OPIS Insights

Watch: Barron’s Senior Energy Writer Laura Sanicola and OPIS Data Analytics Director Andrew Blumenthal discuss what’s ahead for the US coal markets this week.

Watch this week’s episode to gain insight on the recent proposals by the EPA to eliminate greenhouse gas emission limits for coal-fired power plants and repeal stricter mercury and air toxic standards. And hear more about a highly contested permit for a coal mine in Montana.

 

Transcript:

LAURA SANICOLA: Hi, everyone. This is Laura Sanicola, author of Barron’s Energy Insider, and I’m here today with Andy Blumenfeld, data analytics director for North American coal markets at OPIS. Andy, thanks for joining me again.

ANDREW BLUMENTHAL: I’m happy to be here.

SANICOLA: So last week, the EPA proposed eliminating greenhouse gas emission limits for coal-fired power plants and repealing recent toughening of mercury and air toxic standards for those coal and oil fired generators. Can you help us understand exactly what the environment secretary is trying to keep, repeal, and why?

BLUMENTHAL: Alright. So, yes, this did happen last week. Lee Zeldin announced that proposed changes to some of the Biden-era plans that were put in place mostly in May 2024. So this was right towards the end of the Biden administration.

Let’s start with the carbon plan.

That proposed rule is probably the most was, well, probably the most controversial at the time because it limited, future carbon emissions from particularly coal power plants and new natural gas plants. But that was based off an earlier endangerment finding that said that, you know, accumulations of carbon dioxide in the atmosphere is harmful to human health, to climate change and everything else that has been in the news. So the the carbon rule itself was, that was put in place was immediately subject to lawsuits by particularly by a number of Republican states, immediately after it was posted.

It is controversial in that it, in effect, makes it very difficult to use coal as power generation source, and it was phased in over time.

The first phase came in 2032, where any plants that are operating after that date had to, emit no more than a plant that would use forty percent natural gas. And then after 2039, any power plant that coal plant that was to operate had to have carbon capture and sequestration, the equivalent of ninety percent carbon capture, which is a very tall order. So the the Trump administration took a look at this rule and said, first of all, it’s very difficult for coal units to comply with this, and I think that was obvious the obvious intent of the Biden rule.

But they’re in amongst their amongst their, initiatives is to make using coal, a little bit more easier. So they’re basically looking to reverse this entire rule, through a number of programs. One is to basically say that carbon dioxide does not pose that law that large broad effect on human health and well-being.

The other part is they’re attacking some of the technical parts of the rule that says, the use of carbon capture is not demonstrated worldwide. It’s it’s very expensive, and therefore, it shouldn’t be used as a classification for compliance with the law. So their their proposed rule is basically intended to reverse the whole carbon plan.

On the Mercury side, the important point here is that the Biden administration tightened up the rules for mercury emissions in, you know, starting, you know, the rules in 2024, but it started in 2027. That was the compliance date.

But in this case, the Trump administration is saying that the rules and the limits are too onerous for power generators.

Not only that, it hasn’t been proven that it is you know it’s really that big of a health issue, so, in terms of human health. So they’re looking at reversing back to the 2011, which has it’s still a fairly strict limitation on mercury emissions, but, it’s just not as tight as what was proposed under the Biden rule in the last year.

SANICOLA: So if, Secretary Zeldin is successful, and I’m sure that, this proposed rollback, of these rules will will entertain lawsuits, do you envision it being likely to keep certain coal plants operating longer? If so, owned by which which companies?

BLUMENTHAL: So there’s a number of coal plants that, you know, had planned to be you know, utilities plan to retire their cooling units between a whole number of them between the now and the next five to ten years. We believe that these rule changes, as well as certain actions by the Trump administration, in April, will keep some of these plants from retiring, sooner because mostly, they don’t have to put the capital forward to comply with these new rules. So what this does, we believe, is that it keeps the coal units operating longer.

They don’t have to be retired, and, therefore, we see, you know, some of the some of the decline in the coal use is is gonna slow down. Now it we still see overall decline for the next ten to twenty years as these plants age, and get replaced by newer generation technologies. So we don’t think that it’s it stops the erosion of coal, but it it just slows it down.

SANICOLA: Andy, also last week, I noticed that the Department of Interior issued a pretty highly contested permit to a coal mine in Montana. Can you tell us a little bit more about, what permit was issued and, why it had been so contested for so long?

BLUMENTHAL: Right. So it’s actually the permit that exists, it’s a modification to the permit that allowed them access to additional federal coal.

The mine is called Bull Mountains No. 1. It’s operated by a company called Signal Peak. It’s in Montana, as you say.

The coal that’s produced there is principally exported, through Canada, actually, and, most of the coal gets used in in Japan.

South Korea and some other Asian nations also take delivery of this coal, but most of it goes to Japan.

It was a highly contested permit.

Some of the environmental groups in the region sued, the Department of Interior for issuing the permit in the first place saying that they didn’t do the required environmental review, and they got a judge listening to it in 2023. Their permit was basically revoked.

And so the mine is still operating, but they’re producing coal from nonfederal owned sources. So they have some state reserves that they’ve been mining on with some private reserves as well. But those options are starting to run out, and they desperately need to have access to the federal coal to keep going. They have the ear of the Republican legislature and senators and representatives from from Montana who have been doing a lot of have had a lot of effort to get that permit issued.

Part of the issue, of course, is that the litigants against the permit said that the mine was not adhering to the carbon emissions from where the coal is used. In this case, again, mostly in Japan. So, they’re saying that the the environmental rules from this, this permit should not have you know, didn’t consider the carbon emissions and should have. But in a recent Supreme Court decision, it’s but basically reversed that to say that the carbon emissions only don’t really apply. It’s only to the project itself, to the mine itself.

So I believe that what happened is Department of Interior saw this Supreme Court ruling and took it upon themselves to issue the permit.

It is still somewhat controversial. I suspect it’ll get challenged.

And in the same time, there’s even lines in the big beautiful bill to, you know, issue the permit and, as well as some some initiatives in the US senate to issue this. I mean, it’s been a full-court press to get these permits in place for Signal Peak. It was somewhat of a surprise that it happened, but it does seem to be moving forward now.

SANICOLA: Alright. So we’re seeing a lot of support from the administration on the coal front. Thanks so much for breaking it down for us, and thanks everyone for joining. I’ll see you next week.