2 Reasons the Imaginary Coal Industry Revival Could Actually Happen

(MoneyWatch)  The coal industry is apparently booming, according to a recent AP examination of Energy Department records that show more than 30 traditional coal plants have been built since 2008 or are under construction. It certainly sounds impressive, doesn't it? But once you consider that just a few years ago there were plans to build 151 new coal-fired power plants -- and that the Sierra Club and environmentalists blocked 129 of them -- this so-called boom looks more like a fizzle.

New coal-fired power plants simply face more obstacles than they did 10 years ago. Environmentalists have ramped up their efforts and some states, including California, Washington and Massachusetts have passed laws to reduce emissions. Colorado, for instance, has not only increased the state's Renewable Energy Standard from 20 percent to 30 percent by 2020, but it also reached an agreement with utility Xcel Energy (XEL) to cut nitrous oxide emissions by up to 80 percent from several aging coal-fired plants by the end of 2017. The utility has to give natural gas first consideration when it looks at how to reduce emissions from those plants.

That being said, coal will regain its crown if federal impotence continues and natural gas drilling levels off.

The specter of climate-change legislation motivated some states and utilities to turn to natural gas over coal. But the likelihood of Congress passing climate change legislation has faded as quickly as Lindsay Lohan's acting career. The Senate even punted on a scaled-down energy bill that didn't include a renewable electricity standard, a measure that would have sparked investment and construction of new clean energy projects.

That leaves the job to the EPA, which has been given the authority by the U.S. Supreme Court to regulate greenhouse gas emissions under the Clean Air Act. That effort faces multiple challenges from the GOP and the U.S. Chamber of Commerce, which filed a lawsuit Friday against the EPA. Still, the EPA is trying to chip away at the coal industry with a series of new proposals, including regulations to cut air pollution from power plants in 31 states.

Then there's price. Coal is the go-to source for electricity because it's cheap. Utilities turned to natural gas last year because it too was cheap. Coal prices have slowly increased and in the short-term utilities may turn back to natural gas during the winter months. If natural gas drilling activity in North America declines -- which Devon Energy CEO John Richels predicts will occur in 2011 -- gas prices will rise. If they rise above coal then utilities will flip to the new cheaper source.

There is one little development that will damage coal's pricing clout, if Congress gets its act together. Back when Xcel and Colorado reached an agreement to switch to natural gas, the coal industry warned that prices would rise as a result. And that's not wrong. But ironically, carbon capture and storage technology -- the coal industry's only hope for survival if Congress or the EPA ever manages to regulate emissions -- will raise costs for customers who get their electricity from coal-fired power plants.

Photo by Flickr user wsilver, CC 2.0