Released March 13, 2018 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Republican state legislators in Utah and Wyoming are trying a new approach to preserve coal mining jobs and coal-fired electricity in their states: invoking the U.S. Constitution's Commerce Clause.
The Commerce Clause, contained in Article 1, Section 8 of the U.S. Constitution, gives Congress the power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." State lawmakers in Utah and Wyoming assert that the cap & trade policy enacted by California to reduce emissions of carbon dioxide from power plants unlawfully interferes with interstate commerce by limiting the importation of wholesale power from Utah. Coal companies and their legislative allies in Utah and Wyoming further assert agency decisions in California and Washington State illegally interfere with international commerce by blocking planned coal export terminals in California and Washington State.
In its just-concluded legislative session, Utah set aside $1.65 million to fund litigation against California over its climate-change law, which imposes a nearly $15 per megawatt-hour fee on that generated by out-of-state coal plants. That works out to a levy of about $25 per ton of coal burned. California did not force its state utilities to immediately stop buying coal-fired power generated in other states, but it did prohibit the state's utilities from renewing power-purchase contracts once those expire. The cap & trade rule has led several California utilities to sell their shares in out-of-state coal-fired power plants.
California's cap & trade program also levies a fee of about $8 per ton of carbon emitted from gas-fired power plants. Renewable energy sources like wind and solar have no levy because they emit no carbon dioxide.
California's effort to lower carbon-dioxide emissions from out-of-state power plants falls heavily on the Intermountain Power Plant, a two-unit, 1,800-megawatt (MW) coal-fired power plant located in Delta, Utah, and owned by six Southern California utilities. The plant, which came online in 1986, burns Utah coal and sells an estimated 75% of its electricity to its six California owners. But California's cap & trade rule has forced the owners to significantly reduce their purchases of power from the Intermountain Power Plant. Rather than close the power plant entirely, the owners are developing a plan to convert it to burn natural gas, at a cost of about $1.2 billion. For more on that, see October 9, 2017, article - Western U.S. Coal-Fired Power Plants Face Mixed Outlook.
Utah State Representative Mike Noel drafted the bill to set aside funds for litigation. It passed the legislature earlier this year and gained the support of the state's governor despite some initial misgivings. Decrying what he called, "California's war on Utah coal," Noel said the Golden State is "trying to put their values on us," according to a report from the Associated Press (AP).
Declining out-of-state demand for Utah's coal had led to a drop in coal production to about 14 million tons in 2017, down from about 27 million tons in the mid-2000s, said Michael Vanden Berg, energy and mineral program manager at the Utah Geological Survey, according to the AP report.
At its peak, the Intermountain Power Plant burned about 5 million tons of coal per year. But that number has declined to less than 4 million tons per year, and stockpiles of coal at the plant are said to be growing. The plant will stop burning coal and switch to gas by 2025.
"California has placed a $25-a-ton excise tax on all the coal that is burned in Utah for production of energy that goes to California," a clear violation of the Commerce Clause, Noel said during a legislative hearing on his bill. "It's like California is their own China. They are putting taxes on a product we produce here so it makes our product not viable in their energy market."
California officials, the Sierra Club and a Utah Democratic lawmaker blasted Noel's bill. Stanley Young, a spokesman for the California Air Resources Board (Sacramento, California), said California is not singling out Utah. "California's cap & trade program is designed to reduce climate-changing gases and reward electricity with lower carbon pollution used by Californians--regardless of where that electricity comes from," Young said.
Utah has not yet filed its lawsuit. If it does decide to pursue litigation, the suit also may invoke the Commerce Clause in seeking to overturn a decision by the Oakland city council that blocked construction of a planned coal-export terminal in Oakland. Utah coal mines have sought to export their product from West Coast terminals to meet growing demand in Asia and other overseas regions for coal.
Republican state legislators in Wyoming share the frustration of their Utah brethren. Coal miners in that state can't export their product because their preferred options, proposed export terminals in Washington State, have similarly been bottled up by state agencies there. For more on this, see October 30, 2017, article - Conference: CCS, Exports Key for Revival of Western Coal and November 6, 2016, article - Proposed West Coast Coal Terminals Winnowed.
Representative Chuck Gray and four other Wyoming House members introduced a bill to allocate $250,000 to sue Washington State over its decision to deny permits for proposed coal-export terminals. However, not enough of Gray's colleagues agreed with the freshman legislator, and the bill, H.B. 0123, died only days after it was introduced about a month ago.
Commerce Clause-based litigation over coal mines and coal-fired electricity is separate from an actual lawsuit being heard in federal district court in San Francisco, California, that argues the decision by the Oakland city council to deny a permit to a proposed deep-water coal-export terminal in that city was based on faulty science. This narrower argument is being advanced by three Utah coal mines that want to expand their operations, build a 43-mile rail line connecting their mines to the state's largest mine and take advantage of decision by the Utah Community Impact Board to award a $53 million loan to help build a deep-water port in Oakland through which Utah coal could be exported.
Plaintiffs and defendants spent three days in January pleading their case before U.S. District Court Judge Vince Chhabria. Additional filings in the case were made last month. He has yet to issue a decision.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
The Commerce Clause, contained in Article 1, Section 8 of the U.S. Constitution, gives Congress the power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." State lawmakers in Utah and Wyoming assert that the cap & trade policy enacted by California to reduce emissions of carbon dioxide from power plants unlawfully interferes with interstate commerce by limiting the importation of wholesale power from Utah. Coal companies and their legislative allies in Utah and Wyoming further assert agency decisions in California and Washington State illegally interfere with international commerce by blocking planned coal export terminals in California and Washington State.
In its just-concluded legislative session, Utah set aside $1.65 million to fund litigation against California over its climate-change law, which imposes a nearly $15 per megawatt-hour fee on that generated by out-of-state coal plants. That works out to a levy of about $25 per ton of coal burned. California did not force its state utilities to immediately stop buying coal-fired power generated in other states, but it did prohibit the state's utilities from renewing power-purchase contracts once those expire. The cap & trade rule has led several California utilities to sell their shares in out-of-state coal-fired power plants.
California's cap & trade program also levies a fee of about $8 per ton of carbon emitted from gas-fired power plants. Renewable energy sources like wind and solar have no levy because they emit no carbon dioxide.
California's effort to lower carbon-dioxide emissions from out-of-state power plants falls heavily on the Intermountain Power Plant, a two-unit, 1,800-megawatt (MW) coal-fired power plant located in Delta, Utah, and owned by six Southern California utilities. The plant, which came online in 1986, burns Utah coal and sells an estimated 75% of its electricity to its six California owners. But California's cap & trade rule has forced the owners to significantly reduce their purchases of power from the Intermountain Power Plant. Rather than close the power plant entirely, the owners are developing a plan to convert it to burn natural gas, at a cost of about $1.2 billion. For more on that, see October 9, 2017, article - Western U.S. Coal-Fired Power Plants Face Mixed Outlook.
Utah State Representative Mike Noel drafted the bill to set aside funds for litigation. It passed the legislature earlier this year and gained the support of the state's governor despite some initial misgivings. Decrying what he called, "California's war on Utah coal," Noel said the Golden State is "trying to put their values on us," according to a report from the Associated Press (AP).
Declining out-of-state demand for Utah's coal had led to a drop in coal production to about 14 million tons in 2017, down from about 27 million tons in the mid-2000s, said Michael Vanden Berg, energy and mineral program manager at the Utah Geological Survey, according to the AP report.
At its peak, the Intermountain Power Plant burned about 5 million tons of coal per year. But that number has declined to less than 4 million tons per year, and stockpiles of coal at the plant are said to be growing. The plant will stop burning coal and switch to gas by 2025.
"California has placed a $25-a-ton excise tax on all the coal that is burned in Utah for production of energy that goes to California," a clear violation of the Commerce Clause, Noel said during a legislative hearing on his bill. "It's like California is their own China. They are putting taxes on a product we produce here so it makes our product not viable in their energy market."
California officials, the Sierra Club and a Utah Democratic lawmaker blasted Noel's bill. Stanley Young, a spokesman for the California Air Resources Board (Sacramento, California), said California is not singling out Utah. "California's cap & trade program is designed to reduce climate-changing gases and reward electricity with lower carbon pollution used by Californians--regardless of where that electricity comes from," Young said.
Utah has not yet filed its lawsuit. If it does decide to pursue litigation, the suit also may invoke the Commerce Clause in seeking to overturn a decision by the Oakland city council that blocked construction of a planned coal-export terminal in Oakland. Utah coal mines have sought to export their product from West Coast terminals to meet growing demand in Asia and other overseas regions for coal.
Republican state legislators in Wyoming share the frustration of their Utah brethren. Coal miners in that state can't export their product because their preferred options, proposed export terminals in Washington State, have similarly been bottled up by state agencies there. For more on this, see October 30, 2017, article - Conference: CCS, Exports Key for Revival of Western Coal and November 6, 2016, article - Proposed West Coast Coal Terminals Winnowed.
Representative Chuck Gray and four other Wyoming House members introduced a bill to allocate $250,000 to sue Washington State over its decision to deny permits for proposed coal-export terminals. However, not enough of Gray's colleagues agreed with the freshman legislator, and the bill, H.B. 0123, died only days after it was introduced about a month ago.
Commerce Clause-based litigation over coal mines and coal-fired electricity is separate from an actual lawsuit being heard in federal district court in San Francisco, California, that argues the decision by the Oakland city council to deny a permit to a proposed deep-water coal-export terminal in that city was based on faulty science. This narrower argument is being advanced by three Utah coal mines that want to expand their operations, build a 43-mile rail line connecting their mines to the state's largest mine and take advantage of decision by the Utah Community Impact Board to award a $53 million loan to help build a deep-water port in Oakland through which Utah coal could be exported.
Plaintiffs and defendants spent three days in January pleading their case before U.S. District Court Judge Vince Chhabria. Additional filings in the case were made last month. He has yet to issue a decision.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
