Bad days for Newcastle

In 2007, Nevada Gov. Jim Gibbons proposed that the state get into the coal business.

“After visiting with Wyoming Governor Freudenthal and seeing what his state is doing, I will encourage the creation of a coal-to-liquids fuels plant in Nevada, similar to the successful plant in Wyoming,” he told the Nevada Legislature. “It would use existing rail to transport coal to the plant and convert that coal to diesel and jet fuel for use at airports. It could also create natural gas to be injected into a natural gas pipeline for domestic use.”

The idea was widely derided. Assemblymember David Bobzien said, “Burning liquid coal fuel can emit twice as much CO2 as regular gas.”

The Las Vegas Sun said the technology Gibbons described was water intensive, and Nevada is a desert state.

And nearly everyone pointed out that Nevada doesn’t have coal.

That wasn’t entirely true. Coal has occasionally been struck and mined in Nevada, at Lewis in Lander County in 1881, Elko County in 1901, and intermittently over the years at Verdi in Washoe County.

But not recently, and never in great volume.

It turns out there’s another reason Gibbons’ idea did not catch on. Support for coal is falling as fast as support for marijuana is rising. Nevada would have been buying into an investment in decline.

When NV Energy announced on April 3 that it will close its coal-generating plants, starting with Reid Gardner in the south next year (one of its three units will continue operating until 2017), and finishing with its northern plant at Valmy in 2025, it was joining a national trend.

And there have been published reports that NV Energy is considering backing out of its investment in Arizona’s 2,250 megawatt coal-fired Navajo Generating Station, which would be a financial jolt to that state’s utility customers. NV Energy has 11.3 percent of the project, which faces from $600 million to $1.1 billion in federally-ordered improvements to cut down on pollutants. The city of Los Angeles has announced it will no longer be a customer of the plant.

At the same time, NV Energy will accelerate investing in renewable energy and increase its natural gas generating capacity. Its Tracy station east of Sparks uses natural gas.

In-state Nevada comment on NV Energy’s decision on coal tended to focus on supposedly likely rate hikes. Bob Boehm of the Center for Energy Research in Las Vegas told KVVU News, “There’s a cost associated with that and that’s the downside to it. … A lot of these renewables, you put all the expense in right at first.” The state Bureau of Consumer Protection estimates 8 percent in rate hikes over 10 years while NV Energy itself said to expect 4 percent over 20 years.

Reno scientist Glenn Miller disagreed.

“There’s no question that coal is cheap energy, but the price of natural gas has dropped so much that it is more competitive,” he said.

Nevadans currently pay the second highest power costs in the Intermountain West.

Outside Nevada, investors and analysts seemed to agree with Miller. The day after the NV Energy announcement, its shares gained 1.24 percent, closing at $20.36 on a volume of 6.02 million shares. A quick assessment by Goldman Sachs of the corporation reaffirmed its neutral rating and said the coal switch “will likely not impact earnings through 2015.”

SBWire said the corporation’s “focus on controlling costs and lower natural gas prices will certainly help. Lower natural gas prices have led to weakened demand for coal as more and more companies shift to natural gas from coal for power generation.”

Most of the calculations showing financial impact failed to take into account reduced health care costs, though that is one of the reasons Nevada Moapa Paiute tribe has been pushing for shutdown of Reid Gardner.

“The Native American communities surrounding the Reid Gardner facility are going to have better health because of the lack of coal ash,” Miller said. “Each of us makes a decision on our own basis, but I suspect that solar electric generation would not have those kinds of consequences.”

Coal is a factor in asthma attacks, chronic bronchitis, heart attacks, hospital admissions, heart attacks, premature deaths, and lost work days. Nevada tends to be at the wrong end of state rankings in a variety of health maladies.

A Clean Air Task Force study in 2010 estimated that pollutants from coal plants cause 20,000 heart attacks, more than 13,000 premature deaths, and 1.6 million lost work days each year at a total cost to the economy of more than $100 billion.

Miller said there is a moral component to the decisions being made about coal, akin to the concerns over deficits of the Reagan and Bush I administrations, when there was widespread comment that the deficits that created that era’s prosperity were being pushed onto the next generation.

“What we don’t deserve to do is to have cheap electricity when those costs are going to be extended to people in the future because of climate change,” Miller said. Coal is regarded as a principal contributor to climate change.

NV Energy is jumping on an increasingly popular movement. Two days after its announcement, Reuters reported, “U.S. power companies plan to shut or convert over 50,000 MW of smaller, older coal-fired plants over the next few years as cheap natural gas prices and strict environmental rules have made coal the more expensive option in some areas. Eventually, the switch away from coal may shut 60,000 MW to 100,000 MW of power generation across the country, according to industry estimates.”

At the time that NV Energy announced its break with coal, it also offered an amendment to Senate Bill 123 in the Nevada Legislature to accommodate that break. The maneuver alarmed some legislators who said there was no legislative action required in order for NV Energy to accomplish its plans. Their suspicions were heightened when the amendment was reported to contain language reducing Public Utility Commission authority over rate hikes.

On April 8, the Las Vegas Sun reported that NV Energy “can accomplish [the coal switch] through existing regulation; a change in state law isn’t necessary.”

S.B. 123, sponsored by Sen. Kelvin Atkinson of Clark County, is intended to encourage development of renewable power sources.