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DOE backs governmental push for fossil energy, manufacturing in Appalachia

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DOE backs governmental push for fossil energy, manufacturing in Appalachia

Highlights

Sees short window for government action to capture potential

Focus on gas, NGL, coal, petrochemicals and manufacturing

Washington — A US Department of Energy report encourages continued government intervention to help attract private investment into energy production and manufacturing in the Appalachian region.

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Few other regions have the potential for new growth "at a scale not seen since the Industrial Revolution," the DOE said in the report, released June 30. It casts Appalachian economic viability during the recovery from economic slump associated with the coronavirus pandemic as a key indicator for prospects for overall US economy.

There is short window in which public sector action, at the federal, state and local level, "can fundamentally accelerate the pace of economic development in Northern to Central Appalachia," the DOE said. "Absent that action, newly abundant natural gas and natural gas resources will disproportionately leave the region and, in significant measure, be exported to international markets."

Fossil fuel focus

The DOE study continues the Trump administration's push for growth in fossil fuel energy production, focusing on natural gas, NGLs and coal in the Appalachian region, along with the potential for next generation manufacturing and petrochemical industry development. Non-hydro renewables are described as playing a small fraction of the region's energy and economy.

To encourage the development, the report advocates for pro-growth tax policies, efficient permitting and regulatory certainty. It also advocates investments in infrastructure — such as roads, railways, waterways, and broadband — workforce development and research and development.

DOE officials briefing reporters noted the policy goals listed already have been a focus of the Trump administration, but said the White House continues to consider more changes to the tax structure to provide incentives.

The report mostly relies on data during the Trump administration through 2019. For, instance, it says that after declining by over 40% from 2009 to 2016, Appalachian coal production, from 2017 to 2019, realized a 32% net gain from 2016 production levels, despite slight declines in 2019.

But it includes a nod to market dynamics altered in part by the coronavirus pandemic. For instance, it notes that as of the week ending April 25, US coal production was down 39.5% compared with 2019 data, and as of April 21, the US natural gas rig count was down 54.3% from the same time in 2019.

Continuing to champion coal, the DOE report says coal production will remain a priority for the region as a primary source of employment in some communities.

To address that priority, it embraces steps such as "forestalling premature retirement of coal plants," and enabling coal plant fleet upgrades "without punitive re-permitting."

As one example of administration action, DOE officials pointed to the Federal Energy Regulatory Commission's minimum offer price rule in PJM Interconnection as helping forestall retirement of generating units that might otherwise have a long life.

DOE Under Secretary Mark Menezes, in a briefing for reporters, listed a variety of areas where DOE already is investing to support new coal technologies, such as using coal as a feedstock to develop high value products or efforts to advance a next generation of coal-fueled power plants with near zero emissions.

"Each of these projects are solidifying coal's place in our nation's energy future," Menezes said.

In a post-pandemic recovery, he said, the "return to the US of innovative and secure manufacturing industry in Appalachia is poised to play a leading role."

Paradigm shift

In addressing natural gas development, the report depicts permitting challenges as continuing to limit the full potential for growth and asserts that opening the Northeast market access with added pipeline capacity would further boost demand. Gas pipelines in the Northeast have faced increased opposition, particularly as states set goals for reducing greenhouse gas emissions.

A second wave of the shale gas boom could be unleashed if new digital technologies are fully embraced by the industry, the report adds.

To encourage petrochemical industry development, report encourages development of intra-regional pipelines.

"Establishing a petrochemical cluster will require a shift in the current infrastructure paradigm, moving away from increasing NGLs takeaway capacity and moving toward increased capacity for processing in the region."

New anchor facilities, such as added world-scale ethane crackers, and multiple polypropylene, ammonia and methanol production facilities could produce derivatives helping feed a wide variety of downstream manufacturing, the report said. It points to low-cost gas as providing an opportunity for other manufacturers, such as glass, steel, aluminum and cement makers. And it notes the region is also close to the domestic customer base for chemical derivatives and finished manufacturing products.

The report's continued focus fossil fuel production drew criticism in some quarters.

"In light of Virginia's forward looking energy policy, which goes into effect today, DOE's report seems particularly stuck in the past, doubling-down on technologies that have ill-served the economy of Southwest Virginia, rather than creating new jobs and attracting new investment — as the Virginia Clean Economy Act is designed to do," said Harry Godfrey, executive director, Virginia Advanced Energy Economy, in an email July 1.

He noted Appalachian Power in Virginia would need to meet new advanced energy targets, including a requirement that load be at 30% renewable energy by 2030 under a binding renewable portfolio standard.