Regulation hangs question mark over coal
By Kim Phagan-Hansel
January 9, 2013 --
When most people flip on the light switch, they give little thought to what type of resource is used to produce the electricity that powers their iPads, TVs and appliances. But as more people are paying attention to global warming reports and their personal carbon footprints, the discussion over reducing the use of fossil fuels and increasing the use of renewables has heated up.
That national debate was the focus of a December meeting in Gillette sponsored by the University of Wyoming's School of Energy Resources and the Center for Energy Economic and Public Policy. While most of the discussion focused around the challenges currently facing the coal industry, Basin Electric Power Cooperative's Environmental Manager Lyle Witham went deeper to touch on the challenges for the utility industry in planning for future resource development when there are so many factors to consider in the development of both fossil fuels and renewable energy.
"We're doing this with no regulatory certainty," Witham said. "We don't know what resources to build because we can't make rational long-term choices."
Typically working with a 10-year plan, Witham said it's difficult for Basin Electric and other utility leaders to determine which resources they will use to provide their customers with electricity when there is no national energy policy and a number of rules and regulations from the Environmental Protection Agency that have not been finalized, and in some cases are tied up in legal red tape.
"We have to figure out a rational policy to address the greenhouse gas issue," Witham said. "We need to get away from the extremes on the debate where you can't develop a rational policy."
Right now, coal provides approximately 60 percent of Basin Electric's base load energy, a few years ago it was as high as 90 percent. While coal's percentage has been greatly reduced, Witham said "the base-load coal is still the work horse."
Among its coal-fired facilities is the Dry Fork Station that was completed in 2011 just north of Gillette.
"It's an extremely, extremely clean facility," Witham said. "It's our cheapest facility to run based on fuel costs. We run our resources on our lowest-cost resources at the time. At this time, that remains to be coal."
In addition to the state-of-the-art Dry Fork Station, Basin Electric operates the largest carbon capture facility in the world at the Antelope Valley Power Plant in North Dakota. The captured carbon is piped to Canada for Enhanced Oil Recovery use. The Antelope Valley Power Plant also is unique in that all of the byproducts from the coal-fired power plant are used in other products such as anhydrous for fertilizer and the carbon for oil production.
"We take everything off the coal and find a use for it," Witham said. "I think this is the future of coal generation."
Other resources Basin Electric utilizes include natural gas, wind, hydro and nuclear among others. Not only is the coal industry facing uncertainty, but the hydraulic fracturing process for shale natural gas recovery has come under greater scrutiny. Estimates show that 92 percent of all natural gas will come from shale by 2020.
"If something happens regulatory with that and coal, we're going to have a tremendous energy crisis," Witham said. "There won't be any new coal-fired power plants like Dry Fork built until there's some sort of regulatory certainty."
That uncertainty has caused challenges for Rocky Mountain Power as well. Currently, Rocky Mountain Power in Wyoming generates 84 percent of its electricity from coal and 16 percent from wind.
"We believe in our coal-fueled power plants that are low cost and reliable," said Rita Meyer, vice present for Rocky Mountain Power's Wyoming operations. "And we've been in the wind business even before wind was popular."
To accommodate current and proposed regulations, Rocky Mountain Power has undertaken a $100 million investment from 2005 to 2011 to retrofit its coal-fired power plants with the latest technologies to reduce emissions.
"The new environment controls are a significant cost," Meyer said. "It's a huge investment to keep our power plants to environmental standards."
Those costs of doing business unfortunately don't stop with the business.
"We pass a lot of our costs along to our customers," Meyer said. "It is challenging as we determine a prudent balance."
As Rocky Mountain Power determines its resource mix for the future, Meyer said the company is having to consider the current political climate toward fossil fuels and the current market factors that have made natural gas a more affordable choice than coal in recent months.
"Rocky Mountain Power is making decisions about future energy production based on information that is far from perfect and constantly changing," Meyer said. "We have a 10-year cycle of planning and we're always in the process of tweaking that plan."
As both Rocky Mountain Power and Basin Electricmove forward to meet the increasing demand for energy, they continue to make decisions about energy resources based on keeping costs low and meeting all the regulations set forth by the government. Into the future, Witham said it will be critical for the country to look at the bigger picture of the importance of low cost electricity and how those can be made more environmentally friendly.
"Our quality of life is built on the back of cheaper, affordable and reliable electricity," Witham said. "If you stop trying to find the one answer and start focusing on how all these all work together, then we're on the right road."
Wyoming Business Report freelance writer Kim Phagan-Hansel lives in Gillette.