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Issue 1 • 2010

ECONOMIC, ABUNDANT/SECURE AND ENVIRONMENTALLY SOUND

It’s Our Rock! Coal protects North Americans from instability and fluctuations in the markets

In this issue Getting Infrastructure in the Ground Addressing Unintended Consequences Public Nuisance Litigation ACC 2010 Membership Directory


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Published for: AMERICAN COAL COUNCIL

ECONOMIC, ABUNDANT/SECURE AND ENVIRONMENTALLY SOUND

1101 Pennsylvania Ave. N.W., Suite 600 Washington, DC 20004 Tel: 202-756-4540 Fax: 202-756-7323 Fax: 732-231-6581 www.americancoalcouncil.org

CONTENTS

ACC Editorial Review Board

Message from the ACC CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

David Byford, Dynegy, Inc. Jennifer Cannon, APS Trygve Gaalaas, Hawk Consulting Janet Gellici, American Coal Council Jason Hayes, American Coal Council Andy Marti, Martin Engineering Beth Sutton, Peabody Energy

Message from the ACC Communications Director . . . . . . . . . . . . . . . . . . . . 9

Published by: Lester Publications, LLC 140 Broadway, 46th Floor New York, NY 10005 Main line: 866-953-2189

Spotlights Unintended Consequences & Cumulative Impacts . . . . . . . . . . . . . . . . . . . 15

President Jeff Lester | 866-953-2189 Vice President Sean Davis | 888-953-2190 Editor Brigitte Burgoyne | 877-953-2588 Graphic Designers John Lyttle Myles O’Reilly Account Executives Quinn Bogusky, Kathy Kelly, Louise Peterson

Message from the ACC President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

ACC Vision and Mission Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2010 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ACC Member Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ACC Champion & Patron Sponsors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Project No Project: NIMBY’s Attack on Economic Development . . . . . . . . 21 Features All Politics is Local, All Land Use is Political . . . . . . . . . . . . . . . . . . . . . . . . 27 NIMBY Wars book review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 The Three National Security Dimensions of Coal . . . . . . . . . . . . . . . . . . . . . 33 No Easy Climate Answers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Threats to Coal Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Public Nuisance Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 PACE: Fighting for Energy Fairness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 A Motivation to Succeed: Why Advertising during a Recession is Good Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

© 2010 American Coal Council. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the ACC.

Making CO2 Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Disclaimer The opinions expressed by the authors of the editorial articles contained in American Coal magazine are those of the respective authors and do not necessarily represent the opinion of the American Coal Council or its member companies

Index to Advertisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Technologies to Promote Clean and Safe Coal Handling . . . . . . . . . . . . . . . 59 Railroads and Coal: Looking Back and Looking Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

On the cover: the cover of this issue of American Coal illustrates the concept of “our rock” protecting us from instability and fluctuations in the markets.

Printed in Canada Please recycle where facilities exist.

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THE POWER BEHIND AMERICA.


A Message from the ACC President

Coal is here for the long haul It is an energy resource for our future Jeff Wallace, ACC President & Vice President Fuel Services, Southern Company

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on coal – over 1 billion tons of it each year – to provide us with half of our power. That is not something that even the most ardent anti-coal forces can simply wish away in a month, a year, or a decade. As we have said many times before, coal is here for the long haul and it is an energy resource for our future. But it is still worthwhile to recognize that we are facing challenges as an industry. Regulatory uncertainty is a clear and pressing concern. From pending cap & trade legislation, to EPA regulation of greenhouse gases (GHGs), to proposed EPA regulations on coal ash, there is a regular stream of negatives coming from DC. Fortunately, however, not all of the news is bad and it is clear that our industry’s communication and education efforts are having a positive effect. Six months ago, cap and trade was considered a done deal. Now – after an upending of the science of climate change and a few special elections have changed moods around the country – WaxmanMarkey it is being called DOA because of waning concern over climate change and the cap and trade bill’s potential impacts on taxes, jobs, and economic stability.

Source: Energy Facts Weekly (Week of Feb. 8, 2010) – What 50% Really Means: The Scale of Coal’s Contribution to our Electricity Supply

s I have read through various media reports and industry journals, I have noticed some hesitance, some concerns, and perhaps even some confusion. We’re seeing support for clean coal technologies grow at the same time as we’re seeing government agencies moving ahead with “game-changing” regulations that could hinder coal use across the country. We’re seeing a step forward, two steps back, two steps forward, and one step back. We see the public demanding clean and affordable, domestic energy, which would seem to be coal’s niche, but yet we still see special interests able to get confusing messages out that distract from the reality that we need to rely on our coal reserves more than ever. Despite those challenges, we can’t lose sight of the fact that coal represents two centuries of stored energy potential right beneath our feet. Coal is relatively easy to mine, its handling characteristics are very well known, its combustion characteristics are very well known, and as we improve our knowledge on new technologies, it becomes more efficient, and cleaner to use. Above all, it is easy to lose track of the reality that despite challenges, we still rely

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In December last year, the EPAs endangerment ruling on CO2 meant that if we did not have immediate Congressional action on greenhouse gases (GHG), we would have the EPA moving forward to regulate CO2 under the Clean Air Act. With WaxmanMarkey stalled in the Senate, the EPA started to do just that and, as of January this year, large emitters are required to collect data on, and report on, their GHG emissions. However, there are many arguments being raised over the fact that the Clean Air Act was meant to deal with smaller point source emissions. It was never intended to deal with the far-reaching implications of trying to regulate a gas we exhale after each breath. The EPA attempted to address those arguments by “tailoring” the CAA reporting requirements. Or applying those requirements in creative – many are saying “illegal” – ways to avoid having to apply the CAA to every source of GHG emissions; every automobile, lawnmower, and weed whacker in the country. In response to the tailoring, Senator Lisa Murkowski (R-AK) introduced an amendment in January that would bar the EPA from using the Clean Air Act to regulate GHG emissions. That amendment is not expected to go anywhere,

but given the questions and concerns over the EPA’s creative reworking of the CAA, the litigation and political pressure to move in another direction is just getting started. Moving on, the EPA has also taken a serious look at regulating coal ash as a “toxic” or “hazardous” material. This move is in response to special interest pressure after the TVA ash spill. However, it ignores the basic science which shows that leaching from ash is a minute issue, if it is an issue at all. Repeated rulings by EPA and other government agencies have clearly stated that coal ash is not toxic. The proposed regulation also ignores the issues discussed in our recently released 2010 Coal Ash Economic Assessment, including the fact that these regulations could raise the price of land filling ash from $10 - $150/ton. These price increases and “green tape” would effectively kill the recycling industry and some $6 $11 billion/yr in economic benefits. When customers realize this will mean green building products will become less “green” and a great deal more expensive, there will be further pushback. There have been increased pressures put on the industry; there’s no getting around that fact. Regulation, fuel switching, and

international market pressures are all potential “game changers” that impact the way we do business. Additionally, special interests continue to pressure our industry in the media and the government. But those challenges are not a game ender. While pressure is being applied, the efforts of the ACC, as well as other energy- and coal-related associations are showing success. The current government has recently been widely quoted as supporting the development of clean coal technologies as well as the construction of 10 new commercial demonstration plants for carbon capture and storage (CCS) technologies in the next six years. Additionally, several new clean coal generation stations are being built, using efficient generation process like super-critical combustion and integrated gasification combined cycle. While we work in a dynamic and everchanging market, the one reality that remains is that our country was built and continues to operate on affordable, abundant/secure, and clean electricity. Without coal, we may manage “clean,” but our energy will be neither affordable, nor abundant. With coal in the mix, we can readily achieve all three.  u

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Murray Energy Corporation

“Rely on our companies for dependable, low-cost coal supplies.” 29325 Chagrin Boulevard, Suite 300 Pepper Pike, Ohio 44122 Phone: 216-765-1240 4

F Mr. Robert E. Murray – Chairman, President, and Chief Executive Officer bobmurray@coalsource.com For coal pricing and availability, please contact: Mr. B.J. Cornelius, President The American Coal Sales Company bcornelius@coalsource.com 101 Prosperous Place, Suite 125 Lexington, Kentucky 40509 Phone: (859) 543-9220 Fax: (859) 543-1720 american coal council

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A Message from the ACC CEO

Games of Chance Janet Gellici, CAE, Chief Executive Officer, American Coal Council

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he theme of this issue of American Coal – Coal is Our “Rock” – brought to mind a childhood game: Paper-Rock-Scissors. Two or more players hold up a clenched fist and on the count of three extend their hand with either a paper, rock or scissors gesture. Paper denoted by an open hand, rock by a clenched fist and scissors with a two-fingered “V.” The winner of the round is the player whose choice of a gesture beats out the other players’ choices – paper wraps (beats) rock, rock blunts (beats) scissors and scissors cut (beat) paper. Coal, our rock, seems to be getting wrapped up in a lot of paper these days. Our industry is facing an unprecedented and overwhelming number of legislative, regulatory and judicial initiatives. The list includes: • Coal Mine Permitting – EPA and Senate efforts to curtail “mountaintop mining” through the Clean Water Act and other means, effectively placing a moratorium on new coal mines and potentially reducing coal production nationwide by 10-70%.

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• Utility Water Discharge – EPA’s initiative to establish new guidelines that are likely to result in tighter standards and higher costs for power plant operations, including coal ash handling. • Coal Ash Regulations – Pending EPA rulemakings could reclassify coal ash as a hazardous waste under Subtitle C of RCRA, jeopardizing the $6.4-$11.4 economic value of beneficially utilizing coal combustion products which was identified in the ACC’s recent CCP Economic Assessment study. • EPA Multi-Pollutant Regulations – New CAIR guidelines and CAMR regulations (HAPs MACT) will extend and impose stricter regulations on criteria emissions. • EPA Smog Regulations – New rules to lower the National Ambient Air Quality Standards for Ozone (NAAQS) are expected this summer. • EPA GHG Rulemaking – A final rulemaking and enforcement of EPA’s greenhouse gas endangerment finding and “Tailoring Rule” are pending. • SEC Guidance – The Security & Exchange Commission’s Interpretive Release effectively imposes new corporate disclosure requirements pertaining to business implications of global warming. • Power Plant Permitting – EPA appears to be taking an increased role in power plant permitting, recently overriding and reversing two state-approved permits on various counts. Paper will likely continue to dominate the game given that public nuisance injunctions are now condoned for operations that supposedly contribute to global warming and private lawsuits can now

be initiated for damages resulting from global warming impacts. But efforts are underway to cut through the morass of paper initiatives, • Numerous resolutions and bills have been introduced in the Senate and the House to block EPA from regulating GHG under the Clean Air Act. • A Congressional Coal Caucus has been formed in the House. • Congressional delegates are objecting to the usurpation of states’ rights on coal mine and power plant permitting, as well as coal ash management. • EPA has been forced to delay its pending coal ash hazardous waste designation because of intensive OMB and Congressional examination of the proposed rulemaking. • Climategate has gained some traction, as various organizations and states sue EPA to re-examine its endangerment finding in light of questionable scientific data and practices. The scissor-wielders certainly have their work cut out for them; the “rocks” among us need to be careful not to blunt their efforts. Paper-Rock-Scissors is primarily a game of chance, involving little strategy or skill. Perhaps the main message to take away from the articles in this issue is that our nation’s energy and national security should not be left to chance. Without a long-range plan, without understanding the consequences and cumulative impacts of our choices, without a coordinated, cooperative effort there’s a chance we’ll end up in a stalemate. What frustrates me most playing PaperRock-Scissors is the outcome when, with three players in the game, one shows paper, another rock, another scissors – nobody wins.   u

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A message from the ACC Communications Director (letter from the editor)

Coal is our ROCK! Jason Hayes, M.E.Des., ACC Communications Director/Editor of American Coal

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y wife, kids, and I love to watch the Discovery Channel TV show, “Myth Busters.” We’re always itching to see what myth or wives tale will be debunked next. I especially enjoyed one episode, where Adam Savage – one of the hosts – wrongly predicted the outcome of a myth and then (jokingly) refused to admit that he was wrong. Instead of backing down he argued, “That was someone else.” In the face of video proof that he had gotten it wrong, he continued to deny, stating, “I reject your reality, and substitute my own.” That line has become a favorite for our family. Whenever we get caught in a mistake, we laugh as we invoke its protective charm. It doesn’t change anything in the real world; when we’re wrong, we’re wrong, but, it’s still fun to play around with each other. However, because we joke around like this, we’re all that much more aware of it when we see someone else making the same feeble excuse. Over the past few years, I have been repeatedly struck with how many people try to treat our energy supply in this flippant fashion. For most of us, adjectives like, “abundant,” “affordable,” “clean,” and “secure” are the norm. Throughout our entire lives, our domestic coal resource and the coal industry have quietly and efficiently provided a seemingly never ending supply of affordable and clean energy and jobs in our communities, or supported a strong tax base, necessary infrastructure development, and a host of other social, economic, and environmental benefits. Coal has always been the rock on which we’ve built a strong and effective energy policy. It is that quiet efficiency that has allowed many Americans to forget that the movement of coal from mines to utilities funds much of our rail and waterways infrastructure; taxes on the sale and purchase of coal and electricity provides funding for our communities and schools; and that coal sets the price of much of our affordable american coal council

electricity. But the reality that coal is our rock is often ignored by special interests and some elected officials. Their deliberate efforts to remake reality makes it more difficult for the public and other elected officials to realize how much we rely on coal to meet our energy needs. A few years ago, I listened to a presentation by Steve Miller of the American Coalition for Clean Coal Electricity. He described how his office had surveyed an average group of middle managers on their knowledge of energy. One question asked was what they thought coal was used for today. A large percentage of respondents replied that coal was used to power locomotives. They honestly did not know that our railroads have been powered primarily by diesel engines since the mid-20th century. But they’re not alone. At a National Mining Association meeting a year ago, one of the participants described a recent conversation he had with his neighbor. At one point in the discussion, his neighbor asked him what he did for a living and he replied that he worked in the mining industry. His neighbor, incredulous, snapped back, “We don’t still have to mine anymore!” We later learned that this neighbor possessed a PhD – he was a tenured university professor. The man was very well educated and actively involved with his community, but his “reality” refused to admit the brute fact that we rely heavily on our mining industry for most of our goods and services. He had somehow managed to convince himself that we’d moved beyond the need for things like metals, minerals, and coal. However, the old saying that, “if it can’t be grown, it has to be mined” remained true, regardless of this fellow’s denials. Many others share this fellow’s detachment with reality and try to substitute a reality that has us closing mines, refusing to allow new development, and expecting that conservation and renewables will affordably meet all our energy needs. They pass this reality on to their students, coworkers, children, and friends on a daily 9


basis. In fact, I’ve met grade school teachers who admitted that before they had attended a National Energy Foundation teacher’s conference, they daily taught that coal mining did us no good; it was, in their opinion, destructive and needed to be stopped. After attending the conference and learning just how important coal was to our lives – that it is our rock – they began to share the facts with their students. These creative “realities” speak loudly to the work that we, in the coal industry, have before us. It is up to us to educate people about coal in our publications, the media, our schools, and in our communities. So, to help you in this education effort we’ve put together another strong issue of American Coal, in which we consider how to promote energy generation development and infrastructure investments. We also look at the unintended consequences and cumulative impacts of the anti-energy NIMBY efforts to shut down development. We introduce the notion of actively engaging in land use planning processes as a means of protecting your development plans and recognize that coal is the basis of the three E’s of security for the country. In

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the rest of the issue, we tackle Climategate and look at how poorly designed energy policy and overzealous public nuisance litigation continue to hamper affordable energy production. We then move on to look at PACE, a group that is working to promote balanced energy policy for the country and find ways to make CO2 and marketing pay despite the down economy. Then we wrap things up by looking at innovation in the industry and the partnership between coal and railroads. We’ve tried to give you the information you need to stand up for coal in your every day lives. As we’ve said before in this magazine, you can hold your head high when you say you work in the coal industry and that you’re partly responsible for keeping the lights on. The reality is that in every sense of the word, coal is our rock. By helping to provide coal to the country, you help to provide a rock solid foundation for our energy supply and economy. You help to keep the price of our energy low. You play a role in providing hundreds of thousands of careers to our families and friends. You are part of the force that is investing billions in new capital expenditures, new

developments, and providing the goods and services that our country uses every day. You are helping to promote a strong tax base from royalty and severance payments, business, and personal income taxes that support our communities and schools. As we put more clean coal technologies in place, you’re helping to make our air cleaner and our country more livable. Coal is OUR ROCK because it is a domestic energy resource that is mined, transported, and used right here in America, by men and woman like you. Having a few special interest groups and elected officials ignore the reality of coal’s vital role in our lives doesn’t make it any less vital. Having them attack you and your role in providing the country with much needed clean, affordable, and abundant energy doesn’t make your work any less important. They stand up in front of the world and boldly state that they’re “rejecting reality and substituting their own,” but that doesn’t change the fact that people wake up in the morning expecting their lights to come on. The facts remain. We need coal to meet our energy needs. We need coal; it’s our rock.  u

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Membership benefits include educational programming and technical seminars, advocacy support, broad-based networking, Web site,

Membership Coupon Join the 170 companies that recognize the importance of belonging to an association that serves as the pre-eminent business voice of the American coal industry and advocates for coal as an economic, abundant/secure and environmentally sound fuel source. the American Coal Council (ACC) is an alliance of coal, utility, trading, transportation, terminal and coal support service companies, advocating a non-adversial, partnering approach to business. the ACC facilitates the lawful exchange of ideas and information regarding the American coal industry. it serves as a essential resource for companies that mine, sell, trade, transport or consume American coal. the ACC also serves as a resource for those wishing to expand or enhance business relationships in north American and international coal markets.

electronic and printed membership directory inclusion, newsletter and members-only electronic updates, database resources, policy input, referrals and discounts on events and industry publications.

Yes

,

please send me membership information!

Name ________________________________________________________ Title __________________________________________________________ Company _____________________________________________________ Address ______________________________________________________ City _______________________State _____________ Zip _____________ Phone ______________________ Fax ______________________________ E-mail ________________________________________________________ Mail or FAX to: American Coal Council 1101 Pennsylvania Ave. N.W., Suite 600 • Washington, D.C. 20004 • 732-231-6581 ~ Fax

2010 Event Dates Spring Coal Forum March, 2-4, 2010 ~ Clearwater (Tampa), FL Implementing Fuel Flexibility Strategies July 20-21, 2010 ~ Chicago, IL Coal Market Strategies October 5-7, 2010 ~ Tucson, AZ Coal Trading Conference Dec 6-7, 2010 ~ New York, NY

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For additional information visit www.americancoalcouncil.org or call 202-756-4540 11


American Coal Council

Vision Statement the American Coal Council (ACC) strives to serve as the pre-eminent business voice of the American coal industry.

Mission Statement the American Coal Council (ACC) is dedicated to advancing the development and utilization of coal as an economic, abundant/secure and environmentally sound fuel source. the association promotes the lawful exchange of ideas and information regarding the coal industry. it serves as an essential

Coal Suppliers

Transportation

Tim Whelan Vice President Sales Alliance Coal LLC (2008-2010)

Mike Brashier Manager of Utility Sales & Specialty Contracts, AEP River Operations (2009-2010)

Mark Canon Vice President Sales Arch Coal Sales (2009-2011) Membership Chair 2010 Mike Kelley Director Sales & Marketing Cloud Peak Energy (2010-2012) Coal Consumers Jeff Wallace Vice President Fuel Services Southern Company (2008 - 2010) ACC President 2010 Caryl M. Pfieffer Director Corporate Fuels & Byproducts E.ON U.S. (2009-2011) Charles Matthews Vice President Wholesale Energy & Fuels Wisconsin Electric Power Company (2010-2012) Energy Traders Matt Levar Director Coal Marketing EDF Trading (2009-2011) Harry Papadopoulos Portfolio Director Coal & Emissions NRG Energy (2010-2012)

Louis M. Muldrow Director Coal Sales & Marketing CSX Transportation (2009-2011) Doug Glass Vice President & General Manager Energy Union Pacific (2010-2012) Coal Support Services Scott Hutter President & CEO Martin Engineering (2008-2010) President-elect 2011, Treasurer 2010, Chair HR & Compensation 2010 David Smercina Sr. Vice President & Business Manager SGS North America (2009-2011) Scott Stallard Vice President Asset Management Services Black & Veatch (2010-2012) Past President Steve Miller President COALTRADE, LLC (2010) ACC President 2009

resource for companies that mine, sell, trade, transport, or consume coal. the ACC provides educational programs, advocacy support, peer-to-peer

networking

forums and market intelligence that allow members to advance their marketing and management capabilities. 12

American Coal Council 2010 Board of Directors

Thank You Editorial Review Board • • • • • • •

David Byford, Dynegy, Inc. Jennifer Cannon, APS Trygve Gaalaas, Hawk Consulting Janet Gellici, American Coal Council Jason Hayes, American Coal Council Andy Marti, Martin Engineering Beth Sutton, Peabody Energy american coal council


American Coal Council Member Companies ACES Power Marketing

Evergreen Energy, Inc.

Platte River Power Authority

ADA Environmental Solutions, Inc.

Evolution Markets LLC

Platts

AEP Cook Coal Terminal

Fervim Ingenieria Sa de CV

Portland General Electrric

AEP River Operations

FirstEnergy Generation Corp.

Powerspan

Alliance Coal, LLC

FreightCar America

PPL Energy Plus

Alliant Energy

Fuel Tech, Inc.

PricewaterhouseCoopers LLP

Alpha Coal Sales

Glencore Ltd.

Progress Energy

Alpha Natural Resources LLC

Golder Associates, Inc.

Rentech

ALSTOM Power, Performance Projects

Great River Energy

Resource Technologies Corporation

Ameren Energy Fuels & Services Co.

Headwaters Incorporated

Rhino Energy

American Coal Ash Association

Hellerworx, Inc.

Richwood Industries, Inc.

American Coalition for Clean Coal Electricity (ACCCE)

Helm Financial Corporation

Rio Tinto Energy America

Hill & Associates, A Wood Mackenzie Company

River Basin Energy

American Commercial Lines LLC American Crystal Sugar American Electric Power Arch Coal, Inc. Argus Media, Inc. Arizona Public Service ASGCO Mfg., Inc. Benetech, Inc. Black & Veatch B&W Resources BNSF Railway Co. Boral Material Technologies Buchanan Ingersoll & Rooney C N Rail Canal Barge Company, Inc. Cargill, Inc. Carpenter Creek, LLC Central Coal Company Charah, Inc. Chevron Mining, Inc. Coal Marketing Company (USA), Inc. Coal Utilization Research Council CoalTek, Inc. CONSOL Energy, Inc. Constellation Energy Crounse Corporation CSX Transportation Dairyland Power Cooperative David J. Joseph Company Dayton Power & Light Company Department of Entomology, Faculty of Agriculture, Annamalai University Dominion Energy Drummond Company, Inc. DTE Coal Services Dynegy Coal Trading & Transportation LLC

Holcim (US), Inc./ Holcim (Canada), Inc. ICAP United, Inc. ICF Consulting Ingram Barge Company Integrity Coal Sales, Inc. Interlake Steamship Company James River Coal Company James River Coal Sales, Inc. John T. Boyd Company Kansas City Southern Railway KCBX Terminals Company Kiewit Mining Group, Inc. Koch Carbon LLC Lakeland Electric Lower Colorado River Authority Luminant Energy Martin Engineering McGuireWoods LLP MidAmerican Energy Company Midwest Energy Resources

Roberts & Schaefer Company Salt River Project Sampling Associates International Savage Services SCANA Corp. SCH Terminal Co., Inc. Sempra Energy Trading SGS Minerals Services

Storm Technologies, Inc. Taggart Global, LLC. Tampa Electric Company TECO Coal Corp. The Cline Group The McCloskey Group The Saint Consulting Group Traxys TrinityRail Tucson Electric Power Company Union Pacific Railroad Company United Maritime Group

Minnesota Power

University of Kentucky – Center for Applied Energy Res.

Newmont Mining Corporation NexGen Coal Services Ltd. Norfolk Southern Corporation Norwest Corporation NRG Energy, Inc. Nucor Corporation Oglethorpe Power Corporation Omaha Public Power District

University of North Dakota, Energy & Environmental Research Center Usibelli Coal Mine, Inc.

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Unintended consequences: and Cumulative Impacts By: Jason Hayes, American Coal Council

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them. – Fredric Bastiat 1

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astiat’s unforeseen effects are examples of what is often described as “unintended consequences” and held out as reminders that we cannot always have complete control over complex systems. We cannot always foresee all potential outcomes of a management option. “Cumulative impacts” also play a role in choosing management options. Over time, impacts of management actions can add together and, if the impacts are allowed to american coal council

compound, they can have a greater influence – for good or ill – than the sum of those individual impacts. Both concepts have been widely applied in the area of environmental management to describe potentially negative outcomes of human use of the natural environment. However, those concepts can also be 1 2

applied in the economic realm, and to the efforts of special interests and government to stop or severely curtail our use of energy. While initial intentions may be innocent, these actions are having unintended and cumulatively negative impacts on energy supply, generation capacity, energy prices, and job creation. Unintended Consequences are defined as, “any intervention in a complex system [that] may or may not have the intended result, but will inevitably create unanticipated and often undesirable outcomes.”2 Three types of unintended consequence are generally recognized. 1) Positive outcome

Bastiat, F. (1850). What is Seen and What is not Seen. The Law of Unintended Consequences. (n.d.). In Wikipedia Retrieved March 15, 2010 from http://en.wikipedia.org/wiki/Law_of_Unintended_Consequences. 15


– unexpected benefit, 2) Negative outcome – unexpected cost, and 3) Perverse outcome – the solution tends to make the situation worse. “Cumulative impacts result when the effects of an action are added to or interact with other effects in a particular place and within a particular time. … the cumulative impacts of an action can be viewed as the total effects on a resource, ecosystem, or human community of that action and all other activities affecting that resource no matter what entity (federal, non-federal, or private) is taking the actions.”3 While discussion of unintended consequences and cumulative impacts is often focused on the environmental impacts of human activity, the EPA quote above also rightly applies the concept to impacts on “human community.” Where a successive string of regulation, litigation, and special interest pressure makes permitting of mines and/or utility generation more and more difficult, the cumulative outcomes of permit denials and closures can undermine economic and social well-being. The move to stop the use of coal has produced a string of negative unintended consequences and cumulative impacts. It has damaged the economy; caused job losses; damaged communities as businesses are forced to close; and impacted government through the loss of tax and severance (royalty) revenues. Furthermore, attempts to stop emissions of GHG or pollutants by strictly limiting upgrades to existing plants or the number of new generation stations being built is having the perverse outcome of restricting upgrades and updates to existing infrastructure. New Source Review The New Source Review (NSR) rule stands as an excellent example of this issue. As part of the Clean Air Act (CAA), this rule

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Figure: 1 Comparison of growth measures and emissions, 1970-2008 (Source: EPA)

requires the EPA complete a review of “any physical change or change in the method of operation of an existing major source that would result in a significant net emissions increase of any pollutant subject to regulation under the CAA.” 4 However, the definition of “major modification” has been the cause of decades of legal battles, and defining the term “significant” usually has more to do with politics than engineering practices. While routine maintenance, repair and replacement (RMR&R) is technically allowed under the rule, the defining line between RMR&R and a “major upgrade” is ambiguous at best and a mistake in this area could cost a utility and its customers multiple millions in capital expenditures and fines. The outcome of an NSR review may mandate that plant operators meet the latest and most stringent emissions standards regardless of the age of the plant. Of course, upgrades like this on an older plant could end up costing more than the original plant, and the time, legal battles, and capital expenditures required to replace the mature plant might be a regulatory and financial impossibility.

“For years, the NSR rule has provided a disincentive for utility plant efficiency improvements and redefined the term “upgrade” as a dirty word in the industry.”5 A serious attempt to reduce overall emissions would therefore require that the NSR rule be rescinded to help encourage updates to our generation assets without the massive costs entailed by mandatory overhauls. Upgrades and Updates Just as we replace older appliances or vehicles with newer versions when the current model has lived out its useful life, we could (and should) do the same with generation assets. However, when any proposed coal-fueled plant is blindly rejected for no better reason than ‘it is a coal-fueled plant,’ we lose the opportunity to build plants with the newest technologies and emissions reductions equipment, meaning we miss out on the chance to achieve drastic reductions in emissions rates and much improved efficiencies.6 However, EPA research indicates that the use of new emissions reductions technologies is working.7 8 As figure 1 demonstrates,

U.S. Environmental Protection Agency. (1999) Consideration Of Cumulative Impacts In EPA Review of NEPA Documents (EPA 315-R-99-002). Retrieved March 15, 2010 from http://www.epa.gov/compliance/resources/policies/nepa/cumulative.pdf. MasterResource. (2010, February 4). Time to Repeal New Source Review? [Web log message] Retrieved from http://www.masterresource.org/2010/02/time-to-repeal-new-source-review/ Ibid. The Sierra Clubs “Beyond Coal” campaign and an allied effort on “Sourcewatch.org” actually keep databases of “coal plant cancellations” to “help galvanize the movement for a coal moratorium.” U.S. Environmental Protection Agency. (2010). Our Nation’s Air – Status and Trends through 2008. Retrieved March 16, 2010 from http://www.epa.gov/airtrends/2010/index.html. Institute for Energy Research (2010, March 12). The Air is Getting Cleaner: But the Media are Nowhere to be Seen. [Web log message] Retrieved from http://www.instituteforenergyresearch.org/2010/03/12/the-air-is-getting-cleaner-but-the-media-are-nowhere-to-be-seen/.

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“Wind turbines do not reduce carbon dioxide emissions.” – Flemming Nissen, head of development at West Danish generating company ELSAM from 1970 to 2008, all measures related to the well-being of our society showed strong growth. At the same time, aggregate emissions of the six common criteria pollutants decreased by 60%. Over the same period of time, coal use has more than doubled, from 520 million tons in 1970, to 1.12 billion tons in 2008.9 On the emissions side, only CO2 is shown to have increased (by 44 percent). However, there are further (often overlooked) negative and perverse outcomes associated with the move to reduce CO2 emissions by simply stopping coal or attempting to replace coal with renewables. “Since wind power has a ‘limited load factor even when technically available,’ utilities need to maintain permanently online back up generation ‘with capacities equal to 90% of the installed wind power capacity … to guarantee power supply at all times.’ ”10 That back up generation typically has to be a fossil fuel. Other research suggests that, depending on the nature of the firming power needed to back it up, the

addition of wind power to the generation mix may have no impact on CO2 emissions – or, it may even increase them. “Natural gas used as wind back-up in place of baseload or intermediate gas (in the absence of wind) results in approximately the same gas burn and an increase in related emissions, including CO2. Extrapolating from this example to the whole, the working hypothesis is that intermittent wind (and solar) are not effective CO2 mitigation strategies because of inefficiencies introduced by fast-ramping (inefficient) operation of gas turbines for firming otherwise intermittent and thus non-usable power.”11 European utilities are discovering the same negative and perverse outcomes to the widespread use of wind as a CO2 mitigation strategy. “Flemming Nissen, the head of development at West Danish generating company ELSAM (one of Denmark’s largest energy utilities) tells us that ‘wind turbines do not reduce carbon dioxide emissions.’ The German experience is no different. Der Spiegel reports that ‘Germany’s CO2

emissions haven’t been reduced by even a single gram,’ and additional coal- and gas-fired plants have been constructed to ensure reliable delivery.”12 But the negative and perverse outcomes don’t end with CO2 emissions. Where winds farms have been promoted as the energy industry’s solution to fossil fuels, their impacts on aesthetics, troubles with low frequency sounds and human health13, as well as their heavy impacts on bird14 and bat15 populations are only now beginning to be better understood. Compounding those environmental hazards, is the reality that once subsidies dry up, wind farm developments are being scavenged for useful parts, then abandoned and left to decay and leak toxic chemicals into the surrounding environment. This pattern is being reported as the case for at least six wind farms in Hawaii and over 14,000 turbines in California.16 Green Jobs Unintended consequences and cumulative impacts also arise when “green jobs” are pushed as necessary replacements for traditional mining and utility jobs. A 2009 Spanish study demonstrated that every “green job” created through the provision of targeted subsidies for renewable energy, costs 2.2 jobs in other industries and as much as $774,000 per green job created.17 But, as the Spanish government began

National Coal Council. (n.d.) Coal: the essential, secure, affordable, and environmentally compatible U.S. Energy source. Retrieved March 17, 2010 from http://www.nationalcoalcouncil.org/Documents/coaldoc.pdf. 10 Coalblog (2009). Answering the claim that wind alone can replace coal. [Web log message] Retrieved from http://www.coalblog. org/?p=1085. 11 MasterResource. (2009, November 13). Wind Integration: Incremental Emissions from Back-Up Generation Cycling. [Web log message] Retrieved from http://www.masterresource.org/2009/11/wind-integration-incremental-emissions-from-back-up-generationcycling-part-i-a-framework-and-calculator/. 12 Trebilcock, M. (2009, April 8). Wind power is a complete disaster.. National Post. Retrieved from http://network.nationalpost.com/ np/blogs/fpcomment/archive/2009/04/08/wind-power-is-a-complete-disaster.aspx#ixzz0iSQt33mA. 13 Bryce, R. (2010, March 9). The Brewing Tempest Over Wind Power. Wall Street Journal. Retrieved from http://online.wsj.com/article/ SB10001424052748704240004575085631551312608.html. 14 Bryce, R. (2009, September 7). Windmills are Killing Our Birds. Wall Street Journal. Retrieved from http://online.wsj.com/article/S B10001424052970203706604574376543308399048.html. 15 New Scientist. (2007, May 12). Bats take a battering at wind farms. Retrieved from http://www.newscientist.com/article/dn11834bats-take-a-battering-at-wind-farms.html. 16 American Thinker. (2010, February 15). Wind Energy’s Ghosts. [Web log message] Retrieved from http://www.americanthinker. com/2010/02/wind_energys_ghosts_1.html. 17 Alvarez, G. et al. (2009). Study of the effects on employment of public aid to renewable energy sources. Universidad Rey Juan Carlos. 9

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cutting back on its alternative energy subsidies in early 2009, the renewable bubble burst. Reports indicate that without subsidies propping the business up, BP closed two large solar plants and “between 25,000 to 40,000 people” were fired from the Spanish renewable energy industry.18 The report author went on to describe that the “actual loss of jobs could be greater if you account for the amount of lost industry that moves out of the country due to higher energy prices.”19 Higher energy costs do compound the impact of lost jobs and are virtually guaranteed, as 2008 Energy Information Administration numbers show that, “on a dollar per MWh basis, the U.S. government subsidizes wind at $23.34 – compared to … natural gas at 25¢; coal at 44¢; hydro at 67¢; and nuclear at $1.59.”20 In his presentation at the 2010 Spring Coal Forum, Kevin Book, from Clearview Energy Partners discussed how maintaining current utility jobs could help utilities avoid the unintended consequences and cumulative impacts associated with switching from coal to renewables. He argued that jobs created by coal plant retrofits and construction of more efficient plants would result in long-term, employment and substantial environmental

gains. Book argued that retrofits will provide some of “the greenest jobs I know.” Conclusion While some environmental benefits are associated with renewable energy, the reality is that all energy sources have both costs and benefits. In any policy decision to favor renewables over coal, the benefits of renewables must be weighed against the numerous negative and perverse outcomes that will arise from the push to abandon coal. No one doubts the good intention of environmental groups and regulators. However, the heavy load of regulation, litigation, and special interest pressure is impacting industry’s ability to permit

mines and build or update utility generation capacity. With every permit denial and plant closure the cumulative impacts of job losses, increased energy prices, and system instability mount. A balanced portfolio of generation assets is needed to maintain our economy, our electrical system’s stability, and the free flow of affordable and abundant electricity. There are environmentally, economically, and socially sound means of providing that electricity; coal is very simply the most obvious of those means.  u Jason Hayes is communications director for the American Coal Council (www.americancoalcouncil.org).

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen. – Fredric Bastiat 1 Baratti, G. (2009, March 27). Job Losses From Obama Green Stimulus Foreseen in Spanish Study. Bloomberg News. Retrieved from http://www.bloomberg.com/apps/ne ws?pid=newsarchive&sid=a2PHwqAs7BS0. 19 Ibid. 20 Ibid. 12 21 Ibid. 1 18

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NIMBY’s Attack on Economic Development By William Kovacs, U.S. Chamber of Commerce

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rom the east coast to the west coast and everywhere in between, environmental permits for new energy facilities are being blocked by extreme environmentalists and their Not In My Back Yard (NIMBY) allies. This opposition is stifling energy development across the United States. To shed a bright light on this problem, the U.S. Chamber of Commerce launched a new initiative, titled Project No Project, featuring an interactive Web site (www. projectnoproject.com) that details a stateby-state analysis of key energy projects that have been either killed or substantially delayed due to permitting challenges and unreasonable opposition. The site is

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designed to draw attention to this growing problem and its negative impact on jobs, development and economic prosperity. The project started from the simple member inquiry as to how many energy projects are being challenged in the United States. Also, given the movement toward a green energy economy and the $800 billion dollar stimulus package which promised to create millions of “green jobs,” we wanted to know why it is so hard to get these clean projects developed and off the ground. Very quickly we found multi-million dollar and often multi-billion dollar projects mired in the regulatory process. Currently, the site lists 381 projects, including conventional and renewable energy sources

that have been either substantially delayed or killed in recent years. The direct investment of all these projects is $560 billion, costing approximately 250,000 direct jobs and thousands more indirect jobs. Project No Project reveals the truth about the extent to which extreme environmentalists and NIMBYs will go to block any kind of development. They are often well-funded machines who have an arsenal of weapons to derail energy projects. They organize local opposition, change zoning laws, challenge permits, file lawsuits, fight over aesthetics and bleed projects dry of their financing. Their ultimate goal is to fight the project any way they can until the financing dries up or there is no ability to

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continue on with the project. This obstruction is killing jobs and threatening both our economic recovery and our prosperity. While coal projects are a primary target to obstruct, it may surprise readers to learn that renewable energy projects are the market leaders for this type of obstruction. One environmental group even runs an online database that brags about the coal projects it is killing. A classic example is the Baard Energy coal-to-liquids plant in Wellsville, Ohio. The potential economic impact for this community is huge. The project is worth about $6 billion and is estimated

to create 2,500 jobs during the peak construction period. Once operational, the plant would provide 200 full-time jobs and about 750 coal-mining jobs. Several environmental groups have filed lawsuits challenging the permits. In March 2009, it was reported that Baard Energy was abandoning its effort to secure a U.S. Department of Energy (DOE) loan guarantee for the proposed plant, saying that legal challenges against the project’s environmental permits would delay financing for years. Baard Energy said it was warned by DOE that lawsuits against projects seeking

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loan guarantees will be part of the “risk evaluation” and could affect financing costs and timeliness, meaning pending lawsuits would have to be settled before the company could obtain loan guarantee funds. Fortunately, Baard Energy is still planning to proceed with the project despite abandoning plans to use the DOE loan guarantee program and has expressed confidence about finding private financing. The Cape Wind offshore wind project is the nation’s most infamous example of the horrors of environmental permitting challenges and NIMBY opposition. It is a $1-$2 billion project that would have a significant economic impact in the Cape Cod community and create over 1,000 new jobs. At peak generation, Cape Wind will generate 420 megawatts of renewable electricity, which is enough to meet the electricity needs of 420,000 homes. However, its promise to create clean renewable energy and jobs hangs in the balance. Since filing for its first permit in 2001, the Cape Wind project has been forced to navigate through a gauntlet of permit-related hurdles and activist opposition. Over the last eight years, opponents of the Cape Wind project have sued over allegations that the turbines would pose navigational and radar hazards, as well as a threat to birds. Others have argued that the unsightliness of the turbines will hurt their views. It is reported that the Alliance to Protect Nantucket Sound, a local opposition group, has poured more than $20 million into fighting Cape Wind tooth and nail. Notwithstanding the fact that polling shows there is a majority of support in Massachusetts, the Alliance coupled with some elected allies have managed to significantly slow down the project over the years. The most recent challenge was lodged by local Indian tribes, who argue that the project would interfere with sacred rituals which require an unblocked view of the horizon and would be built on a long-submerged ancestral burial ground, warranting the designation of the entire Nantucket Sound as a “traditional cultural property” for listing on the National Register. Such a designation would not only make the Sound off limits to any offshore development, but would also stifle all kinds of commercial activity in the area. Moreover, the success of the tribe would set bad precedent and place another tool in the NIMBY arsenal for killing projects. american coal council


This contention is nothing more than a last ditch effort and desperate attempt to further delay the project from completion. There is no doubt that the intense scrutiny this project has received has only reinforced its viability and environmental soundness. The Cape Wind project will ultimately succeed on its merits, which have been validated over the years. More recently, the meaning of NIMBY reached a new level when Senator Dianne Feinstein introduced a proposal to block millions of acres of the Mojave Desert from solar and wind development. This proposal will certainly make it harder for California to comply with its mandate that a third of the state’s power come from renewable energy sources by 2020. Already, a reported 13 large-scale solar plants and wind farms planned for the region have been scuttled. Such tactics beg the question whether the vision of a green energy future is merely a hallucination. Governor Schwarzenegger said it best: “If we cannot put solar power plants in the Mojave desert, I don’t know where the hell we can put it.” When it comes to blocking development, it’s not just the NIMBY crowd. There are people who have actually gone BANANAs – Build Absolutely Nothing Anywhere Near Anything. A prime example of this mentality rests with an environmental group that recently developed an interactive map of the western United States, using Google Earth, to show areas where renewable energy development is restricted or should be avoided. The environmental group touted the map as a way to move forward for renewable energy development while protecting the western landscape. Just a few weeks after the map was released, however, the same environmental group made a retraction of this new way forward, stating, “We have not – I repeat not – greenlighted any lands for development. While we’ve taken some lands off the table, we are not saying that those that remain are places where development should occur.” While these environmental groups may claim they want to bring clean energy projects to life in an effort to move us toward a safer brighter energy future, their actions say the opposite. Again, it is another prime example of groups claiming to be strong proponents of clean energy but acting to stop clean energy projects that would create jobs. One of the more fascinating revelations of Project No Project is the fact that the 24

development of renewable energy projects has provoked as much, if not more, NIMBY opposition as conventional energy projects. Of the 381 projects listed on the site that have been delayed or outright killed over the past few years, there are 167 renewable projects, 129 coal, 41 natural gas, 20 nuclear, and 24 transmission projects. It is total hypocrisy that the same groups who want the United States to move away from fossil fuels are at the same time screaming “Not In My Back Yard” when it comes to the development of clean energy projects. These abusive practices have placed our national and energy security at risk. Congress must address this growing problem now and pass legislation that would eliminate the abusive practices employed by extreme environmental activists and their NIMBY allies. We need regulatory certainty for companies and their investors. As the private sector continues to see projects die, even companies with most innovative technologies will hesitate to move forward. Investors will be less willing to put their money into alternative energy projects in the future. If we rely on private sector innovation to build the bridge to our 21st century

energy future, they need some confidence that projects will be given a fair chance to succeed. No one objects to a fair and timely process whereby projects are examined and the affected communities can be heard, but reasonableness and common sense must carry the day. If the United States is serious about energy security, global climate change and reducing emissions, the practice of standing in the way of development of low-emissions energy technologies and a modern energy infrastructure must be addressed. To learn where and how our nation’s energy projects have been delayed or stopped, or to share your own stories about NIMBY, please visit the Project No Project Web site at www.projectnoproject.com. Together, we need to get these projects back on track, help our nation responsibly meet its energy needs, and spur a robust economic recovery. William L. Kovacs is the senior vice president of the U.S. Chamber of Commerce Environment, Technology & Regulatory Affairs Division (www.uschamber.com).  u

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All Politics is Local, All Land Use is Political By Christopher Hopkins and Ben Kelahan, Saint Consulting Group

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ormer U.S. House Speaker Tip O’Neill used to say, “All politics is local.” Today, it’s equally true that, “All land use approvals are political.” Americans consistently say they like affordable housing, windmill farms, new single-family homes, or new hospitals in their town (but never power plants, casinos, quarries or landfills). However, they fight when one is proposed. “We’re not against (whichever type of project proposed),” they claim. “But this is the wrong location.” The project will worsen traffic, block views, reduce green space, increase crime, degrade the environment, lower property values, or destroy the character of their community, opponents insist. Not long ago, few places ever said no to new development. Growth meant progress. Mines provided work where people needed american coal council

For politicians, voting against a project is generally easier than voting for one.

jobs. Power plants delivered jobs, tax revenue and energy. Then came environmental movements, smart growth, anti sprawl, historic preservationists and people who said “not in

my backyard.” Elected officials started listening to them, and the land use approval process became politicized. The old adage “you can’t fight City Hall” was upended. 27


Chevron Mining Inc. Our Power is Our People. With a 300-year supply in the United States alone, coal’s growth potential is promising. We anticipate many new applications for its use. In addition, new “clean coal” technologies will continue to enhance our ability to tap coal reserves while minimizing the effects of its extraction on the environment. And through all this, our fundamental resource continues to be our people. Chevron employees are committed to operating in a safe and environmentally responsible manner. We’ve drawn top honors for using innovative reclamation techniques. We donated 208 acres of undisturbed land to the Navajo Code Talkers Association for a museum and future veterans’ center. We volunteer in the communities where we work and live. Our values remain the same: Protecting our people, our communities and our environment – that’s the Chevron Way.

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Not In My Back Yard!

A person who lives on a river will oppose construction of a power plant upstream from him, regardless of how much scientific evidence shows that there will be no pollution.

Public officials usually have a good instinct for survival. They are acutely aware that a public official who annoys enough people will be voted out of office, and one who really infuriates a smaller number will have made devoted enemies. They need the “political cover” of visible public support for a controversial project – even one that is patently beneficial – before they will approve it in the face of organized citizen opposition. If a contentious development proposal is to win the approval of political decision makers in today’s “Not in my Back Yard” America, the developer must understand the politics and figure out what he has to do to get a majority of the board to vote approval. Then, he must identify, educate, recruit and mobilize supporters. That is, he must run a political campaign. Land use proposals affect peoples’ perceptions – and in politics, perception is reality. A person who lives on a river will oppose construction of a power plant upstream from him, regardless of how much scientific evidence shows that there will be no pollution. His perception of the potential danger is real, and it is irrelevant whether his perception reflects an objective truth. He believes it and thus acts accordingly; that’s what counts. american coal council

Land use decisions are essentially political decisions and are, therefore, subject to the same rules of play that control political campaigns for office and ballot questions The point is that in land use politics, as in most else, everyone has an agenda. Even the pure of heart who don’t realize they have agendas actually do, because it’s human nature to think about how a given proposal will affect you, your friends and your community. Some agendas are easily spotted and straightforward. But others may not be so clear, and it falls to the project proponent to figure out what a given person or group’s real agenda may be, and to act accordingly. Land use decisions are essentially political decisions and are, therefore, subject to the same rules of play that control political campaigns for office and ballot questions: plan a campaign, devise strategy, identify leaders, organize field troops, anticipate opposition tactics and plan countermeasures, execute the campaign program, and get out the vote effectively to win.

Recognizing the opponent’s motivation as political, rather than simply religious, moral, or environmental, for example, is essential to mount an effective political strategy. If the opponent’s motivations are perceived as religious, civic or moral, they may well be unassailable at those levels. If the real motives are political, the debate is no longer about “right” and “wrong” but about how the issue affects the community. At that level, campaign tactics will work. The winner of this debate will be the side that is best organized, and devises and executes the most compelling political campaign. Those who fear adverse consequences from development are reacting emotionally, and they quickly become passionate in their opposition and convert that passion into political action. The challenge for an energy plant or any big project is that most people who might be in favor are not so rabid in their support 29


For politicians under pressure from various sides, voting against a project is generally easier than voting for one

that they will go beyond signing a petition to actually sit for hours at public hearings and actively demonstrate their support. Unless they belong to an organization with its own agenda that can round them up and get them to attend hearings, supporters are difficult to corral and even harder to keep committed. Organizing a grassroots political campaign to make that happen is hard work. It requires experienced political hands and tireless field organizers willing to knock on doors, make telephone calls, and build relationships to recruit and mobilize potential supporters. That’s why it’s so tempting to try an easier approach – rely on scientific data to “let the facts speak for themselves,” turn to political insiders, or sell a project (like toothpaste) on the strength of its many benefits. Or to attempt a half-baked quasi-political campaign through “astroturf ” tactics, such as internet petitioning, cookie-cutter letters or computer-generated lobbying of decision makers. The problem with such approaches is that they no longer work. Opponents 30

– frequently with the help and financing of business competitors – are sophisticated enough to recognize and discredit such “demonstrations” of support. The mere presence of real voters and established civic groups to offset the customary anti-development sentiment of crowds at public hearings, however, will surprise and unnerve opponents and get the attention of the public officials. These citizens are not duped into supporting a project, as is often alleged by opponents when AstroTurf efforts are attacked. They decide for themselves whether they like or dislike the proposal, which is why the land use political manager seeks out natural supporters – those he identifies as likely to favor the project, albeit for their own reasons – to form a citizens groups and to arrange coalitions among groups, each with its own agenda and reasons for supporting the project. Because the political approach organizes citizens and rouses them to express their views, it is politically effective in putting politicians on the “hot seat” – creating the predicament for public officials of voting

against their constituents’ expressed wishes. And, because it uses a political campaign approach that organizes public support, generates an inference of consensus, and identifies and addresses issues, it is effective in providing public officials with validation, or “political cover,” to justify their votes in favor of approval. This political cover is highly valuable, even essential, to the politician on several levels: it provides shelter from opponent attacks; a shield for use in the run-up to the next election; the politician with an opportunity to take credit if the project succeeds and proves popular; and the politician with an excuse to blame implementation if the project fails or proves unpopular. Faced by unchallenged or weakly challenged organized political opposition to a project, however, the status quo is usually best for re-election – and voting against a project is generally easier than voting for one.  u Christopher Hopkins is senior vice president for aggregates and mining, and Ben Kelehan is senior vice president for energy at The Saint Consulting Group (www.tscg.biz). american coal council


Nimby Wars: Your Own Personal Yellow Brick Road (Map)

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Review of: NIMBY Wars: The Politics of Land Use By P. Michael Saint, Robert J. Flavell and Patrick F. Fox Saint University Press, 2009, 225 pages Review by Jason Hayes, M.E.Des., Communications Director, American Coal Council

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ne well-known literary figure, having recently undergone a drastic change in the way they perceived and dealt with their local environment opined, “Toto, I have a feeling we’re not in Kansas anymore.” When any organization considers applying for a development permit today, they may be muttering the same words as our hapless heroine above. The land use planning landscape has changed drastically over the past few decades – almost as much as the landscape had after Dorothy and Toto’s breezy trip to Oz. In the past, permitting decisions were often made in the offices or back rooms of land developers and elected officials, and having someone with the right pull on your side as good as assured a permit approval. Today however, the decision over whether to approve a development is fought out on the streets and in the media. “Experts” once ruled the day and the average citizen was refused admission to even the most cursory aspects of the planning process; now, those citizens are an integral part of it. But it’s not only the local citizens that are getting involved. Thrown into the mix of developers, elected officials, and citizens, we also have special interests and stakeholder groups. Some of those groups have money; some have political power and connections; some have a religious fervor for their chosen area or issue. Some groups have all three of those characteristics and much more. Some of the groups are home-grown, or “grassroots” in nature and some come from a capital city hundreds, or thousands of miles away, complete with their own bankroll, legal team, and public relations group. Of course we can’t forget that your competitors are also tossed in on top of that pile. They too are demanding a say in how, when, where, and why you might develop or update your land. The recently published book, NIMBY Wars: The Politics of Land Use, gives readers a detailed look into the dog-eat-dog, cut-throat, and highly politicized world

of land use planning. A short and simple recap of the book goes something like ... “preparation is indispensible” ... there is no room for the faint-of-heart or the unprepared here, and in this world, pride will go before destruction. In fact, one mis-step can cost millions or get your project flat out rejected. As the authors of NIMBY Wars – Michael Saint, Robert Flavell, and Patrick Fox – clearly demonstrate, the local citizens, special interest groups, and competitive interests that now play a key role in land use planning and politics can make or break your development project. For the coal and energy industry, this book reinforces the reality that no plan for a new mine, an expanded mine, a new transmission line, a new generation station, or even a new employee parking lot and accompanying turn off will be immediately – or even easily – approved. But, lest the enlightened among us take this as a slight against the energy sources that have traditionally supplied our base load electricity, the authors also show how so-called green projects will likely face the same stiff competition and resistance from all sides. Put more simply, there are no more ‘slamdunk’ projects – green, or otherwise. There will always be the NIMBYs, or people who say, “Not In My Backyard!” Michael Saint, co-author of NIMBY Wars and CEO of Saint Consulting describes how, Land use politics will play a major role in determining our energy future. Mining projects, new generation facilities, transmission lines — all require permits and approvals granted through a process that is increasingly politicized. And it’s not going to change. Congressmen and governors are not about to take away the NIMBYs’ rights to say “no,” because people don’t vote for politicians who deny them the right to protect their own community. As NIMBY Wars describes, the new reality is that land use planning has moved 31


Now, everyone with an interest and a willingness to get involved can, and likely will, have a say in the final land use decisions. from the small network of “connected” individuals – developers, planners, and elected officials – into realm of advocacy and politics. Now, everyone with an interest and a willingness to get involved can, and likely will, have a say in the final land use decisions. And, like it or not, the approving agencies at the municipal, county, state, and federal levels are more likely to err on the side of doing nothing. They will often even turn down projects that propose to reclaim damaged or abandoned industrial sites, because the reclaimed site could change – forget making better or worse – traffic patterns, noise levels, dust levels, or any number of other site factors. Saint and his co-authors show that to have your project approved, you must be prepared to address citizen and special interest concerns before they become an insurmountable block for the elected officials who are reviewing your plans. Project

proponents must demonstrate to everyone involved that they have a plan to develop in a manner that will improve the area, while still protecting the interests, rights, and habits of all those other interested parties. Saint continues, The coal industry should recognize better than most the perfect storm that hits when NIMBY groups and competitors gang up to press a political attack. Valid scientific studies and technology can be ignored when one side controls the politics. The authors pull from their 25+ years of direct land use planning experience to reveal that although proper land use planning is an involved and expensive proposition, trying to cut corners will be far more expensive, and will likely get your proposal rejected. Thankfully, they also show that all is not lost and a mining company, utility, or developer can still

pilot their way through this increasingly complex and costly maze. NIMBY Wars provides an in-depth review of the recent changes in land use planning. It describes how land use planning has moved away from top-down controls, away from science and reason, and into the realm of feeling and politics. They explain how to develop an offensive plan against a development or a defensive campaign for a development, they show how to enlist locals (or “citizen soldiers”), they describe the development of campaign plans and back up plans for when Plans A, B, and C don’t work. They also provide a detailed appendix of their past case work that shows how land use policy is made today. Call it your own personal yellow brick road (map) to land use planning, because without it and the information it holds, you’re not likely to enlist the aid of a local Glenda the Good Witch. And we all know that without Glenda helping out, you’re not making it past the hordes of wingedmonkeys and wicked witches that are hovering over your next development.  u For more information on NIMBY Wars or to order this book, go to nimbywars.com

THE WAY ENERGY WORKS

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american coal council


The Three National Security Dimensions of Coal The Sources of the World’s Incremental Electricity Supply 2006–2030

Figure 1

By Jude Clemente

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he International Energy Agency (IEA) estimates the U.S. has nearly 270 billion tons of recoverable coal reserves, or roughly 250 years remaining at current levels of consumption. These reserves have an energy content exceeding that of the world’s known recoverable oil. Coal produces approximately half of the electricity consumed in the U.S. and deposits are found in 38 states. Coal is our single most important domestic energy resource. Coal’s contribution to electricity generation is recognized as irreplaceable in the decades ahead. Indeed, a 2008 national public opinion survey sponsored by the American Coalition for Clean Coal Electricity (ACCCE) found: • 72 percent support the use of coal to generate electricity and 69 percent answered “yes” to the question: “Do you believe coal is a fuel for America’s future?” • 72 percent agree new technologies would allow coal-fueled electricity plants to meet an ultra-low, near zero emissions profile – this includes the widespread deployment of Carbon Capture and Storage (CCS) within the next decade or so • 84 percent agree the development of new and advanced Clean Coal american coal council

Technologies (CCTs) offers opportunities to create high-paying domestic jobs and the ability to export these technologies to other countries Additionally, as the world’s fastest growing fossil fuel, coal’s affordability, availability, and reliability provide us a unique national security angle to gain allies abroad in “The Global War on Terrorism.” The export potential of CCTs, as they continuously develop, is a vital strategy to deepen our defense alliances by preparing others for the inevitable global transition to a low-carbon economy. Every one of the United Nations Millennium Development Goals has access to electricity as a necessary prerequisite. Figure 1 illustrates the world is once again turning to coal-fueled generation for incremental supply – reliability and low cost make it integral to global development. Thus, the support of CCTs is the support of domestic clean energy and a critical national security stance for all Americans. The current Administration strongly supports this position: “Carbon capture and storage technologies hold enormous potential to reduce our [greenhouse gas] emissions as we power our economy with domestically produced and secure energy,” President Barack Obama said. The present analysis delineates why the continued use of coal through the development of clean coal technologies directly supports the three dimensions of our

established national security objective of enhancing: 1) energy security, 2) economic security, and 3) environmental security. 1. Energy Security In 2008, the U.S. Department of Energy’s (DOE) National Energy Technology Laboratory (NETL) noted the opposition to the construction of new coal-fueled power plants was leading to capacity shortages in many parts of the country and endangering U.S. energy security. “The current opposition to baseload power, and in particular coal-fueled plants, in anticipation of climate change legislation, will have serious and damaging implications for the reliability of electricity supply and the viability of the U.S. economy,” NETL reports. Coal is a dependable element of energy security, as its use supports the overarching goal of decreasing our dependence on imported energy. Shortly after the terrorist attacks of Sept. 11, 2001, the National Academy of Sciences, our most prestigious scientific organization, conducted a detailed analysis of the vulnerabilities of the main U.S. energy sources – nuclear power, oil, natural gas, coal, and the electric power system itself. The Academy indicates coal is clearly the least vulnerable to terrorist attack. Coal is safely and easily transported and does not require complex pipelines that must be expensively protected (unlike oil and natural gas). Coal’s sources and uses are decentralized, thereby presenting a 33


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smaller target for enemies. The utilization of coal is an inherent buffer against supply disruptions because it is typically stored at power generating facilities. The U.S. Department of Defense (DOD) regards coal as a proven source of energy security largely due to its unmatched fuel flexibility. Coal-to-liquids (CTL) technology was used by Germany’s armed forces during World War II and commercial production has been ongoing in South Africa since the 1950s. The Office of the Secretary of Defense Initiative and The Defense Energy Support Center illustrate the DOD’s commitment to developing alternative liquid fuels derived from secure domestic resources, such as coal. Currently, the DOD uses nine different petroleum-based fuels for its jet engines, gas turbines, and diesel engine applications and has a goal of developing a single battle space fuel for all branches of the Military. The U.S. Air Force consumes approximately 10 percent of the total jet fuel in the U.S and is acutely aware of the significant advantages of CTL fuels, which can be produced to military specifications. The U.S. Navy is interested in alternative transportation fuels for ships and aircraft. The U.S. Army is testing synthetic fuels in tactical vehicles and generators. The DOD purchases more jet fuel than any other organization in the world and serves as an incentive and catalyst for a commercial CTL industry to produce clean fuels for the Military. In stark contrast to other proposed solutions, CTL conversion utilizes mature technologies and has known costs. Investments in liquid coal will only become more profitable because rising global demand and declining resources ensure oil prices will continuously increase. Indeed, the IEA supports CTL plants because they can “bear the higher cost of CCS and establish a CO2 transport and storage infrastructure that can subsequently be applied to power generation facilities.” RAND Corporation concludes CTL utilization is “feasible at crude oil prices well below the prices seen in 2007 and 2008.” Figure 2 demonstrates the 3 million barrels per day CTL industry proposed by RAND could help supplant risky or now fading sources of U.S. crude oil imports. 2. Economic Security Generating a half of all U.S. electricity, coal is one of our least expensive energy american coal council

CTL: Offsetting U.S. Crude Oil Imports

Figure 2

resources. We have consistently relied upon coal to meet growing demand and moderate energy costs for families and businesses. Coal provides stability in both price and availability. Coal sustains our economy because it is readily affordable, available, and reliable. In fact, coal-fueled electricity

has been the cornerstone of the economic empowerment and rising quality of life generations of Americans have enjoyed since the turn of the last century. Research by Schurr (1984) and Jorgenson (1991, 1994) indicated that falling electricity prices (largely credited to the

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use of coal) were at least as important to the productivity growth of the U.S. economy during the 1980s and 1990s as the development of computer technologies. Research by the Center for Energy and Economic Development and others have shown the substantial benefits delivered by coal-fueled power plants and the economic damage that would result if new laws force a reduction in use. For example, a 2006 study by Penn State University analyzed the economic benefits of coal and the potential impact of replacing coal with less reliable, more costly energy sources, such as natural gas and a 10 percent renewable energy mix. Research suggests that by 2015: • The benefit of coal use per year at current project levels is expected to be more than $1 trillion in gross domestic product (GDP) – $360 billion in additional household income and nearly 7 million jobs • A 33 percent decrease in coalfueledpower generation would lower our GDP by $166 billion, household income by $64 billion, and the employment level by 1.2 million people than what would exist otherwise • A 66 percent decrease in coal-fueled power generation would reduce GDP by $371 billion, household income by $142 billion, and employment by 2.7 million people Coal is giving more and more people across the globe an opportunity to step into the modern world. Developing countries, most notably China and India, are

specifically committing to coal. Its reliability and low cost have rescued literally hundreds of millions of people from the depths of abject poverty. Further, these two nations, holding nearly 40 percent of humanity, will require unprecedented levels of energy to sustain their growing economies. Their extensive supplies of coal can help us stave off the geopolitical tension increased competition for resources will surely ignite. Both China and India have relatively small oil and natural gas reserves. The security, stability, and availability of coal help mitigate price shocks in global energy markets. A national CTL program, for instance, would decrease our exposure to the world’s precarious oil market and lessen the impact of a supply disruption. Additionally, every produced barrel of unconventional liquid fuel lowers the price of oil and reduces revenues for major global suppliers – several of which use “petrodollars” to fund terrorism and/or spread anti-democratic ideals. The coal industry is a leading sector in many states and has a long history of highpaying job creation. America’s massive coal endowment is a strategic resource whose economic value in the digital age will be as great as it was in the industrial age. Technologies to use coal cleanly and capture carbon dioxide will be in high demand around the world –creating millions of jobs and other economic opportunities. The U.S. Department of Commerce conservatively projects global demand for CCTs will reach $260 billion from 2003-2030 alone.

3. Environmental Security Even the opponents of coal recognize the inherent value of the fuel and the importance of CCTs. Former U.S. Vice President Al Gore, has stated: “When the cost of not using it [coal] is calculated, it becomes obvious that CCS will play a significant and growing role as one of the major building blocks of a solution to the climate crisis.” CCS technology, once fully demonstrated at utility scale, will be broadly deployed rather quickly. Government support of these imperative projects is materializing: The Obama administration’s economic stimulus package, The American Recovery and Reinvestment Act of 2009, sets aside $2.4 billion to expand and accelerate the commercial deployment of CCS. The American Clean Energy and Security Act of 2009, which passed through the U.S. House of Representatives and is now being debated in the U.S. Senate, also offers key provisions that will facilitate the demonstration and deployment of CCS power plants. “…Prosperity depends upon reliable, affordable access to energy. Coal … is likely to be a major and growing source of electricity generation for the foreseeable future.…We must make it our goal to advance carbon capture and storage technology to the point where widespread, affordable deployment can begin in 8 to 10 years,” said Steve Chu, Secretary of Energy. The European Union recognizes commercial CCS as enough of an emerging reality it wants all coal-fueled power plants to be fitted with CCS technology by 2020. The G-8

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nations strongly support launching 20 largescale CCS demonstration projects around the globe, with the goal of beginning broad deployment by 2020. Just as importantly, the IEA supports the 2020 target date. Rajendra Pachauri, chair of the Intergovernmental Panel on Climate Change (IPCC), the voice of authority on climate change, also encourages an expanded role for CCTs: “They [CCS projects] will work, I see no reason why a technology of that nature will be anywhere beyond human capabilities.” With coal’s dominant position in poverty reduction assured in the decades ahead, he believes all that is lacking for widespread CCS is the political will to commit to commercial deployment by 2020. The benefits involved are profound; Pachauri’s native country, India, has some 400 million people without access to electricity (the IEA reports the figure worldwide is 1.5 billion). From gasification to sulfur-capturing scrubbers, the effect the wide range of CCTs is having on electricity generation is comparable to the influence microprocessors had on computers. “CCTs have been developed and deployed to reduce the environmental impact of coal utilization over the past 30 to 40 years,” says the IEA, the operator of a Clean Coal Center. The U.S. coal industry has a proven track record of developing technological pathways to successfully address environmental concerns.

“We must make it our goal to advance carbon capture and storage technology to the point where widespread, affordable deployment can begin in 8 to 10 years.” – Steve Chu, Secretary of Energy Power plants built today emit 90 percent fewer criteria emissions than those they displace from the 1970s. Since 1980, CCTs have slashed power plant emissions by 54 percent, despite a 71 percent increase in coal-fueled generation. With even steeper reductions on the horizon, the total opposition to coal projects across-the-board greatly impedes the deployment of more advanced plants capable of reining in nearly all emissions. The IPCC confirms current CCT technologies can already capture approximately 85–95 percent of the carbon dioxide (CO2) processed in a capture plant. The result is a power plant with CCS could reduce CO2 emissions by 80–90 percent compared to a plant without CCS. In 2008, the DOE reported the U.S. has the capacity to store 3,900 billion tons of CO2 at 230 different underground sites. Considering the U.S. emits 6-7 billion tons of CO2 every year, this means ample space exists to store 100 percent of its emissions for approximately 560 years. According to the IPCC, properly managed geological formations are likely to retain more than 99 percent of the injected CO2 for over 1,000

years. CO2 becomes much less mobile over time. Indeed, CCS is a prime example of the unique opportunity we have to simultaneously enhance U.S. energy security and mitigate the adverse effects of climate change.

References ABC Services, “IPCC chairman discusses the fight against climate change,” Lateline, Oct. 23, 2008, available at http://www.abc.net.au/lateline/content/2008/s2399649.htm.

Bond Pearce, Oil & Gas Review, March, 2009.

U.S. Energy Information Administration, 2009 International Energy Outlook, May 27, 2009, available at http://www.eia. doe.gov/oiaf/ieo/.

America’s Power, “Behind the Plug: Using Coal to Neutralize National Security Threats,” 2008, available at http://behindtheplug.americaspower. org/2008/03/using-coal-to-n.html.

National Center For Policy Analysis, Economic and Public Health Benefits of Coal-Based Energy, Sept. 27, 2006, available at http://www.ncpa.org/pub/ba573.

Americas Power, “Next Presidential Administration Has Mandate for Use of Coal,” Nov. 4, 2008, available at http://www.americaspower.org/index. php/News/Press-Room/Press-Releases/ Next-Presidential-Administration-HasMandate-for-Use-of-Coal. Barack Obama: New Energy For America, available at http://www.barackobama.com american coal council

International Energy Agency, Clean Coal Technologies, Coal Industry Advisory Board, 2008.

RAND Corporation, Assessing a Coal-toLiquids Fuel Industry in the United States, Project Air Force and Infrastructure, Safety, and Environment, 2008.

Conclusion Due to record oil prices, the constraints on nuclear energy, the volatility of natural gas prices, and the inherent limitations of renewable energy, coal is the standout choice to: 1) meet the inevitable rise in electricity demand and 2) enhance energy security. CCTs extend our energy self-reliance and will solidify coal’s critical position in the U.S. energy system in the switchover to a low-carbon economy. As the U.S. Air Force puts it, we can “neutralize a national security threat by tapping into the country’s abundant coal reserves.”  u Jude Clemente is an energy security analyst and technical writer in the Homeland Security Department at San Diego State University. He can be reached at judeclemente21@msn.com.

U.S. Energy Information Administration, “Electricity Net Generation: Total (All Sectors), 1949-2008,” available at http:// www.eia.doe.gov/emeu/aer/txt/ptb0802a. html. U.S. National Energy Technology Laboratory, Natural Gas and Electricity Costs and Impacts on Industry, White Paper on Expected Near-Term Costs Increases, April 28, 2008.

Scott Klara, Director, Strategic Center for Coal, National Energy Technology Laboratory, U.S. Department of Energy, testimony before the Committee on Science and Technology, U.S. House of Representatives, Oct. 21, 2009. 37


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No Easy Climate Answers: The Aftermath of “Climategate” and the Copenhagen Accord By Stefanie e. dittert, rhino energy llC

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hether your views align more closely with Al Gore’s inconvenient truths or Lord Christopher Monckton’s unapologetic skepticism on the topic of anthropogenic global warming, one common thread has recently weaved its way through both camps: uncertainty as to how the events of the past few months will ultimately impact global climate change legislation, particularly with regard to carbon emissions. The controversy began in November, a mere two weeks before the world’s leaders were set to gather in Copenhagen for the 2009 United Nations Climate Change Conference. A scandal that has been christened as “Climategate” rocked the Climate Research Unit (“CRU”) at the University of East Anglia in Norwich, England. More than 1,000 emails and 2,000 other documents spanning the past 13 years were copied from a campus server and distributed across the internet. An initial read through the most controversial of these emails suggested misconduct by some of the world’s foremost american coal council

climate change scientists. Widely publicized quotes were trumpeted by skeptics to imply efforts by CRU to commit a litany of sins: the conscious distortion of global average temperature data to better support the theory of global warming; the destruction of emails and files to avoid disclosure to critics under the US and UK Freedom of Information Acts; and the discrediting and silencing of global warming dissenters in both scientific journals and the peer review process for reports issued by the UN Intergovernmental Panel on Climate Change (“IPCC”). In the aftermath that followed, these claims were unequivocally rebuked by the scientists involved. Their most common argument was that their words were taken out of context and misrepresented to imply a meaning that was never intended. With regard to data manipulation, scientists at CRU maintained that their publications were of the highest quality and consistent with those from other institutions such as NASA. The Associated Press conducted an independent review of the emails and

declared they did not support claims that any climate change science had been distorted. Months after the initial breach, the battles continue, and the truth seems to be somewhere in the middle of the two camps. Both the University of East Anglia and the British government have initiated investigations into the allegations. The University has commissioned an independent review to evaluate whether its peer review process complies with best practices in the scientific community. Furthermore, CRU issued a statement that it would publicly publish the full body of its climate change data as soon as it received the necessary clearance from certain non-disclosure agreements. Though all these actions are steps in the right direction, there remains a troubling underpinning to the situation. The Climate Research Unit is one of the world’s foremost repositories for data in support of anthropogenic global warming and a critical source of data that supports the climate models and conclusions of the IPCC. In 39


Just as advocates push for increased research and development spending to making green technologies more affordable, we must also invest capital to ensure our carbon-based energy is as clean as possible. turn, the reports issued by the IPCC are the driving force across the globe behind the drafting of legislation to limit carbon dioxide and other greenhouse gas emissions. If significant and valid problems are confirmed with CRU’s climate data or scientific peer review process, this could have substantial ripple effects on the proposed global regulations. In light of the uncertainty surrounding these allegations, it comes as little surprise that the Copenhagen Accord, the document drafted and adopted at the 2009 UN Climate Change Conference, was not as revolutionary as some might have wished. Among advocates of emissions cuts, hopes were high for the meeting to produce a legally binding document with specific emissions targets for industrialized nations. This process was initiated at the 2007 meeting in Bali, where a two year road map was laid out to draft binding legislation to replace the Kyoto Protocol. (The first round of Kyoto expires in 2012.) This goal was not met, as delegates to the conference agreed only to “take note of ” the Accord. Despite its perceived flaws, the Copenhagen Accord does present strong language as to the intentions of the member countries. The agreement endorses the continuation of the Kyoto Protocol and asserts that climate change is one of the greatest challenges of our generation, a challenge that can only be overcome with immediate and significant action on a global level. Delegates agreed that the earth’s temperature must be kept within two degrees Celsius of the pre-industrial average temperature, which they estimate would require cutting greenhouse gases by at least half in the next forty years. Though no universal target was set for developed nations, each country is required to submit its own emission reduction levels to be reached by 2020. The United States has committed to reduce its greenhouse gas emissions by at least 17% (below 2005 levels) by this time. As professionals in the energy industry, these are the points we need to keep at 40

the forefront of our minds. Despite the controversy surrounding the integrity of the data from the Climate Research Unit, actions are still being taken to pass global climate change legislation with aggressive carbon emission reductions. Though the Copenhagen Accord did not achieve its primary goal of binding emissions targets, this is still an objective of many of the delegate nations in the very near future. Despite the projection that global energy demand will double by 2050, emissions of greenhouse gases must be cut in half by this time (from 2005 levels) to comply with the Accord. Looking ahead to the year 2050, the simple fact remains that the world currently does not possess a reliable, affordable energy source with which to replace fossil fuels and

meet increased energy demand. At the same time, real concern exists that we do not have a reliable, affordable technology with which to meet these increased emissions standards. Therefore, the world has a choice as to how to invest the $30 billion promised by delegate nations in the next three years and the $100 billion to be raised annually from 2020 onward, with the goal of helping developing nations comply with climate change legislation. Just as advocates push for increased research and development spending to making green technologies more affordable, we must also invest capital to ensure our carbon-based energy is as clean as possible. Stefanie Dittert is the director of analysis and business development at Rhino Energy LLC.

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Threats to Coal Production By Thomas J. Pyle, Institute for Energy Research

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uring difficult economic times, it stands to reason that government would do everything in its power to create the conditions that allow businesses to compete, expand or, more fundamentally, simply keep the lights on. Unfortunately, as is often the case, the U.S. government’s policy toward coal currently lacks reason. The U.S. has the largest coal reserves in the world and coal is a low-cost, domestic energy source. Using inexpensive energy helps keep American jobs here at home and allows families and businesses to affordably cool or heat their homes and businesses. Still, coal faces attacks like never before. Amazingly, it is harder to dig a mine in the U.S. than in any other country in the world. The Wall Street Journal recently reported that it takes an average of seven years to get the necessary permits and approvals to start mining. By comparison, in Australia it only takes an average of one to two years to navigate the approval process. Many of the problems with the mining approval process predated President american coal council

The Administration wants to eliminate tax credits for coal, oil, and natural gas because, according to the Administration, it “encourg[es] the overproduction of coal” and promotes “more investment in fossil fuel production than would occur under a neutral system.” Obama, but none of that should absolve this Administration’s coordinated attack on coal. Even the president’s supporters are beginning to have second thoughts. West Virginia Senator Jay Rockefeller recently told a reporter that, “I just wonder whether they really do understand the importance of coal, the fact the nation can’t exist without it.” He went on to say that the president’s commitment to coal is “beginning to not be believable to me.” Last year Sen. Rockefeller blasted the Environmental Protection Agency (EPA) for threatening to revoke a permit for a mountaintop removal mine after the agency had previously granted approval for the mine. The EPA also held up more than 70 mining permits because of water

quality concerns. West Virginia state regulators have grown frustrated with EPA’s reluctance to answer their questions. Not only is the Administration making it more difficult to get the coal out of the ground, it’s making it harder and more expensive to use it. One of the Administration’s signature proposals is cap-and-trade. The very point of cap-and-trade is to make using coal and other fossil fuels expensive; as President Obama put it, cap-and-trade will make the price of electricity from fossil fuel sources “necessarily skyrocket.” The Administration continues to push for cap-and-trade, even though its prospects currently look bleak. Maybe even more important than capand-trade is the White House’s continuing 41


attempts to regulate carbon dioxide via the Clean Air Act. Despite Congress’s inability to pass cap-and-trade to date, the Administration has barreled forward with regulations to limit carbon dioxide emissions. The Administration was under no obligation to regulate carbon dioxide using the Clean Air Act, but it has voluntarily chosen to use that tool against fossil fuels, the very energy that powers 85 percent of our economy. That the Clean Air Act is ill-suited to regulate a global issue like world-wide levels of carbon dioxide is a fact conceded even by those who support the strategy. The act was written to deal with local and regional pollutants, not something every human exhales when they breathe. As a result, trying to regulate carbon dioxide with the Clean Air Act will result in the regulation of many sources of carbon dioxide emissions such as over one million buildings, farms, large churches, universities, hospitals, and office buildings. The EPA understands the Clean Air Act, as currently written, would greatly increase its work and force it to regulate many small emitters of carbon dioxide. As a result, the agency is proposing not to regulate the small carbon dioxide emitters for five years and instead focus on regulating coal-fired power plants and other large emitters. EPA’s plan is of dubious legality, and it shows how the Administration has focused on regulating and, ultimately, eliminating the use of coal. One thing that helps explain the psychology behind the president’s enmity toward coal can be found in the White House’s newly-released budget blueprint. The Administration wants to eliminate tax credits for coal, oil, and natural gas because, according to the Administration, it “encourg[es] the overproduction of coal” and promotes “more investment in fossil fuel production than would occur under a neutral system.” In other words, the Administration believes that Americans’ energy prices are too low and we produce too much coal. It would likely come as a shock to Americans struggling to get by that the official position of the executive branch of the U.S. federal government is simply this: Energy is too cheap. Interestingly, though, the Administration’s odium toward energy subsidies appears not to apply to some of the most inefficient, unreliable sources of energy in existence. It’s true that coal, oil, and natural gas 42

receive modest incentives, but on a per unit basis of energy, these incentives are tiny compared to renewables. Da t a p u b l i s h e d by t h e En e r g y Information Administration in 2008 shows that solar energy was subsidized at $24.34 per megawatt hour and wind at $23.37 per megawatt hour for electricity generated in 2007. By contrast, coal received 44 cents, natural gas and petroleum received 25 cents, hydroelectric power 67 cents, and nuclear power $1.59 per megawatt hour. Wind and solar producers argue that renewables are infant industries that need special help. But one has to wonder if wind and solar will ever mature as industries at all, given the billions of dollars that have already been poured into their research and development. In addition to the Administration’s actions to date, the New York Times recently reported that President Obama is looking to use “executive powers” to achieve his energy goals. It isn’t clear what those goals are, but one option would be to follow the example of President Clinton and declare National Monuments to stop future mining. In 1996, President Clinton declared an area in southern Utah as the Grand

Staircase-Escalante National Monument. This designation banned coal mining on the Kaiparowits Plateau. In the future, there will be other threats to coal. One example is low-carbon fuel standards. California and northeastern states are in the process of implementing a regulation that requires the reduction of carbon dioxide emissions associated with the production, manufacture, transportation and combustion of transportation fuels. Effectively, a low-carbon fuel standard makes fuels that require a lot of processing and energy to make, such as oil from oil sands, more expensive. But such a policy would also make a future fuel, like using coal to produce liquid fuel, prohibitively expensive. Coal is under attack like never before. The United States is home to the world’s largest coal reserves and coal produces the lowest-cost electricity. We are hampering our ability to compete in a global economy by implementing policies that artificially make it harder to mine and use coal.  u Thomas J. Pyle is president of Institute for Energy Research (www.instituteforenergyresearch.org).

AmerenEnergy Fuels and Services Company (AFS) provides a full range of fuel-related and business development services to the Ameren group of companies. AFS also provides assistance to some unaffiliated business, assisting with specific fuels, ash management and emission related issues. AFS procures over 40 million tons of coal from the Powder River and Illinois Basins for use in the Ameren generation fleet. In addition to procurement, AFS provides transportation services related to negotiation and administration of rail, barge and truck contracts, as well as the management of over 5000 system railcars. Management and marketing of coal river terminals on the Mississippi River is another area of expertise for AFS. AFS has the ability to provide blending and rail to water trans-loading services for both in-house and third party users. Combustion by-product services for beneficial use such as flowable fill projects as well as ash disposal options are additional services provided by the AFS team. AFS provides all procurement of natural gas on both the wholesale and retail level to over 925,000 customers in the Ameren UE, Ameren Energy Generating Company, Ameren CILCO and AmerenIP territories. Market research is an additional function of AFS, providing senior management as well as plant operations with the necessary information required to keep on top of the ever-changing fuel and transportation markets. The Business Development group of AFS is also responsible for activities related to renewable energy resources and the development of “green generation projects.” Visit our web-site at www.ameren.com. american coal council


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Nuisance Litigation:

Proactive plans for a growing threat By Maureen Martin, Heartland Institute

I

n the past two decades state attorneys general, usually in cahoots with plaintiffs’ contingent fees lawyers, have brought public nuisance cases seeking billions of dollars in damages from manufacturers of a variety of products – guns, asbestos, and lead paint, among many others. Vigorous defense of these cases has almost entirely defeated them. But now, public nuisance litigation is aimed at the electrical power generating industry. So far this litigation, unlike older cases, is succeeding far too well in the courts. Three suits are pending in New York City, New Orleans, and San Francisco. Their core allegations are that the defendant energy companies contribute to manmade global warming through their substantial emissions of carbon dioxide, a greenhouse gas which helps trap heat in the earth’s atmosphere. Global warming legally amounts to a public nuisance, the cases allege, significantly caused by the defendants. The cases couple two questionable theories, one legal and one scientific. The legal theory of public nuisance has long been scorned by serious legal scholars because it is so vaguely defined. It includes anything that “unreasonably interferes” with a right common to the general public. One scholar said it could apply to “Everything from an alarming advertisement to a cockroach baked into a pie,” adding that the theory is “incapable of any exact or comprehensive definition.” This, of course, is exactly what plaintiffs like about it. The scientific theory in the present cases is that manmade emissions of carbon dioxide cause global warming. This theory has been increasingly discredited, as the science behind it is emerging as highly questionable, one-sided, and in important instances, fraudulent. Despite all this, two federal courts of appeals ruled last fall that the New York and New Orleans cases can go forward to trial, and a ruling is expected allowing the California case to go forward as well. The California case is perhaps the least threatening from a monetary standpoint. american coal council

In public nuisance cases, the best defense is a good offense and there is plenty of evidence demonstrating the lack of sound science behind the manmade global warming claims.

The plaintiff is a small Inupiat Eskimo Village of Kivalina on the northwest coast of Alaska on the Arctic Sea. The complaint alleges the energy defendants’ emissions of carbon dioxide contribute to global warming which contributes to sea-level rise which will require the relocation of the village. Cost is estimated at between $95 million and $400 million. The federal trial court dismissed the case, but that ruling is on appeal to the liberal U.S. Court of Appeals for the Ninth Circuit. The New Orleans case has a significantly higher price tag – billions or even trillions of dollars could be involved. It’s a class action lawsuit on behalf of all persons whose property was damaged by Hurricane Katrina. The defendants are operators of energy, fossil fuel, and chemical industries. Plaintiffs allege that emissions of massive amounts of carbon dioxide increased the ferocity of the hurricane and damaged their property. The trial court dismissed the case on the ground it involves political questions

committed to Congress and unsuitable for judicial resolution. The Court of Appeals for the Fifth Circuit reversed this ruling in October 2009. The New York case is quintessentially regulation-by-litigation: it seeks to force six electric power generating defendants to cap their carbon dioxide emissions. The trial court dismissed the case on political question grounds, but the Court of Appeals for the Second Circuit reversed this ruling in September 2009. Recent regulatory actions by the United States Environmental Protection Agency support the plaintiffs’ allegations; in particular EPA’s finding that carbon dioxide emissions endanger human health or welfare. Although these actions are being challenged before the agency and in court for their flaws, their very existence gives powerful impetus to this litigation for the time being. These three decisions involved legal arguments such as standing and separation 45


of powers at an early stage of the proceedings. None of these three cases was resolved on the merits of global warming science. Nevertheless, the cases are troublesome. First, the language of the two Court of Appeals decisions indicates the courts are lopsidedly leaning in favor of the plaintiffs, which telegraphs that they are likely to lean in their favor on the merits as well. Second, if these initial cases succeed, such cases will proliferate, and the entire energy industry will be subjected to trillions of dollars of potential liability and regulatory costs not warranted by the scientific evidence. For both those reasons, a decisive rejection of these pioneering cases is critical to avoid burdening the energy industry. This may not be as difficult as it sounds. Challenging the science on which these cases are based is the most effective way to defeat them. There are two ways to accomplish this. First, the U.S. Supreme Court in Daubert banned the use of “junk science” in federal court and requires judges to ensure that expert scientific evidence is reliable. A pretrial Daubert motion to limit or bar the admissibility of the science allegedly showing manmade carbon dioxide emissions are responsible for global warming, brought early in the proceedings, could be extremely effective. Second, if the pace of revelations that global warming is based on “junk science” continues, a motion under Rule 11 of the Federal Rules of Civil Procedure, which bans frivolous litigation, could be brought; again best done early on. If successful, such a motion could result in sizeable financial sanctions against the plaintiffs. There is plenty of evidence demonstrating the lack of sound science behind the manmade global warming claims. For one thing, it is increasingly doubtful that global warming is taking place at all. In late 2009, emails were released from the Climate Research Unit (CRU) american coal council

at the University of East Anglia written by leading scientists who control the Intergovernmental Panel on Climate Change, previously viewed as the “gold standard” of pro-global warming data. These emails show a pattern of skewed and missing data, distortion of the scientific method, and suppression of contrary academic views. Among other things, CRU prepared a database of temperature data alleged to show warming over the past 150 years. The same data is used by the National Oceanic and Atmospheric Administration and the National Aeronautics and Space Administration. All three have dropped numerous weather reporting stations from colder areas of Russia and Canada, which casts doubt on claims that the climate is warming. In fact, because Russia includes 12.5 percent of the world’s landmass and the omitted data is so significant, the Russian Institute of Economic Analysis has called for the temperature data to be recalculated. In mid-February, Phil Jones, head of the CRU unit until after the emails became public, made several crucial concessions. First, he said CRU has lost track of the raw data, so that the database compilation cannot be verified. Second, he said it was possible medieval temperatures in the world were warmer than in modern times, which would totally discredit the claim that global warming is manmade. And third, he admitted that there has been no “statistically significant” warming in the past 15 years. This data is only a small fraction of the science demonstrating that global warming is cyclical and natural. In these public nuisance cases, the best defense is a good offense based on a thorough understanding of the science.  u Maureen Martin is senior fellow for legal affairs at The Heartland Institute.

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PACE: Fighting for Energy Fairness By Josh Veazey, Partnership for Affordable Clean Energy

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t the National Waterways Conference in Charleston, West Virginia, this past September, a youngish man in a dark suit started his presentation the same way he always does. With a slight Southern accent, he told the gathered crowd, “When it comes to electricity, we don’t have an energy crisis in this country. We have a political crisis.” Earlier in the month, he sat alongside U.S. Representative Mike Rogers in Alexander City, Alabama, and gave the same remarks in an energy town hall meeting. The following Monday, he delivered the message to community leaders in College Park, Georgia, with the former head of the Southern Christian Leadership Conference (SCLC), Dr. Charles Steele. This man’s name is Lance Brown and he runs PACE, the Partnership for Affordable Clean Energy. While other groups might

get more airtime in the national energy debate, Brown says that the future of American energy will be won and lost in the trenches. “The only way we’re going to have the American energy future we deserve is by activating the consumers and businesses that will ultimately pay for it,” says Brown. “PACE feels that the national energy debate had lost all sense of balance and was no longer focused on what people really care about – cost and reliability.” Brown formed PACE in January 2009 with a diverse coalition that included business groups, labor organizations, and pulp and paper companies. Since then, the partnership has grown to 20 institutional partners and expanded to include agriculture and consumer groups. The Montgomery, Alabama-based organization has also attracted some high-profile

allies such as former SCLC President Dr. Charles Steele, a recognized national voice for civil rights. “What PACE has been able to accomplish is absolutely remarkable,” says Steele, who has helped spread the energy fairness message by speaking to the National Conference of Black Mayors in Las Vegas and visiting local churches. “When you get down to it, it is never the political talking heads or the think tanks that are responsible for social change,” explains Steele. “It takes groups like PACE who speak to people in their communities, make them understand what is at stake, and refuse to capitulate when they have truth on their side.” Delivering the Message PACE’s platform has shifted very little with the prevailing political winds in

“When it comes to electricity, we don’t have an energy crisis in this country. We have a political crisis.” – Lance Brown

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Lance Brown delivers the consistent PACE message of a balanced approach to energy that keeps all energy options on the table.

Washington, D.C. From the beginning, the group has argued for a balanced approach to energy that keeps all energy options on the table, recognizes regional differences in resources, and ensures that electricity ratepayers end up with power bills they can afford. It is an argument that is not simply consistent, but also thoroughly researched and updated. “We spend a great deal of time studying energy issues and trying to present a clear, articulate picture to people,” says Brown. “Folks might not always agree with our assessment, but our bottom line arguments are rooted in reality and research.” The truth is, though, PACE finds most of its audience nodding in approval. The group argues, for example, that federal authorities have always considered hydroelectricity a renewable energy source,

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and yet landmark climate legislation that passed the House in 2009 failed to fully count hydroelectric production toward a renewable energy standard. PACE says that distinction alone would cost the Southeast hundreds of millions of dollars. PACE also devotes a significant portion of its face-time with consumers to explaining why alternative energy sources such as solar and wind energy are not going to replace current energy sources anytime soon. “In our town hall meetings, we would have a lot of people convinced that solar and wind energy were going to power their community,” explains Charles Steele. “But when you show them the maps of where the solar and wind resources are, they realize pretty quickly that what works in

California or South Dakota isn’t going to work here.” One of PACE’s most effective anecdotes arose from a tour of Plant Miller, a 3,000 MW coal-fired plant north of Birmingham, Alabama. As part of a tour alongside congressional staffers and local leaders, Brown asked plant operators how much of the plant’s capacity it takes to run the SCRs (selective catalytic reduction), or scrubbers, that reduce the plant’s emissions. The answer was 30 MW, or one-percent of the plant’s total capacity. “To put things in perspective, the largest fully-operational solar plant in the U.S. today is 25 megawatts,” Brown states regularly to audiences. “Solar power does hold promise, but the largest solar plant in the country wouldn’t even power the scrubbers at Plant Miller.”

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Lance Brown: activating consumers and businesses.

It is that level of authentic, firsthand analysis that sets PACE apart from other commentators in the energy debate. “Frankly, I was blown away by the attention to detail shown by PACE when they presented to our group,” says Cline Jones, Director of the Tennessee River Valley Association, a group that invited Brown to speak at its annual convention last October. “There was specific research about the tonnage of coal that travels along the Tennessee

River and what impact national carbon policies could have on the regional economy.” Brown maintains an aggressive travel schedule throughout the Southeast, presenting at annual conferences, hosting town hall meetings, speaking to workers at power plants, and seizing almost any opportunity to sermonize on the need for a smart approach to energy. PACE also serves on an advisory board to the Tennessee Valley Authority and is active in green jobs initiatives. “We want to be a resource to policymakers or anyone looking for common sense solutions for powering this nation for the next hundred years,” explains Brown. “And you can’t do that without being a fair and honest broker of information.” Powering the Future In a future where energy demand will continue to grow, despite gains in energy efficiency, PACE believes that coal has an important role to play in America’s energy future. The organization routinely calls for greater investment in carbon capture, allowing the U.S. to take advantage of native coal reserves. It is a subject PACE should be familiar with, given that the

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nation’s first carbon capture demonstration project is less than one hundred miles away in Wilsonville, Alabama. “If you have 200-plus-years of a resource, you would be foolish to simply walk away from it,” says Brown. “National policymakers have no problem showing great faith in the future of solar or wind, but they have been hesitant to extend the same hope to carbon capture. We believe that’s wrongheaded and impractical.” That belief in coal technology has led PACE to battle with the Sierra Club over a new coal-gasification plant in Kemper County, Mississippi, a project that Brown contends offers significant improvement in emissions from the state’s native lignite coal reserves. It is that same sense of speaking truth to power that has caused some regional leaders to take note of PACE. Among those leaders is Susan Parker, an Alabama Public Service Commissioner who is also the incoming President of the National Association of Regulatory Utility Commissioners (NARUC). This past April, Parker served on a panel with other regulatory experts at a renewable energy conference sponsored by PACE. She quickly became a fan. “PACE has done an excellent job of spreading the word about the potential impact of renewable portfolio standards on electricity customers in the Southeast,” says Parker. “I applaud PACE’s other education efforts, but it’s the work the organization has done on renewable standards that I appreciate most. That’s such an important story to tell.” But the battle is far from over, says Brown, pointing to national energy legislation that is likely to come in 2010 and a potential move by EPA to regulate greenhouse gases, an initiative that PACE vehemently opposes. To prepare, the organization is already planning more town hall meetings and summits to spread the word about energy fairness. And while it’s anyone’s guess the direction Congress may take – proposals have ranged from straight-forward carbon taxes to renewable energy standards – one thing seems extremely likely: PACE will be part of the discussion.  u Josh Veazey is an intern at PACE (www.energyfairness.org). Josh is also producing a documentary on the national energy debate, watch the PACE and ACC websites for updates on its release. american coal council


Here’s Why Advertising During A Recession Is Good Business By Robert Evans Wilson, Jr.

Editor’s note: At American Coal, we are unswervingly focused on coal and the coal industry. However, we thought that this issue might offer more to our readers if we invited viewpoints from outside our typical author pool. With this article, we hoped to help a member or member company wondering how to focus their marketing decisions in an uncertain economy.

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few years ago when my wife was expecting our second son, we realized it was time to move our first born out of the nursery and into a regular bed. So, on a Saturday afternoon, we retrieved my old bunk-beds from my parent’s attic. All we needed to do was buy a couple of new mattresses. The following morning, as we lingered over coffee and the Sunday paper, my wife pointed to several ads and exclaimed, “Look at all these sales. We picked the perfect time to buy a new mattress!” Being in the advertising business, I chuckled, and said, “Honey, that’s the beauty of advertising. Mattresses are always on sale, but no one ever notices that until they’re in the market for one.” Once buyers are ready to enter the market for a particular item, their attention to advertising for that product is heightened. It’s information they want, and the questions on their minds are: “Who has the best product? Who has the best price? And where can I buy it?” This phenomenon is known as Readyto-Buy and occurs at different times for different people. If a company is not communicating with them when they enter the market, then that company will not be considered in the buying decision. This fact is just as true during a recession. Sometimes we need to remind ourselves what the short-term benefits of advertising are – during good times or bad – it can lead to immediate sales; it generates added business from current customers; and it brings in new leads and prospects. Next there is the long-term benefit of advertising: it works cumulatively. The american coal council

more familiar people become with a brand, the more favorable they feel toward it, and the more likely they are to buy it. In other words, people don’t like to do business with strangers. And, since the owners and staff of a company can’t personally meet all their prospective customers in advance, their advertising must do this for them. Maintaining brand recognition should be considered an on-going business investment. The moment it stops – it begins to lose power immediately – and future sales are in jeopardy. Studies have shown that it takes four to six months to see the results of an advertising program. Cutting back during a down-turn is like throwing away your investment. Maintenance today costs much less than rebuilding tomorrow. This doesn’t mean advertisers shouldn’t change anything. In fact, they should work to get the most out of their advertising dollars by eliminating emotion-based, image-building advertising and instead use informative ads that demonstrate their product’s superiority. Perhaps the best reason to keep advertising during a recession is that it may actually provide an opportunity for companies to dominate their market. Many businesses make the mistake of assuming that because money is tight everywhere, customers will spend less and therefore money spent on advertising will be wasted. Another false assumption is that it’s safe to reduce the advertising budget if the competition is reducing theirs. However, research has revealed that companies maintaining or increasing advertising during periods of economic slow-down will boost market

Advertising: a shield against adversity.

share. Some companies will even see an increase in sales over their competitors who decrease advertising. Advertising is a shield against adversity. Even if your business is located in a combat zone, you need to let your customers and prospects know that you are still operating. The only way to do that is with advertising. As we weather the current economic challenges of recession, unemployment and inflation, you can already see many leading companies increasing their advertising budgets. The benefit is clear, when fewer competitors are advertising, the ones that continue or increase their advertising become more visible to the consumer, and that could be – you! Robert Wilson is an award-winning advertising consultant and motivational speaker and the author of the syndicated monthly column on motivation: The Un-Comfort Zone with Robert Wilson. Contact Robert at www.jumpstartyourmeeting.com. 53


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Carbon Compliance Using the Carnegie Enterprise Model: Making CO2 Pay Through Heavy Industrial Co-Location By Walter James O’Brien, Transaction Magazine

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he success of a global climate accord will come down to money, according to Mexico’s President Felipe Calderon at the Davos conference in January 2010. This assertion is not news to coal power plant cost analysts. Determining how to make power plants pay has been the entire ball game for the 127 years American coal-fueled electric power generation has been commercially available. Today, using carbon dioxide as a tool for adding 50 percent and more to a coal-fueled power plant’s bottom line is feasible, if the combined experience of petroleum refinery, steel industry, chemical, natural gas and coal power engineers is deployed. The key is to apply lessons learned as much as 100 years ago in how to monetize carbon dioxide in these industries. Carbon compliance by coal-fueled power plants is possible on a “pay as you go” basis by following the example of a patriotic Scottish-American immigrant in Pittsburgh, Pennsylvania, named Andrew Carnegie. Heavy industrial manufacturers used Carnegie’s model to make money by co-locating related coal-based manufacturing enterprises as part of, or next to, coal-fueled power generation plants. Co-location and co-production together with today’s technology make it possible to manufacture products at an existing coal plant similar to those supplied today by a standard petroleum refinery, chemical refinery, and steel mill. Products that can be made at a profit in conjunction with a coal-fueled power plant with CCS include ammonia and urea fertilizers, gas-to-liquids vehicular fuel, plastics feedstock, hydrogen for fuel cells, steel and iron blast furnace fuel supplements, as well as non-agricultural-based ethanol and methanol. These are all “no-brainers” for hydrocarbon engineers from the petroleum, steel and natural gas industries. The American showcase for co-production of this type since 1986 is Dakota Gasification Company™, and there are many hundreds

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of other examples of the parts and pieces of the Carnegie strategy operating throughout the U.S. However, it remains for this strategy to be applied on a unified basis. (The range of products Dakota Gasification offers is immense; please see http://www. dakotagas.com/Products/Product_Profiles/ index.html ) The “cornerstone” solution in most instances for transforming coal plant conversion of CO2 capture capabilities to coal-based, co-located manufacturing is the addition of the same process equipment that exists at profit-making petroleum refineries or natural gas-based processing

facilities: catalytic steam reforming of CO2 + H2O into H2 and CO. The first step is to select the appropriate co-production partner and product. Catalytic steam reforming vendors and turnkey contractors for building onsite manufacturing plants for part or all of the range of co-products given above include KBR™, Selas Fluid Processing™(a division of Linde Gases™), Uhde™ gmbH of Germany, Midrex™of Australia, and Johnson Matthey™. Chemical Engineering Magazine’s Buyers’ Guide 2010™ at www.che.com can provide listings of alternate equipment vendors as well as 55


Presuming CCS is planned or already in place, your coal plant may already have on hand many of the components necessary for mobilizing this economic powerhouse. marketing research and implementation professionals to help guide your coal plant’s co-production commodity selection effort. If working with a steel industry coproduction partner, an oxyfuel burner which uses CO2 as a fuel supplement to significantly improve burner efficiency is Linde Gases’ REBOX™ burner array. Foster-Wheeler and Babcock & Wilcox also provide oxyfuel coal burner conversion packages with CCS capabilities for existing conventional plants. Presuming CCS is planned or already in place, your coal plant may already have on hand many of the components necessary for mobilizing this economic powerhouse. Basic equipment additions to existing coal plant facilities include the following: • A free nitrogen skid as manufactured by Praxair™, Air Liquide™ or Linde™;

• An oxygen skid as manufactured and installed by Praxair™, Air Liquide™ or Linde™; • Associated liquid and chilled CO2 tanks and pumps, appropriate refrigeration skids as provided by Trane™ or Carrier™; • Counter-flow vertical wet scrubbers or similar flue gas and liquid mixing devices as provided by CrollReynolds™ or Verantis™; • Process skids for manufacture of the desired marketable product (a prospective venture partner would provide these if they are not already on hand); • A storage and delivery system for finished product is needed as well as a reputable logistics and supply chain management subcontract provider is needed to execute the sales and marketing campaign. 2010 Membership

Industrial co-production offers a freemarket, non-governmental, growth-driving method that can be profitable enough to enable the non-crippling imposition of excise taxes for carbon dioxide usage, both as a fuel and as an industrial feedstock. This strategy allows carbon emissions reductions to feed industrial growth without bankrupting the U.S., thereby neutralizing the “us or them” logic of Copenhagen, which predicates the growth of emerging economies on the terminal undermining of America’s growing prosperity. To round out this American “win-win” strategy, a means of stabilizing and upholding commodity prices for fertilizer, steel and iron, and chemical products must be implemented on the government side by applying principles which have upheld America’s agricultural might since before the 1930s Depression through the “Food for Peace” program model. Co-producing coal plants in the U.S. donate these surplus industrial co-products to emerging economies. However, the commodities they then produced would be constrained from re-entering the U.S. market altogether, or except as finished goods. This Directory:Layout would control supply-and-demand 1 2/16/2010 2:25 based PM

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domestic and export pricing and ensure the cost levels of American commodities are affordable yet profitable. Carbon trading and the associated drain on the U.S. economy by foreign governments are unnecessary in this scheme, just as they were in Andrew Carnegie’s day. In this manner, industrial carbon is being excluded from atmospheric release, yet costs are covered and a new market for CO2 is created. Furthermore, many candidate co-production plants’ facilities teams are actively scouting new locations every day. The Carnegie model renders the strategy of heavy industrial re-location overseas by American manufacturers of the above-mentioned commodities not only uneconomic but foolish. The key to success is sharing know how by finding the right American industrial production venture partners. America won two world wars and recovered from them economically through this able and patriotic Scottish immigrant’s common-sense strategy. It remains for the American Coal Council™, the American Petroleum Institute™, the American Gas Association™, the American Society of Chemical Engineers™ and the American Iron and Steel Institute™ to forge a one-stop industrial mobilization team of financial analysts, co-product marketing experts, engineering consultants and industrial developers to build our nation anew. Whether or not anthropogenic global warming is real, the recycling of waste, if profitable, makes good economic sense for any enterprise.  u

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Developing Technologies for Cleaner, Safer More Profitable Coal Handling By Jim Turner, Martin Engineering

A

s the coal industry pursues its goals of delivering cleaner, safer energy, manufacturers throughout the supply chain are investing in new technologies to improve material handling and processing. The strategy for designing bulk material-handling systems has changed little over the last fifty years, despite the fact that virtually every safety, regulatory and performance requirement has changed. The tide is turning, however, as equipment designers begin to embrace a new approach to engineering this equipment. In the past, conveyor systems have been engineered by determining capacity, meeting the minimum codes and safety requirements, and then designing for the lowest construction cost. Instead, industry-leading manufacturers are revisiting every facet of component and system design, with safety, fugitive material control and ease of service as primary criteria. Literally reinventing conveyor technology from the ground up, the new and emerging advancements will help drive continuous and sustainable progress in coal handling, updating the image of an industry sometimes seen as being mired in aging technology and showing little concern for innovation. R&D Is Key At a dedicated research center in rural Neponset, IL, scientists and process experts from Martin Engineering are focused on solving bulk material handling challenges and advancing technologies that can make coal handling cleaner, safer and more productive. Work at the new 22,600 square foot (2100 square meter) facility concentrates primarily on fugitive material control and flow management, with researchers able to develop and test new products and techniques under full-scale process conditions. True advancement in coal handling technology can only result from a complete understanding of material characteristics, including the wide variation in physical properties that can affect the design and american coal council

Tremendous strides have been made toward cleaner, safer and more productive coal handling since the early 20th century. Researchers are developing automation and “intelligent” coal handling systems.

performance of conveyors, chutes and other components of the bulk handling system. In an industry once dominated by off-the-shelf products, equipment suppliers are recognizing that an ability to customize material handling solutions is critical to optimal control. The Center For Innovation (CFI)pursues its goal of total material control through a combination of lab science and process-scale development. In the center’s bulk materials laboratory, researchers analyze particle size, shape, density and distribution, giving them the ability to model and predict flow behavior over a wide range of conditions. Full-sized equipment allows them to observe and test new products and modify designs to maximize performance. The metals laboratory is used to study materials of construction, helping equipment designers evaluate commonly used materials, guiding improvements and investigating new structures. By testing hardness, impact resistance, flex and abrasion, scientists work to improve impact resistance, wear life, corrosion resistance and load-bearing performance. The center also houses a polymer laboratory to assess the performance of “softer” components in a material handling system,

such as urethanes, rubber and plastics. By understanding properties such as modulus, flex and tensile strength, researchers can find the best match for specific conditions and coal characteristics. New formulations can be produced in trial-sized batches to test specific materials and designs under realistic operating conditions. In order to confirm that solids handling equipment will perform even under worstcase conditions, the facility also includes an environmental lab that can test materials at temperatures ranging from -73° C to 190° C (-100° F to 375°F). Samples exposed to severe conditions can then be analyzed by any of the other three labs to develop a comprehensive understanding of behavior and performance in real-world operating environments. Recent Innovations Since the CFI’s opening in 2008, it has contributed to the development of several material handling innovations. Guided by the specific input of customers and conveyor users throughout the U.S., engineers have focused on the specific issues identified as being primary concerns. In one such program, scientists were tasked with designing a new type of belt cleaner, one 59


that could deliver a high level of performance but would be available at a lower price point than premium cleaners on the market at the time. The program resulted in the 2009 commercialization of a new product line that directly addresses those goals, broadening the range of affordable belt cleaning options. Another developmental effort was initiated in response to a growing demand for tertiary cleaning systems, a trend driven in part by environmental, regulatory and safety pressures to improve conveyor efficiency and reduce fugitive material. From this program

came a new style of scavenger conveyor design that captures dust and carry back which would otherwise be lost, returning it to the process and reducing waste. The new system measures just 13 inches in height, allowing installation in tight spaces to fit underneath existing conveyor lines or in low overhead environments. Also introduced in 2009, the new design helps prevent fugitive material from encapsulating belt cleaners and other components, minimizing dust and reducing the exposure of maintenance personnel to potential hazards from working around moving equipment.

The CFI has also been a key to the design and development of an entirely new type of conveyor architecture, one that evaluates every element – including both functional and structural components – and seeks not only to improve performance, but also to find ways to deliver greater safety, dust control, ease of service and upgradability. By matching the fundamental design methodology with specific customer needs for a clean, safe and productive system, this new conveyor architecture represents a cost-competitive system that out-performs traditional designs, yet delivers the flexibility of easy modification to solve operation-specific problems. Future Development While tremendous strides have been made toward cleaner, safer and more productive coal handling, ongoing CFI research provides some hint at the achievements yet to be reached. Researchers are now using their understanding of material characteristics as a step toward greater automation and the development of “intelligent” coal handling systems. Among the innovations now being studied is the design and implementation of technology that “senses” subtle variations in conveyed material properties. CFI scientists are developing closed-loop control systems that can actually make equipment adjustments on the fly. The development of such “smart” systems may include automated adjustment of belt cleaners, belt support, belt sealing and transfer chute technology. These developments are intended to deliver improved maintenance efficiency, reduced downtime and prolonged life of wear parts, improving system throughput and creating a safer environment in which to maintain and operate material handling systems. Perhaps more than anything else, the CFI represents an unmatched commitment to research and training, where customers and equipment suppliers can collaborate on technologies to handle greater amounts of material with continuously improving efficiency and safety. By reducing downtime, material waste and manpower requirements, the facility is contributing to greater productivity and lower cost of ownership for coal processors across North America.  u Jim Turner is VP Sales & Marketing at Martin Engineering (www.martin-eng.com)

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Railroads and Coal: Looking Back and Looking Ahead By John Gray, Association of American Railroads

F

or most firms and industries, 2009 was extremely challenging. The recession meant crippled consumer demand, sharply higher unemployment, and tumbling industrial production. Few countries were immune as the recession battered economies worldwide. Not surprisingly, railroads suffered along with everyone else. Carload traffic on U.S. freight railroads in 2009 was down 16.1 percent from 2008. Intermodal traffic was down 14.1 percent in 2009 from 2008. Every major commodity category of rail traffic was down in 2009, most of them sharply. The sharp decline in rail traffic should not be surprising because railroading is a classic “derived demand” industry: demand for rail service occurs as a result of demand elsewhere in the economy for the products that railroads haul. If people and businesses are not buying and building things, then railroads are not hauling them. Chart 1

Coal is a perfect example. Chart 1 shows average weekly carloads of coal on U.S. freight railroads for each month from January 2006 through January 2010. Rail coal traffic in 2009 was holding its own until April, when it fell sharply. It has stayed down ever since. Why? Mainly because coal-fueled power plants simply stopped using as much coal. Chart 2 shows monthly coal stockpiles at power plants from 2003 through November 2009 (the most recent data available at this writing). Note the huge run-up in stockpiles since early 2009. Stockpiles exceeded 200 million tons in October and November 2009 –higher than ever before. What’s behind the increase? There are at least two major reasons. First, in the first 11 months of 2009, electricity generation was down 4.7 percent from the same time in 2008 (see Chart 3). Reduced demand for electricity, in turn, is a function of the poor economy (a Chart 2

Coal Stockpiles in the Electric Power Sector: January 2003 - November 2009

Average Weekly U.S. Rail Carloads of Coal 160,000 2008

150,000

2006

200 180

140,000

160

2007

130,000

140

2009

120

120,000 Jan. 2010

100

110,000 Jan Feb Mar Apr May Jun

Jul Aug Sep Oct Nov Dec

80 2003

Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S. operations of CN and CP, and reflect revisions from original reporting. Source: AAR

Chart 3

2005

2006

2007

2008

2009

Chart 4

Average Delivered Price of Fuel for the U.S. Electric Power Industry: 1990-2009*

(Million Megawatthours)

440

(Dollars Per Million Btu)

$16

420

380

2004

Source: Energy Information Administration

U.S. Net Electricity Generation

400

(Millions of Tons)

220

$14 2008

$12 2007

360

$10 $8

340

$6

2009

320

$4

300

$2

280 Jan Feb Mar Apr May Jun Source: Energy Information Administration

american coal council

Jul

Aug Sep Oct Nov Dec

$0 Coal

Petroleum

Natural Gas

*2009 is Jan. – Oct. Source: Energy Information Administration

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factory that’s shut down doesn’t use much electricity) and a coolerthan-usual summer in areas that rely heavily on coal-generated electricity. Improved fuel efficiency may have played a role as well. A second key factor behind the increase in coal stockpiles in 2009 is the price of natural gas. Chart 4 shows the annual average delivered price of coal, petroleum, and natural gas to the U.S. electric power industry in recent years, along with the corresponding figures for the first 10 months of 2009. Note the sharp drop in 2009 in the price of natural gas. The relative competitiveness of electricity generated from natural gas has risen at coal’s expense.

Big Problems Start Out Small The Problem

Chart 5 shows the share of U.S. electricity generation from coal by month over the past few years. Not only is the overall electricity “pie” smaller, the coal “slice” is smaller too. In 2009 through November, the coal share of U.S. electricity generation was approximately 45 percent, the lowest coal share for any year since the 1970s. As the discussion above shows, to some extent railroads are at the mercy of larger forces over which they have no control. Railroads have no influence, for example, over the price of natural gas. To the extent that the 2009 patterns discussed above continue in 2010, then rail carloads of coal will be lower than they otherwise would be. And since coal accounts for approximately 45 percent of total rail tonnage and around 23 percent of rail revenue, overall railroad traffic will clearly be affected. Of course, railroads are not simply passive bystanders in every aspect of their performance. It’s their responsibility to provide safe, responsive service; to communicate effectively with their customers; and to continue to introduce innovative new technologies. They also need to be ready when strong economic growth returns. When that happens, America’s demand for safe, effective, and affordable freight transportation that promotes economic growth and enhances America’s competitiveness in the global economy will resume the upward trend it’s been on for decades. That’s why railroads have kept reinvesting in their networks. The recession officiallybegan in December 2007. Nevertheless, railroads spent more on their systems in 2008 than ever before (see Chart 6). Rail reinvestments were down only slightly in 2009 from 2008’s record pace and are expected to remain about equal to 2009 levels

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Chart 5

Chart 6

Record Railroad Reinvestments

Coal's Share of U.S. Electricity Generation 54% 52%

2006

$220,000

50%

$200,000

48%

2008

46%

$180,000 $160,000

2007

44% 42%

Infrastructure & Equipment Spending* Per Mile

$240,000

$140,000 2009

$120,000 $100,000

40% Jan Feb Mar

Apr May Jun

Jul

Aug Sep Oct Nov Dec

Source: Energy Information Administration

in 2010. Since 1980, America’s freight railroads have spent around $460 billion on their infrastructure and equipment – more than 40 cents out of every revenue dollar. In 2010 and beyond, railroads will be asked to do more and more. How well railroads can do this will depend in part on actions by policymakers in Washington. For example, for years debate has ensued regarding the proper type and scope of railroad economic regulation. Freight railroads contend that the balanced approach ushered in by the Staggers Act of 1980 – under which regulators protect shippers against anti-competitive railroad conduct, but otherwise railroads can largely decide for themselves how to run their operations– is the way to go. Others favor a more interventionist government approach. The fact is,railroads themselves pay nearly all of the costs of their systems’ construction and maintenance. Adequate investments in the rail network can only be made if rail earnings are high enough to attract the capital needed to pay for them. That simply won’t happen if unbalanced and unnecessary regulation gets in the way. Policymakers’ actions in other areas are critical too. Consider safety regulation. Legislation passed in October 2008 requires railroads to install positive train control (PTC) systems by the end of 2015 on tracks that carry passengers or extremely hazardous materials. PTC describes technologies designed to automatically stop or slow a train before certain accidents occur.

2000

2001

2002

2003

2004

2005 2006

2007

2008

*Capital spending + maintenance expenses - depreciation Class I railroads only. Source: AAR

According to the Federal Railroad Administration, railroads will have to spend more than $5 billion to install PTC systems, plus more than $700 million more each year thereafter to maintain them. Total costs to railroads over 20 years will be $10 billion to $14 billion. Meanwhile, the value of PTC-related safety benefits over 20 years will be $440 million to $674 million. In other words, railroads will incur approximately $20 in PTC costs for each $1 of PTC benefits. To put the $5 billion PTC installation costs in perspective, it is roughly equal to what railroads spend in a typical year on all infrastructure-related capital spending, and is about equal to what they’ve spent over the past five years combined on capacity expansion. Expenditures on PTC will necessarily mean reduced expenditures on other projects that would increase rail capacity, improve service, provide environmental benefits, and enhance safety. Looking ahead to 2010, the economy will no doubt be a huge question mark that railroads and every other firm will have to deal with. For their part, railroads are cautiously optimistic that the framework for a sustainable recovery is in place. Railroads also hope that policymakers will recognize that to take full advantage of railroads’ unparalleled potential to lower shipping costs, ease congestion by taking trucks off the highway, save fuel, and reduce harmful emissions, smart public policy is needed. As a nation, we can’t afford to get this wrong.  u John Gray is senior vice president – Policy and Economics at AAR (www.aar.org).

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Index to Advertisers AEP River Operations. . . . . . . . . . . . . . . . . . . . . . 25

Energy Publishing, Inc.. . . . . . . . . . . . . . . . . . . . . 58

Mole-Master Services Corp.. . . . . . . . . . . . . . . . . 24

Air-Cure Incorporated . . . . . . . . . . . . . . . . . . . . . 56

Ernst & Young. . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Murray Energy Corporation. . . . . . . . . . . . . . . . . . 4

Allen-Sherman-Hoff. . . . . . . . . . . . . . . . . . . . . . . 26

FreightCar America. . . Directory Outside Back Cover

Ameren Energy Fuels & Services Company. . . . . . 42

Fuel Tech, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 38

National Research Center for Coal and Energy . . . . 35 Peabody Energy. . . . . . . . . . . . . . . . . . . . . . . . . 48

Arch Coal, Inc.. . . . . . . . Directory Inside Front Cover

Golder Associates. . . . . . . . . . . . . . . . . . . . . . . . 58

Platts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Benetech, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

HardSteel, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Resource Technologies Corp.. . . . . . . . . . . . . . . . 47

BNSF Railway Company. . . . . . . . . . . . . . . . . . . . 23

Helm Financial Corporation . . . . . . . . . . . . . . . . . 64

Richwood. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Buchanan Ingersoll & Rooney PC. . . . . . . . . . . . . 56

ICAP United. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Charah, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Ingram Barge Company. . . . . . . . . Inside Back Cover

Chevron Mining Inc.. . . . . . . . . . . . . . . . . . . . . . . 28

Inspectorate America Corporation. . . . . . . . . . . . . 44

Cloud Peak Energy . . . . . . . . . . . . . . . . . . . . . . . 14

Interlake Steamship . . . . . . . . . . . . . . . . . . . . . . 60

Coal-Gen Conference & Exhibition. . . . . . . . . . . . 51

Jennmar Corporation. . . . . . . . . . . . . . . . . . . . . . 46

Coal Marketing Company (USA) Inc.. . . . . . . . . . . 36

KCBX Terminals Co.. . . . . . . . . . . . . . . . . . . . . . . 64

CONSOL Energy Inc.. . . . . . . . . . . . . . . . . . . . . . . 2

Marshall Miller and Associates, Inc. (MM&A). . . . . 62

Constellation Energy . . . . . . . . . . . . . . . . . . . . . . 32

Martin Engineering . . . . . . . . . . . Inside Front Cover

TEMA Systems, Inc.. . . . . . . . . . . . . . . . . . . . . . . 20

CSX Transportation . . . . . . . . . . . . . . . . . . . . . . . 32

Material Control, Inc.. . . . . . . . . . . . . . . . . . . . . . 62

The Raring Corporation. . . . . . . . . . . . . . . . . . . . 63

E S & S Company . . . . . . . . . . . . . . . . . . . . . . . . 58

Microbeam Technologies Inc.. . . . . . . . . . . . . . . . 62

West Virginia University. . . . . . . . . . . . . . . . . . . . 35

Elgin Equipment Group . . . . . . . . . . . . . . . . . . . . . 5

Midwest Generation EME, LLC. . . . . . . . . . . . . . . 10

Westmoreland Coal Company . . . . . . . . . . . . . . . 54

Roberts & Schaefer Company . . . . . . . . . . . . . . . . 6 SCH Terminal Co.. . . . . . . . . . . . . . . . . . . . . . . . . 50 Strata Products Worldwide. . . . . . . . . . . . . . . . . . 19 Taggart Global, LLC. . . . . . . . . . Outside Back Cover Tank Connection. . . . . . . . . . . . . . . . . . . . . . . . . 52 TECO Coal Corporation . . . . . . . . . . . . . . . . . . . . 63

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North America I South America I Africa I Asia I Australia

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