Coal and the Demand for Electric Power: Policy, Persuasion, and Public Consent
Bismarck, North Dakota October 31, 2001

Keynote Remarks by Jack N. Gerard President & Chief Executive Officer National Mining Association
To The 28th Annual Meeting of The Lignite Energy Council

Thank you, Dean Peterson, for your introduction; and thank you ladies and gentlemen of the Lignite Energy Council for your welcome.
Organizing my thoughts around your theme of solving lignite's challenges turned into a good exercise in free association.

It began when I learned that Dean's Falkirk mine is situated on a deposit of lignite called the Hagel bed, which initiated a chain of thought on challenges.

The Byrd-Hagel Resolution of the U.S. Senate is a primary reason we do not have a big, divisive and destructive debate pending on a climate treaty designed to forbid the future use of lignite and other coal. However, climate remains a challenge.

Efforts of resurrection are underway. Other challenges may be in the making. They always are. The lever is an abiding public uneasiness about the affects of an industrial society.

Coming to grips with the way specific issues arise is an unanswered challenge. It is a challenge separate and apart from any particular allegation, concern, regulation or technology.

Think of each pending specific challenge as an outgrowth of the leafy spurge that infests your ranches and rangelands. As long as we deal only with the outcrops, the roots will keep sending us new challenges.

And so, I decided that a keynote in harmony with the theme might well deal with the Washington-based challenges of the moment and also touch on this longer-term challenge.

Then I learned that the largest lignite mine in North Dakota is named The Freedom Mine. Freedom is a word that fits lignite and coal.
The North Dakota Geological Survey's new estimate of recoverable lignite is 25-billion tons and said to be conservative. I had the energy content calculated compared with the energy of other forms.

We found that North Dakota's lignite approximately equals:

  • 60-billion barrels of oil;
  • Or 351-trillion cubic feet of natural gas.
Compared with oil, it is:
  • Almost 4 times the sequestered oil in the Arctic National Wildlife Refuge, now sought to help counterbalance OPEC, 16 billion barrels;
  • Or, almost 3 times the entire proved reserve of the United States, about 22 billion barrels;
  • And almost the equal of four OPEC mainstays - Qatar, Indonesia, Libya and Nigeria, a combined 62 billion barrels.
North Dakota's lignite energy equals 103 years of imports from Saudi Arabia, our No. 1 oil supplier, at last year's rate. It equals 1.6 million barrels a day from now through the year two-thousand-one-hundred-and-four (2104) - 1.6 million barrels a day every day, weekends and holidays included, for at least five generations of Americans.

Lignite and coal are America's freedom energy, Compared with natural gas, the energy in North Dakota lignite is:
  • Close to 4 times the combined reserves of Canada and Mexico, our primary sources of imports, 94 trillion cubic feet;
  • Or, one third again more than all of North America, 261 trillion cubic feet;
  • And a little less than the continent of Africa, 394 trillion cubic feet.
America's gas imports more than doubled in the last decade. In this time, the object federal regulatory practice was to drive those who generate electric power toward natural gas for fuel.

Today about 15 percent of natural gas is imported, most of it from Canada. We import more energy in natural gas from Canada than we do in oil from Saudi Arabia.

In the context of energy among nations, the U.S. coal reserve of 274-billion tons is:
  • 4 times the oil Saudi Arabia;
  • l.3 times the oil of OPEC;
  • Or, equal to all the world's proved natural gas;
  • Or, to all the world's proved oil.
America's recoverable coal is the largest single increment of energy in the world secure within the borders of one country: Freedom's fuel.

The next links in the chain of thought were about freedom's fuel and:
  • The evolving implications of the state of war existing since September 11th;
  • The potential for the unrest behind this war to spread among the oil-exporting nations of the Mid-East;
  • And about related prospects for renewed dislocations and price spikes in energy.
I decided that a keynote in harmony with a theme of challenges might well touch:
  • First, on the open questions of regulatory practice and policy that affect the use of coal for electric power;
  • Second, on national energy policy and legislation where both of North Dakota's U.S. Senators sit at important junctions of influence;
  • Third, that it might also touch on the activities of the National Mining Association;
  • And last, on the leafy spurge I mentioned earlier.
Let's start with a perspective on regulation, policy and power.

Last year electric-power generation required 991 million tons of coal and lignite, growth of 144 percent in the quarter-century since the stability and reliability of energy became a major concern of federal policy. Power demand grew by 98 percent.

Coal was the principal source of source of growth and diversity in the U.S. power supply all through this time.

In the decade ending last year, coal-based generation:
  • Set new records in 9 of the 10 years;
  • Increased by 24 percent;
  • Provided 49 percent of the growth in America's power supply;
  • Maintained position as the principal source of power, about 52 percent;
  • And was the source of reliability in supply when other forms fluctuated or faltered due either to availability or price of fuel.
Toward the end of the decade, the awareness began to take hold that America's requirement for additional electric power is running ahead of past expectations - an awareness:
  • That demand would grow by at least 45 percent through the first 20 years of this century;
  • That oncoming deregulation and competitive power markets would emphasize fuel price, which determines power price;
  • And that both low price and ready availability would mean increased use of coal for fuel.
Related developments of influence included these:
  • The United States committed to an international agreement on climate change;
  • The agreement produced a proposal for enforced restrictions on use of carbon-based fuels, especially coal;
  • The Byrd-Hagel resolution told the prior administration by a 96-0 vote that the Senate would accept no such restrictions under the terms and conditions proposed;
  • The administration demurred on submitting the proposal;
  • And regulators began to flirt with the idea of instituting fuel controls by simply defining carbon dioxide as pollutant but had to set it aside.
However, despite declines in the emissions it could regulate, the prior administration did find new reasons to propose a handful of new regulations that reoriented the Clean Air Act to a kindred end - deterrence of coal use:
  • Found reason to do so against the advice of its own scientific advisors in the case of the most stringent proposal;
  • And to do so despite early compliance and over-compliance by coal-based generators with the same Clean Air Act.
Either in litigation or pending review by the present administration are the Environmental Protection Agency's:
  • Attempt to lower the cap on nitrogen with the SIP (State Implementation Plan) call;
  • Revised New Source Review requirements;
  • Regulation on regional haze and best available retrofit technology, called BART;
  • And revision of the National Ambient Air Quality Standards on nitrogen, particulates and sulfur.
The 1990s were a time of uncertainty about power policy; and the net of uncertainties meant the nation added little baseload capacity. Investment was deterred by a constant raising of the ante and concern about what might be next.

However, existing capacity was used at higher levels. The federal report Electric Power Annual 2000 outlines the decade this way:
  • Coal - 52 percent of the nation's power from 39 percent of capacity; and capacity utilization of 71 percent, up from 59 percent in 1990;
  • Nuclear - 20 percent of power from 12 percent of capacity; and capacity utilization of 88 percent, up from 66 percent;
  • Natural gas and oil - 19 percent of power from 35 percent of capacity; and capacity utilization of 29 percent, figures that highlight limited reliance.
Favorable conditions of regulation and supply led to the addition of natural-gas capacity. But the economics of power generation determine order of dispatch and level of use.

About the oncoming years in electric power, the federal report Annual Energy Review 2000 says this:

"…the outlook for the next couple of decades…is for continued growth and reliance on the three major fossil fuels: petroleum, natural gas and coal…

"…(and) for dwindling use of nuclear power and modest expansion of renewable resources…"

Last year all of the trend lines in energy began to converge. High oil prices led to high gasoline prices and discontent. This year, for a while, the lines collided and tangled.

California developed shortages in electric power. The shortages pointed out weaknesses in the theories that had led national power policy for years.

California made itself dependent on natural gas and hydro-electric power. New capacity was rejected. Demand overran both expectations and capability. Low rainfall eliminated large increments of hydro power. There were blackouts in California. And there was intense competition for natural gas and power across the West.

At the same time, other parts of the nation had a rigorous early winter. The situation in the West and higher national demand for natural gas stressed that system.

In January the average price of natural gas for power generation was 920-cents per million Btus. Coal was about 121 cents. Lignite was lower.

Again, there were complaints among the people; and in Washington there was a deeper concern about the absence of a national energy policy. The new President directed the new Vice President to examine the problems and find answers.

This past spring the administration proposed a mix of regulatory initiative and legislative enactment under the heading National Energy Strategy: The Report of the National Energy Policy Development Group, the formal name of Vice President Cheney's task force.

The report called for:
  • Increased domestic production of oil to moderate the world market;
  • Increased domestic production of gas to moderate the domestic market;
  • A national grid to bring about a true and competitive national market for electricity;
  • Reliance on coal both to produce a substantial share of the power and to guarantee competition;
  • And reliance on technology to guarantee the continuation of environmental improvement.
Specific coal-related recommendations included:
  • Resolution of the regulatory deterrent - clear policies, easily understood, reliably acted on;
  • Regulatory incentive for investment in transmission capability and to promote competition;
  • Regulatory incentive for commercial use of advanced technology;
  • Using new technology to raise efficiencies while improving environmental performance at existing plants;
  • And, $2 billion for technology development to raise further the efficiencies of generation and to lower further the regulated emissions.
In related action, the new administration:
  • Rejected the Kyoto Protocol to the climate agreement, one element of uncertainty;
  • Directed a task force to produce an alternative that relies on technology and efficiency;
  • Put EPA to work what is called a three-pollutant strategy to close the most difficult of the open questions - clear policies, reliable for investment;
  • And rejected domestic pressure to regulate the harmless-to-health gas carbon dioxide as a pollutant, another uncertainty, although Senator Jeffords is pressing a bill to regulate it.
I ought to note for the record that so far the EPA handling of the three-pollutant approach has done little to steady the nerves of investors. But there are several steps left to go.

These things became secondary priorities on Sept. 11th. They've been quietly pending since.

On the legislative side, the House has passed a bill that included the President's recommendations. It contains a coal section behind which coal producers, power producers, the railroads, the entire mining industry and many related enterprises have coalesced.

Called the NEET bill for easy reference - the name is an acronym that stands for the National Electricity and Environmental Technology Act - the coal section provides limited investment and production tax credits for initial commercial deployment of today's advanced generating technologies.

NEET's inducements would apply to legislatively prescribed amounts of:
  • Advanced pulverized coal generation;
  • Fluidized-bed generation, both atmospheric and pressurized;
  • And integrated-gasification-combined-cycle generation.
The Senate's companion energy bill contains a NEET section. Senate action was delayed by disagreement on other sections; and, after September 11th, other priorities.

Then the anthrax threat to Congress intervened.

Meantime, oil prices have fallen; but OPEC once again is setting quotas designed to raise them. Winter is coming on. And the administration is undertaking to elevate the place on energy on the Senate's agenda.

It began at a cabinet meeting earlier this month. The President made the meeting an occasion to point out to the country through the press and the broadcasters that - and I quote him directly:

"…an energy bill is…important for our national security…

"…I urge the Senate to move a bill…that will…make it easier to protect the security of this country. The less dependent we are…the more secure we are at home…

"….homeland security…energy independence…

And so, matters soon may begin to sort out. The energy industries are also urging early action.

However, if Congress does not move this year - and that seems more likely with each passing day - things we cannot now predict may have them eager to move by spring.

In addition to advocating early action, the energy providers also should be linking arms for the next push, and doing now those things that will make the next push more likely to succeed.

This year, on designated visitation days, the National Mining Association has sent teams of chief executive officers to Capitol Hill on behalf of coal and energy policy - three CEOs to the team, one from coal, one from other mining, one from the manufacturing division.

The legislative friends of other mining are introduced to coal, the friends of coal are introduced to other mining, and the friends of the manufacturers are introduced to both.

In consequence, we've widened support in both House and Senate. We're making new friends who are willing to hear out each.

On behalf of the National Mining Association, I invite every enterprise represented here today - member companies and non-members alike - to join our effort to secure passage now.

If your companies have not taken part, think of joining us now. All in the lignite chain are need and welcome - all from the face of the mine to the point of power consumption are welcome and needed.

Join us in explaining:
  • To Senator Conrad, of the Budget and Finance committees, the importance of the credits; he has been friendly but has not yet embraced the concept;
  • To Senator Dorgan, of the Energy and Natural Resources Committee, the benefits of moving a bill;
  • And, perhaps, to Majority Leader Dashle, the benefits South Dakota will experience from the likes of the Lignite Vision 21 Project and a sounder power system.
I'm confident that, if the industry moves forward together, events will see the questions that face the 500-megawatts of Lignite Vision 21 resolved - Vision 21 and other coal projects.

A new increment of coal-based power generation will be put in place. Just as capacity built 20 years ago, or more, has carried the country forward to this point, so will the new increment carry it forward to the next point of expansion.

It won't be easy, but it can be done.

Beyond this is the unanswered challenge.

It's said that three conditions must be satisfied in modern society if any large-scale activity is to move forward.

First, society must need it. We're got this covered: A 45 percent increase in demand for electric power with coal and lignite the reliable, affordable sources.

Second, society must have the resources to engage in it. We're covered here too: The largest increment of energy in the world, 274 billion tons awaiting development, the equivalent of 585-trillion kilowatt-hours virtually awaiting dispatch.

And third, society must either demand it or consent to it. Society will tolerate no activity to which it does not consent.

Think new nuclear power: Half of all nuclear power plants ever ordered had to be cancelled. Think whaling. Think prolonged opinion campaigns.

To offer a pertinent example: The immensely rich Pew Foundation has embarked on sponsorship of a campaign by others to require a 75 percent reduction in emissions from coal-based power.

Such campaigns develop slowly. They depend on the news to deliver the emotional impact that creates a political demand for change. They can involve studies designed to generate news, or they can point out stories in contexts that support the campaign.

Last month an Eastern newspaper of national influence happened to discover in the Chicago area a story that rested on the following facts and assertions:
  • Two girls died in separate locations of complications from asthma;
  • There is coal-base power in the vicinity of each location;
  • There's been no observed connection between the plants and the deaths, but parents feel threatened;
  • And so, coal-based power may be causing public-health problems nationwide.
In fact, the plants in question have reduced both sulfur and nitrogen emissions. Some were recognized by the EPA for their improvement.

They met the standards determined to protect public health.

The headline and story hinted darkly at national dangers.

But earlier this month the EPA's annual summary of national trends pointed out that over the last decade:
  • Sulfur dioxide concentrations are down 37 percent;
  • Particulate concentrations, down 19 percent;
  • Nitrogen dioxide concentrations, down 11 percent.
To borrow the technique: No one has connected the Eastern newspaper's story with the Pew campaign; but campaigns specialize in endless variations of such stories; and Pew has made itself a big player in many such matters. Another arm of the foundation periodically advises the press what the public is thinking about.

Pew is only one activist group of many. The purpose of activism is to wear away consent and capitalize on misgivings.

Here's an admittedly unscientific grouping of findings on attitude that comes from various polls of national opinion and motivational research in recent years:
  • Almost 60 percent think the environment is worse than it has been;
  • Almost 70 percent think the air and water are worse;
  • Almost 70 percent expect a global environmental catastrophe within two decades or so;
  • 80 percent think industrial activity is the main reason for pollution;
  • And there is deep, abiding distrust of business.
This is our leafy spurge. It is the product of endless alarms repeated endlessly until set solid as outlook and attitude.
Life is accelerating, concerns mounting.

We can't expect a public distracted by the likes of anthrax scares:
  • To keep track of EPA's annual reports;
  • To school themselves to the degree necessary to follow some very complicated issues;
  • Or even to remember that there already has been an acid rain debate when the are told repeatedly, as they are beginning hear now, that there may be an acid rain problem in the Adirondacks.
We can't even expect them to read far enough into an alarm story to accept our good and reasoned answers when we give them. Or to recognize that what television often presents as pollution is no more than steam.

But we can expect repeated allegations of danger eventually to raise political pressure as long as 7 of 10 think the environment is getting worse, and 8 of 10 blame it all on industry.

Alarms work best when there is no body of understanding against which to judge them in counterbalance. In attempts to revoke consent, it does not matter if an alarm is proved false after years of study. What matters is the immediate uncertainty and distrust it implants.

When the news-oriented campaigns flag, the opposition has in the past moved on to paid advertising to reinforce the pressure.

The concept of consent could use discussion and thought among energy providers.

We are renewing consent now because there have been power shortfalls; because the danger is clear and present; and because the Bush administration was bold enough to recognize the realities of energy and the fundamentals of technology.

Can we keep it? Can we keep it beyond the next four or eight or 10 years?

We may not unless we organize ourselves in this time of renewed consent to deal with underlying objectives as well as specific concerns.
Lately some independent power producers and some equipment makers have begun to establish standing in public awareness with advertising in the forums that reach policy makers. I've even seen coal mentioned here and there.

Like efforts by the Coalition for Affordable and Reliable Energy to secure an open-minded acceptance of coal-based power have been tested and found successful.

Perhaps in time a coordinated effort to maintain consent can grow out of these beginnings - can grow and flourish in the decade to come as coal flourishes in a national and deregulated market for electric power. Power will have to be marketed like other goods.

A good maxim for energy producers of the near future might be: Show them what you do; show them how well you do it; and show them how it helps them. Stick to the truth and a body of understanding will take root against our spurge.

I am certain America will turn to coal and lignite for electric power in this decade: For coal today is freedom's fuel.

But beyond this, the future is ours to win or to lose.

And it's not too early to start thinking about it.

Thank you for your attention.