WASHINGTON -- When Duke Energy asked North Carolina air-quality regulators for permission to build a new coal-fired power plant near Charlotte, the company got a green light only after agreeing to offset carbon-dioxide emissions.
To the north, just across the border in the heart of Virginia coal country, state regulators are moving closer to giving Dominion Virginia Power the go-ahead to build a new coal-powered plant without limitations on the release of carbon dioxide.
Over the past several years, power companies have pushed to build more than 150 new coal-fired power plants. But with Congress poised to restrict carbon-dioxide emissions some analysts say that the boom may be coming to an end.
For now, though, the different take on carbon at two plants separated by a three-hour drive across a state line illustrates the country's patchwork, state-by-state approach to forestalling climate change.
As the likelihood of national carbon regulation has grown, Wall Street and the federal government have suddenly grown skittish about supporting new coal plants. And state regulators in many parts of the country have in recent months blocked proposed coal plants because of concerns about global warming, even in states with no carbon restrictions on the books.
But with the exception of Florida and North Carolina, plans for new coal plants are moving ahead in much of the Southeast with little or no regard for how much carbon dioxide they will release into the atmosphere.
"We're in a position of flux," said Cale Jaffe, an attorney for the Southern Environmental Law Center, which has brought several lawsuits against new coal plants in the Southeast.
"People are just beginning to clue into the fact that carbon regulation is coming. But, for now, it means we have new coal plants with no plans whatsoever to address global-warming emissions" in much of the region.
Environmentalists say the state-by-state approach is especially problematic because pollutants such as carbon dioxide, and acid-rain culprits sulfur dioxide and nitrogen oxides do not stop at state or national borders. Decisions made by regulators in one state affect the health of neighboring states and, indeed, the rest of the world.
Strongest in Southeast
Unlike California, which gets less than one percent of its electricity from coal plants, or most Northeastern states, where coal accounts for less than 25 percent of the energy mix, the Southeast relies heavily on coal for power.
North Carolina gets 60 percent of its electricity from coal, and most states in the Southeast get at least half from coal.
Environmentalists and those in the industry say that dependence has helped prevent the carbon-emission argument from gaining traction in much of the region.
According to the National Conference of State Legislatures, only five states have enacted binding plans to restrict carbon emissions -- California, Hawaii, Minnesota, New Jersey and Washington. None are in the Southeast. Twelve other states -- including Florida and Virginia -- have set nonbinding carbon-reduction goals.
In North Carolina, Duke Energy recently received approval from state air-quality regulators for a new coal-fired unit at its Cliffside plant west of Charlotte.
As part of the deal to build the plant, Duke agreed to shut down over the next 10 years several existing coal plants whose carbon emissions equal two-thirds of the projected emissions of the new Cliffside plant, and to find ways to offset the release of the other one-third. The company says that the move will eventually make the new plant "carbon neutral."
Keith Overcash, the head of the state division of air quality, called the agreement groundbreaking.
"I am not aware of any other power plant in the United States that is required by its permit to offset its carbon-dioxide emissions," he wrote in an Op-Ed in the Winston-Salem Journal defending the approval.
Environmentalists criticized Duke for building a traditional "pulverized coal" unit at Cliffside instead of a newer, more energy-efficient type of plant known as Integrated Gasification Combined Cycle, or IGCC.
IGCC plants cost more, but generate electricity more efficiently and emit fewer pollutants than traditional coal plants by transforming the hunks of coal into gas under high heat and pressure. The technology is relatively new. Only a handful of plants have been built in the United States, and none of the new plants under development in the Southeast will use it.
Duke is building an IGCC plant in Indiana. Generous tax incentives offered in that state made it affordable, company spokesman Tom Williams said.
Weeks after state regulators approved the permit for the Cliffside plant, Duke CEO Jim Rogers told reporters that the company would not build any new coal plants until a reliable method to capture and store carbon emissions is developed.
Capturing carbon
Scientists are working to improve technology to capture carbon, but it will likely be decades before it is made available for commercial use.
Because North Carolina's underground geologic formations are not well suited to storing captured carbon, it is unlikely that the company will build another coal plant in the state after Cliffside.
In Virginia, carbon fears have not led state regulators to cancel any new coal plants or secure agreements from utilities to limit carbon emissions. Indeed, regulators in Virginia and other Southeastern states remain skeptical that the environmental benefits of restricting carbon emissions outweigh the economic harm.
During a hearing this year on Dominion's proposed coal-fired plant in Wise County, a top utility regulator on the State Corporation Commission complained that "this country will go back to the Dark Ages if this carbon hysteria takes over."
"Sometimes I wish we had never gone to the moon, because everybody says, well, we can change the climate in this country; we went to the moon," said the regulator, Theodore Morrison, who recently retired from the commission. "Carbon dioxide. I am breathing a lot of it out right now. You are, too," he added.
The Dominion facility will sit less than 50 miles from the North Carolina line, and environmental groups worry that pollution will harm people and wildlife on both sides of the border.
Virginia's corporation commission approved the plant last month, but the state's five-member Air Pollution Control Board still has to sign off on the project. And despite the fact that Virginia has no binding restrictions on carbon emissions on its books, at least one member of the pollution board raised questions last week about the quantities of greenhouse gases the plant would emit.
Environmentalists complain that plants billed by the industry as "clean coal" use outdated pollution-control technology instead of newer -- and more expensive -- methods of reducing emissions of mercury, sulfur dioxide, carbon dioxide and other pollutants.
Jim Martin, Dominion's senior vice president for business development, said in an interview that the plant would use the latest pollution-control technology and be carbon-capture compatible. A carbon-capture system would be installed once it becomes commercially available and affordable, he said.
"We've thought a lot about it," he said.
State regulators, however, did not agree about the compatibility. Staff engineers criticized the company's contention that the plant was compatible simply because it had set aside space to install such a system, and that it was located near Virginia's coalfields, which scientists think could one day store captured carbon.
"Under this standard, it would seem that virtually any facility that is located in the coalfield region of the state … and has extra space available on its site, would qualify as carbon-capture compatible," John A. Stevens, a senior utility engineer for the corporation commission's energy-regulation division, testified with regard to the plant. "In the staff's view, this is not logical."
After 20 years during which few new coal plants were built in the United States, the industry's interest in coal grew in the past few years.
Rising costs of natural gas, another popular power-plant fuel, provided utilities incentives to consider coal more strongly. Regulatory hurdles made it easier to build new coal plants than new nuclear plants, which emit no carbon dioxide. And environmentally friendly energy sources, such as wind and solar, were too expensive and not reliable enough to provide a reliably constant supply of power, the utilities argued.
According to the U.S. Energy Department and the Sierra Club, plans for about 170 new coal plants have been announced since 2005.
Outside of Florence, S.C., the quasi-public utility Santee Cooper is obtaining permits to build a new coal-fired plant near Florence. The utility projects that population growth will leave the state with a shortfall of 525 megawatts by 2013, enough to power more than 250,000 homes, unless the new plant in the Pee Dee region is built.
"If we had our druthers we'd much rather be building a nuclear plant at Pee Dee. The biggest thing we know is that we can't get a nuclear plant by 2013," said Laura Varn, a Santee Cooper spokeswoman.
Environmental groups are skeptical of the industry's need-energy-now rationale for the coal boom. The Sierra Club, which is waging a nationwide legal battle with other groups to stop the construction of new coal plants, has termed this boom period a new "coal rush."
The group and others charge that the industry is rushing to build as many coal plants before new carbon controls under debate in Congress are put in place. Under current law, power plants in most states are under no obligation to restrict carbon emissions.
Although federal regulations are still under development, they likely will require utilities to pay for carbon emissions under a "cap-and-trade" system, eventually install technology to capture carbon or a combination of both.
Coal is a much cheaper fuel if the carbon costs are ignored. Factor in the cost of capturing carbon or paying to offset the environmental impact and the cost jumps markedly.
It will not be cheap. A recent report by Synapse Energy Economics, a Massachusetts firm, estimated that electricity rates from coal plants would leap about 75 percent under a mandate for carbon-capture technology.
The legislation, America's Climate Security Act of 2007, sponsored by Sen. John Warner, R-Va., and Sen. Joe Lieberman, I-Conn., is expected to reach the Senate floor in June.
It would set up a national cap-and-trade system to reduce greenhouse-gas emissions and provide financial incentives to switch to low-carbon power sources.
Coal bust?
For that reason, environmentalists, energy analysts and some in the industry say the outlook for new coal facilities is suddenly worsening.
Though Congress has not yet regulated carbon emissions, several states have raised the possibility of future regulation in blocking plant construction in recent months.
In the most notable case, Kansas last fall became the first state to deny an air permit to a new coal plant on global-warming grounds.
"It would be irresponsible to ignore emerging information about the contribution of carbon dioxide and other greenhouse gases to climate change," the state's environment and health secretary, Roderick Bremby, said in announcing the decision.
Last year, lawsuits, permit denials and the uncertainty over future regulation led to the cancellation or delay of 59 new coal plants, according to the Sierra Club.
Lack of financing has also proved problematic. The uncertainty over the scope of climate-change legislation in Congress and state regulation has also reduced enthusiasm on Wall Street to bankroll new coal plants.
In February, three leading investment banks -- Citi, JP Morgan Chase, and Morgan Stanley -- said they would put more emphasis on the costs of regulating carbon emissions in financing energy projects. And in a January report on crucial financial challenges facing utilities, the credit rating firm Standard & Poor's said that the No. 1 issue was the impact of carbon regulations on coal plants.
For Wall Street, said David Schlissel, a senior consultant at Synapse Energy Economics, "it's not a matter of ‘if' in terms of greenhouse-gas regulation, but ‘when,' and what form does it take?"
■ Sean Mussenden can be reached at
smussenden@mediageneral.com
or 202-662-7668.
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