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Murray blasts 'feckless' FERC, warns against short-sighted US energy policy

Coal magnate Robert Murray took the Federal Energy Regulatory Commission to task Oct. 21 for not acting to protect the coal-fired generation fleet from what he said were biased wholesale power market pricing mechanisms.

The head of Murray Energy Corp. blamed a "feckless" FERC for playing a significant role in the "destruction of America's coal industry," pointing to the agency's rejection of a U.S. Department of Energy proposal to stem retirements of coal and nuclear power plants (RM18-1) and inaction on a grid resilience review (AD18-7) opened around 20 months ago.

"We do not even have a uniform definition of resilience from FERC, or criteria for measuring it," Murray told the inaugural EnVision Forum co-hosted by FERC and the University of Kentucky Center for Applied Energy Research, held in Lexington, Ky.

The DOE's proposal and other efforts to curb baseload retirements, however, have been panned by much of the power sector as bailouts to prop up uneconomic generation.

Possibly the biggest impediment to aiding coal and nuclear plants is that these retirements are in line with how the wholesale power markets are supposed to work, with lower-cost facilities causing higher-cost resources to exit the market. Those market fundamentals do not track with President Donald Trump's campaign promises or certain communities' need for a thriving coal fleet for employment and economic purposes.

Stacked deck

But Murray said the deck has been stacked against baseload generators. With a 30% production tax credit, renewable sources at times are able to "pay the grid operators to take their renewable power, as they make their margins on the tax credits provided by all Americans," a practice he said was far from fair and level competition in the markets.

"Since we do not know if FERC will act, nor what action the commission will take, the states that have a large number of coal-fired power plant retirements should set a floor for closures of fuel-secure resources and adopt policies that ensure that the electricity markets maintain that floor," Murray said.

Murray contended that FERC had been fortunate as the past two winters were generally mild. He said much of the coal-fired generation relied upon during the 2014 polar vortex has since been retired, and he alluded to grave grid reliability, resilience and cost implications if an extended cold snap were to hit the U.S. and the fuel security offered by the coal fleet was not available.

Murray also criticized the federal government for having a short-sighted national energy policy reliant on current low natural gas prices with what he said was no forethought to the consequences of coal's virtual extinction from the generation mix.

Noting his American Natural Gas subsidiary and experience in the gas business, he asserted that the shale gas boom would not last. "These wells peak at 18 months and are depleted in 10 years," he said, adding that many operating wells are already five years old.

"It seems that our government and the commission are pleased with a five-year national energy policy," Murray said. "We are headed to major crisis in our country, and FERC and all of our governments — federal and state — have done nothing to prevent these pending disasters."

However, others have offered a far more bullish view on future gas production and demand. A recent Potential Gas Committee assessment combined with the U.S. Energy Information Administration's latest estimate of proven reserves put the future U.S. supply of gas at 3,838 Tcf, up 22%, or 697 Tcf, from two years earlier, breaking prior records.

Critical conversations

Nonetheless, Murray insisted that it was critical for FERC and the Trump administration to "take steps immediately to ensure that we have reliable, resilient and affordable electricity, and that means immediately keeping what remains of the coal fleet."

FERC Chairman Neil Chatterjee, who spearheaded the launch of the EnVision Forum, did not address Murray's assertions but said he hoped that all of the conference speakers would be as blunt as Murray and not pull any punches, even if their arguments were divisive.

Ahead of Murray's remarks, Chatterjee said the success of the forum hinged on the willingness of participants to "engage in the types of critical conversations that are paramount to defining a strong energy future," and he hoped that the forum would start a new dialogue "focused on discovering real and meaningful solutions."

Jasmin Melvin is a reporter for S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.