Keynote Address by George Ellis

President, Pennsylvania Coal Association

at the

2011 Annual Joint Meeting

SME/PCMIA

October 27, 2011

“Southwestern Pennsylvania, the Energy Capital of the Nation”

www.pacoalassn.com


Good morning and thank you for inviting me to participate in your annual meeting.

 

By way of background, the Pennsylvania Coal Association is a lobbying organization representing bituminous coal operators and service suppliers whose total annual coal production account for almost 80 percent of Pennsylvania’s yearly coal output.

 

My remarks will focus on a number of items:

  • A profile of the Pennsylvania coal industry.
  • The energy potential that exists in southwestern Pennsylvania and how this homegrown capacity can make the area the energy capital of the nation.
  • Certain impediments to the use of coal and fossil fuels that could jeopardize this potential.

 

Profile of the Pennsylvania Coal Industry

Pennsylvania is the fourth leading coal producing state – our 2010 production totaled 66 million tons. Most of this output, about 59 million tons or 90 percent of the total production, came from bituminous mines located in western Pennsylvania; including 36 underground mines and 300 surface mines and reprocessing sites.

Underground mining accounts for 80 percent of Pennsylvania’s total yearly output. In fact, of the major U.S. underground bituminous coal mines, four mines located in Greene County rank among the top 15 mines nationally. These mines are led by Consol’s Enlow Force (11.1 MT/Y) and Bailey Mines (10.0 MT/Y), which rank one and two respectively; and Alpha Natural Resources’ Cumberland (6.8 MT/Y) and Emerald (5.6 MT/Y) mines, which rank 5th and 15th.

Indeed, Greene County, located in the southwestern-most part of the state, is the second largest coal producing county in the nation.

 

Pennsylvania is the third largest state in terms of coal produced by underground mining methods and ranks first in terms of total coal extracted by longwall mining technology.

 

Coal is our largest indigenous fossil fuel. The Energy Information Administration (EIA) estimates the demonstrated U.S. coal reserve base at 496 billion tons distributed geographically among 31 states; with 27 billion tons remaining in Pennsylvania (of the 27 billion tons of Pennsylvania’s coal reserves, almost 19 million tons, about 71 percent, are located in southwestern Pennsylvania). At current production and consumption levels, coal supplies will be available for at least the next 250 years. In fact, on an energy equivalent basis, the 5,441 quadrillion BTUs of U.S. coal surpasses the 4,446 quadrillion BTUs of Middle East oil.

 

Most of our coal is primarily used for electric generation – about 80 percent of what we mine each year is used for this purpose. Our other markets include industrial production (particularly in the steel making process) and foreign exports.

Coal is the major fuel of choice for electricity. Almost 45 percent of the United States’ electricity is generated by coal and coal accounted for 48 percent of the total amount of electricity produced in Pennsylvania in 2009. Indeed, Pennsylvania’s reliance on coal-fired electricity has made the Commonwealth the largest net exporter of electricity among the states. About 37 percent of what we generate in Pennsylvania is sent to other states.

 

Coal’s cost and abundance are the reasons for its dominance of the electric generating market.

 

Coal is the least expensive fuel for electric generation and its use in this manner has helped maintain a competitive advantage for many of America’s energy intensive manufacturing businesses. Based on information from the Pennsylvania PUC, the cost to generate electricity from coal is 5.7 cents/kWh. By comparison gas costs 7.20 cents/kWh; wind is 7.46 cents/kWh; nuclear is 7.5 cents/kWh; solar thermal units $2.76/kWh and solar PVs is $4.12/kWh.

 

The mining industry is a significant contributor to Pennsylvania’s economy. In 2008, its annual worth to the Commonwealth, based on employment, compensation, output and the impact of industry’s supply chain, was valued at over $7 billion.

In addition, it was responsible for the creation of 41,500 direct and indirect jobs with a payroll totaling over $2.2 billion. These are high-paying family-sustaining jobs. The annual average wage of a Pennsylvania coal miner in 2010 was $75,348. Taxes on these wages alone netted more than $700 million to the coffers of federal, state and local governments.

 

In addition to the Commonwealth’s array of general business tax obligations that apply to coal operators, the Pennsylvania coal industry is also subject to paying a locally imposed ad valorum tax in which coal is taxed as property before it is extracted.

Essentially, coal reserves are assessed “in-place” as an interest in real estate for property tax purposes. While the rate of the tax varies by county (factors generally considered in developing the rate include the quality and mineability of the coal and the thickness of the seam), the tax represents a substantial portion of the local property tax base in some regions of the state.

 

The coal industry also pays a severance tax on each ton of coal mined under the federal 1977 Surface Mining Conservation and Reclamation Act.

 

Although this money goes into a federally administered fund (the Abandoned Mine Land Fund), it is returned to the states under a statutorily-designed formula to help address abandoned mine land and acid mine discharge problems created before 1977.

Since the inception of this tax, Pennsylvania coal operators alone have paid $526 million into the fund to date. Because the distribution formula is based on historical coal production trends that favor states like Pennsylvania with a long heritage of coal mining, the total dollar amount Pennsylvania has received from the fund within this time span exceeds $850 million. Again, this money must be used towards addressing our past environmental legacy.

 

Southwestern Pennsylvania has a strong concentration of manufacturers producing machinery and equipment for the industry. In fact, Pennsylvania has the largest mining and equipment manufacturing industry in the country, accounting for 27 percent of that sector’s national employment.

 

Supporting its position as the hub of the coal industry, southwestern Pennsylvania is home to two of the largest coal research facilities in the country – the National Energy Technology Center and Consol’s Energy Research and Development Center, both located in Pittsburgh. Together, they account for nearly $500 million in coal-related research and development annually.

While coal mining is inherently dangerous, coal mining in Pennsylvania is safer now than ever before by any standard of measurement. For example:

  • There have been no coal mining related fatalities in Pennsylvania since July, 2009.

  • Incident rates for all categories at Pennsylvania’s underground mines are all below the national average.

 

Frankly, Pennsylvania’s coal mines are among the safest in the world due to commitments made by management, labor and regulators to adhere to a strict culture of mine safety every minute of every shift; enactment of new modern laws and regulations, and technological advancements. We understand that constant vigilance in pursuit of safety is a must.

 

Advancements in technology combined with strict regulatory standards and a rigorous permitting process have allowed mining to proceed without posing long-term environmental effects.

 

Postmining discharges from newly permitted mine sites have been virtually eliminated and the active mining industry has taken the lead in reclaiming abandoned mine lands and abating old acid mine drainage at no cost to the Commonwealth.

 

Most importantly, Pennsylvania operators individually and collectively have an excellent record of compliance with the mining laws and regulations. According to OSM’s 2011 annual review of Pennsylvania DEP’s coal mine regulatory program, Pennsylvania operators achieved a 92 percent compliance rate with statutory and regulatory requirements; OSM’s objective for the states is 88 percent.

 

Pennsylvania DEP data indicate that coal is becoming an increasingly cleaner source of electricity for the state’s power plants. From 2000 – 2010, electric generating units in Pennsylvania have reduced their emissions of SO2 by 58 percent and NOx emissions by 41 percent.

 

In addition, according to EPA figures, newer plants emit 90 percent fewer pollutants per unit of electricity.

These sizeable reductions result from the application of existing pollution control technologies and not esoteric technology barely off the drawing board.

 

Diverse Energy Mix

We certainly have a diverse and abundant mix of energy sources in southwestern Pennsylvania in addition to coal to satisfy the twin goals of achieving economic prosperity and energy security in an environmentally consistent manner.

There are 750 companies located in southwestern Pennsylvania that directly or indirectly support the energy sector. Their economic impact on this region is telling.

 

According to a report prepared by the Energy Alliance of Greater Pittsburgh, these industries – coal, natural gas, nuclear, solar and wind – accounted for 16 percent of southwestern Pennsylvania’s economic activity, were responsible for 50,000 direct jobs and 100,000 indirect jobs in the 10-county area around Pittsburgh, and generated $19 billion to the economy.

 

Although overall employment in the area fell 2.4 percent from 2007 to 2010, energy related jobs actually rose by 6.3 percent. In fact, jobs in the mineral extraction sector – mining, natural gas and oil production, actually increased almost 19 percent in this time span.

 

Both the energy players and the energy resources are here. How do we maximize use of this tandem to produce affordable and reliable energy in an environmentally consistent manner. For this, we need to look no further than Pennsylvania’s electric generation mix.

 

In 2009, coal accounted for 48 percent of the electricity generated in Pennsylvania, nuclear power accounted for 35 percent and natural gas – almost 14 percent. Collectively that is around 97 percent of our total electric power coming from homegrown fuel sources. As a result, our electric rates are competitive, our supply of electricity is reliable and we have a net surplus that allows us to sell electricity out-of-state. This is a blueprint for energy independence – using indigenous energy sources in a wise manner to satisfy energy demand.

 

Impediments

Despite these clear benefits the road ahead for coal, or any fossil fuel, is daunting. Perhaps the biggest impediment to our continued reliance on fossil fuels to generate electricity is federal policies designed to transform America’s energy use away from these sources.

 

This regulatory assault against the use of fossil fuels is being driven by EPA. More than any other reason, EPA’s heightened scrutiny and overzealous regulation of coal mining in the past two years threaten the future economic viability of our industry. These policies attack both the mineral extraction process through protracted federal environmental review of mining permits heretofore reserved to the states, and the end use process through establishing unreasonable and unjustifiable emission reduction standards for greenhouse gases, mercury, coal waste, NOx, SO2 and a plethora of other alleged pollutants.

 

The cumulative effect of this assault will be an economic train wreck.

 

The consequences of enacting EPA’s air rules alone would be devastating. They would result in a heavy burden on consumers through massive rate hikes. Since higher energy prices slow economic growth, they would derail an already fragile economy.

In addition, the forced retirements of coal-fired power plants presaged by the rules, would destabilize our electric grid.

 

Our supply vulnerability is not mere conjecture.

 

Staff at the federal Energy Regulatory Commission estimate that 81 gigawatts (GW) of coal-fired capacity is either “likely” or “very likely” to be retired as a consequence of EPA’s proposed air rules and another 50 GW is “somewhat likely” to be retired. This 131 GW of electric output is 40 percent of the country’s total coal-fired capacity and about 20 percent of our total electricity generation.

 

The PJM Interconnection, the Regional Transmission Organization for 13 Middle Atlantic and Midwestern states, including Pennsylvania, estimates that 25 GW of coal-fired capacity within its system is at some type of risk of retirement because of EPA’s rules.

 

In addition, both the Pennsylvania PUC and DEP have written to EPA about its rules, complaining that the proposals failed to include a full and complete assessment of the risks to electric reliability, especially the prospects of serious local reliability problems.

 

At the risk of sounding over dramatic, how these issues are addressed will not only impact the future role of coal as an energy source but also alter our nation’s ability to secure its energy future and restore economic stability.

 

Environmental protection is certainly a worthy pursuit, but it is a goal that must be and can be balanced by the need for affordable and reliable energy, prerequisites for economic growth and energy security.

 

To achieve such a balance, we need to tap all our indigenous energy sources – there is no one panacea and no source can be left behind.

 

The fact of the matter is that there are challenges inherent with using any energy source. But, if we back away from any of our domestic resources merely because it poses challenges, we will soon find ourselves with fewer, more expensive energy options.

The true path towards energy security and economic prosperity is a balanced energy policy that wisely utilizes all indigenous resources. And, because of this region’s wealth of domestic energy sources, any blueprint for such a path will run through southwestern Pennsylvania.

 
Remarks by George Ellis

President, Pennsylvania Coal Association

at the

25th Annual St. Barnabas CEO Leadership Conference

Monday, September 18, 2011


Good morning and thank you for inviting me to participate in this energy forum.

 

By way of background, the Pennsylvania Coal Association is a lobbying organization representing bituminous coal operators and service suppliers whose total annual coal production account for almost 80 percent of Pennsylvania’s yearly coal output.

 

We certainly have a diverse and abundant mix of energy sources in Pennsylvania, particularly in southwestern Pennsylvania, to satisfy the twin goals of achieving economic prosperity and energy security in an environmentally consistent manner. My remarks will focus on the potential role that Pennsylvania coal can play as part of our energy mix.

 

Historical Context

The coal geology of Pennsylvania is essentially divided into two distinct coal regions – anthracite and bituminous. I will focus on the dominant bituminous region.

 

Bituminous coal seams underlay about 12,000 square miles in 28 counties. Coal is found in its four major coal fields:

 

  • The Main Bituminous Field in the southwest,
  • The Georges Creek Field in the south,
  • The Broad Top Field in the southcentral, and
  • The Northcentral field in northcentral.

 

For over two centuries, coal has played a major role in the economic and industrial development of Pennsylvania. Within that time span, it has been estimated that between 10-20 billion tons of coal have been produced in Pennsylvania, about 20 percent of the total national output during that period.

 

Licenses for exploration of Pennsylvania’s minerals were actually first granted by William Penn as early as 1692, a decade after the founding of the Commonwealth in 1681.

 

Bituminous coal was first mined in Pennsylvania in the late 18th century at “Coal Hill” or what is now Mount Washington.

 

Overlooking Fort Pitt on the south side of the Monongahela River, coal was mined there to provide fuel for the settlement. The coal was extracted from drift mines in the Pittsburgh coal bed, which cropped out along the steep hillside and transported by canoe to the military garrison.

 

The growth of western Pennsylvania’s coal production was tied to population growth and development of rail and river transportation, then escalated with the emergence of the steel industry. Towards the last half of the 19th century, the demand for steel generated by the explosive growth of the railroads and ship building also impacted the demand for coal.

 

Coal eventually played a major role in driving the economic engine that fueled the industrial revolution and helped lead America to victories in two World Wars.

 

With that historical synopsis of coal mining in Pennsylvania, I will now focus on the current state of the Pennsylvania coal industry.

 

Profile of the Pennsylvania Coal Industry

 

Pennsylvania is the fourth leading coal producing state – our 2010 production totaled 66 million tons. Most of this output, about 59 million tons or 90 percent of the total production, came from bituminous mines located in western Pennsylvania; including 36 underground mines and 300 surface mines and reprocessing sites.

 

Underground mining accounts for 80 percent of Pennsylvania’s total yearly output. In fact, of the major U.S. underground bituminous coal mines, four mines located in Greene County rank among the top 15 mines nationally. These mines are led by Consol’s Enlow Force (11.1 MT/Y) and Bailey Mines (10.0 MT/Y), which rank one and two respectively; and Alpha Natural Resources’ Cumberland (6.8 MT/Y) and Emerald (5.6 MT/Y) mines, which rank 5th and 15th.

 

Indeed, Greene County, located in the southwestern-most part of the state, is the second largest coal producing county in the nation.

 

Pennsylvania is the third largest state in terms of coal produced by underground mining methods and ranks first in terms of total coal extracted by longwall mining technology.

 

Coal is our largest indigenous fossil fuel. The Energy Information Administration (EIA) estimates the demonstrated U.S. coal reserve base at 496 billion tons distributed geographically among 31 states; with 27 billion tons remaining in Pennsylvania (of the 27 billion tons of Pennsylvania’s coal reserves, almost 19 million tons, about 71 percent, are located in southwestern Pennsylvania). At current production and consumption levels, coal supplies will be available for at least the next 250 years. In fact, on an energy equivalent basis, the 5,441 quadrillion BTUs of U.S. coal surpasses the 4,446 quadrillion BTUs of Middle East oil.

 

Most of our coal is primarily used for electric generation – about 80 percent of what we mine each year is used for this purpose. Our other markets include industrial production (particularly in the steel making process) and foreign exports.

 

Coal is the major fuel of choice for electricity. Almost 45 percent of the United States’ electricity is generated by coal and coal accounted for 48 percent of the total amount of electricity produced in Pennsylvania in 2009. Indeed, Pennsylvania’s reliance on coal-fired electricity has made the Commonwealth the largest net exporter of electricity among the states. About 37 percent of what we generate in Pennsylvania is sent to other states.

 

Coal’s cost and abundance are the reasons for its dominance of the electric generating market.

 

Coal is the least expensive fuel for electric generation. Based on information from the Pennsylvania PUC, the cost to generate electricity from coal is 5.7 cents/kWh. By comparison gas costs 7.20 cents/kWh; wind is 7.46 cents/kWh; nuclear is 7.5 cents/kWh; solar thermal units $2.76/kWh and solar PVs is $4.12/kWh.

 

The mining industry is a significant contributor to Pennsylvania’s economy. In 2008, its annual worth to the Commonwealth, based on employment, compensation, output and the impact of industry’s supply chain, was valued at over $7 billion.

 

In addition, it was responsible for the creation of 41,500 direct and indirect jobs with a payroll totaling over $2.2 billion. Taxes on these wages alone netted more than $700 million to the coffers of federal, state and local governments.

 

In addition to the Commonwealth’s array of general business tax obligations that apply to coal operators, the Pennsylvania coal industry is also subject to paying a locally imposed ad valorum tax in which coal is taxed as property before it is extracted.

 

Essentially, coal reserves are assessed “in-place” as an interest in real estate for property tax purposes. While the rate of the tax varies by county (factors generally considered in developing the rate include the quality and mineability of the coal and the thickness of the seam), the tax represents a substantial portion of the local property tax base in some regions of the state.

 

The coal industry also pays a severance tax on each ton of coal mined under the federal 1977 Surface Mining Conservation and Reclamation Act.

 

Although this money goes into a federally administered fund (the Abandoned Mine Land Fund), it is returned to the states under a statutorily-designed formula to help address abandoned mine land and acid mine discharge problems created before 1977.

 

Since the inception of this tax, Pennsylvania coal operators alone have paid $526 million into the fund to date. Because the distribution formula is based on historical coal production trends that favor states like Pennsylvania with a long heritage of coal mining, the total dollar amount Pennsylvania has received from the fund within this time span exceeds $850 million. Again, this money must be used towards addressing our past environmental legacy.

 

Southwestern Pennsylvania has a strong concentration of manufacturers producing machinery and equipment for the industry. In fact, Pennsylvania has the largest mining and equipment manufacturing industry in the country, accounting for 27 percent of that sector’s national employment.

 

Supporting its position as the hub of the coal industry, southwestern Pennsylvania is home to two of the largest coal research facilities in the country – the National Energy Technology Center and Consol’s Energy Research and Development Center, both located in Pittsburgh. Together, they account for nearly $500 million in coal-related research and development annually.

 

While coal mining is inherently dangerous, coal mining in Pennsylvania is safer now than ever before by any standard of measurement:

 

  • There have been no coal mining related fatalities in Pennsylvania since July, 2009.

 

  • Incident rates for all categories at Pennsylvania’s underground mines are all below the national average.

 

Frankly, Pennsylvania’s coal mines are the safest in the world due to commitments made by management, labor and regulators to adhere to a strict culture of mine safety every minute of every shift; enactment of new modern laws and regulations, and technological advancements.

 

Advancements in technology combined with strict regulatory standards and a rigorous permitting process have allowed mining to proceed without posing long-term environmental offsets.

 

Postmining discharges from newly permitted mine sites have been virtually eliminated and the active mining industry has taken the lead in reclaiming abandoned mine lands and abating old acid mine drainage at not cost to the Commonwealth.

 

Most importantly, Pennsylvania operators individually and collectively have an excellent record of compliance with the mining laws and regulations. According to OSM’s yearly annual review of DEP’s coal mine regulatory program, operators achieved a compliance rate of 94 percent in 2010; OSM’s objective is 88 percent.

 

Pennsylvania DEP data indicate that coal is becoming an increasingly cleaner source of electricity for the state’s power plants. From 2000 – 2010, electric generating units in Pennsylvania have reduced their emissions of SO2 by 58 percent and NOx emissions by 41 percent.

 

In addition, according to EPA figures, newer plants emit 90 percent fewer pollutants per unit of electricity.

 

These sizeable reductions result from the application of existing pollution control technologies and not esoteric technology barely off the drawing board.

 

Energy self-sufficiency requires us to tap all our indigenous resources – there is no one panacea and no source can be left behind. However, it is hard to deny the fact that coal is essential to generating affordable and reliable electricity, a prerequisite to energy sufficiency and sustained economic growth. In this respect, southwestern Pennsylvania coal fields should play a major role in any blueprint for energy independence.

 

Despite these clear benefits the road ahead for coal, or any fossil fuel, is daunting. Perhaps the biggest impediment to our continued reliance on fossil fuels to generate electricity is federal policies designed to transform America’s energy use away from these sources.

 

Frankly, EPA’s heightened scrutiny and overzealous regulation of coal mining in the past two years threaten the future economic viability of our industry. These policies attack both the mineral extraction process through protracted federal review of mining permits heretofore reserved to the states, and the end use process through establishing unreasonable and unjustifiable emission reduction standards for greenhouse gases, mercury, coal waste, NOx, SO2 and a plethora of other alleged pollutants.

 

The cumulative effect of this assault will be an economic train wreck.

 

The consequences of enacting these proposals would be devastating. They would add a heavy burden on consumers through massive rate hikes, destabilize Pennsylvania’s electric grid by replacing reliable forms of energy with intermittent sources and derail an already fragile economy. Our supply vulnerability is not mere conjecture. The PJM estimates that 20,000 MW of coal-fired capacity within its system is at risk of retirement from EPA’s rules and both the Pennsylvania PUC and DEP have questioned the reliability assessments performed by the federal agency for these rules, maintaining that they could present serious local reliability issues.

 

At the risk of sounding overly dramatic, how these issues are addressed will not only impact the future role of coal as an energy source but also alter our nation’s ability to secure its energy future and restore economic stability.

 

Everyone wants a sound environment, but this goal has to be and can be balanced by the need for cheap and reliable electricity in quantities that only coal can reliably deliver at costs that only coal can reliably promise.

 

This is the true path towards energy security and economic prosperity and it is a route that runs through southwestern Pennsylvania.

 
mcall.com

Expect fewer jobs, higher electric bills: George Ellis of the Pa. Coal Association

10:14 AM EDT, June 13, 2011 (Published in the Sunday Edition of The Morning Call)

The U.S. Environmental Protection Agency is considering two new rules, the transport rule and the utility Maximum Achievable Control Technology - MACT - rule, both of which would have a devastating impact on Pennsylvania's economy if implemented. The rules could lead to increased electricity rates and unemployment at a time when our economy is at best weak, and certainly fragile.

According to a recent analysis conducted by the National Economic Research Associates, and covered in high-traffic news outlets including the New York Times and Bloomberg News, the EPA's regulations would cost four jobs for every new clean energy job created and cause electricity rates to rise by 11 percent to 23 percent.

The proposed rules will require the installation of emission-control technologies at coal plants by roughly 2015 in unrealistic timetables while providing no flexibility to meet targeted reductions. The rules are potentially ruinous for Pennsylvania.

According to the analysis by National Economic Research Associates, some 59,000 years of total jobs - a job-year is one job for one year - in Pennsylvania will be eviscerated by 2020. Electricity rates will rise by more than 15 percent in our region.

Can we afford higher utility bills when energy costs are already hitting Pennsylvanians hard?

In 2009, Pennsylvania households with annual incomes below $50,000, almost half of Pennsylvanians, spent an estimated 18 percent of their after-tax income on energy. Energy costs claimed 62 percent of the after-tax incomes of the commonwealth's poorest households earning less than $10,000.

High energy costs are burdening too many families in Pennsylvania and the situation is not improving - especially at the gas pump where the average cost for a gallon of gas here is around $3.70. To think about the strain this is putting on pocketbooks, consider that a gallon of gasoline was just $1.47 in 2001. This is not the time to make it more expensive to plug in cell phones, switch on lights, or turn on a computer.

To understand where our electrical power comes from in Pennsylvania, here are some numbers. Currently in Pennsylvania more than half of our electricity is generated by coal. The other half comes in like this: nuclear, about a third; natural gas, about one-eighth; renewables such as wind and solar, only a few percent.

All sources are necessary but without coal playing anchor, the math to keeping our power grid functioning and affordable simply doesn't work. The wind does not always blow and the sun does not always shine.

President Obama recently visited Pennsylvania for an energy speech and spoke about the importance of reducing our dependence on foreign sources of energy by utilizing domestic resources including coal. Fortunately we have enough coal in the United States to last 250 years and, on an energy equivalent basis, the 5,441 quadrillion Btu of American coal surpasses the 4,446 quadrillion Btu of oil from the Middle East.

With a resource base exceeding 24 billion tons, coal is by far Pennsylvania's most abundant, indigenous fuel source. Pennsylvania can continue to look to this fuel as a secure source to satisfy the commonwealth's need for affordable, reliable and increasingly clean energy. In fact, from 1970 to 2009, America's population has grown 48 percent, electricity generated by coal has increased 225 percent, but emissions of regulated pollutants from coal have decreased by 77 percent.

Pennsylvania is the nation's fourth leading coal-producing state, mining 60 million tons in 2009. In addition, the mining industry is a major contributor to Pennsylvania's economy. In 2008, its economic benefit to the commonwealth exceeded $7 billion and it is responsible for the creation of 41,500 direct and indirect jobs with a payroll exceeding $2.2 billion. Taxes on these wages netted more than $700 million to the coffers of federal, state and local governments. Fifty-nine of our 67 counties have coal-related businesses, and coal equipment and machinery are one of the few industrial sectors in our state experiencing growth.

Coal is the fuel that powers Pennsylvania's economy. It employs many of our citizens, and it keeps electricity prices affordable for our businesses to hire and to keep daylight in sight for working families struggling to make ends meet.

Hopefully, the EPA will give more thoughtful consideration of the impact of these proposed rules and make major revisions to them before great harm is done to our commonwealth.

George Ellis is president of the Pennsylvania Coal Association.

Copyright © 2011, The Morning Call

 
Coal has critical role in Pennsylvania, nation

Published: Sunday, June 12, 2011, 5:30 AM

By Patriot-News Op-Ed The Patriot-News

By George Ellis

President Obama came to Pennsylvania two days after announcing his re- election campaign to give a speech on America's energy future. The visit was a reminder of Pennsylvania's importance in presidential politics and the significance that energy issues will have in the 2012 campaign for the White House.


For President Obama to win re-election, he likely needs to earn Pennsylvania's 20 electoral votes. To do that, he will need to convince Pennsylvanians that his administration has an energy plan that deals with spiraling costs and has a vision for how to power our future.

High energy costs are hitting Pennsylvanians hard. In 2009, Pennsylvania households with annual incomes below $50,000, almost half of Pennsylvanians, spent an estimated 18 percent of their average after-tax income on energy. Energy costs claimed 62 percent of the average after-tax incomes of the commonwealth's poorest households earning less than $10,000.

High energy costs are burdening too many families in Pennsylvania. The situation is not improving, especially at the gas pump. The unease in the Middle East has hiked gasoline prices to almost $3.70 per gallon nationally. To think about the strain this is putting on pocketbooks, consider that a gallon of gasoline was $1.47 in 2001.

It was against this backdrop that the president came to Pennsylvania to lay out a vision for our energy future. The president said that by 2035 he wants 80 percent of our electricity to come from renewables such as wind and solar, as well as from natural gas, clean coal and nuclear power.

"We can do that," the president said.

We can, and the president was right to say we need coal to do it.

The president spoke in Bucks County at a wind turbine plant owned by a company based in Spain. Energy derived from renewable sources such as wind and solar are important and helpful to our base load electrical power grid, but make no mistake, coal carries the load.

To understand where our power comes from, here's some numbers. In Pennsylvania, more than half our electricity is generated by coal. The other half comes in like this: nuclear about a third, natural gas about one-eighth. Renewables such as wind and solar account for only a small percentage.

All sources are necessary, but without coal playing the anchor role, the math to keeping our power grid functioning and affordable simply doesn't work. The wind does not always blow and the sun does not always shine.

In his remarks here, the president talked about the importance of reducing our dependence on foreign sources of energy. Fortunately, we have enough coal in the United States to last 250 years. On an energy equivalent basis, the 5,441 quadrillion BTUs of American coal surpasses the 4,446 quadrillion BTUs of Middle Eastern oil.

With a resource base of more than 24 billion tons, coal is by far Pennsylvania's most abundant indigenous fuel source. Pennsylvania can continue to look to this fuel as a secure source to satisfy the commonwealth's need for affordable, reliable and increasingly clean energy. In fact, from 1970 to 2009, coal generation has increased by 225 percent while emissions of regulated pollutants have decreased by 77 percent.

Pennsylvania is the nation's fourth-leading coal-producing state, mining 60 million tons in 2009. In addition, the mining industry is a major contributor to Pennsylvania's economy.

In 2008, its economic benefit to the commonwealth exceeded $7 billion, and it is responsible for the creation of 41,500 direct and indirect jobs, with a payroll exceeding $2.2 billion. Taxes on these wages netted over $700 million to the coffers of federal, state and local governments. And 59 of our 67 counties have coal-related businesses. Coal equipment and machinery is one of the few industrial sectors in our state experiencing growth.

Coal is a key to Pennsylvania's economy. It employs our citizens and it keeps electricity prices affordable for our businesses and working families struggling to make ends meet.

We'll probably be seeing a good bit of the president in Pennsylvania until November 2012. Hopefully, he will continue to speak to the key role of coal in America's and Pennsylvania's energy futures.

George Ellis is president of the Pennsylvania Coal Association.

 

 
TESTIMONY
Of
George Ellis
President
Pennsylvania Coal Association


Before the
PENNSYLVANIA CITIZENS ADVISORY COUNCIL

April 19, 2011


Regarding
The Effects of Subsidence Resulting From
Underground Bituminous Coal Mining on Surface Structures and Features and on Water Resources:  Third Act 54 Five-Year Report (2003-2008)


Pennsylvania Coal Association
212 North Third Street, Suite 102
Harrisburg, PA 17102
P:  717-233-7900
F:  717-231-7610
E:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it




Introduction

Good afternoon.  My name is George Ellis and I am President of the Pennsylvania Coal Association (PCA).   

PCA is a trade association organization representing bituminous coal operators – both underground and surface – as well as other associated companies whose businesses rely on a thriving coal economy.  PCA member companies produce over 80 percent of the bituminous coal annually mined in Pennsylvania (over 60 million tons in 2009), and all of the coal produced by the longwall mining method (almost 40 million tons).

We thank the Council for this opportunity to provide our perspective on the third five-year report on Act 54, which studied the effects of underground bituminous coal mining on surface structures, features and water resources for the period August 2003 to August 2008.

PCA’s Perspective on the Report

Before one can analyze and comment on the report, one must fully understand the genesis and objectives of Act 54.

Act 54was intended to reconcile the interests of mineral rights owners and surface owners.  These were primarily issues of competing private property interests where mine operators acquired sub-surface rights to minerals, and surface owners acquired surface rights to their land.  Both of these interests can be regulated and limited by the legislature in the public interest, but neither interest is compellingly superior to the other.

The legislature, in unanimously enacting Act 54, made a conscious public policy decision to balance these competing ownership interests more than they had been in the past.  

It gave more rights and protection to the surface owners than they previously had under the 1966 law that, at the time, governed mine subsidence.  Essentially, the 1966 Act required operators to mine so as not to cause damage to the following limited class of structures in place as of April 27, 1966:
  • Dwellings,
  • Public buildings or noncommercial structures customarily used by the public,
  • Cemeteries.
DEP implemented this provision by requiring that 50 percent of the coal had to be left in “support pillars” beneath this list of structures and if structural damage occurred, the operator was liable.”

This protection did not apply to water loss.  Indeed, the 1966 law provided no protection or remedy to any surface owner whose source of water was affected by underground mining regardless of the date the structure was in place.

The law also offered no protection or remedy from subsidence damage to owners of structures built after 1966 (while the 1966 law did allow owners of post-1966 structures the right to purchase coal pillar support from the operator, this right was rarely exercised because it was too costly).

In recognizing that full extraction mining is more efficient, safe, and less environmentally damaging in the long run than other forms of coal mining, Act54 also removed the statutory impediments to this mining technology.

The purpose of the Act was to allow operators to extract a higher ratio of coal in a responsible manner after receiving a permit from DEP, while being liable for any damage that the activity caused to overlying structures and any water supplies regardless of when they were built.  It also expanded the class of structures afforded these protections to include commercial, industrial and agricultural structures and water supplies.

Essentially, the law created a replacement and repair remedy for damage caused by subsidence; it did not create a subsidence prevention standard.  This was the legislative solution for balancing the rights of the landowner and coal operator.

Therefore, in determining whether implementation of the Act is meeting legislative intent, as is the purpose of the five-year report, one must evaluate the industry’s response to subsidence damage and water loss claims to see if those claims have been adequately resolved under the remedies provided in the law.

It should also be noted that the remedies in Act 54 provide more for the property owner and for the farming community, in terms of structural repairs or compensation and water replacement, than the corresponding federal standard or the standard imposed in other coal producing states where longwall mining operations are conducted.

Based on data collected and studies conducted to date, including this five-year report, it is clear that Act 54 is working as it was intended, operators are meeting their repair/restoration obligations in accordance with the law the mandates required by Act 54 are being met and the magnitude of damage caused by underground mining is limited and manageable.

Specific Comments

First, the authors of the report specifically cited representatives from three coal companies – CONSOL, Alpha and Rosebud – whose total underground mine production in 2009 amounted to about 90 percent of Pennsylvania’s total underground production – for willingly and fully cooperating with the University in making their data available, saving considerable time and effort in data gathering.

This responsiveness is indicative of industry’s attitude that the more public policy officials focus on accurate data, the more convinced they will become of Act 54’s effectiveness in balancing the property owner and coal owner’s rights.

Second, we need to put in perspective the limited scope of underground mining’s footprint on total land mass.

During the third assessment period, 50 underground mines were active undermining a total of 38,256 acres of land.  Pennsylvania’s total land area is 44,820 square miles so underground mining has the maximum potential to affect about 1 percent of Pennsylvania’s total land mass.

In addition, the use of longwall mining technology to extract coal is employed in only two of Pennsylvania’s 67 counties – Washington and Greene.

Water Supplies

The report supports the contention that mining’s effect on water supply is limited in scope and not permanent.

According to the report, about 75 percent of water supplies undermined during the third assessment period had no reported impacts (2,106 wells, springs and ponds out of a total of 2,789).

Of the 683 cases with reported effects, 449 (66 percent) were resolved and the remaining 234 were pending a resolution (the status of which mainly ranges from currently implementing an agreed-to water replacement plan, waiting to install public water or reaching an agreement on operation and maintenance costs).

The average number of days to resolve water supplies’ reported effects was 321, although operators are required to provide temporary water to the landowner from the time the source is reported to be affected until a permanent supply is installed and useable.  

Resolution strategies for recovering water supplies are often multi-step, especially when wells and springs are being replaced.  For example, longwall mining subsidence takes approximately seven months to stabilize before meaningful repair can begin.  

Among the other major factors leading to delays in resolving water replacement issues involve extending public water to a property and protracted private disputes over a final payment for operation and maintenance costs (O&M costs) of the replacement water source.

According to the report, public water is used as a replacement source by longwall operators about 20 percent of the time.  If a public water source is the preferred option, the company must wait until mining is completed to avoid subsequent subsidence before the hook-up can occur.  In addition, it takes time to physically extend the public water line to the property.

These water lines are installed at the company’s expense and, as a result of using public water as a replacement source, the area of Washington and Greene Counties served by public water have increased more rapidly than it would have without mining.

Agreements over long-term O&M costs can also extend the resolution date.  Operators are required to compensate the landowner for O&M costs attendant with a permanent water source.  In some cases, the amount of that payment becomes an issue necessitating a negotiated settlement with DEP’s assistance, which also adds time.  However, the permanent supply is in place and usable until the payment dispute is resolved.  

Other factors contributing to delays in final resolution of water loss clams include:
  • Location of the water supply in relation to future mining,
  • A determination of whether a groundwater supply needs to be reestablished,
  • Allowing a period for the original supply to recover,
  • Requiring a period for the ground to stabilize so the replacement supply is not transient,
  • Private disputes where a homeowner may, for various reasons, deny an operator access to the property after mining and resist attempts to repair the damage.

It is significant to note that Act 54 allows the property owner, at any time during the water restoration process, to file a claim with DEP if he or she feels that the operator is not complying with the law.  At that point, DEP must render a decision within 90 days.

We recognize that this is of little consolation to the property owners whose claims have not been fully resolved.  Yet, the facts indicate that there is no trend or pattern of claims being neglected or ignored by operators.

Structures and Land

The report also confirms that the majority of undermined structures do not appear to have sustained damage due to subsidence and those that were damaged are being repaired.

During the assessment period, 456 structures with reported effects were found to have occurred out of a total of 3,735 structures undermined or just 12 percent.

Of the 456 cases, 441 (or 97 percent) have either been resolved or pending an interim resolution.

Also, there were 108 incidents of land impacted by underground mining out of 3,587 properties undermined, or just three percent.

Of these, 105 properties (98 percent) have either been resolved or pending an interim resolution.

Streams

During the assessment period, of the 55 streams or stream segments reported to have been impacted by mining, 20 have been resolved and 35 cases are either in some stage of the investigation process or a state of interim resolution, including:

  • Monitoring flow,
  • Measuring biological diversity,
  • Granting open fractures,
  • Altering stream gradients,
  • Deregulating stream bonds,
  • Augmenting flow,
  • Promoting aquatic diversity, or health, or
  • Repairing obstacles within the streams that impair flow.
The authors make it a point under this section to explain certain challenges that impeded their ability to make definitive judgments on stream impacts from underground mining because of the lack of permitting information collected during most of this assessment period.  Due to this dearth of information, the authors go on to say that, “…many of the questions concerning what streams  are impaired and, after mitigation actions, which have attained pre-mining stream flow and biological diversity standards are yet to be answered.”

The authors also maintain that because of a technical guidance document that DEP recently began to implement, this data collection situation has been corrected.  Under the document, protocols have been established for:
  • Increasing the amount of technical information on streams required to be submitted by the permit applicant,
  • Increasing the stream monitoring requirements,
  • Assessing the biological health of streams, and
  • Determining when a stream was impaired for low flow or degraded diversity and when it attained a resolution of the reported impact.
The authors also note that stream mitigation actions have increased dramatically through the three assessment periods while in other cases, “…natural processes have been successful since no impacts were observed in more than half of the streams undermined by longwall panels.”

Finally, it is interesting to note that DEP routinely issues Water Obstruction and Encroachment Permits to other non-mining activities (e.g. land developers and highway builders) authorizing the enclosure or “fill” of streams.  Why is the mining program held to a zero tolerance standard for unmitigated mining impairment to streams while other programs allow permanent impacts by water obstructions or encroachments?

Wetlands

A total of 93.9 acres of wetlands were identified as having been undermined during the assessment period.

According to the report, mining permits reviewed prior to 2007 contained very uneven reporting data so the authors had difficulties in trying to gauge mining’s impact, if any.

As with streams, however, DEP instituted a policy guidance that took effect in 2007 that establishes a sound and precise protocol for delineating wetlands.  As a result, the authors concluded that, “Thus all permit applications submitted after October, 2007 contained excellent pre-mining data that inventoried all wetlands down to sizes of a few hundredths of an acre.”

I79

According to the report, nine longwall panels undermined Interstate 79 during the 2003-2008 timeframe.

The authors noted that the damage associated with mining under the interstate was within the range of commonly observed distress concrete documented by the Federal Highway Administration.  It went on to say that the vast majority of highway deformations were transient.

More importantly, no accidents were attributed to mine subsidence and driving restrictions were limited to reduced speeds and single lane traffic during times of active mining or repairs.

The study also found that it has been more cost effective to allow longwall mining to proceed than for the Commonwealth to condemn the amount of coal needed to provide support for the highway.

Conclusion

PCA and its member companies recognize that there are fundamental and legitimate property owner concerns about the impacts of mining.  My testimony should not in any way be construed as industry’s indifference towards these concerns or an attempt to marginalize them.  We fully understand the apprehensions that people may have when they learn that their home will be undermined and we make every effort to work with them to return their home and lifestyle to normal after subsidence.  While mining impacts are temporary and not a permanent disturbance, there still can be a significant impact on people’s lives during the mining and post-mining process.  As such, we are both mindful of and sensitive to these concerns.

Finally, when reviewing the background of Act 54, the Council should keep in mind the intent of the law, which was to provide a replacement or restoration remedy for damage caused by subsidence.  This was the legislature’s solution for balancing the rights of the landowner and coal operator.  The intent was to balance the disparate rights of surface owners under the antiquated 1966 Subsidence Law, allow the use of modern mining technology and correct surface impacts form subsidence, not to prevent subsidence.

Within this context, PCA believes that the third five-year assessment report on Act 54 confirms that this law is working as it was intended and its damage repair and water restoration strategies are being carried out as intended.

Thank you for this opportunity to provide our perspective on the report.
 
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