According to four people who spoke to Politico on conditions of anonymity, the Trump administration’s plan to bail out coal and nuclear plants has hit a speed bump within the White House itself.
The most recent plan from the Department of Energy (DOE) involved invoking the Defense Production Act of 1950, a wartime rule that allows the president to incentivize and prioritize purchases from American industries that are considered vital to national security.
Another potential plan involved invoking Section 202(c) of the Federal Power Act to mandate that struggling coal and nuclear plants stay open either through compulsory purchases by grid managers or through subsidies. FirstEnergy, a power corporation whose coal and nuclear units are under Chapter 11 bankruptcy, petitioned the DOE to use this power in April.
In June, President Trump reportedly told Energy Secretary Rick Perry to “prepare immediate steps” to stop the retirement of coal and nuclear plants in the US.
But since then, coal power plant closures have not been reversed, and some coal plants have been added to the list of those that are scheduled to close.
An economic problem
Citing four anonymous sources, Politico reports that White House advisors on the National Security Council and the National Economic Council have resisted invoking either the Defense Production Act or Section 202, purportedly on the basis that someone will have to pay for a coal and nuclear bailout, and nobody currently wants to do it.
Utilities, grid managers, and consumer groups have resisted a coal bailout because moving from coal to natural gas has kept prices reasonable for electricity-rate payers. Forcing utilities to pay for relatively more expensive coal generation to keep it alive would lead to higher rates for their customers to no additional benefit (and additional pollution and emissions).
Although nuclear power would also receive a bailout under many of the plans that the DOE has proposed, the Trump administration has focused primarily on bailing out the faltering coal industry. US coal companies like Murray Energy have made significant contributions to Trump’s campaign.
“It is unclear whether Trump himself has decided against following Perry’s proposal,” Politico wrote. “Even if he has, the sources warned that Trump frequently changes his mind, and the idea could re-emerge in advance of the president’s reelection campaign.”
Some of the factors frustrating a bailout for the coal industry included the vagueness of the DOE’s May memo recommending the use of the Defense Production Act, as well as a previous decision by the Federal Energy Regulatory Commission (FERC) that found that closing coal and nuclear plants did not pose a threat to the reliability of the grid. Politico wrote that two sources named National Economic Council Director Larry Kudlow as being skeptical of a coal bailout in particular.
“One of Perry’s biggest problems in formulating a bailout is figuring out who would pay the billions of dollars needed to keep money-losing power plants operating—raising the specter that electric customers would have to cover the cost in their monthly utility bills,” Politico wrote.
The slow response has reportedly frustrated Sen. Joe Manchin (D-W.Va.), who told reporters this week, “I’m trying to find the darn plan, because I understand it’s gone from the Department of Energy over to the White House, and I don’t know who in the White House would be sitting on it for whatever reason. But it’s something very important to me and to West Virginia,” according to Utility Dive.
Take to the sea
If Trump can’t justify saving coal at home, the next best option is to export it to countries with more expensive fuel and more relaxed standards on particulates and greenhouse gas emissions. Asia, specifically Japan, could be an excellent potential buyer if Wyoming and Montana coal could only be exported. As it is, the only significant ports for coal exports exist on the East Coast, making transportation costs on the West’s Powder River Basin coal slightly too expensive for export to Asian markets.
Coal companies and local politicians have tried for years to get California, Oregon, and Washington to open up their ports to coal exports but to no avail—in addition to general objections, for health reasons, locals don’t want coal dust from trains to coat their towns. BNSF, the train company responsible for shipping significant amounts of coal, says it requires coal cars to be loaded in a specific way and sprayed with a surfactant to minimize dust, but concerns have remained.
Now, the Department of the Interior seems to be wanting to force the states’ hands by permitting West Coast exports via military bases.
In a statement to the Associated Press, Interior Secretary Ryan Zinke said that he would consider using naval facilities to export coal, regardless of whether or not the states where the bases are located agree to it.
“I respect the state of Washington and Oregon and California,” Zinke told the AP on Monday. “But also, it’s in our interest for national security and our allies to make sure that they have access to affordable energy commodities.”
Secretary Zinke did not name any candidate naval facilities for coal export, but he did suggest that the partially abandoned Adak Naval Air Facility in Alaska’s Aleutian Islands could serve as a port for exporting natural gas.
What coal ships need
Coal-transport ships require ports in deep waters as well as space to store large amounts of coal between shipments. This combination is relatively rare on the West Coast. “Six proposed coal ports in Washington and Oregon have been rejected or shelved due to worries about air and water pollution and rail safety, combined with changing market conditions,” the AP writes. A potential coal-export terminal in Oakland, California, has also been disputed.
The AP writes that “A $680 million project in Longview, Washington, was denied a key permit last year by state regulators who said it would increase greenhouse-gas emissions and cause ‘significant and unavoidable harm to the environment.'” Since then, the project’s backing company, Lighthouse Resources, has sued Washington state, and six states have lined up behind the company, saying that only the federal government can regulate interstate commerce.
Critics told Politico today that Zinke’s latest federal-facility port plan sounded poorly thought out. Experts reportedly said that “development would still need the approval of state-level environmental regulators who have stymied other projects.”
Sarah Emerson, managing principal at oil and gas consulting firm ESAI Energy, noted that “The Adak base is on an Aleutian island, so you would also need an undersea [pipeline] connection. I think this would be a hard sell for the oil and gas industry.“
Tom Hicks, a former undersecretary of the Navy and now a principal at energy consulting company Mabus Group, also noted that, “Just because it was once a military base that’s closed, it doesn’t mean Department of Defense has anything to do with it. I don’t even know what the role of Interior would be at that point. Usually the land is turned over to the state.”