by Robert L. McPhail
CEO and General Manager
Basin Electric Power Cooperative
Coal has become a pariah in the eyes of the news media, many environmentalists,
policymakers and some scientists in this country. It is obvious to me that policymakers
have put coal-fired generation on what they hope is a list of endangered energy sources.
The Administration is spending about $3 billion each year to develop scientific proof
that global warming is a potential disaster for our world.
It should be obvious to all of us that this is not good news for electric cooperatives,
for their consumers or for the American economy. Generation and transmission cooperative
managers know the reasons why but, in my view, we haven’t done a good job of
communicating that message to our policymakers, our member cooperatives, our employees,
our consumers and the general public.
We need to put together a program in response to the attacks on coal-fired electricity
that is similar in intensity and support, to the successful resistance against the
proposed sale of the federal Power Marketing Administrations (PMAs). I want to make the
case why such a plan is necessary not only to protect the billions of dollars in
investments made by rural electric members, but also to save our economy and way of life.
As providers of electric service, an essential commodity, we have an obligation to our
member owners to deliver our product at the lowest possible cost. Power supply for most
distribution cooperatives is the largest component of their cost of service to their
member consumers. In a recent study done at Basin Electric, we found that about 50% of the
operating costs at our distribution cooperatives are associated with power supply.
Anything that is done to raise costs at the G&T level passes directly to our consumers
in the form of increased rates.
America Relies on Coal
The negative connotation now associated with the use of coal to produce electricity has
put us, as managers of generation and transmission cooperatives, in a tough spot. We
produce low-cost electricity, which serves to fuel and stimulate the healthy American
economy. We use some of the best environmental controls in the world. Yet our business is
being threatened by an environmental hammer, a threat that could weaken our economy and
cause America to falter under global competition.
America’s reliance on electricity generated by coal isn’t well understood. We
know that, for instance, about 56 percent of the electricity produced in this country is
fueled by coal. More than half of the 3 trillion kilowatt-hours used by consumers today
comes to them by the combustion of coal in generators throughout the United States.
Yet, research shows that only about a third of Americans understand that coal and other
fossil fuels are the primary means for powering their daily lives. Incidentally, the same
research indicates about half of all Americans think that hydropower is the primary source
of electricity.
The focus on coal is even more intense for rural electric cooperatives and their
consumers. Nearly three-fourths of the electricity delivered by G&Ts across the
country is derived from coal. All of the hydropower from the PMAs provides a total of less
than 20 percent. Considered as a single system, the nation’s G&Ts represent the
largest utility in the country. G&Ts also have the most coal and generating assets
($23 billion) compared to other utilities, representing 80 percent of our total
generation.
Think about what low-cost, coal-fried electricity has done for this country in the past
20 years. Here is a quick overview.
- While America’s coal use has increased more than 75 percent, our energy efficiency
has increased significantly. For example, the Utility Data Institute reports that 22 of
the nation’s top 25 lowest-cost power plants use coal.
- The Gas Research Institute forecasts that coal will fuel two-thirds of all new electric
supply in this country through 2015.
- Our nation’s economy has grown tremendously. America’s gross domestic product
(GDP) has climbed 70 percent in real terms and yet spending on energy has remained flat.
All of this speaks directly to the efficiency and low cost of electricity fueled by
coal.
Still, with increased energy use and economic growth, the air in America is getting
better. According to the Environmental Protection Agency (EPA), our air is cleaner than it
was in 1970.
Coal is the Target
Despite all of this good news about the economy, efficiency and the environment, coal
remains a target. If you want confirmation of that fact, consider this quote from a 1998
report by the Washington International Energy Group: "The coal industry will be the
primary target (linking electric industry restructuring and global warming)." That
doesn’t leave much to the imagination, does it_
The targeting of coal is coming on many fronts. Of those, the most threatening is the
Kyoto Protocol. If it becomes effective, this treaty would mean reducing carbon dioxide
(CO2) emissions to 7 percent below 1990 levels by 2010. The losses to the U.S. GDP would
be staggering, from $100 billion to $300 billion annually. The cost of complying with this
treaty, says the American Council for Capital Formation (ACCF), "may be dangerous and
prohibitive for the American economy."
The ACCF paints this potential cost in very dramatic terms. Preserving the Social
Security system to allow future retirees to receive the same benefits as current retirees
would require a tax increase of $80 billion now and larger increases in the future.
"Since implementing the Kyoto Protocol imposes costs that are larger than the cost of
preserving Social Security, the adoption of near-term emissions targets would make the
achievement of other national priorities much more difficult," said Dr. Margo
Thorning, ACCF vice president and chief economist, in testimony before a Congressional
subcommittee.
The Department of Energy’s economic study on the issue predicts dramatically
negative economic effects that mirror the findings of ACCF.
For rural electric cooperatives, the threat to agriculture and the farm economy should
be even more startling. We know that farming is energy intensive. Farmers need fuel and
oil, and those costs represent about 30 percent of farmers’ total energy bill.
However, there is another 70 percent contained in the costs for fertilizer, pesticides and
other chemicals.
According to the American Petroleum Institute, gasoline, diesel fuel and electricity
prices would need to increase by 50 percent or more – 50 cents per gallon of fuel
– to achieve a goal of capping U.S. greenhouse gas emissions at below 1990 levels. On
the government side, the U.S. Department of Commerce says the tax needed for capping
emissions is 25 cents per gallon of fuel.
Using those estimates, the cost of agricultural products – from pesticides to fuel
– would rise anywhere from 5 to 25 percent or to 10 to 50 percent, depending on those
two scenarios. So, from a farmer’s point of view, the net income that he or she would
earn could drop anywhere from 25 to 50 percent if the Kyoto Protocol was implemented. That
is a potential loss our farmers simply can’t afford!
"It is no exaggeration to say the Kyoto Protocol may be the biggest single public
policy threat to the agricultural community today – forcing an economic downturn in
this sector comparable to what occurred in the mid-1980s," says the ACCF.
The U.S. Senate already has made it clear in a 95-0 vote that it would not ratify any
such treaty if it would harm the U.S. economy. It ought to be clear to all of us that this
treaty potentially represents a harmful threat to our economy and our way of life.
In the face of this unprecedented Senate vote, the Environmental Protection Agency is
working diligently behind the scenes to implement many provisions of the Kyoto Protocol
through administrative action.
A Scientific Shell Game
But there is more to this proposed treaty than just the economics. Much more.
I feel strongly that we miss the point if we allow those promoting the idea of a
catastrophic global warming to rule the day on the science. We hear news reports
speculating about the spread of tropical diseases, about sea levels rising, about
devastating droughts, about melting glaciers and about more intense storms, all linked to
global warming. From my part of the country, we even heard official pronouncements that
the flood hitting the Red River Valley in the spring of 1997 can be chalked up to changes
that would occur increasingly in the future under a global-warming world.
G&T managers are not scientists. However, we have listened to the debate in the
scientific community, and we know from those reports that the science is not settled on
this issue.
There is an array of unanswered questions that go to the heart of this issue. Is any
warming actually occurring_ If so, is it consistent with variations and cycles throughout
geologic history_ Are the trends due to some other variable such as sun spot activity_ If
temperatures are rising and it can be attributed to rising concentrations of CO2, how do
current levels of CO2 compare with those of other geologic eras_ What are all of the
sources of CO2 and what percent comes from the burning of coal_ What are the results of
higher CO2 levels_ Are they good or bad_ If they are good, as current evidence seems to
indicate, why should the U.S. economy go broke trying to stop a good thing_
It is true that the level of CO2 in the atmosphere is increasing. In fact, there could
be a doubling of atmospheric CO2 in the next 100 years. In addition, there has been a
slight increase in the earth’s temperature over the past 100 years, based on
terrestrial instrument records.
But, does this mean we will have apocalyptic results_
Not so, according to an array of scientists and studies. "The evidence that
increasing carbon dioxide in the atmosphere is going to cause a disaster is somewhere
between slim and none," says Dr. Patrick Michaels, who is professor of Environmental
Science at the University of Virginia. "However, the evidence that it’s doing a
good thing by lengthening the growing season and making plants grow better is somewhere
between large and overwhelming."
What’s happened in this debate seems to be a kind of scientific shell game. Here
you have CO2, which is a nutrient and a basic building block of life. Suddenly, this
benign substance is transformed into a pollutant in the eyes of global-warming-as-disaster
thinkers.
But CO2 has been around since the earth began. "CO2 has been part of the planetary
atmosphere since the first day this earth evolved. The plants and virtually everything we
see evolved in a period of time when the CO2 level was very much higher than it is
today," says Dr. Robert Balling, director of the Office of Climatology, Arizona State
University.
The reality is that it is difficult – if not impossible – to find any
relationship between CO2 and any dramatic, catastrophic global warming. Based on research,
any warming that occurs appears to be modest and benign, if not beneficial to living
things.
What is the sense in inflicting a harmful blow to our economy and to our future by
implementing a treaty addressing a problem that is nonexistent or unclear, at best_
A Nationwide Message
Through the efforts of the Western Fuels Association, we have been somewhat successful
in getting that kind of information to the public. For instance, we carried that message
nationwide during the annual meeting of Basin Electric last November. From the meeting in
Bismarck, ND, we provided a live satellite broadcast of the premier of the video titled,
"The Greening of Planet Earth Continues: The Promise for the 21st Century
and Beyond" . The video’s message was clear and convincing: When you take
away all the scare headlines and oversimplifications, you get a picture of CO2 as a plant
nutrient that will make this world better for plants, animals and humans. We did this with
the help of the Western Fuels Association, Greening Earth Society and Center for Energy
and Economic Development. Joining with us as cosponsors were the statewide rural electric
association in our eight-state region, U.S. Chamber of Commerce, Burlington Northern Santa
Fe Railway and others.
Many of your co-ops downlinked the video as well as the questioning of the scientists
involved. Many co-ops and their consumers were motivated to join the Greening Earth
Society to help focus attention on the Kyoto Protocol and its potentially damaging
impacts.
Mark Mills of Mills·McCarthy & Associates, an energy research firm, makes an
additional point about the benefits of coal-fired electricity. And that is that
electrification is linked to health conditions and increased average life span. He notes
that the average national life span increases 10 years with a tenfold increase in per
capita electric use. So, a person who lives in the United States, Germany, Japan or other
electrified nation will live much longer than those who live in a country with less
electricity.
What are those electric technologies behind this trend among electrified countries
toward better health and longer life span_ They really are basic things like
refrigeration, irrigation, sanitation and others. Mills goes on to point out how electric
technologies also can make the workplace safer and reduce health risks in our daily lives.
Facing New Challenges
Coal is facing another major environmental challenge, very soon. Just ahead of us is a
requirement called the Toxic Release Inventory or TRI. Starting July 1, 1999, utilities
operating coal or oil-fired power plants must file TRI reports with the EPA.
Created as part of the Emergency Planning and Community Right-to-Know Act, TRI will
become a database available to the public that contains specific information on discharges
of toxic chemicals from industrial facilities that will now include power plants fired by
coal. The idea of the law is to increase the public’s knowledge of information on
what toxic chemicals are in their communities and on what is released into the
environment.
This will generate news stories and headlines, and we must be ready. I’m
encouraged by the fact that G&T communicators and the National Rural Electric
Environmental Association have been working together, developing a white paper and
communications strategy regarding TRI. That certainly is valuable.
But there are other environmental challenges. Some are current; some are pending. You
know the list: regional haze, mercury emissions, ozone transport, etc. The list of
challenges today likely will get longer tomorrow. As in the case of the Kyoto treaty and
others, these challenges could threaten the existence of coal-fired electricity in this
country.
Part of the answer to these challenges is spelled out by Mark Mills in "Getting It
Wrong: Energy Forecasts and the End-of-Technology Mindset." One of his major points
is that environmentalists and others really don’t understand the forces behind
electrification of our economy.
In particular, they assumed that electricity use would level off because of market
saturation of an electrical device or process. As I’ve noted, overall national energy
efficiency has improved even as electrical demand has shot upward. What many people
overlook is the ever-growing number of new technologies that use electricity and use it
more productively and efficiently.
What’s Needed: A Strategy Like the Anti-PMA Sale Plan
I believe what’s missing is an overall communications strategy that encompasses
all of these environmental challenges. We have not leveraged our communications resources
effectively so far.
I feel the only effective way to address these environmental challenges is a
cooperative and coordinated way. We need a comprehensive strategy that is proactive and
well understood by the G&Ts. We need communications pieces that are well written and
address the issues plainly for the average citizen, not for those of us in the business.
It is vital to our future that we agree now to develop this collectively and then act
cooperatively. I think a good model for us is the overall strategy in fighting the
attempts to auction the PMAs in recent years. We need to have that same kind of fervor and
resolve.
In that battle, we had opinion polls showing voters opposed selling the PMAs. We had
buttons showing one of the hydroelectric facilities with the slogan, "Not For
Sale!" We had anti-sale postcards being sent in by members and consumers. We had
rallies that included our political and business friends. We had well-written stories and
editorials that were used in co-op publications as well as appearing as
letters-to-the-editor and ads in newspapers, magazines and other places.
The idea to auction the PMAs has the same potential for damaging or destroying the
energy system that has served rural America so well. We owe it to our members, our
consumers and our employees to inject that kind of fervor into a new strategy to again
carry our story effectively to the rest of the country.
Robert L. McPhail became general manager of Basin Electric in March of 1985.
He is president of Western Fuels Association, a fuel supply cooperative for consumer-owned
electric utilities. A registered professional engineer, McPhail graduated from the
University of Mississippi with a bachelor’s and master’s degrees in engineering.
