CHAIR'S REPORT
Energy & Environment Committee
BACK TO CHAIRS' REPORTS MAIN PAGE
The 63rd Annual Meeting of the Southern Legislative Conference

August 15-19, 2009

TO: Members of the Energy & Environment Committee
FR: Representative Rocky Adkins, Kentucky
Chair, Energy & Environment Committee
RE: Report of Activities of the Energy and Environment Committee at the 63rd Annual Meeting of the Southern Legislative Conference in Winston-Salem, North Carolina, August 15-19, 2009

The Energy & Environment Committee convened on Sunday, August 16, for a program session, and Monday, August 17, for a business session, during the 63rd Annual Meeting.  The following is a summary of the speaker presentations and Committee activities during this event.  An attendance list is attached.

Program Session, August 16
I.         The South’s Energy Future
Kenneth Nemeth, Executive Director, Southern States Energy Board (SSEB), Georgia
Bill Schafer, Senior Vice President of Business Development, Range Fuels, Colorado
Rodney Andrews, Ph.D., Director, University of Kentucky Center for Applied Energy Research
Joseph Craft, Chief Executive Officer, Alliance Resource Partners, Kentucky
Christopher Hamilton, Senior Vice President, West Virginia Coal Association

Background

In light of rising fuel costs, increased volatility in energy markets, as well as concerns over environmental impacts of energy production and use, it is vital for Southern legislators to examine the role both fossil fuels and renewable energy sources will play in Southern states in the years to come, in order to assess how current and future trends will affect these resources and plan for future energy needs. 

Mr. Nemeth's Presentation

Mr. Nemeth began his presentation by giving the audience some background about the Southern States Energy Board.  Through innovations in energy and environmental policies, programs and technologies, SSEB enhances economic development and the quality of life in the South.  One of SSEB’sprimary goals, is to assist legislators in assessing what resources are available in the Southern region, then determine what action is needed.  A primary component of this is taking a close look at the reliable power stores accessible to Southern energy producers.  This is where collaboration is of utmost importance.  In order to move innovative programs forward, members of all branches of government, as well as participants from the private sector, must come together in a common initiative.   

Mr. Nemeth emphasized that the current energy supply is “at a crossroads,” with a host of difficulties facing the energy sector.  Global oil price instability alone has changed the way government officials view energy accessibility.  As the price of energy increases, volatility will increase.  In 2004, foreign oil dependence rose to 26 percent in the United States, the same year that the Northeast Blackout left 50 million people without electricity.  Since that time, oil exceeded $50 per barrel, peaking at $144 per barrel in 2008; gasoline rose to more than $3 a gallon; oil and gas rigs saw significant damage from Hurricanes Katrina and Rita, and other formidable weather events; and experts estimated that global oil production may have peaked.

Electricity production has become increasingly important in the 21st century.  Electricity demand is estimated to grow more than 16 percent between 2008 and 2017, whereas production will only grow a little more than 5 percent.  Therefore, the United States needs greater electrical storage capacity, along with more efficient means for using electricity.  It also will require greater diversification in energy sources. 

According to Mr. Nemeth, there will be some changes in what percentage of electricity comes from what sources in the next 20 years.  By 2030, it is estimated that the United States will get 47 percent of electricity from coal, down from 49 percent in 2007; 20 percent from natural gas, verses 21 percent in 2007; 18 percent from nuclear power, slightly down from 19 percent in 2007; and 14 percent from renewables, up from 9 percent in 2007. 

Also, electricity demand is outpacing generation growth.  The U.S. generation capacity reserve margins have greatly declined, from 30 percent to 40 percent in the early 1990s, to approximately 16 percent in 2008.  These margins are expected to fall below the 13 percent reference minimum in the South sometime in the next three to five years.  It is expected that generation capacity will grow about 5.2 percent in the United States in the next 10 years, while demand will grow approximately 16.6 percent. 

The United States has a variety of energy resources: approximately 500 billion tons of coal; 1.3 billion tons of biomass; more than 1 trillion barrels of oil shale liquid fuels; more than 1600 trillion cubic feet of natural gas; 300 gigawatt (GW) hours of wind capacity; and 600 terawatt hours of solar power.  All of these energy forms are needed for proper U.S. diversity of supply. 

There are limitations to all sources of energy.  Oil consistently costs above $50 a barrel, reserves are declining, and it comes from risky sources.  Nuclear energy is clean, but production is constrained due to safety and waste disposal concerns.  Hydroelectricity currently has no growth in supply.  Wind energy has limited availability, and is subject to grid disruptions and erratic supply.  Ethanol is clean but energy inefficient.  Natural gas, like oil, is subject to great price volatility, reserves are declining, and comes from risky sources.  Coal faces great greenhouse gas, climate change, regulation, and other environmental challenges.  Solar power is limited by the cost of the materials used to produce it, as well as regional effectiveness.  In addition, there is a lack of transmission infrastructure in the United States.  Also, financing of new infrastructure is speculative due to, among other things, uncertainty about the capabilities of financial markets.

Transportation issues pertaining to energy will remain a critical area of attention.  For instance, there is a great deal of potential for wind energy in the United States, but getting the energy from the point at where it is produced to where it is needed is often problematic.  Nuclear energy poses a different kind of transportation problem.  Moving spent nuclear rods from plants to locations where they can be safely stored limits nuclear production in many ways.  

There are advantages to all sources of energy as well.  Coal, for instance, will continue to be a major part of the energy equation in the South.  With advances in gasification technology, construction of more pipelines for transporting carbon emissions, and more effective methods for capturing and storing greenhouse gases, coal production will continue to be a major contributor to electricity production.  The Southeastern Regional Carbon Sequestration Partnership currently is testing a project in Alabama that will potentially store 150,000 tons of carbon over five years.  Sequestration projects such as this can move forward if efforts are made to substantially characterize the potential carbon sequestration sinks in the South; conduct adequate field verification studies in the most promising geologic formations; advance state-of-the-art monitoring, measurement and verification techniques and instrumentation; and develop sequestration technologies and characterize geologic sinks for future readiness.  The commercialization of carbon capture and storage is another important aspect of coal technology innovation.

Currently, the United States has 110 coal-fired projects underway.  However, overall coal plant construction has been lagging.  There have been delays and cancellations due to regulatory uncertainty, economics relating to escalating costs, and a backlog of plants currently sited for construction.  The impact of the recent coal ash spill at the Tennessee Valley Authority plant in Kingston has emphasized many of these environmental concerns. 

Mr. Nemeth insisted that it is possible to reduce energy demand through a variety of measures, such as developing renewable portfolio standards; enforcing efficiency standards for boilers, appliances, and electronics; upgrading building codes; giving tax incentives for “green” buildings; expediting permits; optimizing weatherization; improving energy performance in government buildings; and increasing the use of alternative fueled government vehicles.  Four SLC states have renewable electricity standards: North Carolina, Texas, Florida and Virginia.  Maryland also has energy efficiency standards. 

In addition, natural gas is replacing coal as the base load generating option in the United States, mainly due to its short lead time; lower carbon emissions; lower capital costs; and smaller increments of capacity.  However, there are security issues pertaining to natural gas, as well as gas price volatility, and the switch to gas could change the transmission flow patterns that currently exist. 

Mr. Nemeth noted that the U.S. Chamber of Commerce’s transition plan for securing America’s energy future includes 13 principles: promote energy efficiency; reduce environmental impacts of consumption and production; allow climate science to guide Energy & Environmental policy; research and develop advanced clean energy technology; expand oil and gas exploration and production; expand nuclear energy; promote clean coal; expand and develop renewables; transform transportation sector; modernize energy infrastructure; shortages of energy professionals; reduce litigation opportunities and regulation; and demonstrate global leadership on energy security and climate change.

Mr. Nemeth concluded by stating that the South can play a large role in securing America’s energy future through contributions in energy efficiency; enhancing building codes; advancing energy star programs; improving carbon capture and storage infrastructure; promoting low-carbon energy source development; enhancing the transmission infrastructure; and identifying renewable energy zones. In addition, there are other emerging technologies, such as electro-technologies, nanotechnologies, robotics, superconductivity, and space exploration, that also will contribute to the strides already being made in the energy field. 

Mr. Schafer’s Presentation

Mr. Schafer began his presentation by emphasizing that Range Fuels is a leader in biofuels and focused on the South because of its vast renewable resources.  Range Fuels, founded in 2006 by Khosla Ventures, developed the world’s first commercial cellulosic biofuels plant, and is in the first phase of the commercial development, which has been fully financed, at a plant in Soperton, Georgia.  Additional sites and partnerships have been secured as well.  The Soperton plant will be the first in the country to produce commercial grade cellulosic ethanol.  Once the plant is completed, it will employ approximately 100 people, including a diverse and experienced management team.  Range Fuels estimates that there are more than 2 billion gallons per year of cellulosic ethanol production potential in Georgia and the surrounding states.  The Soperton plant, once online, is expecting to produce more than 500 million gallons of ethanol per year. 

Mr. Schafer continued by describing the production process involved in producing cellulosic ethanol.  There are two major steps: converting solids to gas and converting the gas to liquids.  The first step involves devolatilization of the biomass, steam reforming (syngas production), and syngas cleanup.  The second step involves alcohols separation and production, and biofuels (ethanol, methanol and higher alcohols) storage. 

There has been increasing biofuels demand in the United States for some time, according to Mr. Schafer.  The 2005 Energy Policy Act established aggressive support for renewables; the 2007 Energy and Independence Security Act established a renewable fuels standard with an emphasis on cellulosic biofuels; the 2007 Energy Bill mandated the production of 36 billion gallons a year (BGY) of “renewable fuels” by 2022, including 21 BGY of “advanced biofuels” and 16 BGY from “cellulosic biofuels;” and the 2008 U.S. Farm Bill went further to establish programs targeted at all facets along the biofuels supply chain, including incentives for growers, harvesters, transporters and producers. 

The limitations of the current ethanol technologies are vast.  Current production technologies use corn or sugarcane, and the maximum capacity in the United States currently is 15 BGY.  This contributes to the high cost of the product.  A second limitation is the impact ethanol production has on food sources, which  results in low land efficiency for fuel production; sharp increases in feedstock prices; depleting water tables; wide price fluctuations due to weather; and corresponding resistance from grocery and livestock industries.  A third limitation is lower fossil energy ratio for ethanol production.  Corn has a 1:1.4 input to output energy ratio, and sugarcane has a 1:8 input to output ratio. 

There are significant economic benefits to cellulosic ethanol production.  One major economic benefit is that the lowest cost feed stocks, such as woodchips or corn husks, can be used in the process.  These products are inexpensive, and would otherwise be considered agricultural waste.  Perhaps the greatest advantage to using cellulosic ethanol, is that it does not use food products.  Although, according to Mr. Schafer, ethanol production’s effects on food sources has been exaggerated, there is some impact.  Cellulosic ethanol eliminates this effect.  Perhaps the largest advantage of biomass is that it is a cheaper, less volatile feedstock, and there is a flexible “high volume” feedstock supply, including woodchips, municipal and industrial waste, manure, switchgrass, corn stover, olive pits, and coal. 

Correspondingly, there are other strategic advantages to using cellulosic ethanol.  These include a superior differentiated technology; feedstock flexibility; feedstock advantage of woody biomass and dependable procurement; a highly scalable business model with replicable plant modules; and environmentally friendly production processes.  Another advantage of cellulosic ethanol production is the limited impact production has on the environment.  Approximately one-twentieth of crops are disturbed during the process.  There are significant greenhouse gas savings in cellulosic ethanol production, even more so than with corn or sugarcane ethanol production, and significantly more than gasoline production.  The process also is thermally self-sustaining.  Excess process heat is recycled, and a minimal amount of outside thermal energy is used.  In addition, water use is competitive with advanced corn ethanol plants, reducing purification costs and impact.  Finally, there are significant material land use benefits, including polyculture compatibility, as well as better yields, biodiversity, and low impacts and inputs.

Moreover, there are strategic advantages to using cellulosic ethanol produced from sources in the South, Mr. Schafer continued.  Most ethanol is produced in the Midwest, but this is not where major consumption happens.  This creates a transportation barrier, for logistical as well as financial reasons.  Producing and using cellulosic ethanol in the same region eliminates this dilemma.  Also, while the South is limited in its capacity of wind and solar power, biomass is abundant.  Finally, the South has the existing infrastructure to supply biomass—similar to the type of infrastructure available for farming in the Midwest.  Over 650 million tons of low cost woody biomass is available in the United States annually.  Also, there is high land efficiency for cellulosic crops—they require low water and fertilizer inputs.  In addition, cellulosic availability fits the demand for ethanol, which results in fewer transportation issues.  There also are limitations to using cellulosic ethanol.  One is that production is expensive and energy intensive.  However, through new, innovative technologies, much of the excess energy released during the process can be captured and reused in the process itself. 

The vision for Range Fuels, Mr. Schafer concluded, can be summarized by the Three E’s: energy independence, environmental benefits, and economic benefits.  Range Fuels’ strategy is to be the first to market commercial cellulosic ethanol; to capture the best plant locations; and rapidly expand production capacity.  Range Fuels’ goal is to be a premier producer of ethanol through operational excellence, world-class project management, and focus on technology advancements, such as improving yields and efficiencies and ensuring competitive capital costs.  However, continuous work and improvement in the field is imperative.

Dr. Andrews’ Presentation

Dr. Andrews began his presentation by emphasizing that world energy use is dramatically growing, alongside population growth.  The world population was approximately 6 billion in 2000, and total energy consumption was 400 quadrillion British thermal units (QBTU) a year.  While projections estimate the world’s population will be almost 9 billion by the year 2050, energy consumption is expected to double to 1,000 QBTU a year by that time.  It is very simple, according to Dr. Andrews: as the population goes up, demand goes up. 

There is a great universal need for affordable energy.  Coal is a global commodity, and we compete globally for energy.  The issue is how does the United States use coal without dramatically affecting the environment?  One answer is efficiency.  Another is technology.  If less energy is used, and if more energy is gleaned from every ton of coal—as opposed to merely trying to utilize more sources of energy—then the industry is moving in the right direction. 

The world will continue to use coal in large amounts, according to Dr. Andrews.  Projections for 2030 show that coal is “here to stay.”  While approximately 50 percent of the nation’s electricity is derived from coal, the South relies on it much more heavily, getting about 55 percent of its electricity from coal generation.  In states like Kentucky, upwards of 92 percent of electricity is derived from coal, which amounts to around 16 gigawatts (GW) of production.  There are 32 coal plants in Kentucky and the Ohio River Valley alone, yielding approximately 33 GW total.  The United States has not upgraded its power plants in more than a quarter century, partly because there is no encouragement to update them.  Other countries are using more coal as well.  For instance, China is using more coal, and U.S. power plants are 30 years older than their Chinese counterparts. 

Carbon emissions will put restraints on expansion of coal production.  In 1980, U.S. energy-related carbon dioxide emissions were approximately 5,000 million metric tons (MMT).  In 2005, the amount had risen to just under 6,000 MMT.  Projections for 2010 and 2030 emission levels are 6,214 MMT and 7,950 MMT, respectively.  Correspondingly, electricity generation from coal went from a little more than 1,200 billion kilowatt hours (kWh) in 1980 to almost 2,000 billion kWh in 2005.  That level of generation is expected to reach almost 3,000 billion kWh in 2030, when overall electricity demand for the United States will reach almost 5,000 (energy contributions from nuclear, natural gas, renewable, and liquids all will remain well under 1,000 billion kWh by that time).  For this reason, it is no surprise that electricity generation capacity additions for coal will rise significantly during that time as well. Also, it is expected that U.S. energy-related carbon dioxide emissions will decrease, while other regions of the world will see significantly escalating energy-related emissions. 

Carbon emissions management is an important component of moving the South forward, according to Dr. Andrews.  The main issue is whether or not technology can keep up with the reality of coal’s prominence in the energy world.  However, technology and innovation can lead to substantial reductions in carbon emissions.  Several major areas of development include: fuel switching (relying more on natural gas, renewable, and nuclear power); improving efficiency (demand side and supply side), and sequestering carbon through capture and storage or enhancing natural sinks.  Reducing carbon emissions by switching to renewable energy sources poses a variety of problems.  Wind, hydro, and geothermal sources would not provide enough energy.  Biomass has transportation and land use barriers and is very expensive to produce.  Solar also involves land use difficulties, as well as capital cost and storage barriers. 

Reductions in emissions can be made through adopting new power generation technologies.  For instance, relative to the average pulverized coal plant in 1999, all new sequestration technologies have contributed to almost a 100 percent reduction in carbon emissions.  The integrated gasification combined cycle (IGCC) technology, which produces syngas from high-sulfur coal, alone will contribute to a more than 50 percent reduction by 2010.  Currently, IGCC is a mature technology for gasification, and a new wave is being pushed by General Electric, Shell and ConocoPhillips.  Within this arena, there is ongoing research and development, which includes: new catalyst/shift-reactor processes to reduce water and carbon ratios; membrane separation; sorbent development; process integration; and oxygen production. 

Also, advances are being made in scrubbing in the areas of amine and ammonia.  The Center for Applied Energy Research’s (CAER) post-combustion carbon capture pilot plant, for instance, initiated by a $1.5 million grant from EON-US, currently is underway.  They employ a 0.1 MW pilot scrubber system, the largest at any university.  It provides a platform for testing new chemistries and new scrubber designs, and focuses on lowering emissions and increased carbon credits, which can yield estimates of 60 percent cost increases and one-third power output for plants.  A research group at CAER is currently working to develop more energy and cost effective carbon management technologies, as well as address specific materials, controls and waste management solutions.  A $1 million a year match is provided by Kentucky. 

Innovations are taking place in developing algae systems for scrubbing coal-fired power plants as well, according to Dr. Andrews.  Such systems use carbon as a feedstock; are robust and easily produced; have high solar efficiency; and may have a high oil (lipid) content—as high as 65 percent by mass—which can be converted to biodiesel.  The Kentucky Department of Energy Development and Independence has given $3.5 million to develop, over a three year period, an algae system for the mitigation of carbon from coal-fired power plants.  The agency is working with several utilities in this endeavor. 

Dr. Andrews concluded by adding that, although coal will play a major role in energy production for the foreseeable future, exactly what that role will be, and what that will, in turn, mean for ratepayers, is uncertain.  In order to insure that the cost of electricity does not increase, the model by which the coal industry operates must be changed.  This includes basing regulation on efficiency, allowing “real future cost” in the best price option, and promoting clean coal technology.  Second, the United States must innovate.  New technologies to deal with carbon, improve efficiency, and develop renewable and alternative energy sources, must be pursued. 

Mr. Craft’s Presentation

Mr. Craft began his presentation by stating that Alliance Resource Partners operates eight underground coal mining complexes in all major eastern coal producing regions, and currently has four significant organic development projects identified for production in the growing Illinois Basin and Northern Appalachia high-sulfur coal markets.  Alliance currently has more than 3,012 employees and expects to employ more than 3,700 people by 2011.  Alliance is headquartered in Tulsa, Oklahoma, and markets coal in 14 of the 16 SLC states. 

Mr. Craft emphasized the importance of job creation in the coal industry.  He referenced several childhood experiences, growing up in rural Kentucky in an impoverished environment, and emphasized how the coal industry brought jobs to not only his home county, but the rest of the region as well.  He spoke about the energy crises of the 1970s and how those experiences bring to light the importance of energy reliability and affordability. 

Mr. Craft then enumerated current consumption sources of electricity in the United States: residential (39 percent), commercial (36 percent) and industrial (25 percent).  Also, coal consumption has grown with the U.S. GDP, and is a critical component of the U.S. energy portfolio, making up approximately 49 percent of all electricity generation and 93 percent of all fossil energy reserves.  In 2008, this amounted to 4.110 million GW of electric power generation and 986.77 billion barrels of oil equivalents. 

Coal also is the world’s fastest growing fuel, according to Mr. Craft, with a 4.9 percent change in global energy consumption from 2003 to 2008.  China and India greatly depend on coal to generate electricity.  China derives 80 percent of its total electricity generation from coal (2.529 million GW), and India gets 68 percent of its electricity from coal (517,000 GW), based on 2006 statistics.  Developing nations will continue to increase energy use and put pressure on global supply.  Electricity use in the United States is upwards of 15,000 kWh per capita, and passenger vehicles per 1,000 people is approaching 800.  Current population growth rates in China (0.66 percent), India (1.55 percent) and the United States (0.98 percent) continue to increase.  Coal use in the United States is expected to accelerate over the next several decades.  Estimates for increased usage from 2008 to 2030 are upwards of 48 percent, second only to renewable (60 percent).

Coal also has a history of environmental success.  While coal generation has tripled over the past 30 years, technology has enabled the coal industry to significantly reduce emissions while generating additional electricity.  Today’s coal-based electricity generating fleet is over 80 percent cleaner than it was in the 1960s (based on emissions per unit of energy produced), and levels of nitrogen oxide and sulfur dioxide emissions have dramatically been reduced. 

Reliable assets such as coal are particularly significant during such economically dire times as the United States is experiencing right now, Mr. Craft continued.  This year the national debt reached $11 trillion for the first time ever, which equates to over $36,000 for every U.S. citizen.  This is up from $10 trillion in September 2008, a $1 trillion increase in just over five months, the fastest jump in U.S. history.  By September 30, 2012, that debt is estimated to be upwards of $16.2 trillion, or 100 percent of the U.S. GDP.  Mr. Craft noted that environmental concerns are important, but emphasized that a prosperous economy is a necessary prerequisite to improving the environment. 

Mr. Craft concluded by noting seven principles for creating sound energy policies: promote energy independence; improve energy efficiency; examine the science behind global warming; invest in research and development and incentivize technology to address environmental concerns; rely on all forms of energy; protect national security; and let the free market work to provide low-cost, affordable energy to consumers, thereby supporting economic growth and creating quality jobs.

Mr. Hamilton’s Presentation

Mr. Hamilton began his presentation by emphasizing that coal has been one of the South’s  leading industries, providing thousands of good-paying jobs, millions of dollars for local and state economies, and low-cost electricity for state residents.  The South has the opportunity to become the nation’s center for energy and commerce, if the future is approached with reason, intelligence and common sense. 

The coal industry is well-poised on high-growth opportunities, Mr. Hamilton continued, as the country pursues energy independence and economic growth from a strong domestic energy industry.  However, success is contingent on how we deal with today’s challenges on the national and international scale, including global climate change; cap and trade legislation; renewable portfolios; national energy policy; regulations on coal; and mountaintop mining. 

Mr. Hamilton stated that West Virginia is the second largest coal producing state in the nation (trailing only Wyoming), producing 161 million tons a year.  It is the largest underground coal producing state in the country, yielding 95 million tons a year.  West Virginia also is the largest international coal exporting state, sending 20 million tons overseas every year.  In fact, 70 percent of all coal produced in West Virginia is exported, either to 26 other states or 23 foreign countries.  The coal industry is the bedrock of the state’s economy, providing approximately 12 percent of the state’s gross domestic product.  In addition, more than 50,000 West Virginia families depend on the coal industry for their livelihoods.  Coal mining is a $6 billion a year industry in West Virginia alone.  Mr. Hamilton emphasized that a great deal is at risk.  Kentucky, Virginia and West Virginia alone mined approximately 131 million tons in 2008, 11 percent of total U.S. coal production.  According to Mr. Hamilton, it is in the South’s best interest for its coal and other energy industries to remain viable and competitive in global markets.

Mr. Hamilton spent the remainder of his presentation addressing the issue of mountaintop mining.  According to Mr. Hamilton, the public image of coal is often one of environmental destruction.  This is especially true as it pertains to mountaintop mining.  There are two types of mines: underground and surface mines.  Surface mines can involve contour mining along a bench; highwall or auger mining; or mountaintop removal mining, where equipment is used to remove rock and earth along the top of the mine.  In other words, mountaintop mining is simply coal mining that occurs at or near the topmost portion of a mountain.  Valley fills are areas where the rock and dirt from mining excavation is placed according to a plan designed by engineers and approved by government agencies.  The fills usually occur in either dry stream beds, or ephemeral or intermittent streams—streams that flow only when it rains. 

Surface mining in general, and mountaintop mining in particular, play an essential role in keeping West Virginia coal competitive in the global marketplace.  Production from surface mine operations constitutes approximately 40 percent of the total production of the state’s coal mines, or 68 million tons of the total 161 million tons mined every year. 

Mountaintop mining is environmentally friendly, according to Mr. Hamilton.  Restoration, including revegetation and reforestation, returns the mined region almost to its original state.  There also are alternatives to simple restoration, whereby surface mined lands are left in non-original contour configurations if an alternative use is part of the planning.  Since surface mining creates level land, that land has the potential for many other uses.  For instance, recreation areas, industry development, education facilities, golf courses, cemeteries, airports, hospitals, sports complexes, shopping malls, hunting preserves, hiking trails, prisons, landfills, and farms all are examples of projects that have been developed on mined land.

The South’s coal industry competes in regional, national and international markets where the tightest of margins exist, Mr. Hamilton continued.  Western coal is on the rise, and imported coal encroaches on Southern and Mid-Atlantic markets.  Today’s Appalachian coal seams are more difficult to access, require more sophisticated preparation and are further from transportation points of rail and barge.  Mining costs, including fuel, engineering, permitting and reclamation, personnel, equipment and supplies all have increased in recent years.  In addition, the nation now has an aging workforce and is experiencing an overall shortage of workers.  There also are legal challenges and continuing unpredictability in the permitting processes, which have inhibited the ability of the industry to maximize its production opportunities.  The success of Appalachian coal is dependent on how we deal with today’s challenges on the national and international scale.  World energy demands will increase and coal will continue as a predominant energy source.  Coal is the key to energy independence, and America’s coal infrastructure is well established to meet these goals. 

Mr. Hamilton concluded by emphasizing that state legislatures must preserve and protect the coal industry in the region, including mountaintop mining, and Appalachian states must advance an attractive environment for investment in coal, and advance programs to foster economic growth, expansion and sustainability.  This includes developing fair, growth-oriented tax structures; predictable mine permitting processes; manpower assistance (recruitment and training); infrastructure and technology fiscal incentives; mine operational research; and a fair and consistent regulatory and enforcement framework. 

Business Session, August 17
I.          Energy and the Federal Stimulus
Skila Harris, Recovery Adviser, U.S. Department of Energy (DOE), Washington, D.C.

Background    

The American Recovery and Reinvestment Act (ARRA) of 2009 included $47 billion for renewable energy, smart grid, and energy efficiency programs, as well as an additional $20 billion in the form of tax incentives. 

Ms. Harris’ Presentation

Ms. Harris began her presentation by giving some background of the American Recovery and Reinvestment Act activities.  Funds were allotted to almost every aspect of energy, and efforts have been made to move the funding to projects as quickly as possible.  The goal has been to invest in projects that provide enduring value for the state in which they exist, as well as the nation.  Attempts have been made to deliver these funds with unprecedented transparency and accountability as we  “make a down payment” on the nation’s energy and environmental future. 

A significant commitment to energy efficiency and innovation has been made through ARRA.  The Act allots $38.7 billion to the budget and loan authorities; $32.7 billion in grants and programs; $6 billion to underwrite up to $60 billion in new loan guarantees, in addition to the $76 billion in existing loan authorities; and $6.5 billion in Power Marketing Administration borrowing authority.   

The DOE is using multiple vehicles to support its energy recovery goals, Ms. Harris insisted.  The budget and the loan guarantee authorities are dispensing funds for energy efficiency, renewable, batteries, nuclear energy, fossil fuels, environmental management, smart grid, carbon capture, and various mixed technologies.  Currently, phase one of funding, in which money went out to states in non-competitive grants such as weatherization grants and appliance rebates, has been completed.  States must act fast in order to access these federal funds.  For instance, the community renewable program, which involves competitive grants, will be closing soon.  In August, the Energy Efficiency Conservation Block Grants, which includes funding for battery programs, transport electrification, and biorefineries renewable loan guarantees, will end.  In September and October, another host of funding programs will end as well, including smart grid grants, funds for industrial carbon capture and storage, and other renewable loan guarantees. 

Ms. Harris pointed out the usefulness of the ARRA website, which provides information for each state.  On state pages, information pertaining to funding for weatherization, state energy programs, and energy efficiency and conservation block grant programs is available.  In addition, the site offers specific information pertaining to programs within the state that have won grant funding, what purposes those programs serve, and the partnerships that are involved in those programs.  The DOE currently is working on a geospatial map that will track all ARRA award data, in which awards will be updated weekly.

One of the biggest challenges for the grant program is finding qualified reviewers, Ms. Harris continued.  In addition to the initial $38 billion, there is another loan program under the ARRA, which will cover transmission, distribution and renewable energy.  There also is an older loan program that has not been accessed yet. 

Syncratization is very important in this endeavor, Ms. Harris concluded.  For instance, when the DOE makes a loan, they notify the U.S. Department of Labor as well as the U.S. Department of Education.  The DOE wants to ensure that entities such as community colleges, unions and utilities all have a chance to benefit from these funds.

II.        Southern States Energy Board’s Legislative Digest, 2009, Presentation and Roundtable Discussion
Representative Rocky Adkins, Kentucky

Background

The Legislative Digest is a compilation of model energy and environmental legislation enacted by Southern states, which has been compiled by SSEB for more than four decades. 

Representative Adkins’ Presentation

The energy measures highlighted in the 2009 Legislative Digest are divided into the categories of alternative energy development; coal and minerals; emergency management and homeland security; energy efficiency; natural gas and petroleum; reorganization and coordination; and utilities.  According to Representative Adkins, energy related matters accounted for 42 percent of the total legislation summarized in the Legislative Digest.  The largest topic area was utilities, with the passage of 37 bills in Southern states this year. 

The environmental measures highlighted in the Digest are divided into the categories of air quality and pollution control; coastal zone management; emergency management and homeland security; environmental health services; hazardous waste and substance management; inland water resource management and conservation; radioactive waste; reorganization and coordination; solid waste; and water quality and pollution control.  Approximately 58 percent of the total legislation featured in the Digest is related to the environment.  The largest two categories were land management and conservation, and water quality and pollution control.  These categories combined for 135 pieces of legislation passed throughout SLC states this year.  Energy & Environment legislation was passed in every category, with the exception of radioactive waste.

Representative Adkins highlighted various pieces of legislation in a sampling of these categories and then opened the floor to any members who preferred to speak on specific pieces of legislation, or other energy or environmental issues addressed in their home states.  Topics of discussion included: carbon sequestration; buildings and energy efficiency; water resources; tertiary gas production; rebates for energy efficient programs; expanding nuclear power; natural gas; coastal restoration; lignite mining; energy infrastructure; cap-and-trade legislation; wind energy; cellulosic ethanol; and coal gasification. 

III.       Consideration of Policy Positions

Senator Denny Altes, Arkansas, introduced two policy positions regarding energy security and clean energy.  The first position urges the administration and Congress to seriously review the threat posed to American energy security by policies that do not enable the productive use of indigenous energy sources and rely on imported fuels.  It calls for Congressional action to accelerate the deployment and use of alternative transportation fuels produced from coal, biomass and oil shale in order to eliminate the United States’ dependence on foreign sources of oil.  The second position urges Congress and the administration to support $25 billion in increased loan volume for nuclear projects under the Title XVII Loan Guarantee Program at no cost to taxpayers; to deploy the top projects selected by U.S. Department of Energy; and to further the economic growth associated with new nuclear construction.  It also gives support to the creation of a Clean Energy Deployment Administration that includes nuclear energy as an eligible technology, among many others, to ensure rapid deployment of carbon-free electricity generation in support of climate change goals.  The two policy positions were passed unanimously by the Committee.  Subsequently, they were adopted by the Southern Legislative Conference, Tuesday, August 18.   

IV.       Election of Officers

The Nominating Committee, chaired by former Energy and Environment Committee chair Representative Ron Peters, Oklahoma, recommended that the Committee reelect Representative Rocky Adkins, Kentucky, as its chair and Representative Chuck Martin, Georgia, as its vice chair for 2009-2010.  The nominations were moved and seconded, and Representative Adkins and Representative Martin were elected by acclamation.

V.        Southern Legislative Conference 64th Annual Meeting, Charleston, South Carolina

The SLC will meet for the 64th Annual Meeting in Charleston, South Carolina, July 31 - August 4, 2010.  In keeping with the wishes of the SLC presiding officers, please note that meeting notification does not authorize travel.

SLC Staff Contact

If you have any questions regarding this report, please contact Jeremy Williams in the Atlanta office at (404) 633-1866 or jlwilliams@csg.org.


Attendance List
Southern Legislative Conference 63rd Annual Meeting
Energy & Environment Committee
August 15-19, 2009
Winston-Salem, North Carolina

 

(List reflects those attendees whose names appeared on the sign-in sheet)


Alabama
Representative Randy Davis
Representative Howard Sanderford
Representative Roderick Scott
Ronald Buford, Alabama Power

Arkansas
Senator Denny Altes
Senator Barbara Horn
Representative Barbara Nix
Representative Mary Slinkard
Representative Linda Tyler
Kevin Anderson, Bureau of Legislative Research
Kim Arnall, Bureau of Legislative Research
Ann Cornwell, Secretary of the Senate
Sammy Cox, AEP/SWEPCO
Estella Smith, Bureau of Legislative Research

Florida
Representative Charles Chestnut
Representative Clay Ford

Georgia
Representative Harry Geisinger
Representative Chuck Martin
Kathryn Baskin, Southern States Energy Board
George Bullock, The Center for Energy and Economic Development
Judith Costello, Office of the
Canadian Consulate General
Susan Gibson, Department of Defense
Polly McKinney, Southern States Energy Board
Patrick McShane, Southern States Energy Board
C.S. Muir, Norfolk Southern
Tom Park, Southern Company
Brian Sernulka, Southern States Advocacy Company
Canissa Summerhill, Southern States Energy Board
Rudy Underwood, American Chemistry Council

Kentucky
Senator Joey Pendleton
Senator Jerry Rhoads
Senator Dorsey Ridley
Senator Dan Seum
Senator Brandon Smith
Representative Rocky Adkins
Representative John Arnold, Jr.
Representative Eddie Ballard
Representative Mike Cherry
Representative Jim DeCesare
Representative Jim Gooch
Representative Melvin Henley
Representative Jimmy Higdon
Representative Charlie Hoffman
Representative Jody Richards
Representative Kevin Sinnette
Representative Fitz Steele
Representative Addia Wuchner
Representative Brent Yonts
Bill Caylor, Kentucky Coal Association
Steve Collins, Office of the Speaker
Yolanda Costner, Legislative Research Commission
John Grate, Legislative Research Commission
Stefan Kasacavage, Legislative Research Commission
Laura Knoth, Kentucky Farm Bureau
Kyna Koch, Legislative Research Commission
Charlotte Ellis Land, Office of the Speaker
John Marquette, Columbia Gas Company of Kentucky
B.R. Masters, Senate Democratic Leadership Office
David Moss, Kentucky Coal Association
Dave Nicholas, Legislative Research Commission
Judy Rhoads, Kentucky Coal Academy
Peggy Williams, House of Representatives

Louisiana
Senator Robert Adley
Senator Butch Gautreaux
Representative Simone Champagne
Representative Karen St. Germain
George Guidry, Georgia-Pacific Corporation

Minnesota
David Wefring, 3M

Mississippi
Senator Hillman Frazier
Representative David Gibbs
Tammy Cowart, House of Representatives

North Carolina
Speaker Joe Hackney
Representative Angela Bryant
Representative William Current
Representative Ruth Samuelson
Representative Fred Steen II
George Baldwin, Piedmont Natural Gas
Eddie Davidson, Piedmont Natural Gas
Mike Durham, Piedmont Natural Gas
Jennifer Gardner, Food Lion
Scott Gardner, Duke Energy
Katie Hallaway, Lowe’s
Bryant Kinney, Duke Energy
Hank McCullough, Piedmont Natural Gas
John Monaghan, Piedmont Natural Gas
Phillip Morgan, Piedmont Natural Gas
Jaz Tunnell, Piedmont Natural Gas
Marty Viser, Piedmont Natural Gas

Oklahoma
Senator David Myers
Representative Ron Peters
Representative Weldon Watson

South Carolina
Representative Carl Anderson
Representative Mike Forrester
Representative Phillip Lowe
Representative Walt McLeod
Representative Bill Sandifer
Representative David Umphlett
Scotty Griffin, Piedmont Municipal Power
Jeanelle McCain, Progress Energy

Tennessee
Senator Tim Barnes
Annette Crutchfield, Office of Legislative Budget Analysis

Texas
Representative Edmund Kuempel
Carl Richie, TXU Energy

Virginia
Senator Emmett Hanger
Senator Mark Herring
Senator Frank Ruff
Tammy Kelch, National Rural Electric Cooperation Association
Mark Tubbs, Charles Ryan Associates

West Virginia
Delegate Larry Border
Delegate Allen Evans
Delegate Mike Ferro
John Snider, Arch Coal

Washington, D.C.
Melissa Albert, American Forest and Paper Association
Mike McGarey, Nuclear Energy Institute
Roy Norton, Canadian Embassy
Donald Zowader, Takeda Pharmaceuticals

Canada
Senator Wilfred P. Moore, Nova Scotia
Member of Parliament Brad Trost, Saskatchewan
June Dewetering, Canada-U.S. Interparliamentary Group