The 4th meeting of the Special Subcommittee on Energy was held on Friday, September 16, 2005, at 10:00 AM, in Room 131 of the Capitol Annex. Senator Robert Stivers II, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Robert Stivers II, Co-Chair; Representative Tanya G Pullin, Co-Chair; Senators Walter Blevins Jr, Charlie Borders, Denise Harper Angel, Ernie Harris, Vernie McGaha, Katie Stine, and Johnny Ray Turner; Representatives Rocky Adkins, Eddie Ballard, Carolyn Belcher, James E Bruce, Dwight D Butler, J R Gray, Fred Nesler, Tom Riner, Brandon D Smith, and Brent Yonts.
Legislative Guests: Representative Jim Gooch.
Guests: Randy Eminger, Vice President, South Region, Center for Energy and Economic Development, Dr. Keith W. Bird, Kentucky Community and Technical College System, Dr. William J. Higginbotham, Director of Fossil Fuels and Utility Services, Office of Energy Policy, Susan Bush, Commissioner, Department for Natural Resources, Danny McClain, Bond Pool Fund Administrator, Eric Gregory, EKPC, Barry Mayfield, EKPC, Eleanor Self, Sierra Club, Mike Kurtz, KIVC, Jason Bentley, Commerce, Energy Office, Caryl Pfeiffer, LG&E, Laura Owen, Commissioner of Workforce, and Sharon Dodson, LG&E, John Davies, Director, Division of Renewable Energy and Energy Efficiency, Kentucky Office of Energy Policy.
LRC Staff: Todd Littlefield, Bill Bowker, and Rhonda Carter.
The subcommittee approved the minutes of the August 12, 2005, meeting.
Chair Stivers called on Representative Gray to make an announcement before the meeting. Representative Gray reminded the members of the increase in the mileage rate to 48.5 cents which went into effect September 9, 2005.
Chair Stivers introduced Randy Eminger to discuss clean coal incentives and give a presentation overview of clean coal.
Randy Eminger, is the Vice President, South Region of the Center for Energy and Economic Development, (CEED), a nonprofit organization supporting coal fuel generation and they are supported by electric utilities, railroads, and mining companies. Mr. Eminger discussed clean coal technology incentives and opportunities. He added that environmental emissions and pollutions from various sources such as sulfur, nitrogen oxide, and mercury, from coal fueled power plants, have dropped in large percentages, while electric power production has increased from 1980-2005 by 70 percent.
Mr. Eminger said natural gas and oil prices increased over the last six months, however coal costs have remained relatively stable over the last three decades due to competition and technology advancements in mining. He stated that there are environmental concerns associated with using coal to generate electricity. The recent mercury rule and the EPA Clean Air Interstate Rule (CAIR) are of concern. He said that the CAIR has added more stringent standards for coal fired power plants for a number of pollutants. The EPA has estimated deposition of mercury in lakes and streams at about 144 tons per year in 2001. He said of that 144 tons the actual amount coming from coal fueled generation is about 11.05 tons.
Chair Stivers asked what made up the rest of that amount. Mr. Eminger claimed that much of it was coming from landfills, municipal incinerators, medical waste incinerators, mercury switches in cars, car batteries, and fluorescent light bulbs.
Mr. Eminger stated that the Federal Energy Bill provides $14.6 billion dollars in incentives for energy technology and of that, $6.2 billion went toward coal related issues. He stated that the 6.2 billion included coal to liquids, hydrogen, carbon sequestration, clean coal technologies such as fluidized bed combustion systems, and coal gasification. The Administration believes that coal needs to remain a large part of our future generation and therefore will invest in clean coal technology. He said clean coal power initiatives will total $200 million dollars a year from 2006 to 2014. He said 70 percent of the $200 million is set aside for gasification technology and 30 percent for other technologies.
Chair Pullin brought to the attention of the members that the packet contains a summary of the Energy Policy Act, which is a part of this record.
Mr. Eminger stated that there are a number of clean coal technologies that the federal government will be exploring. Fluidized bed uses coal and limestone together. The limestone acts as a sponge for the sulfur dioxide emissions. The primary advantage of the Circulating Fluidized Bed Combustion System is that you can use low ranking coals, high sulfur coals, and high ash coals, such as those found in Kentucky. He said another alternative is integrated gasification combined cycle (IGCC) which takes coal and gasifies it. The gas is then purified and the pollutants are removed before it is burned. A byproduct associated with this is sulfuric acid that can be used for fertilizer.
Mr. Eminger said the industry is interested in meeting environmental goals. He said sulfur, nitrogen oxide, particulate matter, and mercury, are the pollutants that DOE has targeted. FutureGen is a zero emissions, coal fired power plant being promoted by DOE.
Kentucky is one of the states that is interested in FutureGen. The Department of Energy will be issuing a draft RFP this month or next month. A final RFP will be published in January. DOE hopes that the site selection is less than a year away. He touched on the competition for Kentucky and informed the committee there were six states that have already expressed interest in FutureGen.
Mr. Eminger turned his attention to state clean coal technology programs. He said that there were a number of states that have coal associations that are involved in promoting coal. HB 272 passed in the 2005 General Assembly to provide tax incentives for use of Kentucky coal and clean coal technology projects.
Mr. Eminger talked about coal to liquids saying that the United States uses 22 billion barrels of oil a day and 60 percent of that is imported. He said when looking at energy independence, coal is our most abundant resource. He said there are a number of options in the United States when looking at alternatives to petroleum.
Mr. Eminger concluded by touching on the conversion of coal into liquid fuels. He said a study using Illinois Basin Coal was being conducted.
Chair Stivers stated that he felt Kentucky has a fair chance at getting FutureGen and that it could be a substantial event in our history. It would be of tremendous economic value to Kentucky coal.
Senator Harris asked Mr. Eminger about Steve Miller. Mr. Eminger said was the president of CEED.
Representative Pullin commented that this is very exciting technology and she loved to hear the words zero emissions. She asked Mr. Eminger if the zero emissions included mercury. Mr. Eminger stated that it does.
Representative Adkins thanked Mr. Eminger. He said Mr. Eminger mentioned that we are producing more electricity for base load power today than we ever have and he felt that over the next 25 years that the demand for electricity may double in the United States. He stated that energy independence would stabilize our economy, reduce the national deficit, and stabilize the price at the gas pump.
Representative Gooch feels that people need to be educated on new technologies. He supports the building of new refineries in this country. He asked Mr. Eminger how he thought we could encourage new refinery construction.
Mr. Eminger stated that some progress has been made according to environmental impact statements.
Senator Borders encouraged his colleagues to be very proactive and listen to their constituents. He expressed concern for young people in the workforce with the price of gasoline.
Chair Stivers asked for additional information on oil shale.
Chair Stivers introduced Dr. Keith W. Bird, Kentucky Community and Technical College System (KCTCS), and Dr. William J. Higginbotham, Director of Fossil Fuels and Utility Services, Office of Energy Policy.
Dr. Bird discussed the enhanced training and education for the Kentucky coal mining workforce. He also said that KCTCS is working with one of the major auto manufacturers to help train the workforce to build hybrids. He said KCTCS will work with the Southern States Energy Board and other states to create coal academies. The Director of the Southern States Energy Board had asked if KCTCS would host a meeting showcasing the workforce development work of the Kentucky's Technical College System.
Dr. Bird said KCTCS created an adaptable curriculum using modern facilities and is able to use the existing infrastructure of the coal region to create alternative delivery systems. They have created job profiles for the mining industry which are used to develop the curriculum. He said they were also providing an opportunity for the Kentucky Office of Mining , Safety and Licensing to be located on KCTCS campuses.
Dr. William J. Higginbotham testified about the beginnings of the Kentucky Coal Academy. Promotion of coal and education of the new generation of miners were central goals. The Academy is a partnership among industry, KCTCS, K-12 career and technical education, the Department for Workforce Investment, and the KY Commerce Cabinet, Office of Fossil Fuels and Utility Services. He said in East Kentucky thick seams of coal are now scarce and the challenge is to figure out ways to mine thin seams more efficiently. Protecting the environment is also crucial. He said they hope to develop a speakers bureau. He said the problem of drug use among miners is serious.
Representative Bruce said he was really impressed with Dr. Bird and the work he was doing.
Senator Harris asked for causes of a decrease in the number of tons mined down to 113 million tons. Dr. Higginbotham said that competition from western coal is fierce. Senator Harris then asked about the drug problem. Dr. Higginbotham said that most coal mines that are hiring are doing drug testing and that drug-free applicants are scarce. He said education is the answer to the problem. Dr. Higginbotham said that when accidents occur they gather information on those involved. Dr. Higginbotham invited the committee to visit an underground mine.
Senator McGaha asked about the marriage of academia and industry. He asked what a certificate requires and if the program is customized for each student. Dr. Higginbotham said that certificates were a bundling of specific competencies and skills that the worker must have. He said industry wants communications and math. Dr. Higginbotham said they integrate these skills into the actual work tasks. He said they have an agreement with the universities, career and technical programs, who will accept credits toward a baccalaureate program. He said every one of their students whether they are in a career or technical program or in a transfer program can go on and get a baccalaureate degree. Dr. Higginbotham said that industry does a lot of on the job training and that workers who already have competencies would not be required to retrain in those areas.
Representative Ballard congratulated Dr. Bird and Dr. Higginbotham on their presentation. He said everyone in Madisonville is pleased with the college and that they started a new mining program this year.
Representative Adkins expressed his enthusiasm for this approach and that it adds something badly needed by the industry.
Representative Smith asked for the contact person overseeing the program at the Hazard Community college. Dr. Higginbotham said Judy Mitchell is currently the person on the steering committee for the college.
Representative Riner asked Dr. Bird about KCTCS potentially training coal miners in China and expressed his reservations.
Representative Pullin announced to the members that the Kentucky Gas Pipeline Authority is up and running and ready to receive applications.
Chair Stivers welcomed Susan Bush, Commissioner for the Department of Natural Resources and Danny McClain, the Bond Pool Administrator.
Commissioner Bush commented on the drug abuse concern in the mining industry. She said she chaired the Substance Abuse Mine Task Force and they are currently working on recommendations to address the issues on drug abuse in the mining workforce. She said it is a community problem and the mining industry is a part of our community. Some coal companies have very good substance abuse programs.
Commissioner Bush gave an overview of the Kentucky Bond Pool and the potential for expansion. Commissioner Bush provided eligibility requirements, fee requirements, bonding costs, revenue sources, historical data, current bond liability , current fund amount, and forfeitures.
A participating company must be in good standing, and companies are ranked A, B, or C, based upon their compliance history and financial standing. She said there are fee requirements, and tonnage fees.
Chair Stivers asked if they still pay that. Commissioner Bush said there is a provision in the law that once an operator has made 36 payments into the fund, payments can be suspended if the fund is above the minimal level set by the actuary. Right now there are about ten members that have to pay out of a total of thirty six. She said twenty-five of those thirty-six are actually producing coal. Revenue sources are from surface mining penalties, application fees, membership fees, tonnage fees, and interest earned on the fund balance. Bond Pool participants currently have joint reclamation liabilities of $34,723, 857. The Bond Pool balance is $17,771,942.67 guaranteeing that thirty four million dollars. She said right now the bond pool is four and a half percent of the bonding capacity in the state.
Representative Yonts asked about companies or individuals that might default on a bond and later incorporate under a different name. Commissioner Bush said that they can prohibit an owner who has done that from securing further permits.
Representative Adkins expressed his concern for larger operators as the pool is made of primarily small operators and large operators had difficulty in getting reclamation bonds.
Commissioner Bush replied that larger operations may shy away from the fund. She said there is a requirement that once an operation is a member of the fund; mining operations must be bonded under the fund.
Commissioner Bush said the Bond Pool Commission consist of members of the coal industry, a certified public accountant, and a representative of the Secretary's office.
Representative Pullin introduced our new special point of contact to the United States Trade Representative, Jason Bentley.
The meeting was adjourned at 12:15.