By Jim Snyder - 03/24/10 10:43 PM EDT
A fight in Colorado over legislation that could require the state’s largest utility to switch from coal to cleaner-burning natural gas may be a precursor to a bigger battle in Washington over climate legislation.
Coal lobbyists view Colorado as a test case because they worry a trio of senators is also considering extra incentives to encourage utilities to replace older coal-fired power plants with facilities that use natural gas or other electricity sources like solar and wind energy to lower greenhouse gas emissions.
Because coal has a higher carbon content than natural gas does, another result of the legislation would be lower greenhouse gas emissions.
The governor’s office expects the bill will force Xcel to close at least two coal-fired plants that generate 900 megawatts of electricity in the Boulder and Denver areas, according to a news release from the governor’s office.
In response, the American Coalition for Clean Coal Electricity (ACCCE), a group of coal producers and users, has bought nearly $2 million worth of radio, television and newspaper ads that warn switching to natural gas will cost consumers money.
An ad in the Denver Post, the state’s largest newspaper, shows a photo of a rollercoaster with the script: “Replacing coal in our energy mix? Hang on tight.”
The ad says natural gas is three times as expensive as coal and is subject to wide price swings.
“Consumers are going to get creamed by this bill,” said Lisa Camooso Miller, a spokeswoman for ACCCE.
Representatives from the natural-gas industry say new reserves in shale rock will lower costs and moderate price swings for natural gas.
The Colorado Mining Association, an affiliate of the National Mining Association, is also lobbying against the bill. In a letter, it asks residents to send state lawmakers notes that the legislation would allow Xcel to cover the expense of switching to natural gas by raising consumer electric bills. The association also maintains the bill will cost jobs in the coal industry.
Mark Stutz, a spokesman for Xcel, said the utility would submit a plan to state regulators in August as to how it plans to meet the emissions-reduction targets. While using natural gas instead of coal is the “primary” option, according to the governor’s office, Stutz said the utility has not ruled out keeping its existing fleet of coal plants if retrofits can reduce emissions by the required amount.
He said the utility agreed to the plan because it feared eventually it would face tougher clean-air regulations from the Environmental Protection Agency.
In Washington, coal and natural-gas lobbyists are watching the efforts of Sens. John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) to craft a climate bill that can attract centrist support.
The three are reportedly considering tax incentives to encourage utilities to retire older coal plants earlier than scheduled, coal and natural-gas industry lobbyists said.
One idea supported by the natural-gas industry is a so-called “cash for coal clunkers” program designed to mimic the effort to encourage drivers to trade in older cars for new, more fuel-efficient models.
The natural-gas industry, wanting to create new demand to accommodate massive gas reserves newly discovered in the Northeast, Texas and Louisiana, is also pushing a “clean energy standard” that would mandate that utilities get a certain percentage of power from natural gas and renewable energy sources by a set date.
The whole point of climate legislation is to reduce the amount of carbon dioxide released into the atmosphere. Given coal’s high carbon content, the coal industry is likely to suffer under an emissions cap.
The question the two sectors are fighting over boils down to timing. Coal lobbyists want more time to allow technologies that could cut coal’s carbon content to develop. They also want multibillion-dollar subsidies to help the process along.
Natural-gas companies say they want their industry’s natural ascent not to be blocked by giveaways to the coal sector to win political points.
Coal releases as much as twice the carbon dioxide than natural gas when burned. Coal, abundant and relatively cheap, now provides around 50 percent of the nation’s electricity, versus the 20 percent generated by natural gas.
Groups like the America’s Natural Gas Alliance want the ratios reversed.
Asked what his industry’s priorities were, a lobbyist who represents the interests of natural-gas companies said “gas for electric generation and gas for electric generation.”
“That is the growth market for natural gas,” the lobbyist said.
Other big interest groups are likely to be drawn into the debate given the importance of energy costs in their businesses.
Mike Walls, vice president of regulatory and technical affairs at the American Chemistry Council, said the chemical industry would oppose any mandate for “fuel switching” in the climate bill.
The industry uses natural gas as both an energy source and a key ingredient for its products, and is vulnerable to price fluctuations in gas prices.
He said the industry is “encouraged” new reserves have increased estimated supply availability to 100 years. “Short-term, we have a concern of getting the gas to market,” Walls said.