Coal & Minorities Affordability, Reliability & Economic Development

Morry C. DavisNational Energy Efficiency Team Lead

Legislative Issues & Public Policy Committee

American Association ofBlacks in Energy®

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Energy Efficiency Contact

Regardless of your position on coal & the environment, we should all be for energy efficiency because we can ALL participate.

Whether it’s through new techniques, new technologies or changes in behavior, we can always find new ways to do more with the same amount of energy or less than what we’re currently using.

There are many simple things that residential & commercial consumers can do. When it comes to lighting, we can:

Maximize the amount of sunlight we let in our home or business.Buy new, more efficient light bulbs that use less electricity.Simply turn the lights off when we aren’t using them!

New energy projects are the energy industry’s way of implementing energy efficiency:New plants use less fuel than existing plants.New electric & natural gas transmission reduce energy lost.Enhanced infrastructure, logistics and operations help to save energy & maximize productivity.

Whether your interest is environmental stewardship, economic stewardship or promoting tranquility being a SMARTER CONSUMER will help you achieve your goal!

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The Potential for Higher Energy Prices from Climate Change Legislation

Rising Cost of Electricity & Volatile Natural Gas

High Gasoline Prices, and in some regions Gasoline Shortages (likely to return with national & worldwide economic recovery)

The American Family, already working through a weak economy, credit crunch and in many cases job loss, has to balance …

High Food Prices due to the increase cost to produce, store & transport food supplies, but also in part from the use of food supply as feedstock for bio-fuels

America’s Energy Burden

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Increases in Energy Prices Hit Low- andFixed-Income Families the Hardest

Families earning $50K or more annually spend 4% of their income on energy-related expensesFamilies earning $10K or less spend 46% on energy costsHouseholds earning < $50 K: 54% of households say rising energy costs are forcing them to make hard decisions on which bills to pay…

Energy?Healthcare?Child care?Housing?Food?Clothing?Investments?

Household Energy Expendituresvs. After-Tax Income

0%5%

10%15%20%25%30%35%40%45%50%

> $50K $30K - $50K $10K - $30K < $10K

54% of Americans shoulder major energy burden

Source: U.S. Dept. of Energy (2006); Americans for Balanced Energy Choices (ABEC)

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Rising Energy Cost:A Cause for Concern for Minorities

50%

5%

20%

Percent of Generation

“The continued availability of a reliable and reasonably priced supply of electricity and natural gas is critical to our nation’s economic well-being, security, and the health and well-being of our citizens” [National Association of Regulatory Utility Commissioners (NARUC) Resolution, June 25, 2007]

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50

75

100

125

150

175

200

225

250

275

Source: Energy Information Administration Annual Energy Review 2006; National Center for Health Statistics, National Vital Statistics Report, December 28, 2007.

U.S. Economic and Energy GrowthU.S. Economic and Energy GrowthGDP +164%

Electricity Use +117%

Coal Use +78%Inde

xed

to 1

974

(100

)

1974

72

2004

77.8

2000

77

1995

75.8

1990

75.4

1985

74.7

1980

73.7

Per Capita Income +86%

Life Expectancy

Coal Use, Electricity, GDP andLife Expectancy All Grow in Tandem

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Technology is Driving Greater Coal Use &Economic Growth With Lower Emissions

-50%

0%

50%

100%

150%

200%

250%

1970 1980 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Electricity from Coal

Population

GDP

Energy Consumption

Total Emissions

Electricity from Coal Has Tripled Since 1970 While Electricity from Coal Has Tripled Since 1970 While Emissions Have Been Significantly ImprovedEmissions Have Been Significantly Improved

203%

182%

47%47%

-42%

Inde

x =

1970

Source: Energy Information Administration, Annual Energy Review, June 2007; U.S. EPA Air Emissions Trends Data, July 2007.

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The Use of Coal is Critical to SustainingAffordable Electricity in the U.S.

Retail Cost Per kWh & Percent of Coal GenerationRetail Cost Per kWh & Percent of Coal Generation

Source: Energy Information Administration – Mar. 2008

10.3¢ 30%

7.5¢64%

6.4¢94%

6.4¢8%

6.2¢60%

5.3¢95%

7.7¢68%

7.0¢8%

6.9¢73%

7.4¢77%

10.0¢22%

12.8¢1%

6.4¢85%

6.8¢47%

10.3¢36%

6.8¢77%

7.4¢60%

7.3¢47%

6.5¢82%

8.5¢47%

8.5¢37%

8.4¢63%

6.9¢47%

8.4¢ 25%

8.6¢59%

6.5¢94%

7.9¢86%

13.3¢2%

8.1¢35%

7.5¢54%

7.8¢62%

7.2¢ 40%

5.8¢ 93%

7.1¢45%

9.1¢55%

5.3¢98%

7.8¢61%7.1¢ 64%

5.1¢1%

13.2¢9%

21.3¢13%

NH 14.0¢ 17%VT 12.0¢ 0% MA 15.2¢ 25% RI 13.2¢ 0%CT 16.2¢ 11%NY 15.4 ¢ 15%NJ 13.4¢ 16%DE 11.4¢ 66%MD 11.4¢ 59%

¢ = average retail price per kilowatt hour for CY 2007

% = percent of total generation from coal for CY 2007 < 7.0¢

> 7.0¢ - < 8.5¢> 8.5¢ - < 10.0¢> 10.0¢ - < 11.5¢> 11.5¢ - < 13.0¢ > 13.0 ¢

Hydro

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New Advanced PC Continues Trend of Abundant, Low-Cost Baseload Electricity

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

Coal Natural Gas (Combined Cycle)

Nuclear Wind

$/M

WH

Cost of Capital Fixed O+M Variable O+M Fuel

Comparison of New Baseload Generation OptionsComparison of New Baseload Generation Options(not Including CCS or Required Carbon Credits/Taxes)(not Including CCS or Required Carbon Credits/Taxes)

Does not include the cost of:

•Natural Gas Back-up, nor

•Transmission Upgrades

$8/m

mB

tu$1.60/mmBtu

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Population vs. Projected 10Population vs. Projected 10--Yr. Growth inYr. Growth inTotal Energy Demand per Capita Total Energy Demand per Capita

India and China: The Second Industrial Revolution is Underway

Industrial superpowers are competing withIndustrial superpowers are competing withdeveloping nations for access to energy resourcesdeveloping nations for access to energy resources

88%36%

5%

20%

27%

17% 13%

12% 33%

4%

4%7%

37%

Source: U.S. Census Bureau, International Data Base; U.S. Energy Information Administration, International Energy Outlook 2006

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“The Dash to Gas”: Trend of Natural GasReplacing Coal is an Emerging Issue

Coal-based generation is critical in:helping to mitigate natural gas pricing & volatility by displacing natural gas demand for electricitymaintaining load balance on the U.S. electric grid

“Expecting natural gas generation to displace coal-fired generation is, at best, problematic.”(DOE, April 2008)

“Increased demand for natural gas will put a severe strain on the gas supply infrastructure, which could lead to serious reliability problems.”(Springfield, IL CWLP to NERC, Nov. 2008)

“If such fuel switching were to occur quickly, the bulk electric system would be unable to accommodate relocated generating facilities, which, in turn, would have an adverse impact on [electric transmission] system reliability.”(FirstEnergy to NERC , Nov. 2008)

Households, businesses & factories cannot afford:

To compete with power companies for access to natural gasHigher priced, less reliable electricity

North American Reliability Corporation (NERC), October 2008:North American Reliability Corporation (NERC), October 2008:FuelFuel--switching from Coal to Natural Gas Could Negatively Impact Reliaswitching from Coal to Natural Gas Could Negatively Impact Reliabilitybility

Source: DOE- NETL; Natural Gas & Electricity Cost and Impacts on Industry, April 2008

Cum

ulat

ive

Gas

Cap

acity

Add

ition

s (G

W) A

verage HH

Natural G

as Price ($/mm

Btu)

Electric Power is now the fastest growing consumer in the U.S. natural gas market:

19% in 1990; 22% in 2000, 30% in 2007 (DOE, June 2008)

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Energy Reliability is Highly Critical toLow-Income Households & Small Businesses

The Association believes that given the socioeconomic profile of many minority-based communities, the consequences of extended energy shortages are more severe, including:

Lost goods sold & services rendered for small businesses from interruptions in production

Lost revenue for small businesses, which may result in price increases for local consumers

Lost wages from inability to work or travel to work

Job losses if small businesses are severely affected

Disruptions in mass transit

Health & mortality concerns

Impacts on families if schools are closed

August 2003: New York City Blackout August 2003: New York City Blackout

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Energy & Economic Prosperity asthe Key to Racial Equality in U.S.

The Association believes that in order for economic equality to be achieved in the U.S., all citizens must have access to

affordable, appropriate, abundant, reliable energy.

President-Elect Barack Obama:

“Race is still an enormous factor in our society, but economics can overcome a lot of racial division.”– National Urban League Conference; July 27, 2007

“A new economic turbocharger is going to have to be found, and there is no better potential driver that pervades all aspects of our economy than a new energy economy … that’s going to be my No. 1 priority when I get into office.”–TIME Magazine; October 22, 2008

14U.S. Solar PotentialU.S. Solar Potential

“Green Jobs for Blacks?” Many Blacks AreNot Close to Wind & Solar’s True Potential

U.S. Wind PotentialU.S. Wind Potential

The “Black Belt” The “Black Belt” Over 50% of the U.S. Over 50% of the U.S.

Black PopulationBlack Population New Regional Coal PlantsNew Regional Coal PlantsNew Regional Coal Plants

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The Illinois Basin Example: AbundantCoal Reserves Located in the Middle U.S.

The State of Illinois alone has more energy in coal resources than all the oil in Saudi Arabia, Iran, Iraq and Kuwait combined

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Coal as a Cornerstone for Obama’s“Energy Economic Turbo-Charger”

The impacts of a typical Midwestern coal conversion plant creating:

3,000 jobs during construction

150 permanent jobs w/ 2,000 indirect & others from a stimulated local/regional economy

$200 million in additional income

$3 billion gain in total output

$600 million in additional tax revenues (over life of plant)

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Chain of Value:The IL Basin to Gulf States Example

20 million tons of CO2/year from 3 Midwest CTG plants

Requires a new 30” diameter CO2 pipeline from the IL Basin to the Gulf States

Enough CO2 for EOR of 54 million barrels/year

Assuming $80 per barrel crude oil, over $4.3 billion annually of American money stays here … At Home!

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Coal, Coal Conversion & CO2-EOR Can BeThe Foundation of a New Energy Economy

Feedstocks

Consumer & Manufacturing

Benefit Value Added Processes

Illinois Basin Coal Stranded Oil Reserves

Coal Production CTG Production

CO2 – EOR Oil Refining

Coal CTG

Crude Oil Gasoline

Products, Businesses, Jobs

An American Energy Strategy

Illinois Basin & Gulf States as Primary Energy Manufacturing Centers

Enormous Benefit – Products, Businesses & Jobs -- Could be Generated through Energy Development

For More Information,

Please Visit:

http://aabe.org/about/committees/LIPP

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What is the American Association ofBlacks in Energy?

The American Association of Blacks in Energy (“Association”) is a national association of energy professionals founded and dedicated to ensure the input of African Americans and other minorities into the discussions and developments of legislative and regulatory policies, regulations, R&D technologies, and environmental issues.

The purposes of the Association are the following:

To serve as a resource for policy discussion of the economic, social and political impact of environmental and energy policies on African Americans and other minorities.

To ensure involvement of African Americans in governmental energy policymaking by recommending capable, sensitive and informed personnel to appropriate officials.

To encourage both the public and private sectors to be responsive to the problems, goals and aspirations of African Americans in energy-related fields.

To encourage African American students to pursue careers in energy-related fields and to provide scholarships and other financial aid for such students.

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What is AABE’s “LIPP” committee?

The Legislative Issues & Public Policy (LIPP) committee is charged with tracking legislative and public policy issues the Association may have an interest in and developing position papers on these issues to be presented to the Association's Board of Directors for approval.

Through the development and dissemination of its position papers, the committee must ensure that African-Americans and other minorities have a voice in the development and implementation of U.S. energy/environmental polices.

In 2008, the LIPP committee is focusing three main areas:

Climate Change: What are the potential impacts of climate change legislation on African-Americans and other minorities? How do you minimize the impact of the cost of compliance on low-income consumers? What must U.S. climate change legislation and carbon management strategy include to ensure economic growth and energy security and avoid unfairness?

Energy Efficiency: How significant a role can energy efficiency play in the future? How can African-Americans benefit from and actively participate in energy efficiency programs from the residential and commercial perspectives?

Renewable Technology: How much can increased renewable capacity contribute going forward? How can African-Americans get involved in the renewables industry?

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LIPP General Principles

AABE recognizes that minority communities contain higher concentrations of low and fixed income households, and therefore, are more sensitive to changes in energy and environmental policy

AABE recognizes the need for increased participation in the discussion of global energy and environmental policy by the African American community and the important need for enhancing current and future business opportunities in those communities which sound energy and environmental policy provide

AABE recognizes that access to reliable and affordable energy isessential to low and fixed income households, and it is an important element for sustaining business development and economic growth both domestically and internationally

AABE supports efforts to enhance US energy development and energy awareness

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LIPP Principles dealing withAdvanced Coal Technology

Climate Change Principle #8: AABE recognizes that there is no silver bullet for addressing the GHG issue. Options that must be pursued include but are not limited to the development, commercialization and deployment of:

• Advanced clean coal technologies (including advanced PC & IGCC)• Carbon capture and storage• Advanced nuclear energy generation • Energy efficiency• Renewable energy technologies

Energy Efficiency Principle #1: AABE supports enhancements to U.S. energy infrastructure through the development and implementation of technologies, which optimize the utilization of domestic and foreign energy resources while promoting:

• Energy security• Economic prosperity• Environmental solutions

Renewables Principle #2: AABE believes that renewable programs must carefully balance:

• Availability of renewable technologies• Cost effectiveness of such technologies• Environmental benefits

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AABEAABE’’ss Critical RoleCritical Role

Public PolicyJobsEducationAABE

Low income consumersEnergy Organizations

Public Policy Leaders

Students

Technology Leaders

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The Resource: 27% of the World’s Coal is in the United StatesThe Resource: 27% of the World’s Coal is in the United States

250 Billion Tons of Recoverable Coal250 Billion Tons of Recoverable Coal

Coal: Homegrown Energy Abundance in a World of Energy Shortfalls

27272727

0

1000

2000

3000

4000

5000

6000

Qu

ad

rill

ion

BT

U

USACoal

Russia Iran Qatar SaudiArabia

Venezuela

Natural Gas Crude Oil Coal

Source: EIA, 2008

U.S. Coal Reserves vs. Foreign Oil & Natural Gas Reserves

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“50% of U.S. Electricity Comes from Coal”What Does That Really Mean?

SOLARSOLAR4,000x More Solar Generation than Currently in Use

WINDWIND500,000 1.5-MW Wind Turbines, Covering 59 Million Acres

NUCLEARNUCLEAR250 New Nuclear Plants

NATURAL GASNATURAL GAS17 tcf… Nearly Double U.S. Production

HYDROHYDRO500 Facilities the Size of Hoover Dam

EFFICIENCYEFFICIENCYU.S. Would Need to Reduce Electricity Consumption 50%U.S. Would Need to Reduce Electricity Consumption 50%

Resources Needed Just to Replace Resources Needed Just to Replace U.S. Electricity from CoalU.S. Electricity from Coal

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Legislative Issues & Public Policy VisionLegislative Issues & Public Policy Vision

Establish AABE as a valued resource for decision makers addressing social, energy and environmental issues impacting African-Americans, low and fixed income organizations

Establish AABE as the preeminent organization identifying potential business opportunities in the energy and environmental areas for African-Americans, low and fixed income organizations

Establish a cadre of experts on energy and environmental issues to implement this vision and encourage development within the African-American, low and fixed income community

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Clean Coal Technology Provide the Path for Affordable & Adequate Energy Supplies

Coal-to-Electricity – New “supercritical” clean coal plants emit 15% less CO2. FutureGen-type plants would have near-zero emissions.

Coal-to-Gas – Coal can be gasified to create NG for power plants and the CO2 can be captured and stored. CTG from coal with CCS has better footprint than LNG.

Coal-to-Liquids – CTL with CCS can produce better fuels at the same rate of CO2 emissions as imported oil. Adding biomass increases cost but improves CTL’scarbon footprint.

31

The Enabling Technology:EOR & Carbon Storage

Source: U.S. Department of Energy, Office of Fossil Energy, National Energy Technology Laboratory, Carbon Sequestration Atlas of the United States and Canada.

32

The Technology Path to Near-Zero Emissions from Coal

Advanced Supercritical Combustion Plants

Retrofitting PC Plants with CCS/EOR

Demonstrating Carbon Capture/Storage (CCS)

Commercial IGCC with CCS/EOR

Commercial CTG/CTL with CCS/EOR

New Supercritical Plants and CCS/EOR Demonstration EssentialNew Supercritical Plants and CCS/EOR Demonstration Essential

2007 2010 2020 2030

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Why Carbon Dioxide (CO2) is Valuable toU.S. Energy Security

CO2 is:Essential for Sustaining Life on Earth (i.e. Plant Growth)Not ExplosiveNot FlammableNot ToxicSafely transported – No significant injuries or deathsTransported through 5,500 mile of CO2 pipelines in the U.S.

CO2 Enhanced Oil Recovery (EOR) is:Proven technology – Practiced in the U.S. for over 30 yearsCurrently use in producing about 200,000 barrels of oil per day in Texas (25% of Texas’ Oil Production)Capable of increasing domestically produced energy (oil & natural gas) beyond just Gulf States

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And The Stranded Oil Is There

About 350 billion barrels of oil are “stranded in the continental United States *

* Excludes Alaska and offshore

Billion Barrels

Texas alone has over 120 billion barrels of stranded oil – More than 30% of the U.S. total.

Pipeline Owner

Dakota Gasification

KinderMorgan

Trinity

ChevronDevon Gas

DenburyResources

BP, Amoco

Oxy, KinderM, Crosstimbers

KinderMorgan

Existing CO2Pipelines

Proposed CO2Pipelines

Using the 20M+ tonnes of CO2 provided by the KY & IL projects, EOR has the potential to recover 54M more Bbls of oil per year ; EOR makes an additional 2B+ Bbls of oil economically recoverable in East & Central Texas

2-4 new coal plants in KY & IL will provide the pipeline with 20M+ tonnes of CO2 per year

CO2 Pipelines in the US & Proposed Expansion

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Data Source: NETL, 2008

The Scale of CO2 – EOR’sPotential Contribution

CO2 – EOR could provide over 40 years of current U.S. production

The U.S. Strategic Petroleum Reserve:

700 M Barrels

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What Two Million Barrels a Day fromCO2 – EOR Would Do