Energy Policy in Kentucky

By John Gregory | 5/23/17 9:00 AM

Republican politicians from the White House and Congress down to the Kentucky Legislature have pledged to revitalize the state’s beleaguered coal industry. But will reversing environmental regulations foster a resurgence in the Appalachian coalfields that lawmakers have promised?

KET’s Kentucky Tonight explored the prospects for coal under President Donald Trump as well as other energy issues facing the commonwealth. The guests were Bill Barr, chair of the Kentucky Oil and Gas Association’s government affairs committee; Sarah Lynn Cunningham, an environmental engineer and board president of the Kentucky Conservation Committee; Tom FitzGerald, director of the Kentucky Resources Council; and Tyler White, president of the Kentucky Coal Association.


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New Hope for Coal
In his first months in office, President Trump has signed legislation and executive orders to scale back a number of environmental measures put in place by his predecessor, Democratic President Barack Obama. Trump diluted the Clean Power Plan that seeks to limit carbon dioxide emissions from power generation stations, ended the Stream Buffer Rule that protects waterways from coal mining waste, opened more federal lands to coal mining, and directed federal agencies to suspend regulations that could hamper domestic energy production.

Although it’s too early to tell what long-term effects those actions will have, the Kentucky Coal Association’s Tyler White says there’s already a renewed sense of optimism in many mining communities.

“It has… stopped the bleeding of an industry and has given the people, especially some people in eastern Kentucky, some hope of some stabilization,” says White. “We need to make sure that we are stable first before we start talking about growth.”

White says the state lost only 236 coal mining jobs in the first quarter of this year. He contends that’s good news since it represents what he calls a “flat-lining” of the job losses endured by the industry in recent years. The state Energy and Environment Cabinet reports that coal now directly employs about 6,200 Kentuckians. In contrast, some 19,000 people worked in state coal mines just six years ago. Kentucky now ranks fifth in production among all coal-producing states.

White acknowledges that the eastern Kentucky does need to diversify, but he argues that the way to do that is to use coal as a bridge to a new economy for the region.

“We’re a predominately poor state, we face big problems, and one of the things that this particular resource can do is provide affordable and reliable energy that attracts industry into Kentucky,” White says. “It fuels economic growth… and that is the key to diversifying our economy.”

Natural Gas Continues to Surge
But the environmental regulations that some mining advocates have labeled as a “war on coal” are only part of the industry’s problem.

“Shale gas has really been the nail in the coffin [of coal], and those jobs are not coming back,” says Tom FitzGerald of the Kentucky Resources Council.

Natural gas, which is relatively inexpensive to produce thanks to new extraction technologies like hydraulic fracturing (or fracking), has surged in recent years as companies have tapped shale reserves in portions of Appalachia, the Gulf Coast, and Great Plains. Electric utilities have embraced natural gas as a fuel source both because of its competitive price and because it burns more cleanly. FitzGerald says that it is those market forces that are the greatest cause for coal’s decline.

That’s especially true in eastern Kentucky, where most of the easily accessible coal seams have already been mined. Bill Barr of the Kentucky Oil and Gas Association notes that 40 percent of the coal burned by utilities in the commonwealth comes from southern Illinois and Wyoming, where mining costs are much cheaper. Even with transportation costs, that out-of-state coal can still cost less than Kentucky coal, he says.

That’s leading some utilities here to switch to natural gas. Barr says 98 percent of Kentucky’s electricity came from burning coal in 2010. Now it’s down to 83 percent, thanks in large part, he says, to increased use of natural gas a fuel source. But the picture isn’t entirely bright for the state’s gas producers.

“The regulatory and market forces that have caused issues for the Kentucky coal industry have also caused problems for the Kentucky oil and gas industry,” says Barr.

He says the state issued only 200 permits for wells in 2016 and there could be even fewer this year. And just because a company gets a permit doesn’t mean they’ll actually drill a well, Barr explains. He says the gas pulled from the Devonian Shale found in eastern Kentucky simply can’t compete economically with gas pulled from Marcellus and Utica Shale reserves located in West Virginia, Ohio, and Pennsylvania.

Transportation issues are also hampering the state’s oil and gas industry, according to Barr. He says a number of gas pipelines already cross the state, but many of those were built decades ago. Retrofitting old pipelines or building new ones has proved challenging, he says, because of environmental regulations, landowner rights, and public safety concerns.

“Everyone wants the natural gas,” Barr says, “but nobody wants the pipeline, the new one, in their backyard, despite the fact there are lots of them all over the state of Kentucky.”

The issue behind this resistance isn’t so much natural gas as it is the natural gas liquids (NGLs) that some companies want to transport through the pipelines. These highly flammable liquids, including propane and ethane, are byproducts of natural gas production and are highly sought by some industries. Barr says the plastics and auto manufacturers in Kentucky use large quantities of propane and ethane, much of which comes from out of state.

FitzGerald says older pipelines and older pipeline standards weren’t meant for the high volumes of NGLs being shipped today.

“I don’t view it as a NIMBY issue,” says FitzGerald of those people who don’t want a pipeline in their backyard. “I view it as a rational response to a reckless proposal, which is to repurpose a line that was built under yesterday’s standards to move a very dangerous product.”

FitzGerald is part of a working group of industry representatives, state officials, and environmental advocates tasked with making recommendations on how to better manage the risks associated with oil and gas production. One issue they’ve focused on, says FitzGerald, deals with how to safely dispose of wastewater and sludge from fracking wells that may contain radioactive materials.

Renewable Energy Sources
Solar, wind, and hydro power continue to represent a tiny but growing fraction of the state’s energy market. Sarah Lynn Cunningham of the Kentucky Conservation Committee attributes that to the clout the coal, gas, and petroleum industries still wield in this country.

“The fossil fuel people talk about energy independence, but it’s really not,” Cunningham says. “It’s dependence on the fossil fuel industry, and if we want to talk about true energy independence, we need to talk about energy efficiency and we need to talk about solar.”

She contends fossil fuels have remained viable energy sources because those producers have been allowed to use the environment as a “free dump.” Cunningham says if all subsidies were removed and realistic costs like carbon taxes were applied to fossil fuels, then solar power would be the source of energy that would be better for the environment, be more cost efficient, create more jobs, and lead to lower utility rates for consumers. She adds that Kentucky doesn’t have sufficient concentrations of wind to make wind farms a viable option for power generation.

Cunningham also encourages residential consumers to reduce their energy use by incorporating better insulation, installing solar panels, and upgrading to more efficient appliances, furnaces and air conditioners.

International Climate Talks
Many energy producers and environmental advocates are curious to learn whether President Trump will keep the U.S. in the Paris Accord on climate change. The pact negotiated by 195 countries seeks to limit greenhouse gas emissions in order to prevent further increases in global average temperatures.

Two Kentucky Republicans, U.S. Sen. Rand Paul and U.S. Rep. Andy Barr (KY-6), introduced separate resolutions in Congress this week urging Trump to withdraw America from the agreement. The president is expected to tell world leaders his decision at a Group of Seven summit later this week in Italy.

“We must stick to it because I think [climate change] is humanity’s biggest existential threat,” says Cunningham. “I think it’s already kicking our rear ends and we really need to deal with it because it’s an economic threat, it’s a geopolitical threat, [and] it’s a public health threat.”

A number of corporate leaders who support climate action have called on the president to remain in the accord lest the U.S. economy be put at an economic disadvantage. But White and Barr contend the agreement is especially unfair to Americans. They argue that without sanctions and enforcement provisions, which the agreement lacks, countries like China and India as well as many developing nations will continue grow their economies by burning fossil fuels, yet face no ramifications.

FitzGerald says the agreement represents a high watermark in global cooperation, and to leave it would hurt America’s position in future international negotiations. He says the Paris Accord addresses climate change and energy diversification in ways that make economic sense.