Remarks by Kraig R. Naasz …

                             Remarks by Kraig R. Naasz
            "Climate Change and the Energy Industry ­ the Role for Coal"
                                        USEA
                                  January 16, 2008


Good afternoon and thank you for inviting me to speak to you today.


To appreciate the role of coal in the climate change debate, we should start with an
appreciation for coal's role in the U.S. economy. Coal generates half of our
electricity today ­ and is forecast to generate 57 percent by 2030.


Keep in mind this is a growing share of a growing market. As we know, demand for
electricity is projected to grow by 40 percent over the same period.


This fact alone ­ that we are a growing nation of more than 300 million people who
require more and more electricity ­ cannot be understated. Nor should it be ignored.


It obliges us to ask ourselves how will we generate the power that is increasingly
vital to our economic growth? The question applies to our entire energy portfolio ­
from electric power to transportation fuels to feedstocks for manufacturing.


The dimension and complexity of these challenges make them difficult to resolve.


Certainly, I do not have all of the answers. I do believe that America's response to
the intertwined challenges of climate change and energy policy will bear fateful
consequences. And I am certain that arbitrarily capping coal use could have
profound economic consequences for the nation.


The reason lies in coal's dominant role in the power generation market ­ to say
nothing of its potential to provide 2.6 million barrels a day of premium transportation
fuels from coal liquefaction or to meet many industrial needs through coal
gasification.


Behind this dominance is the fact that the U.S. has 27 percent of the world's coal
reserves, the largest of any country.
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Just to put this in perspective, on an energy equivalent basis, the 54 hundred
quadrillion BTUs of U.S. coal surpass the 44 hundred quadrillion BTUs of Middle East
oil.


Not only is coal abundant here ­ with an estimated 240-year supply ­ it is also very
affordable.


This makes coal an enormously valuable domestic resource for a country that
expects its electricity demand to grow significantly over the same time that the
world's demand for energy is expected to rise by an extraordinary 50 percent by
2030.


In a world roiled by political turmoil and marked by increasing competition for
available energy reserves, this fact looms ever larger.


In short, coal is ours, it's accessible and we have lots of it. We do not have to import
coal, spend enormous sums to find it, or worry about a foreign government
nationalizing it.


So to answer the riddle: how will this country provide the energy for its future
growth? I would say with others who are familiar with the energy demands placed
on our economy that first, all sources of energy must be utilized.


Second, that coal must obviously be a large part of this nation's energy mix.


And third, that prudent steps must be taken on the demand side to use energy more
efficiently.


Now to the other pressing question: how to mitigate climate change?


It follows from what I have said that the answer is "carefully." The way we respond
to climate change need not conflict with our response to the energy demand
question.
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Certainly the coal industry does not quarrel with the objective of addressing
greenhouse gas emissions.


We do object to the means some propose for dealing with this important issue ­
especially if they ignore technology.


A case in point is legislation proposed by Senators Joe Lieberman and John Warner.


·   Their bill mandates very aggressive CO2 reductions over the next decade ­ caps
    that will drive energy costs up and jobs offshore.


·   Their bill has no meaningful provisions for mitigating the impact on carbon-
    intensive industries or the economy as a whole.


·   Their bill will not provide the ambitious funding levels that are needed to
    accelerate the development and deployment of carbon capture and storage
    technology.


·   And their bill does not synchronize the imposition of controls with the . . .
    anticipated availability of carbon capture and storage technology.


The result from these deficiencies would almost certainly be costly fuel-switching by
power plants from coal to natural gas, whose supply is already constrained.


In fact, an economic impact analysis of Lieberman-Warner by CRA International
estimates the bill would accelerate the nation's de-industrialization, cost up to 2.3
million jobs, raise wholesale electricity prices as much as 65 percent by 2015, and
cost the average family of four about $3,500 a year.


As more Senators focus on its consequences, the Lieberman-Warner bill's prospects
in the full Senate fade.


Meanwhile in the House, Congressmen John Dingell of Michigan and Rick Boucher of
Virginia, who chair the committee and subcommittee of jurisdiction, intend to take
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up climate change legislation later this year. The chairmen will produce additional
policy white papers as a precursor to drafting legislative language.


This caution is understandable.    The closer Congress looks at imposing mandatory
controls, at their complexity and costs, the less certain it is that controls alone are
the answer.
There is no assurance that sufficient investment will flow to carbon capture
technologies so long as power companies can switch to other fuels ­ despite their
cost compared to coal.


Certainly the European Union's experience with the Kyoto Treaty offers little
encouragement that such a system will work as well in practice as it does in theory.


Already, eight member countries have sued or plan to sue the European Commission
for tightening caps on emissions and Japan itself is falling behind its promised
emissions reductions.


Moreover, mandatory controls such as those currently being proposed will do little to
improve the environment.


Reducing U.S. emissions will not have any meaningful impact on atmospheric
greenhouse gas concentrations when emissions from China and India already
surpass our own. Capping our emissions unilaterally will be all pain for U.S.
consumers and little gain for the environment.


This is not a reason for doing nothing. But it is a reason for carefully examining the
costs and benefits of whatever we do.


Thankfully, some in Congress are turning to a major policy tenet of the National
Mining Association ­ namely, that a technology pathway should be built before we
impose mandatory carbon controls.


Specifically, we should remove regulatory impediments to improved power plant
efficiency and accelerate funding for the development and deployment of carbon
capture and storage technology.
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Most experts ­ from MIT's to those in industry research institutions ­ believe the
U.S. should be investing far more in CCS technology.


They recommend an investment of at least $2 billion annually for the next 15 years
over and above what the federal government is currently spending.


Granted, $2 billion a year is a lot of money. But it would buy a lot of value for a
nation so heavily dependent on coal to secure its energy future.


This funding would be for basic R&D on carbon capture but also for the large-scale
demonstration projects needed for new and existing power plants.


We have already taken an important step in this direction with the official
announcement last month that the FutureGen site has been awarded to Illinois. This
billion-dollar-plus coal-based plant will generate electricity with virtually no emissions
and store the CO2 underground.


The FutureGen project mirrors the global dimension of the climate change challenge.
In addition to a private sector alliance of coal companies, power companies and
mining machinery companies that are contributing to the funding, the project also
enlists support from the United States, China, India and South Korea.
But FutureGen is just a start. If, as some suggest, global warming is the greatest
threat confronting our planet then we should embark today on the equivalent of the
Apollo Project to develop the CCS technology to generate near emissions-free
electricity from coal.


Thanks largely to clean coal technology, since 1970 U.S. power plants have reduced
emissions of conventional pollutants by 40 percent while tripling coal use to generate
electricity.


A new power plant built today emits 90 percent fewer pollutants than the plant it
typically replaces.
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I'm confident that a sufficient commitment of dollars and ingenuity would have equal
success in reducing greenhouse gas emissions.


At the same time, more incentives are needed to ease the cost of installing advanced
clean coal technologies such as coal gasification and ultra-supercritical pulverized
coal.


These technologies can enhance the efficiency of coal plants, so that less carbon is
emitted for every BTU of energy produced. Each efficiency gain of 2 percent yields a
5 percent reduction in CO2.


NMA believes it is critically important that policymakers not put the cart of
mandatory controls before the technology horse . . .


And we expect to see legislation advancing a technology-centered solution for
climate change introduced shortly.


Such a technology roadmap can lead to a more socially responsible use of our
country's unrivalled coal reserves while providing Americans with economic
prosperity and security in an increasingly unsettled world.


Thank you.