Mississippi and Alabama have long prided themselves on being anti-Washington, D.C. and pro-coal. At least, that was the case until earlier this month, when utilities there—led not by local politicians, but by their business leaders—pulled a few plugs on coal-fired electricity.

The news, which should help both the environment and ratepayers, broke on August 4. It involved Mississippi Power, a subsidiary of Atlanta-based Southern Co, which operates power plants in Georgia, Mississippi, and Alabama. The company, which has been in a legal battle with the well-funded environmental group Sierra Club for five years, struck a deal to massively reduce its use of coal, mostly in favor of natural gas. As part of the deal, the Sierra Club withdrew its multiple-front litigation challenging the permitting of Mississippi Power’s Kemper County power plant. The Kemper plant, which will burn coal, is now clear to become operational next year.

The deal raises some questions about coal’s future in Dixie. It seems to signal that the region’s business executives don’t share the seemingly unshakable attachment that many local politicians have to coal. The business execs have apparently figured out that, besides being good for the environment, lowering CO2 emissions will end up driving electricity rates down, not up.

How, you ask, can a deal that clears the way for a big new coal-burning plant be evidence that the south is no longer clinging to coal? I’ll explain.

First, a key part of the settlement involves shuttering or converting large coal-burning units at its plants in Mississippi, including its 870-megawatt Plant Watson facility and a 500-megawatt facility in Greene County.

Here’s an excerpt from Southern Co.’s announcement:

Mississippi Power will no longer use coal at Plant Watson, converting its two remaining coal-fired units to natural gas no later than April 16, 2015. The plant already has three units that operate on natural gas… And at Plant Greene County, Mississippi Power will cease coal operations and convert two units to natural gas no later than April 16, 2016.

“With the repowering, natural gas conversion or retirement of certain units, Mississippi Power’s energy mix is expected to be 60 percent powered by natural gas in 2020,” said Ed Holland, president and CEO of Mississippi Power. “This further illustrates the importance of the Kemper County energy facility, which will use locally mined, low-cost lignite, in maintaining a diverse fuel mix for our customers.”

Second, the settlement has other facets that are, believe it or not, right down the fairway of the Obama Administration’s Clean Power Plan. The deal includes an investment of $15 million in energy efficiency and clean energy to Mississippi. Southern has said that as part of the deal, it plans to shutter some older-generation, natural-gas burning equipment at its Lonnie P. Sweatt electric plant in Meridian, Miss., shifting towards “more advanced technology or… an alternative non fossil-fuel source.”

Third, there’s the $5 billion, 582-megawatt Kemper facility itself. It is no ordinary coal plant. It will use a low-grade lignite coal for fuel and its technology will strip 65 percent of the carbon from its emissions, for starters. And it will be the nation’s first coal-powered plant to employ carbon capture and sequestration (CCS). So its carbon footprint is expected to be about the same or even lower than a natural gas plant. The CO2 will then be recycled—used commercially for enhanced oil recovery.

In fact, the Kemper plant, and its CCS technology, is also a key centerpiece of the Environmental Protection Agency’s (EPA) proposed carbon emissions rule for new power plants issued in January 2014. Under that rule, only new coal-burning plants that can capture for underground storage between 20 to 40 percent of the carbon they emit are allowed. The EPA relied on the Kemper model to conclude that CCS is a demonstrable technology—a critical legal underpinning of the Agency’s new rule.

It’s not all bad news for the coal industry, mind you. Arguably, this deal opens the door to not only lower electricity rates, but also to a brighter future for coal—with CCS—over the long run. But Alabama political officials aren’t seeing it that way quite yet. Unlike their business counterparts, the politicians have been inconsolable in their hostility toward the EPA’s Clean Power Plan, and they are in a fighting mood.

Part of the reason is the influence of the coal lobby. Alabama is a big coal-producing state and the whole of the Southeast has a history of outsized reliance on coal-fired power. With over 19 million tons of coal mined in 2012, Alabama ranks as the 13th-largest producer in America. Meanwhile, Southern Co. itself has subsisted on a heavy diet of coal over the years. As of 2005, the company had 68 coal-fired power plants accounting for over 53 percent of its entire generation output.

Coal-fired power for Southern Co. is lower today, but it still makes up 38 percent of its generation portfolio. Also, Southern has three zero-carbon, efficient, and highly reliable (average three-year fleet capacity factor of 91.54 percent) nuclear plants that supply about 20 percent of the electricity used in Alabama and Georgia. And Southern is adding two new nuclear units to its nuclear Plant Vogtle in Georgia—another reason for ratepayers and environmentalists alike to be glad. With the closing of the two coal facilities, Southern’s coal diet is about to go down further.

But this is a region that clings to old habits, even when change makes business sense.

Twinkle Andress Cavanaugh, the head of Alabama’s utility regulatory commission, known as the Public Service Commission (PSC), appeared at a media event hosted at the Alabama Coal Association office, which turned into an all-out rail against the Clean Power Plan. Chip Beeker, a Republican running unopposed for a seat on the PSC, joined in the organized indictment against the Plan.

Not to be outdone, Alabama Attorney General Luther Strange has signed on for Alabama, along with 11 other states, to a court challenge filed in late July of the EPA’s pending proposed carbon emissions rule for existing power plants. That proposed rule requires every state (except Vermont) to submit plans to the EPA to reduce carbon emissions using measures of their choice. Those can include greater use of zero-carbon sources like nuclear, wind, and solar, more use of natural gas, use of existing carbon trading markets, such as the Regional Greenhouse Gas Initiative (RGGI), and use of energy efficiency.

It must be said that the settlement gets the Sierra Club out of an uncomfortable pickle. The Kemper plant, with its CCS technology, is vital to the success of the Clean Power Plan’s rule for new power plants. The Sierra Club’s opposition to the plant might have had the unintended consequence of undermining the carbon emissions rule for new power plants—a measure the environmental group strongly supports. Had Sierra stopped the Kemper plant, it might have brought the Clean Power Plan down with it.

The Alabama Coal Association and politicians might want to rethink their knee-jerk opposition to the deal and the Clean Power Plan and tone it down. Though this deal might seem to undermine coal in Dixie in the short run, rate payers will be better off and successful CCS is the key to the long-term viability of coal for power generation—not just in this nation, but also worldwide.


Sourced from Forbes.com August 19th, 2014.