Anglo American coal bidders down to three, say sources
The final bidders are down to Yancoal Australia, Stanmore Resources and Peabody Energy.
After several failed attempts to bail out coal power plants, President Donald Trump and his administration have turned to co-opting national security tools and arguments to pursue their domestic energy agenda. Recently, administration officials have selectively targeted natural gas and renewable energy generation resources, falsely claiming they pose greater risks to the electric grid than do nuclear or coal resources. Specifically, Secretary of Energy Rick Perry misconstrued the facts about certain electricity generation resources and their relative vulnerability to threats, hiding behind his access to classified information to short-circuit a policy debate and thereby strengthen his proposal in a way that circumvents fact-checking.
This unprecedented use of defense arguments to favor certain electricity generators over others defies competitive energy market rules. Furthermore, it impairs the ability of experts, officials, and even the public to assess, prevent, or respond effectively to actual threats to the energy system, thereby undermining national security efforts as a whole.
All energy resources face vulnerabilities. Natural gas power plants rely on pipeline delivery of fuel for operation, generally without on-site storage. Additionally, natural gas pipelines increasingly depend on electricity at pumps, refineries, compressor stations, and monitoring, all of which present vulnerabilities to natural and man-made events. At the same time, oil and refined petroleum products, renewables, and even coal rely on modes of transmission, distribution, and storage that expose these resources to both physical threats as well as cyberthreats. More comprehensive assessments of the resilience of energy infrastructure, such as large power transformers and reliance on railways to transport energy commodities, have revealed equally or more serious vulnerabilities.
The reality is that severe weather continues to outrank all other threats to the U.S. electric grid, including to on-site coal storage. Residents of Puerto Rico, the U.S. Virgin Islands, Florida, Texas, and other storm-ravaged locales can confirm this; in fact, residents of New York City, which Secretary Perry recently speculated would turn “into a jungle because the lights go out,” can point him to Superstorm Sandy. Sandy damaged substations, transformers, and power lines, causing blackouts; it even forced some nuclear plants to shut down some reactors in advance to prevent damage. The U.S. Department of Energy (DOE) memo overlooks these very real threats to U.S. national security and energy infrastructure.
Following several campaign promises, President Trump and his administration have repeatedly attempted to subsidize uneconomic coal and nuclear power plants. In 2017, Secretary Perry directed the DOE to study the U.S. electric grid and then summarily rejected his own agency’s findings, namely, that no evidence supported his claims emphasizing the need to subsidize nuclear and coal power plants. In a subsequent proposed rule, Perry urged the independent Federal Energy Regulatory Commission (FERC) to order electricity market operators to subsidize power plants with on-site fuel reserves, meaning nuclear or coal, again claiming a resilience threat. FERC unanimously rejected the idea, with experts stating it “would blow the market up.” The influence of Trump’s donors on this effort is clear.
No Evidence supported his claims emphasizing the need to subsidize nuclear and coal power plants.
Other signs also point to the administration’s prioritization of ideology over fact-based analysis. Reports have indicated that President Trump may nominate Bernard McNamee, who has led the coal bailout efforts from his DOE post as head of the Office of Policy, to fill a vacancy at FERC. While addressing a nuclear industry audience, a top FERC political appointee described the collaborative effort among FERC, the DOE, and the National Security Council to name which power plants are “critical” to the grid. The administration has carefully set the stage for this latest move.
Given the absence of any exigent threat to the national electric grid, President Trump’s directive follows similar patterns of invoking national security authorities to situations that do not demand them. Specifically, the Trump administration’s coal bailout proposal would direct grid operators and, potentially, other entities to purchase any electricity used for defense purposes from a list of coal and nuclear power plants under Defense Production Act (DPA) authorities. The DPA, a Truman-era procurement law, enables the government to procure products or services needed for wartime, including to stimulate innovation to advance strategic goals. The proposal would also direct the DOE to use its Federal Power Act Section 202(c) emergency authorities to keep nuclear and coal generators running. Section 202(c) authority enables the secretary of energy to temporarily require the operation or connection of individual generation, distribution, or transmission facilities to maintain normal operation of the electric grid to prevent or respond to a blackout or other localized power shortages.
In both cases, the proposal distorts the intent of the two laws and potentially undermines the ability of future administrations to respond to real threats. The DPA authority would force grid operators to purchase electricity from coal and nuclear generators, ultimately passing the costs along to consumers, and Section 202(c) would require these generators to produce it, despite it costing more than power from other resources. The proposal may also further provide industry loans or require stockpiling excess fuel resources. Combined, the DPA and Federal Power Act Section 202(c) authorities would support coal generation and mining, paying for both by wasting scarce taxpayer dollars while forcing utilities to run their least efficient, most expensive, and highest-polluting power plants. According to a Brattle Group study, a DOE subsidy of coal and nuclear plants could cost taxpayers up to $35 billion annually.
The Trump administration’s proposed use of these authorities would misinterpret their intent. Currently, no grid emergency exists that merits invoking the DPA; in other words, there is not a lack of power supply to defense facilities or functions in the lead-up to an armed conflict, as the law envisions. This proposed use of the DPA would not meet its standard of “promoting efficiency and competition,” either. In the case of individual blackouts or service shortages, Section 202(c) can and should be utilized in a localized, limited, and strategic fashion—not by subsidizing an entire class of generation.
Proposed use of the DPA would not meet its standard of “promoting efficiency and competition.”
U.S. Department of Defense (DOD) facilities certainly experience electricity outages, but the DOD plans for contingencies and services their critical infrastructure with backup generators. Furthermore, the remoteness of these facilities makes a stronger argumentfor enhancing on-site resilience through microgrids, nonfuel-dependent generation sources, such as renewable generation, and more on-site system redundancies rather than increasing their dependence on the traditional centralized grid architecture that existing coal and nuclear power plants utilize.
By isolating its risk assessment to a limited set of threats, metrics, and solutions to favor political outcomes, the administration obscures other, possibly more imminent threats to U.S. energy infrastructure. The application of these emergency authorities—when there is neither an emergency nor an efficient outcome from their use—would subvert the rule of law and the intent of the DPA and Federal Power Act Section 202(c) provisions, opening the door to further abuses of power.
This article was published first at the Center for American progress website.
(By Luke Bassett and Ned Price)
