Gov. Schweitzer is betting Montana’s future–and just maybe his own–on clean coal. Why is nobody buying it?
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Pulverized coal plants, like the state’s largest coal-fired power plant at Colstrip, spew millions of tons of CO2 into the air each year. Gov. Schweitzer says a new generation of clean coal plants will reduce greenhouse gas emissions. Critics aren’t convinced.
To use one of the governor’s own jabs, “You ought to get out where there’s a light shining once in a while” if you can’t name Brian Schweitzer’s top policy initiative. If you’re familiar with the folksy, fast-talking, sometimes combative, Democratic cowboy outside of Big Sky Country, chances are coal is the reason.
The key to clean coal plants, IGCC or otherwise, is the ability to sequester the excess CO2 underground. The most economical way to do that is to pump it to nearby oil fields where it can be used to squeeze the last remaining drops of crude out of nearly depleted reservoirs. When the gas is pumped underground it becomes pressurized and eventually turns to liquid that seeps into the rock, forcing oil out and up to the surface.
Other methods of sequestration include pumping the gas deep into the earth, into saline reservoirs or other geological structures capable of holding onto it for thousands of years.
Ultimately, the roadblock to developing such plants is Congress’ reluctance to regulate greenhouse gas emissions. If there’s one thing that might force private investment in truly clean coal technologies—including carbon sequestration—it’s a carbon tax. Investors are wary of tying up billions of dollars in coal-fired plants that may become even more costly in a few years when the federal government, as seems likely, passes a law dealing with carbon emissions. Currently there are no restrictions on CO2 emissions, but most observers seem to agree that in the coming years lawmakers in Washington, D.C. will have to create disincentives for dumping greenhouse gases into the air if the government is going to try to address global warming seriously. That means old, dirty coal-fired power plants are likely to become much more expensive as carbon emissions become taxed. Until that happens, investors aren’t lining up to spend their own money on unproven technologies to remove and sequester carbon.
“It’s possible that the next federal administration will do something about taxing carbon that will turn that around,” suggests Tom Power, recently retired chair of the University of Montana economics department. “The high costs of imported petroleum combined with carbon taxes would make technologies that clean up coal economically viable and we’ll be off and running. That’s the key though. Right now that technology is not developing. It’s not taking place, partly because we can dump the carbon into the atmosphere for free. There are no financial consequences, so the technology is not being developed except on a demonstration scale.”
Schweitzer agrees. He says we’re not likely to see new coal-fired generation projects in the United States until Congress “pulls their heads out of the southern part of their torsos.”
“I believe that we are not building new electricity generation in this country that is associated with coal until we have a carbon law, and the reason is the market,” Schweitzer says, pointing to the $32 billion private-equity buyout earlier this year of Texas energy giant TXU Corp., which went through only when the utility agreed to scrap plans for eight of 11 coal plants it had hoped to build in the state.
“Rate payers, whether they be members of a public utility or rate payers who are buying from an investor-owned utility…are going to be on the hook paying for these increases in carbon,” Schweitzer says. “There will be disincentives to produce carbon. And if you build a new plant right now and you tie your consumers to 50 years worth of carbon tax or carbon disincentives, then you are no longer competitive with those who choose to go to a clean coal plant. To build a new dirty coal plant today is ludicrous. It isn’t good marketing sense.”
But the market may already be turning away from coal, period.
Late last month, just days before the announcement that Bull Mountain Development had lost its air quality permit for the proposed Roundup power plant, investment giant CitiGroup downgraded coal stocks across the board. “Prophesies of a new wave of coal-fired generation have vaporized, while clean coal technologies such as IGCC with carbon capture and coal-to-liquids (CTL) remain a decade away, or more,” according to CitiGroup’s July analysis, which also noted that the 2008 presidential election isn’t likely to brighten the picture for coal investors: “Candidates are already stepping up to ‘ban coal,’ while company productivity/margins are likely to be structurally impaired by new regulatory mandates applied to a group perceived as landscape-disfiguring, global warming bad-guys.”
Meanwhile, as investors and coal companies scramble to figure out a way to turn the industry around, a legal challenge in Montana could have major implications for future coal plants, and possibly force Congress to move faster on passing a carbon law.
MEIC, along with a handful of other environmental groups, has challenged the first air quality permit issued to a coal-fired power plant since the Supreme Court ruled earlier this year that CO2 is a pollutant under the federal Clean Air Act. The groups claim Montana failed to follow federal law when the state approved the permit for the proposed 250-megawatt Highwood Generating Station without imposing greenhouse gas limits. That plant, proposed by the Southern Montana Electric Cooperative for construction near the Missouri River along the Lewis and Clark National Historic Trail, is expected to emit 2.8 million tons of greenhouse gases per year.
The federal Rural Utility Services, which is providing funding for the plant, stated in a record of decision (ROD) for the Highwood station that “Possible government regulation of carbon emissions has recently drawn considerable and rapidly increasing attention.” Nonetheless, the ROD states that, “[T]he agencies believe that the required political initiative and deliberative process to make such regulation a reality remains some time off in the near future.”
If MEIC’s permit challenge is successful, that may change in a hurry. Currently the challenge rests with the state Board of Environmental Review, but no matter what the board ultimately decides, Hedges expects the appeal process to take years.
“I cannot imagine a circumstance in which the losing side wouldn’t appeal,” she says.
Environmentalists hope that if the dust settles with MEIC on top, it could lead the way for other groups that want to stop new power plants from dumping greenhouse gases into the atmosphere, and thus force Congress to enact a federal carbon law.
But without such a law, the future of new coal development looks grim.
Republican critics say Schweitzer’s talk of a clean coal future for Montana is just that, talk. They think he’s a phony who’s trying
to take a popular issue away from Republicans in eastern Montana, and that while Schwetizer says he supports coal development, he’s done little to actually affect it.
“The governor seems to do a lot of talking, but I’ve never seem him get actively involved in any of these permitting processes,” says Roundup Republi-can Rep. Alan Olson, one of the Legislature’s biggest cheerleaders for coal development. “He likes to have his name in the paper as far as trying to promote things like this, but he’s gotta quit talking.”
Some environmentalists, on the other hand, are convinced Schweitzer’s interest in coal runs much deeper.
Last October Schweitzer announced with great fanfare Montana’s first proposed $1.5 to $2 billion coal-to-liquids facility, which would use coal from Bull Mountain to produce synthetic diesel fuel. But since that announcement, the project has hit a string of major setbacks, including most recently a successful appeal challenging the facility’s air quality permit. Last month a Montana Department of Environmental Quality (DEQ) hearings examiner ruled that the state had improperly extended the company’s air quality permit after that permit had expired. Bull Mountain had initially proposed a conventional coal-fired plant, but construction didn’t commence within the required 18 months. The company went back to the DEQ in the days before the permit expired in 2005 and asked for an extension, which was granted on the basis that plans had been updated to incorporate IGCC technology.
The hearings examiner finally ruled the DEQ couldn’t modify a permit that had already expired. Now that Bull Mountain has lost its permit, it could be years before a new one is granted.
“It’s an enormous setback for this coal-to-liquids plant,” Hedges says. “Suddenly the only thing that really was of any value, which is an air permit, no longer exists. [Getting a new permit] is a very long process and a very public process, and I believe that we have an even better understanding of these things today than we did in 2002 when they were making these decisions.”
According to news reports, one of the reasons Bull Mountain never began construction is because the company had trouble getting financiers to invest. Last February the company shut down its coal mine near Roundup due to lack of cash, and some of the investors who bought into the mine early on have dogged the company with lawsuits claiming they never received their promised returns. Last week a federal judge in North Carolina awarded investors a $9.1 million judgment against a Tennessee investment broker who put their money into Bull Mountain.
But Schweitzer shrugs off Bull Mountain’s litany of problems and says Roundup’s setbacks are solvable.
“It’s not the permits,” Schweitzer says. “They’ll file for the permits and if they’ve got the financial resources to build these plants they’ll build the plants. If they are going to build an IGCC plant, its emissions are nearly zero so it’s pretty easy for them comply with Montana’s air laws.”
Still, Hedges says, the Schweitzer administration went to extraordinary lengths to help Bull Mountain hang on to the permit it had.
In September 2006, David Klemp, the DEQ air quality permitting manager, told an attorney for MEIC that the governor’s office didn’t want Bull Mountain to have to go through the permitting process again. In a sworn deposition, Klemp said he didn’t think it was appropriate to use the permit amendment process to request an extension, and told MEIC’s attorney that he’d made his views known to others in the DEQ, including department director Richard Opper, but that the agency didn’t follow his recommendation.
“I believe…there are certain individuals that did not want this facility to go through the public participation process again,” Klemp said, adding that in his view the department should have gone through the revocation proceedings and the re-permitting should have gone through the public process. But, Klemp said, “there were other individuals outside of our department in the governor’s office that conveyed, I think, that they did not want it to go through the public participation process.”
In an interview with Montana Public Radio last month, Opper said it was his decision to allow the extension of the permit in the first place.
“I felt I had discretion to extend the permit,” Opper told MTPR capital reporter Hope Stockwell, adding that he felt the project deserved more time.
Evan Barrett, the governor’s chief business development officer, acknowledged that his office contacted the DEQ, telling Stockwell that an existing permit makes the project more marketable to investors.
“We certainly spoke to [DEQ] about it,” Barrett said on MTPR. “Our rationale, we think, is absolutely appropriate. We do not direct the department to make a decision on the permit. That is not our role. We do express a position or an attitude about certain issues. That is the role of the governor. We never urged the law to be bent or broken.”
But Hedges says this governor’s influence over the DEQ permitting process in unprecedented.
“Schweitzer trumped the air permitting expert at DEQ who was making a legal determination,” Hedges says. “It’s one thing for the governor to be involved in policy decisions, but this is a legal determination.”
While Schweitzer and environmentalists diverge in their visions of energy development in Montana, both agree that reducing greenhouse gas emissions is imperative. Anti-coal advocates want to see state and federal governments funnel more money into conservation and wind, solar and other renewable energy projects. Schweitzer, while saying he wholeheartedly supports renewables, is also convinced that for the next 30 to 50 years, clean coal will have to replace existing CO2-belching power plants in order to meet our current energy demands. That said, Schweitzer is adamant that he will only support new coal plants if they are required by federal law to sequester CO2. Faced with criticism that the technology to safely do that isn’t ripe—or exists only in theory—Schweitzer responds that none of these facilities will be online for at least seven years, and by then we’ll have a federal carbon law that will give coal companies the incentives they need to get it done.
“If we can sequester 90 percent of the CO2 that we’re using in this country right now, and the rest of the world followed us, then we wouldn’t increase the temperature of the earth and global warming doesn’t exist anymore,” Schweitzer says.
Clean coal is just part of a new energy future, Schweitzer says.
“Petroleum, natural gas, wind power, solar power, coal gas—these are all planks on the bridge,” Schweitzer says. “Not any one of them can replace our energy supply today. Not any one of them will be able to do it in the next 30 years. It could be that one or more of these technologies are the ones we use exclusively 50 years from now.”
It’s unlikely that Schweitzer will lose his bid for a second term as Montana’s governor, which means we’ll be hearing a lot more about clean coal, IGCC, CTL and carbon sequestration from Helena over the next five years. While it would be unfair to say Montana’s Coal Cowboy is riding a one-trick pony, it’s not a stretch to imagine that this issue could define his legacy. It’s a gamble that could define Schweitzer’s role in history as either a forward-looking leader on energy issues, or just another politician on the wrong side of a global environmental disaster.