Analysis: U.S. 'war on coal' may be good fight for some manufacturers

Mon Oct 21, 2013 11:04am EDT
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By James B. Kelleher

CHICAGO (Reuters) - When the Obama administration unveiled new emission regulations for coal-fired power plants earlier this year, the National Association of Manufacturers (NAM) blasted the proposed rules, saying they would hurt its members "twice" - as energy users and as polluters "next in line" for such rules.

Last Tuesday, a NAM-supported effort to challenge the rules cleared an important hurdle when the U.S. Supreme Court agreed to hear arguments in the case. The regulations, which critics call a "war on coal," will cost industry "tens of billions of dollars per year," according to the petition to the high court.

But the proposed carbon caps, which come as the United States is on the brink of a potential power plant construction boom, could be a billion-dollar bonanza for the manufacturers that supply utilities and others with the pumps, boilers and turbines used to generate power.

It's impossible to say with certainty how the rules will affect the finances of individual manufacturers. With some companies, such as Caterpillar Inc (CAT.N: Quote), gains from sales to utilities scrambling to meet the new regulations will likely be offset by reduced revenue from coal miners.

But between now and 2040, the country will need to build 340,000 megawatts of generating capacity - or the equivalent of 15 of China's massive Three Gorges Dam - to meet growing demand from consumers and replace retiring plants, according to the U.S. Energy Information Administration (EIA).

No matter what the Supreme Court decides, given the concerns about carbon and its link to climate-changing greenhouse gases, as well as the high cost, long lead times and unease associated with nuclear power, industry experts say the future belongs to natural gas-fired power plants. Those emit half the carbon dioxide as coal plants and can meet the new rules - if they're upheld - without much investment.

The new rules "make you look real hard at natural gas," says Jim Norvelle, a spokesman for Dominion Resources Inc (D.N: Quote), one of the nation's largest electricity generators.

"No. 1, you can build it quickly. No. 2, it involves the least amount of emissions of all the fossil byproducts. Certainly less than coal."   Continued...