Bluegrass Beacon: Make no mistake – the feds are coming after Kentucky coal

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Though Appalachian coal is paramount to America’s energy future, new federal regulations are liable to snuff out the bright economic sparks it provides.

It’s a threat that some folks – even those with good intentions – just don’t get.

For example, Cato senior fellow Jerry Taylor stated in a podcast that the unprecedented new mandates pushed by President Obama’s Environmental Protection Agency are not to blame for the expected 50-percent decrease in Appalachian coal production during the next decade.

Instead, Taylor, a firm supporter of free markets and constrained government, puts the blame solely on market competition from abundant new supplies of cheap natural gas due to the process of hydraulic fracturing.

There’s no doubt that a warm winter and competition from alternative energy sources hit Kentucky’s coal industry hard this year, with massive megawatt-generating plants scheduled to shut down in the near future. The Big Sandy plant in Louisa is the most recent to announce the closure of its primary generating unit; but other facilities also are doomed.

Thousands of miners will lose their jobs as a result of these decisions.

If, as Taylor suggests, natural market forces were all that’s affecting the future of coal’s economic vitality in the commonwealth, you would get no pushback here.  To protect an obsolete industry through federal fiat is to force a ceiling on American innovation and the kind of tremendous growth we’ve seen in human welfare in modern times.

Rather, my grievance is with the unnatural forces of government regulators determining winners and losers in a particular industry, including Kentucky’s energy sector.

What’s worse, the victors aren’t even being decided by locally elected legislators who have the best interests of Kentuckians at heart. Rather, this black-out scenario is the work of the EPA – an unelected bureaucracy whose allegiances are to the current administration, not to you and me.

To absolve the EPA of its shoot first, ask questions later approach while placing regulatory crosshairs on Kentucky’s energy future is simply irresponsible.

Although some of the EPA’s sweeping new mandates have not yet been implemented and thus do not directly impact the industry, they cast a dark shadow on future opportunities for the Bluegrass State’s energy sector.

For instance, the EPA’s Mercury and Air Toxics Standards (MATS) rule will soon force devastating costs on the Appalachian industry to the tune of $10 billion annually.

This rule virtually guarantees no new coal-fired utility plants can exist profitably in the commonwealth, and threatens those existing operations that provide Kentuckians with 93 percent of our electricity, and some of the cheapest energy rates in the nation – attracting business from the steel, aluminum and automotive industries.

Some prefer to live in a fairyland by believing the EPA’s new regulations will have zero effect on the commonwealth.

But dreams don’t make reality.

Yes, competition from natural gas is a dominant factor in coal’s downturn this year. But market conditions change, and if they once again favor coal in years to come, the regulatory gauntlet laid down by the EPA guarantees no new coal plants can take advantage of such opportunities.

What’s more, the EPA has created a regime of uncertainty.

Industry executives want to know how the feds will next impact their businesses and react accordingly. But with a bureaucracy as volatile as the EPA, how in the world are they supposed to do that?

Neither good intentions nor burying our heads in the sand can change the fact that the EPA’s culture of unpredictable strong-arming truly is a factor in turning the lights out in Appalachia.

Jim Waters is acting president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.freedomkentucky.org/bluegrassbeacon.