board rejected arguments against that authority.

In a case involving an

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