Special Report: U.S. 'clean coal' program fails to deliver on smog cuts

Arq

03/12/2018 12:00

(This is the first story in a three-part series on U.S. 'clean
coal' subsidies. For more Reuters Special Reports, double-click
on  SPECIAL/ )
    By Tim McLaughlin
    Dec 3 (Reuters) - Champions of coal say the superabundant
fossil fuel can be made environmentally friendlier by refining
it with chemicals – a “clean coal” technology backed by a
billion dollars in U.S. government tax subsidies annually.
    But refined coal has a dirty secret. It regularly fails to
deliver on its environmental promises, as electric giant Duke
Energy Corp found.
    Duke  DUK.N  began using refined coal at two of its North
Carolina power plants in August 2012. The decision let the
company tap a lucrative federal subsidy designed to help the
American coal industry reduce emissions of nitrogen oxides –
also known as NOx, the main contributor to smog and acid rain –
along with other pollutants.
    In nearly three years of burning the treated coal, the Duke
power plants collected several million dollars in federal
subsidies. But the plants also pumped out more NOx, not less,
according to data from the U.S. Environmental Protection Agency
analyzed by Reuters.
    The NOx emission rate at Duke’s Marshall Steam Station power
plant in Sherrills Ford, North Carolina, for example, was
between 33 percent and 76 percent higher in the three years from
2012 to 2014 than in 2011, the year before Marshall started
burning refined coal, the EPA data shows.
    The utility also discovered that one of the chemicals used
to refine the coal, calcium bromide, had reached a nearby river
and lakes – raising levels of carcinogens in the water supply
for more than a million people in greater Charlotte.
Duke stopped using refined coal at the plants in May 2015
because of the water pollution problems, said spokeswoman Erin
Culbert. Bromide levels in the region’s drinking water dropped
sharply several months later, said Barry Gullett, the city’s
water director, in a 2015 memo.
    Duke’s experience reflects a fundamental problem with the
U.S. clean coal incentive program, a Reuters examination has
found. Refined coal shows few signs of reducing NOx emissions as
lawmakers intended, according to regulatory documents, a Reuters
analysis of EPA emissions data, and interviews with power plant
owners, scientists and state environmental regulators.
    Consumption figures compiled by the U.S. Energy Information
Administration show that American power plants are on track to
burn about 160 million tons of clean coal in 2018 – a fifth of
the U.S. coal market. That amount would generate about $1.1
billion in incentives at the current tax credit amount of $7.03
per ton.
    But most of the plants receiving the subsidy failed to
reduce NOx emissions by 20 percent – the threshold required
under the policy – in 2017 compared to 2009, the last year
before they started burning refined coal, according to a Reuters
analysis of EPA data on power plant emissions.
    Reuters identified 56 plants that burned refined coal in
2017 using data from the U.S. Energy Information Administration
and disclosures from energy companies and refined-coal
developers.
    Only 18 of that group reduced NOx emissions by more than 20
percent in 2017 compared to 2009. And 15 of those 18 only
reported the improvements after installing or upgrading
pollution control equipment or switching a portion of power
production to cleaner-burning fuel, complicating the question of
whether their pollution reductions are attributable to refined
coal.
    At 22 of the 56 plants, NOx emissions were higher in 2017
while burning refined coal than they were when using raw coal in
2009.
    As a group, the fleet of U.S. power plants that burn refined
coal also underperformed the rest of the industry in cutting
emissions of NOx, the Reuters analysis found. NOx emissions
rates declined 19 percent among the 56 power plants that
reported burning refined coal in 2017. That compares with a 29
percent reduction by 214 other coal-fired power plants over the
same period.
    The analysis included U.S. coal-fired power plants with at
least 100 tons in annual NOx emissions in 2017.
    Investors in plants that failed to show substantial NOx
emission cuts collected the tax credit anyway because the
Internal Revenue Service allows them to prove emissions
reductions with laboratory tests. The results of those tests –
conducted for several hours a couple of times a year – often do
not translate to real-world improvements at plants that burn
millions of tons of coal annually.
    The IRS, which approves applications for the tax credit,
declined to comment on the design or effectiveness of the
testing regimen.
    “It’s hard to hang your hat on refined coal as the way to
reduce nitrogen oxide emissions,” said Ron Sahu, an
environmental engineer who has consulted with utility companies,
the EPA and the U.S. Justice Department on power plant
emissions. 
    Sahu, who reviewed the data and methodology used by Reuters,
said the analysis shows refined coal has little to no impact in
reducing NOx emissions at actual power plants.
    “It’s clear that any benefit from refined coal can easily be
overwhelmed by modest changes in combustion conditions” at power
plants, Sahu said. “It’s debatable that a tax credit should be
given for NOx reduction.”
    Reuters sent its analysis of EPA emissions data to every
major utility operating power plants that burn clean coal, along
with the leading U.S. investors who finance clean coal
facilities in partnerships designed to take advantage of the
subsidy. Most companies declined to comment or did not respond.
The handful that did respond did not contest the findings of the
analysis.
    “We do agree with the overall assessment that emission
controls have a more measurable impact on emissions reductions
over refined coal,” DTE Energy, a Detroit-based utility that
uses refined coal, told Reuters.
    The Edison Electric Institute, which represents the U.S.
electric utility industry, did not respond to requests for
comment.
    The law requires all refined coal producers seeking the
subsidy to show that burning their product can lead to a 20
percent cut in NOx emissions. The producers also must show a 40
percent reduction in either mercury or sulfur dioxide. They are
given the choice of which of those two pollutants to target.
    Refined coal investors tend to target mercury as the second
pollutant for cuts, according to disclosures by the corporations
involved in the program. That’s because reducing mercury
emissions with refined coal is a cost-effective way for plants
to comply with other, relatively new EPA regulations governing
the pollutant. Utilities already have spent tens of billions of
dollars on equipment to filter out sulfur dioxide, making
additional reductions of that gas more difficult.
    The subsidy program has been more successful at combating
mercury than NOx, the analysis found. The mercury emission rate
at power plants burning refined coal product, for example, fell
75 percent between 2009 and 2017, more than the 40 percent cut
required to qualify for the subsidy. Some of those cuts can also
be attributed to other pollution control measures, such as the
installation of scrubbers that filter coal plant exhaust,
according to the EPA.
    High exposure to mercury can damage the intestines, kidney
and nervous system, according to the EPA. Sulfur dioxide and NOx
can cause lung damage.
    The refined coal subsidy was adopted by Congress and signed
into law by President George W. Bush as part of the American
Jobs Creation Act of 2004, alongside credits for generating
renewable energy from solar and wind. The legislation had broad
bipartisan support and generated little public debate.
The subsidy is set to expire in 2021, and coal-state lawmakers,
including North Dakota Republican Congressman Kevin Cramer, are
moving to extend it for another decade.
    “The tax-credit program is bridging the divide to make coal
clean and beautiful,” said Cramer, borrowing President Donald
Trump’s two favorite adjectives to describe coal.
    Trump has promised to advance the interests of the coal
industry to support blue-collar energy jobs. His administration
has argued coal provides a more reliable fuel for power
generation than natural gas, solar and wind, which can be more
easily interrupted by pipeline problems or uncooperative
weather.
    The White House did not respond to requests for comment.
    
    ‘TOO GOOD TO BE TRUE’
    In one of the industry’s first refined coal ventures, power
plant operator Associated Electric Cooperative Inc in 2010
signed a 10-year deal with affiliates of Goldman Sachs Group Inc
 GS.N  to burn refined coal at the New Madrid and Thomas Hill
power plants in Missouri.
    As a tax credit investor, Goldman worked with Advanced
Emissions Solutions Inc  ADES.O  to build refined coal
facilities next to the cooperative’s power plants. A refined
coal operation typically costs about $6 million to develop,
featuring new conveyor belts and sprayers to move and treat the
coal with chemicals, according to presentations to investors by
Advanced Emissions. Silos also are installed to store the
refined coal chemicals.
    The deal called for the utility to sell raw coal to the
Goldman-led investment group at cost, and then buy it back at a
discount after it was treated, saving the utility millions of
dollars, disclosures show. 
    Goldman and its investment partners collected about $63
million in gross tax credits from the program in 2017, based on
an estimate in Associated’s annual report that its plants used 9
million tons of coal that year. Goldman Sachs declined to
comment.
    Associated had no upfront cost for the refined coal facility
and contributes nothing to its annual operating costs. It
forecast the arrangement would bring in $7 million to $9 million
in annual revenue through at least 2018. “The project at first
was questioned as simply too good to be true,” the utility wrote
in its 50th anniversary report released in 2011.
    The money-making deal also illustrates how the potential
benefits of refined coal on air quality can be erased by a
variety of complex factors.
    The New Madrid plant in southeast Missouri, for example, has
seen its production of NOx soar to a higher rate than any other
U.S. coal plant while burning refined coal. In 2017, the plant’s
NOx emission rate was 298 percent higher than it recorded in
2009, before New Madrid started burning clean coal, according to
the EPA. During the first quarter of 2018, the rate jumped even
further, to seven times the 2009 level.
    Associated Electric said the increase in NOx emissions at
New Madrid was due in part to the cooperative’s purchasing
tradable pollution credits through the U.S. cap-and-trade
system. The market-based system sets an overall limit on
pollution, and allows power plants that cut their pollution to
earn credits that can be stockpiled or sold to other polluters.
When large volumes of credits are generated, the cost of buying
them can be lower than the cost of running pollution control
equipment.
    “At times during the last seven years Associated has met
compliance with emissions rules by purchasing NOx credits from
the cap-and-trade markets, rather than running the control
equipment all year,” the electric cooperative said in a
statement, which it issued through Goldman Sachs spokesman
Michael DuVally.
    The National Mining Association, which represents the U.S.
coal industry, supports extending the tax credit. It said the
cap-and-trade system was the primary reason NOx emissions went
up at many power plants in the Reuters analysis. The association
said clean coal lowers emissions, but provided no data to
support the claim.
    Duke Energy said in a statement that routine changes in
electricity demand can also make clean coal ineffective in
reducing NOx by changing boiler temperatures and catalyst
conditions in pollution control devices.
    Sahu, the environmental consultant, said refined coal is
most effective at reducing NOx emissions when a utility burns
the fuel at a relatively low temperature, something that
typically occurs when electricity demands on the plant are low.
    But using low temperatures over an extended period can also
damage power plant boilers by causing corrosion and soot
buildup, he said. Conversely, burning the coal at a relatively
high temperature – more common during high-demand periods – can
reduce the risk of damage but limit the effectiveness of smog
reductions.
    The Grand River Dam Authority stopped burning refined coal
at its Oklahoma power plant last year because corrosion and
other problems outweighed any upside, said John Wiscaver, head
of GRDA’s corporate communications.
    “We had too many problems with refined coal,” he said.
    
    TROUBLED WATERS
    Refined coal has also led to contamination of water supplies
for more than a million people, according to regulators and
utility officials.
    In 2012, the South Carolina Department of Health &
Environmental Control noticed elevated levels of bromides, the
chemicals used to treat refined coal, in the Santee Cooper-Lake
Moultrie public water system, said Tommy Crosby, a spokesman for
the agency.
    The South Carolina plant’s refined coal operation stopped
spraying bromide on the coal burned at the Cross Generating
Station out of concern for the elevated levels of cancer-causing
trihalomethanes, Crosby said, and the levels decreased within
six months. Trihalomethanes are created when bromide mixes with
the chlorine in treated drinking water.
    The plant’s refined coal facility was financed by global
insurance firm AJ Gallagher, Boston-based mutual fund giant
Fidelity and a U.S. subsidiary of France’s Schneider Electric SE
 SCHN.PA . Fidelity declined to comment on the elevated TTHM
levels and pointed out that federal limits were not exceeded.
Schneider Electric and AJ Gallagher declined to comment.
    The North Carolina town of Mooresville, downstream of Duke’s
Marshall power plant, saw its trihalomethanes surge as high as
127 parts per billion at times in 2015, after the facility
discharged bromide used to treat coal into a nearby lake,
according to the town’s drinking water quality report.
    That did not trigger a violation of federal clean water
rules because the town’s annual average of 54 parts per billion
that year was below the maximum trihalomethane contaminant level
of 80 parts per billion. The same was true of the South Carolina
plant, where trihalomethane levels in 2012 rose to 67 parts per
billion.
    Over the past decade, however, many studies have shown that
exposure to trihalomethanes at much lower levels than the
federal limit raises the risk of cancer and of problems during
pregnancy. Some people who drink water containing TTHMs in
excess of the maximum standard over many years may experience
problems with their liver, kidneys, or central nervous system,
and may have an increased risk of getting cancer, according to
the EPA.
    In 2016, the EPA included bromide in the Safe Water Drinking
Act as an unregulated contaminant to be monitored by public
water systems.
    Research by Jeanne VanBriesen, director of Carnegie Mellon
University’s Center for Water Quality in Urban Environmental
Systems, found that bromide additives used to reduce mercury
could significantly boost trihalomethanes in drinking water
supplies downstream of coal plants. Her 2017 study focused on 22
drinking water systems serving 2.5 million people in
Pennsylvania.
    Once Duke Energy halted refined coal operations at the North
Carolina plant, bromide dropped about 75 percent in the nearby
Catawba River, Zachary Hall, director of environmental science
at Duke, said in a February 2017 deposition given to the
Southern Environmental Law Center.
    Duke officials concede that bromide applications contributed
to the elevated trihalomethane levels.
    “While bromides from our facilities were not the sole
cause,” Duke’s Culbert said, “we felt it was important to
partner with downstream water utilities and suspend the
program.”

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Full coverage: The truth about 'clean' coal    https://www.reuters.com/investigates/special-report/usa-coal-pollution/
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 (Reporting by Tim McLaughlin
Editing by Richard Valdmanis and Brian Thevenot)
 ((tim.mclaughlin@thomsonreuters.com; +1 617-856-4409; Reuters
Messaging: Tim.McLaughlin.thomsonreuters.com@reuters.net
))