Power plant emissions order provokes energized debate

Plans to change the operations of Xcel Energy power plants to reduce emissions has sparked a debate over the potential effects in Western Colorado.

Depending on who’s talking, the changes could bolster natural gas production in the region, but at the expense of coal mining jobs.

But Fred Eggleston, for one, believes the effects won’t be that dramatic one way or  the other.

Plans to switch two units at power plants from coal to natural gas and construct a new unit to burn natural gas will bolster gas production some, but only a small fraction of the overall output from the Pieceance Basin. A decrease in the Colorado coal used in the plants similarly constitutes only a small percentage of total production from the state, said Eggleston, area manager of local and government affairs for Xcel Energy in Western Colorado.

The ultimate outcome remains unclear, however, because the order from the Colorado Public Utilities Commission (PUC) approving the plans likely will be appealed.

The PUC issued an order to close some coal-fired power plants, fit others with pollution control equipment, switch two units from coal to natural gas and construct a new gas-burning unit. The order in turn follows state legislation enacted last year requiring Xcel to reduce nitrogen oxide emissions from its power plants by 70 percent to 80 percent by 2017.

David Ludlam, executive director of the West Slope Colorado Oil and Gas Association, called the order a win-win situation: “The Front Range needs cleaner air. The Western Slope needs more jobs. The PUC’s decision results in both.”

But Stuart Sanderson, president of the Colorado Mining Association, said the ruling could cost hundreds of coal miners their jobs and burden residents with significantly higher utility bills. “This is a very serious issue for Colorado.”

Ron Binz, chairman of the Public Utilities Commission, said the order is needed because the federal government is expected to enforce more stringent air quality regulations.

“With these decisions, we have taken bold steps to reduce air pollution from power plants in a away that will be less expensive to consumers than any other course,” Binz stated in a news release. “This is vastly preferable to waiting for the Environmental Protection Agency to impose a plan for cleaning up power plant emissions.”

The plan is estimated to cost a total of $1.4 billion and result in a 2.5 percent increase in Xcel electrical rates by 2020. “We’re confident that the 2.5 percent impact of this plan would be higher if we wait for the EPA to impose an emissions reduction plan,” Binz stated.

Under the combination of steps in the order, Xcel will close down 551 megawatts worth of electrical production, install new emission controls on 951 megawatts of production and switch to natural gas on an additional 460 megawatts, said Mark Stutz, a spokesman for Xcel Energy in Denver.

Not counting production from a new natural gas-fired plant, the plan involves a total of 1,962 megawatts of production  — about 25 percent of the 7,800 megawatts Xcel generates or purchases in Colorado.

Ludlam said the plans won’t create jobs in Western Colorado overnight, but constitutes part of a trend that bodes well for the region. “As Colorado and states around the nation continue using more and more clean natural gas, Western Colorado will play a critical role in supplying it,” he said. “That means long-term economic benefits to the whole region.”

New discoveries of natural gas reserves and new techniques for extracting gas from rock formations have substantially increased supplies, Ludlam said. That translates into new uses for natural gas for electrical production and transportation. “The new international resource base of natural gas allows for new possibilities for its use. Environmental benefits of natural gas are immediate and Western Colorado jobs will follow as demand gradually increases.”

At the same time, tough, Sanderson criticized the PUC order as a result of legislation enacted as part of a “closed door” deal that involved Xcel and natural gas and environmental groups, but not the coal industry.

That industry produces about $1 billion worth of coal a year and employs more than 2,200 people in jobs that pay average annual salaries of $96,000, Sanderson said. Moreover, the largest coal mines in the state are located on the Western Slope — in Moffat and Routt counties in Northwestern Colorado and the North Fork area east of Delta.

While most Colorado coal is shipped out of state, converting Xcel power plants from coal to natural gas would affect West Slope mining jobs, he added.

Stutz said the Cherokee and Valmont stations burn coal mined in Western Colorado.

Sanderson also disputed the estimated utility rate hike associated with the plan and said it likely will be far higher.

According to the PUC news release, there was “contradictory” evidence of the effect of the plan on the coal mining industry. However, the commission directed its staff to work with state and local agencies to development a contingency proposal for funding the retraining of coal miners if the plan results in layoffs.

Eggleston said the Business Research Division of the Leeds School of Business at the University of Colorado conducted an economic analysis of implementing the plan. According to that analysis, the plan would generate total economic effects of $884 million to $1.8 billion in Colorado over the next 15 years and create a total of 400 to 1,250 new jobs in construction, utilities, professional business services and mining. The mining sector includes both natural gas and coal production.

Eggleston said he expects there will be effects from changes in Xcel power plant operations on the natural gas and coal industries in Western Colorado. But those effects likely will be less than other variations in the markets.

Eggleston also noted that Xcel opened a 750-megawatt coal-fired power plant in Pueblo earlier this year, although that plant burns coal from Wyoming, not Colorado.

Stutz said Xcel currently generates about 70 percent of its electricity from coal-fired production, although that proportion is projected to decrease to 50 percent by 2018.

Eggleston is scheduled to present information about Xcel plans to comply with state legislation at a free energy briefing set for 7:30 a.m. Jan 12 at the Grand Junction Area Chamber of Commerce offices at 360 Grand Ave.

The ultimate outcome of those plans remains unclear, though, because the PUC order likely will be appealed.

Sanderson said his association is considering regulatory, legislative and legal options for changing the ruling. Stutz said that given the 40 different parties involved in the process, an appeal is “likely.”

The Xcel plan at a glance:

  • Close three units of the Cherokee Station in Denver, one unit of the Arapahoe Station in Denver and the Valmont Station in Boulder.
  • Install additional emission controls at the Hayden Station near Hayden and Pawnee Station near Brush.
  • Convert one unit each at the Arapahoe and Cherokee stations from coal to natural gas.
  • Construct a new natural gas-burning unit at the Cherokee Station.
Phil Castle is editor of the Grand Valley Business Times, a twice-monthly business journal published in Grand Junction. Castle brings to his duties nearly 30 years of experience in editorial management positions with Western Colorado newspapers. In addition, his free-lance work has appeared in a variety of publications, including the Washington Post. He holds a bachelor's degree in technical journalism from Colorado State University.
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