More on the War on Coal

Back in June, the Supreme Court quietly took another step in their ongoing “war on coal”.

Background

The EPA’s Mercury and Air Toxics Standards rule (MATS) extends that agency’s restrictions on the amount of mercury, assorted other metals like cadmium, nitrous- and sulfur-oxides, and fine particulates that electric generating plants can emit. The rule has been tied up in the federal courts, not because the EPA lacks authority to issue such a rule generally, but over whether the EPA followed the proper procedural steps in this particular case. Last year, the Supreme Court ruled that the EPA had done certain things out of sequence and remanded the matter to the D.C. Circuit Court. That Court in turn remanded the rule to the EPA but did not vacate it.

The EPA corrected its analysis and reissued the rule. Under the latest version, power plants are given between four and six years to come into compliance. Twenty states, led by Michigan, requested that the D.C. Circuit court issue a stay on the rule – in effect, stop the four-year timer – until all appeals of the rule itself were finished. The D.C. Circuit court declined to do so. The states appealed that decision to the Supreme Court. This past June, the Court declined to hear that appeal. The countdown for MATS compliance is running. Generating companies are going to have to make tough decisions about how to spend – or not spend – their money. Should they add the necessary gear to their coal-fired plants to clean up the exhaust? Should they convert to natural gas?

Why Michigan?

Michigan is the lead plaintiff in the MATS lawsuit for good reason. The MATS rule hits hardest at coal-fired power plants – almost exclusively so. Most of Michigan obtains electricity through the market operated by the Midcontinent Independent System Operator (MISO). The generators that sell power through the MISO market are heavily dependent on coal. For various reasons, those generators are retiring coal-fired plants at a brisk rate. That retirement rate is, according to various studies (PDF), much faster than the region has ever been able to add new capacity in the past. MISO anticipates that the reserve margin (generating capacity held in reserve for emergencies) will drop below the level required to ensure reliable grid operation as early as this year.

Currently, the conventional wisdom is that coal-fired generation will simply be replaced by natural gas. The availability of additional natural gas in Michigan is limited by, among other things, the capacity of the pipeline network that delivers gas to that state. Despite a general national glut of natural gas with resulting low prices, in recent years Michigan has experienced regional natural gas shortages and price spikes. The ability for Michigan utilities to purchase electricity from farther afield is limited by the existing capacity of the MISO transmission network.

This all leaves Michigan in a tough place. The cost to clean up the coal-fired plants – adding scrubbers for mercury, filters to capture the particulates, etc – is larger than the plant owners are willing to pay. Building new interstate pipelines to support reliable supplies of natural gas takes a long time (if possible at all; consider Kinder Morgan’s experience in New England). New or expanded transmission lines are always controversial. It all adds up to a short-term version of the question that I often ask more broadly for the longer term: how are they going to keep the lights on?

But the MATS rule might be overturned…

As a matter of personal speculation, I think the Supreme Court sent exactly the opposite message in their decision. I think they’re sending the same message that was sent in the Cross State Air Pollution Rule decision: the Clean Air Act and Clean Water Act pass constitutional muster; those acts require that coal-fired power plants be cleaned up; therefore there must be some rules that force the clean-up and pass constitutional muster; CSAPR was such a rule, and so is MATS. Shorter version: we (the Court) are going to approve MATS, so y’all had better start planning how you’re going to conform.

One important aspect of the MATS situation is to demonstrate the difficulty of making policy about electricity supplies at the national level. CSAPR was the first large example of this: while eastern states are screaming about it, the rule was a non-event for states from the Great Plains west. MATS will be similar, in the long run. California is busily replacing coal and nukes with renewables. Pennsylvania will get every last gasp of natural gas out of the Marcellus Shale. Georgia and South Carolina are exploiting anticipated growth to finance new nukes. And poor Michigan is stuck, without inexpensive renewables, without local natural gas, without growth, trying to figure out who will bail them out.