As Natural Gas Booms, Coal Goes Up In Smoke
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By Chris Faulkner
The Environmental Protection Agency's new carbon emissions standards have caused an uproar in the coal industry.
These rules limit the amount of carbon new coal-fired power plants can produce. Industry-friendly lawmakers have been quick to voice their outrage. Congressmen John Shimkus and Rodney Davis say they "will kill the future of coal." Senate Minority Leader Mitch McConnell called them a "war on coal."
But the real threat to coal's dominance isn't excessive federal regulation. It's natural gas.
With natural gas, the United States has found an expansive homegrown energy source that's cleaner than coal and increasingly cost-effective. The modern natural gas boom has given the United States a chance to both achieve genuine energy independence and seriously cut down on carbon emissions. Meanwhile, those looking to protect coal from new EPA regulations are defending an energy source that is already falling into disfavor in the United States and other developed nations.
Currently, coal helps provide 37 percent of the electricity produced in the United States. Historically, it has always been the lowest-cost fuel option for power plants.
But burning coal has long presented serious public health and environmental concerns -- from the first recognition of the dangers of soot, toxic ash, and sulfur emissions during the heyday of the coal industry in Britain in the 19th Century, to the sulfurous Great Smog that killed thousands of Londoners in 1952, to the environmental devastation wrought by acid rain and mercury emissions first identified in the 1970s.
At the same time, coal-fired power plants are the single biggest source of CO2 emissions in the United States.
Fortunately, we don't have to continue treating coal as a necessary evil. Thanks to the recent surge in domestic natural gas production, policymakers now have a historic opportunity to end America's dependence on coal once and for all.
Over the last decade, energy entrepreneurs have made major advances in two well-established resource development technologies -- horizontal drilling and hydraulic fracturing, or "fracking."
These techniques have enabled a massive surge in domestic natural gas production, particularly in underground shale formations that had previously been too difficult to develop. Between 2008 and 2012 alone, American gas production jumped 600 percent.
The Alfred P. Sloan Foundation predicts natural gas production will continue to climb for the next three decades. In August, the Energy Information Administration announced that in 2011 the United States registered the single largest yearly increase in proved natural gas reserves in over thirty years.
This expansion in supply has precipitated a drop in price. Between 2003 and 2008, the per unit cost dropped an astonishing 61 percent.
And from an environmental standpoint, natural gas is clearly superior to coal.
As the EPA has noted, "[c]ompared to the average air emissions from coal-fired generation, natural gas produces half as much carbon dioxide, less than a third as much nitrogen oxides, and one percent as much sulfur oxides as the power plant."
Given its economic and environmental advantages, natural gas has already seriously undercut coal as the go-to source for electricity generation. A new study from Duke University found that the abundance of cheap gas has rendered nine percent of the nation's coal plants uneconomic.
If the EPA follows through on these stricter emissions rules, natural gas plants are expected to out-compete about 56 percent of all coal plants.
Additionally, low-cost natural gas is helping to fuel a new industrial renaissance in the United States. A new building boom is under way in America's petrochemical and fertilizer industries, thanks to the reduced costs of their natural gas-based feedstocks. Other energy-intensive manufacturing industries such as steel, aluminum, cement, and glass are pressing new capacity expansion plans because of low-cost natural gas.
And the abundance of cheap gas has enabled the United States to emerge as a global leader in energy production -- something that was unthinkable just a few years ago. The United States will soon surpass Russia as the world's leading oil and gas producer. This development marks the beginning of a new era in global energy politics, one in which the United States will no longer be dependent on Middle Eastern oil.
The EPA's new coal regulations merely codify what should already be obvious. Now that natural gas is abundant, the economic, environmental, and political case for coal-based energy has gone up in smoke.
Chris Faulkner is President and Chief Executive Officer of Breitling Oil and Gas.