Monday, April 9, 2012

New Emission Restrictions Announced

The EPA has issued new regulations restricting the emission of carbon dioxide in power plants to 1,000 pounds per megawatt hour of electricity produced.  The new regulations make power plants fired with natural gas far more attractive than coal fired power plants.  Natural gas fired power plants produce approximately 850 pounds of carbon dioxide for every megawatt hour of electricity while coal fired power plants average closer to 1,800 pounds of carbon dioxide emissions per megawatt hour of electricity produced.

My understanding is the regulations impact new power plants.  To meet these restrictions coal fired power plants will have to deploy sophisticated and expensive carbon capture technologies to drive their number below 1,000 pounds.  Whether coal fired power plants can do so remains to be seen, but President Obama's promise to bankrupt coal fired power plants seems to another campaign promise he is keeping.

From the perspective of built industry professionals this confirms the supremacy, at least in the short term, of natural gas, the cost of which has been driven dramatically lower by the production of shale gas in the Marcellus, the Bakken and the Ford formations in western PA, eastern OH, WV, North Dakota, and south Texas.  The need for responsible infrastructure development in these areas looms large.  Exploration, extraction, transportation, processing and sales related infrastructure funded by the energy companies in these areas represents an enormous opportunity as does the creation / supplementation of new and existing infrastructure in the communities impacted by the sale gas booms unfolding in those areas.

Separately, the coal industry will not roll over and quit.  Lobbyists, politicians and unions will seek modification of these regulations to ensure coal can compete.  Multiple coal fired power plants have already been forced off-line by EPA regulations related to cross-border pollution rules and restrictions on mercury emissions.  The cost of shutting down, upgrading and bringing coal fired power plants back online - or decommissioning  them if re-starts are not viable - will be tremendous.  The combined effect will fulfill another of President Obama's campaign promises, "electricity prices will necessarily skyrocket."

Higher prices for electricity will enabled new coal fired power plants, with expensive carbon capture technology in place, to compete with natural gas.  Higher electricity prices may also open the door for electricity produced through alternative energy sources - solar, wind, etc. - though it is not clear how long these regulations will survive.  My guess is the regulations remain in place.  Regulations and taxes are much easier to put in place than to repeal.

The bottom line is these regulations will drive energy prices higher which means oil and gas exploration will expand and there will be more infrastructure related work in the pipeline as a result.  Consumers of energy - the American people and American businesses - will shoulder the cost of these increases but the increases are inevitable.  Accordingly, it is imperative that advocates of IPD, BIM and lean processes engage the energy sector vigorously.  Tools that increase the efficiency with which infrastructure in that sector is procured, operated and maintained will have a tremendous impact on the environment.

Opinion Piece on the Topic

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James L. Salmon, Esq.
Collaborative Construction
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