Here's a pop quiz about the Environmental Protection Agency's proposed regulations for newly built fossil-fuel power plants, and how the rules might affect the business of burning coal. The 464-page proposal is one of the most significant regulations ever offered to address global warming pollution, and it's at the center of what President Obama calls his climate action plan—and what opponents call his "war on coal."
This is a one-question, multiple-choice quiz, and it's open book, in the sense that you can search for clues in the newly proposed rule, published in the Federal Register on Jan. 8 and available online. The rule would be the first ever to use the Clean Air Act to regulate carbon dioxide emissions from a large stationary source of pollution.
The proposal's publication, after months of delay, kicks off a 60-day period for public comment, including a daylong hearing in Washington on Jan. 28. The EPA might make important changes to the proposal based on the comments; an earlier draft drew so many suggestions that the Obama administration significantly rewrote it. If you are planning to comment this time around, perhaps taking the quiz below will help you organize your thoughts on a central question: What's it all mean for coal—will the rule kill coal as a power plant fuel, or will it save it?
By way of background, the latest proposal announced in September, would effectively require that new coal-fired power plants install equipment to partially capture their emissions of carbon dioxide, the principal greenhouse gas that is warming the planet. Since coal plants account for 40 percent of energy-related emissions, they must be strictly controlled if the United States is to meet its climate change goals. The proposal also would regulate emissions at power plants that burn natural gas, but gas is cleaner-burning than coal, so those plants won't need fancy new equipment. Later, the EPA will propose separate regulations for existing power plants.
Industry groups and their allies in Congress say that carbon sequestration and storage, or CCS, which pipes excess carbon dioxide off to underground storage sites, is too unproven and too costly to be a realistic solution. The rule, they say, will ultimately banish coal forever as a fuel for power plants, with older coal-fired plants being replaced by low-carbon alternatives as time goes by. The Obama administration counters that CCS is on the verge of commercial viability, and that these rules will eventually pave the road to coal's survival as a viable fuel by making it almost as clean to burn as gas. The whole issue is sure to end up in court, but so far, the courts have mostly supported EPA's powers to control greenhouse gas emissions.
Now for the quiz:
How many new coal-fired power plants will actually be built after the new rules are finalized?
(a) None. Nobody's building coal-fired plants anyway, because alternatives, especially natural gas, are cheaper these days. In short: The rule shuts the door forever.
(b) One or two, but only if the operators can sneak them in before the regulations take effect. They could be the last ever built without CCS.
(c) A handful of pilot demonstration plants equipped with costly CCS, most of them subsidized heavily by the government, because that's the only way that CCS will ever be affordable
(d) More than 90, all of them capturing CO2, and selling the gas to the oil drillers for injection underground. CCS, suddenly making money, will become the new black.
Here at the Carbon Copy blog, we've been chewing on our erasers and still can't make up our minds. The answer depends on many variables, including the future price of natural gas, the generosity of future subsidies, how much more the EPA finetunes its rule, and how much faith we put in the spread of new technology.
Despite conventional wisdom and the dire warnings from the coal industry, the best answer isn't likely to be (a).
One way or another, someone is likely to end up building a new power plant that burns coal. The question is how many, and whether CCS eventually becomes commonplace.
True, in its regulatory impact analysis, a companion document to the new rule, the EPA wrote that "even in the absence of this action, new fossil-fuel fired capacity constructed through 2022 and the years following will most likely be natural gas." With gas so cheap, who needs coal?
But with the words "most likely," the EPA was hedging its bet.
Based on an examination of actual utility plans, the EPA said in the proposed rule, "a small number of new coal-fired power plants may be built in the near future." Under the rule, the agency expects any such plant to incorporate CCS.
While "this is contrary to the economic modeling predictions" run by EPA and the Energy Information Administration, or EIA, the models don't always reflect factors like utilities' desire to diversify fuel sources, or their reliance in coal country on the closest fuel at hand.
So the bottom line does not quite indicate "zero" as the correct answer: "Few, if any," as the agency put it, may be closer to the truth.
So far, the documents seem to suggest marking (b) or (c)—or perhaps both.
If it's (b), then new coal plants that are already being built and aren't covered by the proposed rule will be the only ones constructed; if (c), some number of new plants using CCS will follow along.
Recent forecasts by the Energy Information Agency, cited by EPA in its rule, suggested that both were possibilities.
But recently, it's has been getting less likely that (b) will pan out, as there were never more than a few new plants ready to leap across the line before CCS is required. And their number has been shrinking.
EPA's proposal specified that the Wolverine project in Rogers City, Mich. might be treated as a pre-existing source of pollution, and not be covered by the new rule. But on Dec. 17, the plant operator in Michigan said it was pulling the plug on Wolverine.
Wolverine, the EPA's proposal says, had appeared to be "the only fossil-fuel fired boiler" under development that the agency actually expected to be under construction in time to escape the new-source rules. There may be one or two others, but they're iffy.
So, how about answer (c)—that a handful of new plants will start burning coal, but that all of them will be equipped with the CCS technology favored by the proposed rule?
The Southern Company's Kemper County plant in Mississippi is the poster child for CCS advocates who say a number of such projects could be brought on stream. It is expected to enter commercial operation this year. But it cost billions of dollars to build and needed big government subsidies.
How many other coal plants with CCS might follow? That's anybody's guess. But it's not impossible to imagine enough coming that (c) would be the correct answer.
EPA argues that the main thing holding back CCS is precisely the lack of regulations. Once they take hold, it claims, so will CCS.
As evidence, it cites the experience of AEP, which in 2009 began a pilot scale demonstration of CCS at its Mountaineer Plant in West Virginia. With the assistance of DOE, it had planned to expand this to commercial scale. But it put the plan on hold, "citing the uncertain status of U.S. climate policy." The state public utility regulators refused to let the company pass on the costs of the project to ratepayers unless the expensive technology was required by law. As EPA sees it, this regulation would do the trick.
If it were purely a matter of the cost of generating power, it would be hard to see how coal with carbon-capture could ever beat out natural gas. Unless gas prices go way up and CCS costs drop significantly, there's no real competition, EPA's tables show.
But as the EPA notes, there's no certainty that low gas prices will last for decades. For that reason alone, it said, some utility companies are going to be willing to pay the price for readily available coal—even if that price includes costly CCS.
And the agency cites several reasons for believing in lower CCS costs.
For one thing, the EPA is not calling for all the carbon dioxide from a coal plant to be captured. Requiring only partial capture and sequestration significantly reduces the cost.
Furthermore, the agency says, as the industry gains experience from a few pilot plants that are nearing completion here and abroad, future CCS installations will become cheaper than the first ones. This has generally been the case with other forms of pollution control, it argues. Federal R&D support will help lower costs further, it predicts.
"The need for subsidies to support emerging energy systems and new control technologies is not unusual," it adds. "Each of the major types of energy used to generate electricity has been or is currently being supported by some type of government subsidy such as tax benefits, loan guarantees, low-cost leases, or direct expenditures for some aspect of development and utilization, ranging from exploration to control installation."
If the combination of rising natural gas prices, falling CCS costs, forceful regulations, and significant subsidies plays out, there might be a surprising number of new coal plants built even with this new rule in place.
But 90 of them? Where on earth did answer (d) come from?
It is an exceptionally bullish outlook, described briefly in the text and a footnote of the rule, for the use of captured CO2 from power plants for enhanced oil recovery, or EOR.
Enhanced recovery is a rapidly growing approach to getting oil out of the ground by forcing carbon dioxide in. Already, EOR accounts for 6 percent of the nation's petroleum production, and most of the handful of carbon-capture projects on the drawing board so far involve piping the CO2 to the oil patch for this use.
EPA and DOE both believe that this sector of the fossil fuel industry is poised for rapid growth, and that selling excess carbon dioxide for this use could cover much of the extra cost of carbon capture. And if new technology pans out, the EPA reckons, the twin horses of carbon capture and enhanced recovery could race ahead in tandem.
In the proposed rule, EPA says: "A recent study by DOE found that the market for captured CO2 emissions from power plants created by economically feasible CO2-EOR projects would be sufficient to permanently store the CO2 emissions from 93 large (1,000 MW) coal-fired power plants operated for 30 years."
The study was prepared in 2011 by contractors for DOE's National Energy Technology Laboratory. It found that enormous amounts of additional oil could be produced using next-generation EOR techniques if there was plenty of carbon dioxide available from CCS plants.
The results, the report stated, were "large and impressive."
With oil at $85 per barrel, enhanced oil recovery could make available 67 billion additional barrels of economically recoverable oil reserves, enough to produce nearly 4 million barrels a day of oil for 50 years. The oil companies would need to buy 18 billion tons of the gas from man-made sources. And that much demand could soak up all the emissions of 93 one-megawatt coal plants for 30 years.
This is not a sure thing. Next-generation technology for enhanced oil recovery, like carbon-capture technology itself, is not yet proven. But if you believe that a lot of technical progress is just around the corner, you might not rule out marking (d) on this quiz.
And if you do, that implies two big changes in the nation's energy future: lots more coal being burned, and lots more oil being produced. And all the carbon dioxide that resulted from those fossil fuels would probably not be captured and stowed in the ground.