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Carl Pope Headshot

Can Anyone Spell Cartel?

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Big Coal has always been nasty and mean. But with its back to the wall, it gets nastier. For years now, natural gas producers have been pointing out the truth that among the fossil fuels, gas is uniquely clean. That's basic chemistry -- a molecule of gas has four hydrogen atoms and only one carbon, whereas oil and coal get progressively more dependent on heavier carbon atoms for their energy content, which is why oil is a liquid, and coal a solid -- and neither a gas.

Yes, you can produce gas in dirty ways or in the wrong places -- but the fuel itself is vastly better than coal or oil, if not as good as efficiency or renewables. And there's nothing new about gas producers pointing this out -- you could find ads for "clean gas" decades ago.

But as coal's carbon intensity gets more and more attention with global concern about global warming, coal is suddenly sending not-so-subtle messages to gas producers that if they keep reminding the public of their product's advantages, they can expect some vicious responses. For example, the American Clean Skies Foundation, supported by natural gas producers, ran an ad recently going after our dependence on foreign oil, and touting natural gas as a cleaner fuel for vehicles. They also ran an ad discussing the recent decision by the Department of Energy to cancel a hugely expensive experimental effort to test technology for sequestering carbon dioxide from coal-fired power plants, the inaptly dubbed "Future Gen" Project. Denise Bode, of American Clean Skies, said "the Department of Energy deserves a round of applause for its well-founded decision to back out of the original agreement for the $1.8 billion FutureGen project. Among the reasons given by DOE officials for 'folding the bet' on the project to develop 'clean' coal-fired generation was that there had been huge cost overruns -- it had started with a projected price tag of $800 million."

So who cried foul? ExxonMobil, whose product was really trashed? Nope. The oil industry's not really worried -- yet. But coal is. So the National Mining Association, on behalf of its coal mining members, fired off a not even vaguely veiled threat. In a letter to Bode, NMA's CEO, Kraig Naasz, claims that the ads are off base. "Your advertorial is seriously misleading. Whatever reasons may have prompted the Department of Energy to renege on its commitment to the FutureGen project, rising costs is not a compelling one. Escalating costs of manpower and materials that have affected virtually every power project over this period were easily foreseen..."

Since dozens of public utilities have been canceling power plants because they said their rising costs had NOT been foreseen, and have assured their shareholders that these impacts COULD NOT have been foreseen, one wonders just where NMA stores its crystal ball. I imagine we would all like a look at it. And if cost overruns were not DOE's real reason for canceling Future Gen, what did motivate them? Was it that they concluded the technology wouldn't work, period? Or are we expected to believe that Dick Cheney has suddenly joined the Sierra Club in a secret conspiracy to deprive America of its God-given right to burn coal?

More importantly, NMA rattles their sabers -- and, in doing so, reveals an ugly truth that almost everyone in Washington knows but which it is not politically correct to mention in polite company. NMA accuses Bode and Clean Skies of breaking the unwritten cartel agreement among energy producers:

"As a diatribe against coal utilization and research, it marks a disturbing departure from the understanding we tacitly share in the energy sector to avoid denigrating competing fuels. Doing so enrages policymakers, distracts attention from our common goal of increasing supplies of every fuel to meet America's growing energy needs and invites public rebuttals from competing fuel producers. The interests of natural gas producers will not be enhanced in such an environment..."

Here NMA is telling part of the truth. Historically, the American energy market has been a narrowly controlled cartel in which producers might try to grab contracts from each other by underbidding on price, but when it came to public policy, they all ganged up on the public interest. And now natural gas is breaking away and finding its own voice, and Big Coal is very, very -- well, enraged is the word that comes to mind.

This is not the first time the coal industry has threatened that if natural gas producers keep pointing out that they have a better product for the environment, then coal will use its political connections to take retribution. I've heard these stories on the Hill for the past six months. But now they are putting it in writing, yet another sign of their desperation.

Adam Smith would not be surprised. He always said that competition, real competition, was not something that businesses mostly really liked. But it's good news for all of us that the fuel cartel is breaking apart, and that a new constellation of energy sources and approaches that can contribute to solving global warming -- each in its own way -- is beginning to emerge.

But everybody better watch their back. DC is full of dark alleys.