A resurgent coal industry faces several public policy challenges. Will the industry be up to the task?

We've heard a lot about the resurgent coal industry. And rightly so - the signs are very auspicious for continuing strong demand for our most abundant energy source. For the foreseeable future, our economy will need coal as long as it needs electricity.

Coal is also benefiting from a change in the global energy risk factor. In the past decade, it would have been highly unlikely to hear coal touted as “America's security blanket.” We didn't think we needed one. After all, a security blanket is a symptom of childhood neurosis - one that adults grow out of.

But, today, we may need an energy security blanket. Consider these events:

·  Oil majors are revising their reserves downward.
·  Offshore energy investments are hostage to political instability.
·  Prices of natural gas have trebled in several years.
·  Americans remain stubbornly averse to developing new domestic supplies for satisfying our growing energy needs.

This is a nervous-energy environment. Some may call it a paranoid environment. But as someone once said, even paranoids have enemies. In such an environment, risk factors are changing. It's not surprising that investors are taking a second look at nuclear power. To my mind, all of this global insecurity underscores the strategic importance of U.S. coal:

·  We don't have to import coal because we own a quarter of the world's coal reserves.
·  This supply generates more than half of our electricity today.
·  It's projected to generate a greater share in future decades.

In an uncertain world, coal is certainly not a four-letter word.

The Race
In fact, coal is suddenly among the favorites in the race to provide our future energy needs. In this race, coal is not competing against other fuel sources. There are well-known constraints to the development of virtually all competing fuels, from natural gas to nuclear.

The race is really against the environmental expectations of the American public - its demands for cleaner air and a cleaner environment. Coal can win this race by staying ahead of these environmental expectations.

We know the coal-fired generation today is not the same as it was in bygone decades. We now have a Clean Air Act and important amendments to that act. We have a deep-seated environmental ethic. And, we have exciting new technologies in the works for achieving emissions reductions, including carbon sequestration.

Already, coal-fired plants have made impressive progress in reducing emissions. Since 1970, we've cut sulfur dioxides and nitrogen oxides by 53 percent, and, as a co-benefit, have reduced mercury emissions by almost 40 percent. This was accomplished while our population grew by 39 percent, our energy consumption grew by 45 percent and our gross domestic product by 176 percent.

The Technology Solution
It will be the application of these advanced technologies - not numerical standards harnessed to fixed timetables - that will provide the most-promising approach for continuing this progress. If we rely on the ingenuity of technological innovation to fulfill our obligations under expected new interstate and mercury rules, further progress in reducing emissions is virtually assured.

There's another reason to rely on technological solutions. With our unmatched combination of wealth and coal-generated power, the United States presents the world with the best opportunity for the development of clean coal that will pay great dividends in developing economies.

Public Policy Challenges
One way to judge the future pace of continued emissions reductions is to turn to the public policy arena. For it is here - not just in the marketplace - that we will see some of the biggest challenges to coal in its race to meet environmental expectations.

Start with the stalled Energy Bill in Congress. Tax incentives and clean coal technologies are very important for coal. Fortunately, Congressman Rick Boucher (D-Va., the ranking Democrat on the Subcommittee on Energy and Air Quality) understands the benefits to our economy will be substantial if we smooth out the transition from today's power plants to the low-emission plants now on the drawing board.

A second challenge will be to get the next generation of emissions standards right. No amount of tax incentives or capital investment can attain an emission standard if the technology is not available to achieve it.

Hopefully, the mercury standards proposed by EPA will finally reflect this fact. We applaud the cap-and-trade approach that relies on the market to expedite further mercury reductions. And, we're working with EPA to ensure its mercury regulation will be based on current technological capabilities, good data and a realistic assessment of the costs and benefits.

With its new mercury proposals, EPA is stepping through a minefield. It must proceed with caution if we're to avoid another spike in natural gas demand.

Policies that favored gas have led to painful consequences for American industry. In particular, EPA must be aware of costs that ultimately will be paid if regulations inadvertently favor one coal type over others. We have made a persuasive case that regulations should not benefit or disadvantage one coal-producing region compared to others, or one energy source to others.

A third public policy challenge is climate change - specifically, the challenge posed by legislation designed to lower greenhouse gas emissions. A recent joke was that Russia's critical support for the Kyoto Treaty could do more harm to capitalism than the USSR caused throughout the Cold War. But there's nothing funny about the cost of Kyoto - the costs to the United States would exceed all the benefits we would derive from compliance. E+P


Jack Gerard is president and CEO of the National Mining Association. These comments are from a speech he delivered last year to the Eastern Coal Council. For more information, visit www.nma.org.