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December 4, 2007

Kentucky still lags behind, but the Bluegrass could change yet

Tom Fitzgerald is the director of the Kentucky Resources Council and an attorney with more than three decades of experience in environmental and regulatory law. He sat down with LEO last week for a wide-ranging interview about Kyoto, Kentucky, carbon, optimism in a time of crisis, and how we might extract ourselves from the mess we’ve made of our ecosystem. LEO: It’s been 10 years since the Kyoto Protocol was signed. Of course, the United States signed it but has never ratified, so it’s essentially symbolic here. Where are we — both as a country and as a state — 10 years after most of the world declared it was time to begin to curb greenhouse gases? Tom Fitzgerald: I think it was either Moody’s or Standard & Poor’s, one of the indices that is a business oriented index, had a brief article where they said that 2007 was the year that global warming went from controversial to conventional, and there really has been — (State Rep. Jim) Gooch’s sideshow notwithstanding — a sea change in the awareness and understanding, despite millions of dollars spent by certain industries and certain sectors to try to give the impression that there was still some scientific debate concerning climate change and concerning man’s contribution to destabilizing the climate. There has been a real sharpening of interest, not only within the international scientific community but also the international business community, and as is typically the case, the lag between that and the political response — you’re seeing now it’s generally assumed that early 2008 we’ll see congressional movement, probably the Senate will take up the Warner-Lieberman bill, because industry is asking for a target within the United States to begin to address greenhouse gas reductions. The lack of a national target and a national framework for both reduction and for trading of credits in greenhouse gases is really having an unsettling effect in the electric utility sector and in a number of other sectors where they’re looking at significant capital expenditures on energy, but they don’t know which route to take.     Kentucky has always been a state that does not lead on environmental policy, and that is in large part attributable to the fact that we historically have been a natural resource-producing state, and the political and government policy of the state has been driven by extractive industries. They have reluctantly understood that it is in the state’s interest to manage the federal environmental programs, because they felt they’d get a better shake out of Frankfort than they would out of D.C. or Atlanta, but they had made the federal minimum standards our ceiling, so we would do nothing more than was required of us to protect the environment, and that’s part of our policy for air, waste, water and mining. Occasionally, we will do more than a minimum, but typically when we perceive a direct threat. For example, when out-of-state waste was going to be dumped in Kentucky, we actually passed one of the better waste laws in the country.     When Kyoto was adopted, the coal industry proposed — and the state adopted — a legal requirement that our environmental agency not set any standards based on Kyoto. There is actually a prohibition against doing so. LEO: Some of the criticism of Kyoto hinges on a dated argument that global warming does not exist. But others argue Kyoto is anti-industry, and that its intent was to somehow inhibit some of the major industries and help level the playing field for Third World countries to create more of an international economy. What do you believe is the usefulness of Kyoto? TF: Kyoto was symbolically useful as the point at which the international community began to discuss climate change. What has happened since then, with the release of four reports now by the Intergovernmental Panel on Climate Change, we realize that the Kyoto targets were very modest compared to what will have to be done in order to stabilize the climate. It is assumed by the overwhelming weight of the scientific community, and by the international community, that we will have to reduce carbon loading into the atmosphere by 80 percent by 2050. Kyoto’s targets were much more modest than that. Its value also has been as a framework for reductions, but it has been eclipsed by the tremendous growth that has occurred in countries that Kyoto had not assumed growth in. It is particularly China and India. As go those two nations, so will go our ability to succeed in (reducing) emissions. China is adding the equivalent of a 500-megawatt plant a week to meet its growing consumer and industrial demands. If they are investing in pulverized coal plants to do that, then that will eclipse almost anything that most other nations could do. LEO: Do you think the United States is in any sort of bargaining position there? The Bush administration has said in the past that if China doesn’t have to —TF: I don’t know that we’re in a bargaining position because I don’t know that we have, at this point, the moral high ground, and we certainly don’t have the economic high ground over those two nations.     One of the things we have not outsourced and have not lost in terms of our base in this country is pollution control technology. We have significant ability, not only in terms of efficiency and conversion of fuels but also pollution control and end-use efficiency. We have the capability of doing much better than we’re doing right now. EPA just came out with a study called “Vision 2025” where they indicated that efficiency investments alone could cut in half the projected energy demand over the next 25 years, and it would do so at a savings of half a billion dollars — consumer savings as well as economic savings as well as greenhouse gas reductions. The one area where we really could be of assistance to China and India is in the deployment of renewable technologies, the deployment of efficiency and the deployment of advanced technologies for fuel conversion. Both China and India are looking at that. LEO: You’ve talked a lot in the past about the impending carbon mandate in the United States. Can you explain what that might look like? TF: The best way to look at the framework would be to look at the Climate Action Partnership, which is a who’s who of the American industrial sector that has jointly called for a plan to reduce carbon emissions. What they’re looking at is a combination of regulatory and market-based strategies that would first price costs and eliminate the price signals that currently do not value the environmental cost of carbon emissions, and then would provide various frameworks in which to allow the different sectors to reduce. That would be anything from, in the mobile-source sector, fuel efficiency standards to reformulation of fuels to standards for design of engines for on-road and off-road vehicles, and then incentives for purchasing for a fleet, for efficient vehicles. For the industrial sector or large utility or other industrial emitters, it would probably be a cap and trade system that would set an ever-declining target that in any given year would require that emissions sources — well first, you would do an inventory, because you can’t control what you can’t count, so you would do a greenhouse gas inventory, and a number of states have already started that type of inventory, but it would put it on a national level. It would set a base year that, without changes, without reductions, here’s what has been emitted. Then it would assign by industrial sector, and by state, the reductions that would be needed for each of those major sources of greenhouse gases, and would require for them to hold a certain number of credits equal to the tonnage that they emit, and it would penalize the failure to do so. What that would do is it would require, say by 2012, that you would have to present these credits. And you’d have to purchase them. LEO: What will that mean for a coal-rich state like Kentucky? TF: Kentucky, I think, is among the most vulnerable states to the coming carbon mandate, because we have a fleet of aging pulverized coal plants. Well, first, because we still produce a significant amount of coal, third or fourth in the nation, and there are direct jobs associated with that, and indirect jobs associated with that, and also state revenue that’s associated with that, with the severance tax, and a change in fuel supply from other utilities. 99 percent of our coal goes to coal-fired utilities. If you see a significant shift away from coal-fired utility usage, you will see a decline in production, a decline in revenue. You’ll also see, on the positive side, a decline in environmental consequences and environmental impact, which is kind of an off-budget cost that isn’t factored in. The full cost of the fuel is nowhere near being paid by the consumers. It’s being paid by the people who live downhill and downwind and downstream, not only from power plants but also the mines.     You’ll also see a potentially significant increase in the cost to consumers of the coal-fired power. We as a state have built our economic profile on the fact that we were a cheap date — we used to have the lowest combined electric rates in the nation. We no longer do. Now it’s maybe third or fourth. And a number of our industries, particularly the aluminum industry, came to the state because we had access to a significant volume of water, and also because we had cheap power. We also are among the poorest states in the nation. We have a significant number of low- and fixed-income consumers for whom there is no elasticity in electricity use. They use what they need to use to stay warm or to stay cool, depending on the season.     If you see, as is being projected, significant costs — because the utilities will pass through, to the extent they’re allowed to pass through, the cost of retrofitting existing plants or replacing that electric generation with another source — will be passed through directly to the consumer. There is a potential, within the not-too-distant future, that you will see significant spikes in the rates that are paid by consumers. LEO: Is anything being done statewide to prepare for that? TF: There’s now a growing awareness. The one thing the special session (of the Kentucky General Assembly) this summer helped to do was to provide a platform, for myself and for a couple of others who testified, to highlight not only our vulnerability, but to highlight the fact that there is an array of things that we can do that would not prevent those costs from being incurred but would both delay the need for new coal-fired power — it’s irresponsible, absolutely irresponsible, to be building a coal-fired plant right now without knowing what the nature of the mandate is.     There is a tremendous amount that can be done right now that not only would keep more money in the consumer’s pocket, but would also help us to anticipate and to blunt the impact of the coming carbon mandate. First and foremost, in the near term, investment in energy efficiency, in the end-use efficiency — heating and cooling and refrigeration are the big areas where there is a significant inefficiency.     Among the combined rates of consumers — residential, industrial and commercial — we have the third or fourth lowest rate in the nation. In 2005, there were, I believe, 20 states whose electric bills were lower than Kentucky’s in the consumer category, and in 43 other states whose consumers used less power on a monthly basis than Kentucky in the residential sector. Just think of the housing stock. Think of how under-insulated, not only the windows but the walls, is our housing stock, particularly rental housing. We spend millions of dollars every year on volunteer weatherization programs and other types of weatherization programs to put plastic on windows in low-income housing, rental housing, because right now there is no incentive for any landlord to make the rental properties that they rent energy efficient. The renters typically either don’t have the means or aren’t going to invest because they’re not going to be there long, they’re not going to see the payback. And the landlord, if the renter’s paying the electricity bill, and they’re paying the heating and cooling bills, what incentive do they have, other than if it gets way out of line with other under-insulated houses that somebody would find a different place to live? If we were to align the interests of the landlords through accelerated recovery of investments, through tax offsets or other rebates in order to encourage durable investment in efficiency of rental stock, just think of how much savings there would be, not only in the direct savings out of pocket for fixed- and low-income consumers, but in the ability to avoid the utility cutoffs and the transactions associated, in the reduction in homelessness that is caused by the inability to maintain utilities. LEO: The General Assembly convened over the summer to pass House Bill 1, which gives some $240 million in financial incentives to Peabody Energy — the nation’s largest coal company — to build a coal-conversion facility in Kentucky. Studies have shown that this type of facility is just as polluting as our current models, and the technology it pursues is not yet the proven alternative to oil that many politicians claim. You testified in Frankfort about House Bill 1, mainly that it lacked any carbon sequestration requirements. What are your thoughts on House Bill 1? TF: At this point in time, investment in a broad array of research is justified and is appropriate. Obviously, one of the strategies for dealing with carbon reduction is the concept, the idea that you capture the carbon and then you sequester it, permanently store it somewhere. The thing that concerned me about House Bill 1 is that the focus of the legislature needed to be on the impact of the carbon mandate on our existing infrastructure, our existing utilities and our existing economy. Rather than attempting to create significant investment to help the coal industry add additional value to its product, we need to be looking at the fleet of existing coal-fired plants, the coming mandate and the fact that we are going to be caught flat-footed because we have not begun to prepare. We are probably the most vulnerable state to the coming mandate. So I thought that it was a misguided focus, and I testified to that effect, that that was where the lion’s share of our money, and our time and our thought needs to be spent. And I think a number of the legislators understood that. There are nuggets of progressive policy buried in a bill that is more of the same.     These are incentives that you are able to acquire only if you actually build and only if you actually operate. Every financial individual I have talked with, and everything that I have read, tells me that we will not see coal liquefaction plants and we will likely not even see coal gasification plants. And they’re canceling them right and left: There have been seven or eight of them canceled within the past couple of years. The reason for that is there is an uncertain regulatory climate. And in the absence of an answer to the carbon question, private investment will not risk their capital. LEO: In Kentucky and other Appalachian states, coal has long been an industry by which entire rural economies live and die. But the environmental degradation from certain forms of mining — particularly mountaintop removal — as well as the greenhouse-gas pollution from coal-fired power plants, are proven villains to the environment. How do you balance the two? TF: We haven’t balanced the two. We have allowed the coal-bearing regions to largely be sacrifice areas to meet the nation’s energy needs, and we have failed to keep faith with what Congress intended in 1977 (with the Surface Mining Control and Reclamation Act). The ’77 mining law was the product of a significant amount of compromise, and it was, as Jimmy Carter said, the most stringent bill they could get through at the time. Ford had vetoed it twice, Congress had grappled with it since the early ’70s — I lobbied on the ’72 act. What we had done over the years was we had elevated the level of accountability of the coal industry from almost negligible to requiring now mediocre planning in mining and accounting for some of the environmental consequences. There is a significant ecological cost, a significant cost in terms of occupational health, a significant cost in terms of life, and also a cost in terms of the dependence of those economies and the failure to diversify those economies. Coal has had a significant negative effect on the diversification of those economies in a number of ways. And it has cost a lot. All of those impacts have not been fully accounted for, and we grapple with them in different ways. Many counties have been grappling for years to try to move beyond — as strippable coal reserves are exhausted, and they will continue to be exhausted, there will be an increasing shift to the western U.S. and to underground mining, and that underground coal will be deeper, gassier and more dangerous. What we have failed to do, as the easy coal has been obtained, as the coal that is in more difficult locations, the coal that requires more damage to get to, has been accessed, we have failed to maintain accountability within the industry — in a number of ways. Where Congress intended that the coal technology should be dictated by environmental protection rather than dictating levels of protection, we have allowed the area mining technologies of the western coalfields to be imported to Eastern Kentucky with the result that significant amounts of dirt and rock material are displaced in order to get to the coal seam. Most of the mountaintop mining that’s occurring is actually not called technically mountaintop mining, because we don’t require of those companies the level of accountability that Congress intended. It said the only time you should be able to do mountaintop mining is when you have a specific long-term economic plan for that property that will be of benefit. We are so lax in our enforcement as a requirement to return the mined area to its original contour that you can look at a mine that has a variance from approximate original contour and one that theoretically had been reclaimed to that level, and they’re indistinguishable. We have accommodated, not only by weakening the rules but also by accommodating poor quality mine planning, the burying of a lot of headwater streams, which have impacts — not only localized impacts in terms of water quality, but systemic impacts in terms of impoverishing the quality of a state that has more flowing stream miles than any other state. LEO: But what about the argument that coal economies save whole communities? TF: Well, it’s difficult. And a coalfield legislator is looking at the fact that there are no other options for kids growing up in those communities other than to either leave or to work in the industry. It’s less so than it used to be because the industry has systematically displaced the workforce for machinery; they’ve replaced miners with large-scale earthmoving equipment, and so the workforce that is directly associated with the coal industry has declined. There are a number of coalfield legislators who are very conflicted. They’ve seen the damage, they’ve seen the loss; many of them have suffered some of that loss themselves on a personal scale associated with the negative impacts of mining coal. They recognize also that it is an industry that tends to not be hospitable to other diversifications, not only in workforce training but also in economic opportunities.     There are some positive efforts that are being made — at local levels, regional levels, within the nongovernmental community — to try to create alternative models of economic development. That’s heartening. Some of the work that MACED (Mountain Association for Community Economic Development) has done over the years, very innovative, very creative ways to try to assist in home-growing a more diverse economy — some of the tourism initiatives, some of the sustainable logging initiatives. There is a tremendous amount that can be done to invest and diversify the economy so that you don’t get into that jobs-versus-environment argument. LEO: You’ve been working on these issues a long time, since 1972, and what has transpired — some good but mostly the bad things that have happened over that period of time — would’ve probably knocked down a lot of people. But here you are. What keeps you in this? TF: While at times in the crucible of public policy making, we are sometimes inclined to think that people are maliciously motivated, the reality is that everyone brings to a discussion their beliefs, their assumptions, their aspirations, their fears, based on their own frame of reference. I have seen enough positive change occur at the state level, and in local government, in terms of trying to reclaim accountability, responsibility — we went through a period in the late ’60s and early ’70s, of acknowledgment and recognition of a common interest in environmental protection. We passed a number of landmark laws that were intended to better internalize and better account for pollution. Unfortunately, the environment became a partisan political issue, starting with the Reagan administration, and we have been fighting a defensive battle essentially against the elimination or the reduction of levels of accountability and responsibility for pollution for the intervening 23 years. The state and local communities have had to step up, and have done so in some pretty remarkable ways. It’s been a battle.     I do this work because we are, in answer to the question, our brother’s keeper; each entrusted to stewardship and accountable for advancing justice in all its facets — economic, social, political and environmental.