Tom Power Commentary: “Political Opportunism and Economic Illiteracy: The Closing of the Corette Power Plant”

Republicans are hot on the attack against Democratic candidates in the upcoming election over the recent announcement that Montana’s oldest coal-fired electric generator will be mothballed in three years. The Republicans are blaming that closure decision on the refusal of Democrats in Congress to block EPA’s court-ordered application of the Clean Air Act to older, dirtier electric generators.
Under pressure from the coal and electric utility industries, EPA had chosen not to apply the 1990 amendments to the Clean Air Act to older power plants. This provided an incentive to utilities to keep those plants operating indefinitely rather than retiring them and building new, more efficient, and cleaner electric generators. The older plants were repeatedly rebuilt from the inside out so that they could last forever, exempt from the air pollution rules passed by Congress. The same poisons all other industries were forbidden from dumping into the air that we and our children breath could continue to pour forth from these old power plants. In 2008 federal courts declared EPA’s refusal to enforce the Clean Air Act on these older, dirty plants illegal and ordered EPA to adopt new rules enforcing the air pollution laws that Congress had passed almost twenty years earlier.
It is more than a little ironic to find Montana coal boosters complaining about EPA air quality regulations. After all it was the Clean Air Act that largely created a national market for Montana and Wyoming Powder River Basin coal. That coal is low quality in terms of energy content, making it costly to ship, and lies in the middle of nowhere, one or two thousand miles from large population and industrial centers. The Clean Air Act’s restrictions on sulfur emissions, however, gave that coal a distinct advantage: Its sulfur content was unusually low. If it were burned instead of higher sulfur eastern coal, the pollution controls that had to be installed were much less costly. In that sense the Clean Air Act and EPA created a national market for Montana and Wyoming coal allowing it to be marketed across almost all of the United States. Powder River Basin coal became the dominant coal supply to American domestic markets thanks to the Clean Air Act and EPA regulations. If we want to keep selling coal to the rest of the nation, we should be careful about advocating the repeal of the Clean Air Act and the abolishment of EPA.
There is another irony in the Republican criticism of EPA and the supposed “war on coal” that Obama is said to be waging. These folks claim that they believe that we should depend on market forces and private business activities to guide our economy and society. Yet, in their near hysteria over the closing of a very old and very small electric generator, they completely ignore the powerful market forces that explain that closure.
The Corette Power Plant is one of dozens and dozens of small older coal-fired power plants that are being retired nationwide. Those plants will be replaced by natural gas-fired electric generators. If this is a war on coal, it is a war being conducted by market forces. The expansion of North American natural gas supplies has driven the cost of natural gas to very low levels. That has allowed natural gas to successfully compete head-on with coal as a fuel for electric generation.
This decline in natural gas prices was just the latest market pressure on our past reliance on coal. Technological improvements in the design of natural gas-fired electric generation have increased the fuel efficiency and reliability of gas-fired plants and reduced the upfront investment cost of building them. They also can be built in smaller modular units to match demand growth without losing economies of scale. In addition they take much less time to permit and build. Finally, natural gas burns cleaner than coal in terms of greenhouse gases, sulfur, mercury, particulate, and other health-threatening emissions. This reduces pollution control costs and the risks associated with stricter air quality regulations of coal combustion in the future. As a result of these straightforward cost advantages, electric utilities have focused almost exclusively on building natural gas-fired electric generators over the last decade, even when natural gas prices were much higher.
That led to the building of a whole new fleet of natural gas-fired electric generators. As natural gas prices have tumbled downward, these generators have been operated more often during the year because they are the cheaper source of electricity. This has also reduced the market price of electricity on wholesale markets. Utilities can avoid operating their higher cost plants and instead purchase electricity more cheaply on the market.
In fact, it was this later reality that led the owners of the Corette Power Plant to decide that that facility, which will be almost 50 years old when it is retired, would not be a competitive source of power in this new market setting.
There is no “war on coal” being conducted by our political leaders. Those objecting to the mothballing of a dirty and inefficient electric generator that is far beyond its planned economic life are really objecting to natural gas prices being low and technological improvements allowing us to produce electricity more cheaply and cleanly. That is, they are objecting to economic improvements and improvements in the well-being of most Americans. That does not seem like a very viable political platform to stand on.

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