COAL:

AEP move to stop carbon capture and sequestration project shocks utilities, miners

The decision by a major utility yesterday to shelve a carbon capture project sent shock waves through the energy industry about prospects for controlling greenhouse gas emissions from coal plants around the globe. But some lawmakers unconcerned about climate change simply shrugged.

The project by American Electric Power, an Ohio-based utility, was considered one of the best test pilots of installing equipment on a large, existing coal-fired power plant that captures carbon dioxide and stores the gas permanently underground in deep rock formations, or saline aquifers.

While there are other proposals and projects testing the concept of capturing and storing carbon in the United States, many are on new facilities and hold less significance for curbing greenhouse gases from older coal plants, analysts said. Coal plants emit about a third of U.S. carbon dioxide, and the technology of curbing their emissions has never been proved at scale.

"I don't think the game is over for the carbon capture industry," said Mark Taylor, an energy analyst at Bloomberg New Energy Finance. "But there is not another project like this on the horizon."

Mining workers in coal-rich states such as West Virginia expressed concerns that their jobs could be at risk eventually. Utilities will be under increasing pressure to switch from coal to natural gas because of new federal regulations on coal, and the industry had been counting on carbon capture as a savior for old coal plants, said Phil Smith of the United Mine Workers.

"This is a grave concern, frankly," he said of the utility's announcement.

In a statement, American Electric Power CEO Mike Morris indicated the company had little choice in the current economic environment. The Department of Energy vowed to provide half of the $668 million for the company to retrofit the company's Mountaineer coal plant, a 1,330-megawatt facility in West Virginia.

That left the company with the prospect of asking state regulators to fund the other half at a time of economic troubles and no climate legislation in Congress.

Electricity rates could rise as much as 35 percent in some regions over the next few years because of new U.S. EPA rules targeting coal-fired generation, said Pat Hemlepp, a spokesman for the utility. In Kentucky, rates are up by 50 percent, he said. The company serves customers in 11 states.

'Not the time' to approach state regulators

"The Midwest got really hammered by the economic downturn," Hemlepp said. "It's just not the time to go to regulators and ask to add this to our other costs," he said.

Public service commissions in West Virginia and Virginia denied the utility's request for full reimbursement of costs for Mountaineer.

The company began capturing about 2 percent of the Mountaineer plant's carbon dioxide output two years ago and injecting the gas underground, with hopes to scale up the process commercially in 2015. The initial validation test permanently stored 37,000 metric tons of CO2 before ending in May 2011 and proved the technology works, the company said. To capture carbon, American Electric Power used chilled ammonia from Alstom, a technology considered well-suited for older plants.

American Electric Power sent a letter to the Department of Energy last week announcing it would not scale up the project past the first phase, Hemlepp said. That means the company will complete engineering and design work with $16 million in DOE money, but will not do more underground injections for now.

On Capitol Hill, there was disappointment from lawmakers representing state economies dependent on coal.

"It's sad," Sen. Jay Rockefeller (D-W.Va.) said of the carbon capture and sequestration, or CCS, suspension yesterday. "But it's not the end."

Two years ago, Rockefeller and a parade of industry and administration officials described the Mountaineer project as a protector of the coal miner and a defender of cheap electricity from an abundant resource made clean.

The rising awareness of climate change and Congress' movements to deter it were enough to make West Virginians "scared" of job losses, Rockefeller said at the plant as the project was unveiled.

"People need to come and see what's being done here today," he said then. "That's what's going to settle people down."

But as Congress' threat of charging fees for carbon dissipated, so did AEP's justification for harnessing it. Rockefeller took a longer view yesterday, suggesting that the state's coal sector has begun a transformation that can't be stopped now.

"Coal's going to have to get cleaned up," he said. "We're going to have to get 90 percent of the carbon out of the coal. That's what we're going to have to do."

Fallout from Congress' retreat from climate change

A neighboring Democrat, Sen. Sherrod Brown of Ohio, a state that uses heavy amounts of coal-fired electricity in its industrial sector, suggested the announcement is the result of Congress' abrupt retreat from the climate issue.

"It's concerning to me that the Republican Congress is backing off of any kind of strong environmental rules," Brown said.

The American Electric Power decision leaves a hodgepodge of proposed and existing CCS projects in the United States.

Perhaps the most well-known CCS proposal in the United States is FutureGen, which envisions retrofitting a shuttered oil plant to burn coal with oxy-combustion technology, a different process for capturing carbon than that tested by American Electric Power. Oxy-combustion also is less far along technologically and therefore less applicable to older coal plants that need retrofits sooner rather than later, according to Kurt Waltzer of the Clean Air Task Force.

Many of the other large proposals and existing projects in the United States involve enhanced oil recovery, in which C02 from industrial facilities is piped to oil fields to extract more crude. Southern Co., for example, plans to build a new advanced coal plant with equipment capturing 65 percent of its carbon dioxide for later sale in enhanced oil recovery.

Earlier this week, two think tanks -- the Pew Center on Global Climate Change and the Great Plains Institute -- announced a new alliance of industry and government officials to develop recommendations on scaling up enhanced oil recovery (ClimateWire, July 13).

The carbon dioxide used in oil patches stays out of the atmosphere, Waltzer said, but there's a limit on how far enhanced oil recovery can curb emissions on the existing coal fleet. Some of the most optimistic projections say oil recovery could hold a sixth of the nation's annual CO2 output.

"But in the end, we're going to need storage in deep formations outside of oil fields," Waltzer said. "We need to test that."

Among other things, not all coal plants are near oil patches. Pipeline structure would have to be constructed. American Electric Power's project was significant because it put everything together in one place -- capture from an existing old coal combined with permanent underground storage, outside of oil fields, analysts said.

Without the AEP project, large-scale testing of sequestration in deep rock formations is left to companies such as Archer Daniels Midland Co., which recently announced plans to begin CO2 injections underground from an ethanol plant in 2012.

"But one or two projects is not enough. We need more like 20 or 30," Waltzer said.

Globally, there also are proposed projects. A company in Poland, for example, plans to begin a full-scale demonstration in 2015 with technology similar to the chilled ammonia mechanism used by AEP.

EPA to the rescue?

Hemlepp said the utility's project was technically on hold, but would not move again unless there were clear federal rules setting a timeline for when and how much coal plants have to reduce emissions.

Many are looking to pending standards from EPA in September outlining how existing coal plants must satisfy greenhouse gas regulations under the Clean Air Act. It is not yet clear whether carbon capture and sequestration will be part of those rules.

"The EPA could really change the dynamic, depending on what's proposed," said Waltzer. If the rules are strict enough so that utilities face high costs for not testing CCS, it could give the industry a boost, he said.

Others predicted little would happen without a price on carbon or new spending by the Department of Energy.

"There has to be a carrot or a stick; without that, nothing is going to happen," said Taylor. EPA regulations could be a stick, he said.

Some GOP lawmakers believe CCS can be encouraged without a carbon price. They focus on finding new markets for captured CO2, which, if it's sold to enough users, they say, can become a commodity that's valuable enough to save and sell.

Sen. Richard Lugar (R-Ind.) introduced legislation this week that provides tax breaks for utilities that provide CO2 for enhanced oil recovery projects.

Another energy state Republican, Sen. John Hoeven (R-N.D.), thinks it's a good idea to find new carbon markets. He also says government funding for research and development needs to continue, so the cost of capturing the gas goes down.

"So if you develop the technology and develop the economic viability, it doesn't just get adopted here in the United States," Hoeven said. "It gets adopted in other countries, as well."

Republicans have less concern

On the other side of the Capitol, there was less concern. Capturing carbon might be beneficial, at least economically, but it shouldn't be done at the government's behest, some lawmakers said.

"I'm not really in favor of government subsidies for CCS or wind power or anything else," said Rep. Ed Whitfield (R-Ky.), chairman of the Subcommittee on Energy and Power.

He supports private pursuit of CCS, because it can provide jobs in the coal sector -- but not because it addresses climate change, which he says human activity is barely affecting.

"I think human activity is contributing to it, but I think the amount we're contributing is so small," he said yesterday. "For example, that big volcano eruption in the Philippines spewed more carbon dioxide in the world -- into the atmosphere -- than all the activity prior to that in human history. So yeah, I think human activity is contributing to it, but I don't think it's something to be so alarmist about."

Rep. Bob Goodlatte (R-Va.) also thinks humans play a small role in climate change, even as the vast majority of climate scientists say it is a man-made problem. But, he said, the United States should not be adding to its economic troubles by "trying to lower the thermostat of the world by raising the cost of energy in the United States."

As for CCS, he says he's not opposed to research funding if it can be done "very efficiently" and "lead to results."

"But just subsidizing the doing of it, we can't afford it," Goodlatte said.

Want to read more stories like this?

E&E is the leading source for comprehensive, daily coverage of environmental and energy politics and policy.

Click here to start a free trial to E&E -- the best way to track policy and markets.

Latest Selected Headlines

More headlines&nbspMore headlines

More headlines&nbspMore headlines

More headlines&nbspMore headlines

More headlines&nbspMore headlines

Latest E&ETV Videos