Last month’s bankruptcy of coal giant Murray Energy Corp. is yet another sign that West Virginia’s coal industry will continue to shrink as power plants make the necessary transition to less costly fuel options such as natural gas, according to a WVU energy expert.
“Electric utilities are accelerating the retirements of their existing coal plants, as their long-term plans show that it is cheaper for ratepayers to build new, efficient natural gas-fired generating plants or renewable facilities, either wind or solar, than to continue to run existing coal plants,” James Van Nostrand, a West Virginia University law professor and director of WVU’s Center for Energy and Sustainable Development, said in an email.
“And no utility in the U.S. is building a new coal plant; a utility simply could not justify the investment in a technology that is so much costlier than the alternatives.”
Case in point. The Longview Power plant in Maidsville, which is in the processing of adding natural gas and solar power, an expansion that carries a $1.1 billion price tag. Plus, the average age of a coal-fired power plant in West Virginia is 45 years, some of which are in danger of becoming obsolete in the coming years. Around 92% of the state’s electricity comes from coal-fired power plants.
“West Virginia faces a challenging future,” Van Nostrand said. “Our political leaders for the past decade have taken virtually no actions that would prepare the state for the inevitable transition that is underway in the energy industry.”
There is some possibility coal exports — to China, India and other parts of Southeast Asia — could fill some of the void caused by declining domestic demand. That part of the world is continuing to burn coal in growing quantities, he said.
West Virginia is also one of the few states in the nation that has no policy incentives encouraging the development of renewable resources.
In fact in 2015, the state legislature repealed West Virginia’s Alternative and Renewable Energy Portfolio Standard, the first state to do so at a time when “new economy” employers want access to low-cost, low-carbon energy.
“West Virginia’s utilities offer high-cost, carbon-intensive energy,” he said. “Our electricity rates have gone up four times faster than the national average over the past 10 years, a greater increase — 6.1% annually — than any other state in the country.”
It’s expected that Murray Energy, based in St. Clairsville, Ohio, just outside of Wheeling, will re-emerge from bankruptcy. But the bankruptcy may also impact the pensions of more than 80,000 miners, Van Nostrand said.
“Sen. (Joe) Manchin has been working hard on federal legislation that would address this issue by backstopping the pension and health care benefits for retired coal miners,” he said. “If that legislation is unsuccessful, West Virginia will be burdened with retirees lacking the financial resources to survive.”
Another possible negative impact of the bankruptcy is if Murray Energy uses the process to avoid its environmental liabilities associated with restoring mine lands after mining operations cease.
“State environmental regulators have frequently allowed coal operators to self-bond rather than requiring operators when they open a new mine to post a bond that would provide the necessary funds for reclamation,” Van Nostrand said. “In other words, they are basically saying ‘we trust you’ll have the money when it’s time to reclaim the land.’ ”
But failure by state regulators to enforce bonding means state taxpayers will end up paying land reclamation costs, or reclamation won’t happen, he added.
Despite the bankruptcy of Murray and other coal operators in the last several years, there will still be coal mining for decades to come.
“The size of those operations will continue to decline over time, so the associated industries will be adversely affected as well,” he said. “Some of these companies should have opportunities to transition into areas of the economy that could expand with the right policies, such as renewable energy (wind turbines and solar panels) and energy efficiency.”
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