New US Laws Require Coal Industry to Clean Up

THE United States's new clean-air laws are causing big changes for companies that mine coal and turn it into electricity.

From the corporate boardroom to the mine shaft, environmentalism is changing the ways of utilities and coal companies. Even research labs feel the shift.

"The Clean Air Act ... has forced utilities to take operating technology that they have been using for years and jump to a new plateau," says Linda Stuntz, deputy secretary of energy under the Bush administration.

Take the Consol research facility here in Pittsburgh.

Monitoring a bank of computer screens, researchers test different blends of coal to see how much sulfur dioxide and other pollutants they emit. The goal is to mix coals that keep emissions low without hurting the performance of the boiler and other emission-control equipment. It is a new area of research.

"Four years ago, I don't think we did two tests a year where we blended coal together," says Tony Fonseca, Consol's director of coal utilization. Today, testing blends represents 80 percent of the lab's work. Even small changes can make a difference. Through slight adjustments in the direction of the burners, for example, Consol researchers can change the amount of nitrous oxide that is produced.

The economic adjustment will be more dramatic. "It's going to have a fairly significant impact," says Jeffrey Watkins, vice president of Hill & Associates, a management and consulting firm specializing in energy.

To meet the requirements of the Clean Air Act, utilities have several options. They can install scrubbers to reduce emissions. They can switch to low-sulfur coals or, in some cases, to completely different fuel. Or they can buy pollution credits from other utilities and not cut emissions at all.

Although they do not have to file their compliance plans with the federal government until Feb. 15, most utilities have decided to switch fuels to comply with the first phase of the Clean Air Act.

Compliance Strategies Review, a Washington, D.C., newsletter, estimates that plants representing 45 gigawatts of power will switch to alternate fuels. Two-thirds of that total will move to low-sulfur eastern coal. Only 13 gigawatts will install scrubbers to comply with Phase I of the act, which kicks in in 1995.

Phase II, which invokes even more stringent standards, will cause an even bigger switch to low-sulfur coal starting in the year 2000. The big winners: low-sulfur mines in central Appalachia and the West. The big losers: high-sulfur mines in the Midwest and northern Appalachia.

"There are going to be a lot of mines closing in Ohio, Illinois, and northern West Virginia," Mr. Watkins says. "There will be a fairly dramatic boost in employment in southern West Virginia and eastern Kentucky."

AS demand changes, low-sulfur coal prices will go up significantly. Imports should jump too under Phase II. Watkins estimates 8.5 million tons of low-sulfur foreign coal could hit US shores. One supplier could be Indonesia, which has a super-low-sulfur coal that might be blended with US varieties.

The Clean Air Act is also forcing utilities onto a political high-wire, balancing economic and environmental concerns. For example, American Electric Power late last month put an end to more than a year of political squabbling over the future of its huge Gavin Plant.

The Columbus, Ohio, utility initially said it intended to switch Gavin to low-sulfur coal and close its nearby high-sulfur mine. But the miners and various political interests caused the utility to reconsider. On Nov. 25, Ohio's public-utility commission approved the company's plan.

Such decisions are coming under increasing scrutiny from western states and their coal producers. In the case of Gavin, the utility claims scrubbers are the lowest-cost solution. But that is because the state helped out. It approved tax credits last year for utilities using Ohio coal.

State regulators also encouraged American Electric Power to consider a lease-financing deal that the utility originally considered too risky. Under the deal, a group of investors will build the scrubbers and lease them back to the utility. That plan will save the utility $400 million over 18 years. It was the key factor that made scrubbing cheaper, says John McManus, the utility's director of acid-rain compliance.

The US Supreme Court has already struck down Oklahoma's blatant attempt to keep its mines open. Now, western states and producers are considering a suit against Illinois, which has approved subsidies and other regulations that encourage the use of Illinois coal.

Another potential battle is brewing over the use of emission credits. Under the Act, utilities that do not want to spend the money to clean up their plants can buy credits from utilities that are cleaner than they need to be. But when Wisconsin Power & Light Company announced it had sold emission credits to the Tennessee Valley Authority and Pittsburgh's Duquesne Light Company, it provoked a storm of protest from local activists, especially in Pittsburgh.