COAL:

White House meeting part of new, uncertain relationship between EPA, industry

Last week's much-touted White House meeting between Obama administration environmental leaders and West Virginia Democrats on coal was part of what advocates are calling an increasing dialogue between both sides of the contentious debate.

U.S. EPA and top lobby groups alike have been stressing cooperation rather than disagreement about proposed and potential rules affecting coal-powered electricity and mining.

While some coal boosters don't see anything positive coming out of dialogue with the White House, those who attended the meeting -- including representatives from the West Virginia Coal Association, the United Mine Workers and coal-country Democrats -- hope new EPA Administrator Gina McCarthy means a change in both attitude and policy.

"Certainly the doors of communication were opened further than they had been with the previous administrator," Rep. Nick Rahall (D-W.Va.) told West Virginia MetroNews last week. "She expressed a genuine willingness to listen, not sit in a room and roll her eyes and fidget around like she can't wait to get to the next meeting."

Sen. Joe Manchin (W.Va.), the only Democrat to vote against McCarthy's confirmation last month, helped organize the meeting and is now calling on the new EPA chief to visit the Mountain State.

"We as a delegation made it clear it was imperative that Ms. McCarthy visit West Virginia to see firsthand the devastating effects that will occur if any new, unobtainable and unreasonable regulations are imposed by the EPA," he said, expressing hope that EPA will be a "partner rather than a constant adversary."

The West Virginia lawmakers say they pressed McCarthy against reducing coal use in favor of other sources of electricity, like natural gas or renewables.

They also expressed concerns about the agency's reliance on carbon capture and sequestration, a technology that is yet to be widely available commercially, for coal's future. "What we need is the time to develop CCS, time and more money," Rahall said.

Industry backers often mention the King Coal Highway project, to be born from reclaimed mine sites, as evidence of the administration's anti-coal stance. EPA had expressed concerns about the permitting process.

"My point to her was, this is opening up southern West Virginia to the years beyond coal," Rahall said. "We are looking beyond coal. We are taking economic diversification into our own hands here."

Rahall and others at the meeting say they saw glimmers of hope. McCarthy, for example, was aware of issues surrounding the King Coal Highway and expressed concern about job losses. The UMWA said McCarthy "was open and receptive to the delegation's concerns."

An EPA spokeswoman said: "This was a good and productive meeting. It is always helpful to hear views of the West Virginia delegation as we work together to find the best solutions to protect public health and reduce carbon pollution while promoting job growth."

Numerous other meetings

Last week's meeting may have been the most high-profile, but it was definitely not the first high-level gathering between coal interests and Obama administration officials since the president's re-election.

McCarthy met with the National Mining Association in March when she was the agency's air issues chief. The lobby group said then that it wanted to introduce the nominee to some of its other priorities.

NMA said it had two other meetings with McCarthy last month, one of them including group CEO Hal Quinn. An NMA representative did not attend the White House meeting.

"We found her to be very keenly interested in hearing what we had to say about the potential impact of rules, not only on our industry but also the grid and electricity supply and finally employment, beyond the coal fields," NMA spokesman Luke Popovich said about McCarthy.

"I don't know that there is an expectation. I think there is a sense that there may be some caution where there maybe wasn't before, driven possibly by the realities of litigation," Popovich added in an interview. "They have to survive what they know will be legal challenges from all sides."

The American Coalition for Clean Coal Electricity has also met with top administration officials in recent months (E&E Daily, June 5). The group said its goal is a regulatory system that both sides can live with.

Environmental advocates who have been pushing EPA for strong mining and plant emissions standards say they take hope from McCarthy's track record so far. Her official schedule showed a meeting with senior environmental group leaders right after the coal meeting.

"We know that the White House is going through a process now in preparation for writing carbon pollution standards, and that includes talking to the industry," said John Coequyt, the Sierra Club's federal and international climate campaigner. "We would expect them to be talking to the industry right now."

He added, "This is what they said they were going to do. The Environmental Protection Agency has a long track record of operating in a highly professional manner."

Kentucky state Rep. Leslie Combs (D) of the coal-field community of Pikeville, who has met with EPA officials, penned an op-ed released last week calling for an administration official to visit Appalachia.

"Consider last summer about this time, when I served as a delegate at the Democratic National Convention," she wrote. "While I was proud to take part, I made it clear from the beginning that I could not cast a supporting vote if I did not get to speak with someone from the president's administration about coal."

Combs said the meeting did not happen until earlier this year in Atlanta with then-Regional Administrator Gwen Keyes-Fleming, now EPA chief of staff.

Companies still in the red

The most recent White House meeting came as coal mining companies were reporting earnings for the second quarter of this year. Many of them are awash in red ink.

And even though there is disagreement over what exactly is causing coal's woes in the United States, companies are hoping Obama administration regulations won't make it worse.

Peabody Energy Corp., the largest U.S. coal producer, beat estimates when it reported second-quarter revenues of $1.73 billion, a 13 percent drop from last year.

Alpha Natural Resources Inc. reported a $186 million net loss, and Arch Coal Inc. similarly reported a $72.2 million net loss because of the ongoing market slump.

"We remain committed to successfully managing through this market downturn while continuing to set the stage for value creation for our stakeholders over the long term," Arch CEO John Eaves said in a recent statement.

The market for both power plant and steel-making coal remains sluggish worldwide, particularly because of global economic troubles and a cooling in Chinese growth. While coal use has risen in the United States because of higher natural gas prices, many plants are relying on inventories.

Companies have been restructuring to make ends meet, including shutting down or selling mines. Alpha CEO Kevin Crutchfield said during his company's earnings report, "[W]e anticipate additional actions may be required between now and the end of the year."

However, the industry remains optimistic about its long-term prospects, especially internationally, if companies are able to secure increased port capacity.

"Coal use grows faster than petroleum and other liquid fuel use until after 2030, mostly because of increases in China's consumption of coal and tepid growth in liquids demand attributed to slow growth in the [Organisation for Economic Co-operation and Development] regions and high sustained oil prices," the Energy Information Administration said in a recent analysis.

Lobbying spending

Spending on lobbying by mining companies and coal groups has been mixed, disclosure records show. Some interests have pulled back compared with periods during the beginning of the Obama administration or when Republicans took control of the House.

The American Coalition for Clean Coal Electricity, which has been reworking its communications strategy, reported spending $270,000 during the first half of the year, compared with $840,000 during the same period in 2012.

The National Mining Association has spent about $1.25 million so far this year compared with more than $2 million during the same period last year.

Arch Coal spent $580,000 during the first two quarters of 2013, down from the $680,000 the company spent during the first two quarters of 2012.

But Alpha Natural Resources has been boosting its spending in Washington, D.C. Lobbying disclosure records show the company has spent more than $500,000 so far this year, compared with $348,305 during the first half of last year.

House Republicans, along with some pro-coal Democrats, have been working on passing measures aimed at rolling back the Obama administration's regulatory agenda surrounding coal.

Before leaving for the August recess, House lawmakers approved legislation to block a so-called carbon tax and to block EPA from designating coal ash as hazardous.

But with the many pro-coal measures either dead on arrival or at least facing an uphill climb in the Senate, coal backers are hoping for a more receptive White House.

"That remains to be seen, whether our pleas in that regard will have an impact or not," Rahall said. "I'm not naive enough to believe we changed any minds. But I also follow a philosophy that I never refuse to talk to somebody."

UMWA spokesman Phil Smith said about the success of negotiations: "The proof, of course, will be in the direction the administration takes moving forward."

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