Kentucky Coal Blog

By Jim Snyder & Ben Geman

The Senate climate change bill will call for greenhouse gas emissions to be cut by 17 percent by 2020 and seeks to find a workable compromise between opponents and supporters of offshore drilling in light of the ongoing spill in the Gulf of Mexico.

“Mindful of the accident in the Gulf, we institute important new protections for coastal states by allowing them to opt out of drilling up to 75 miles from their shores. In addition, directly impacted states can veto drilling plans if they stand to suffer significant adverse impacts in the event of an accident,” according to a document described as a “draft short summary.”

The long-awaited bill, to be released in full on Wednesday, also includes a 37.5 percent state royalty share to help protect coastlines and coastal ecosystems. That could upset drilling opponents who see the royalties as an inducement for expanded offshore drilling.

The legislation also contains a number of provisions designed to attract business support.

For example, it will include a “hard price collar” that will keep carbon prices between $12 and $25 in the trading market created by the legislation, a significant win for electric utilities that sought more assurance the sweeping climate bill would not lead to huge increases in energy costs.

And it contains new subsidies to support coal and nuclear power.

Its nuclear provisions include approval of $54 billion in loan guarantee authority to help spur a “nuclear renaissance,” a level supported by the Obama administration. It would also streamline the process for permitting nuclear plants, another change the industry had sought.

The coal industry, meanwhile, would get $2 billion a year to research and develop technologies to capture carbon before it reaches the atmosphere. Coal-fired power plants account for roughly one-third of the country’s annual carbon emissions.

The summary also states the legislation would provide “significant incentives for the commercial deployment of 72 [gigawatts] of carbon capture and sequestration.”

As expected, large manufacturers get a reprieve from having to comply with the emissions reductions until 2016. That year, “energy-intensive and trade-exposed industries receive allowances to offset both their direct and indirect compliance costs,” the summary states.

As in the climate bill passed by the House last summer, farmers would be exempt from having to comply with the carbon caps. Instead, they could see a benefit in the form of revenues through an offset program companies can use to meet their targets in addition to cutting emissions at the smokestack.