RD101 - Annual Executive Summary of the Virginia Coal and Energy Commission


    Executive Summary:
    Pursuant to Chapter 25 (§ 30-188 et seq.) of Title 30 of the Code of Virginia, the Virginia Coal and Energy Commission ("Commission") is charged with studying all aspects of coal as an energy resource and endeavoring to stimulate, encourage, promote, and assist in the development of renewable and alternative energy resources.

    The Commission has 20 members: five members of the Senate, eight members of the House of Delegates, and seven citizen members appointed by the Governor. Delegate Terry G. Kilgore, served as the Commission's chairman and Senator John C. Watkins as vice chairman. The other Senate members are Senators Charles J. Colgan, William C. Wampler, Jr., Phillip P. Puckett, and Frank Wagner. The other House of Delegates members are Delegates R. Lee Ware, Jr., Charles W. Carrico, Sr., William R. Janis, Watkins M. Abbitt, Jr., Kristen J. Amundson, and Clarence E. Phillips. The citizen appointees are Barbara Altizer, Harry D. Childress, Frank Henderson, Albert Darrell Holbrook, James K. Martin, Dale P. Lee, and Brian Sullivan.

    Staffing was provided by Bill Owen from the Office of the Clerk of the House of Delegates and Frank Munyan and Ellen Porter from the Division of Legislative Services.

    Meetings

    The Coal and Energy Commission held its first meeting of the 2008 interim on August 7 at the Wytheville Meeting Center to discuss progress on renewable energy initiatives and receive an update on the implementation of the Virginia Energy Plan and new generation projects.

    Gerald Spraker, the current president of the Wythe County Farm Bureau, spoke to the Commission about the promise of biodiesel production for use in county vehicle fleets such as school buses. After reviewing potential impacts of switching to biodiesel, Mr. Spraker took the Commission step-by-step through the relatively simple process of converting waste vegetable oil to biodiesel fuel suitable for powering existing vehicles at roughly $1.00/gallon. Mr. Spraker encouraged the Commission to provide Wythe County and other localities in the Commonwealth with the political and financial resources to convert school buses from traditional diesel to biodiesel.

    Mr. Stephen Walz, appointed by Governor Kaine to the position of Senior Advisor for Energy, provided the Commission with an overview of progress made towards implementing the recommendations of the Virginia Energy Plan. In energy efficiency, utilities have begun various pilots and programs to meet a goal set in 2007 to reduce the consumption of electricity by 10%. Additionally, the General Assembly passed legislation during the 2008 Session to decouple natural gas rates and remove the disincentive for utilities to reduce demand. Net metering legislation has furthermore resulted in the purchase of more than 400kW from consumer-producers. Mr. Walz stated that the Energy Star sales tax holiday will be expanded to WaterSense products this fall. In many ways, state and local governments are leading by example through standards for telework and energy management.

    A number of improvements have been made to the energy supply and infrastructure system in the Commonwealth. The air emissions permit for the Virginia City Power Plant has progressed, as have various permits for new biodiesel plants and wind projects. New transmission lines have been added and more are planned. Construction for the HRX pipeline has begun and the capacity of the refinery at Yorktown should be increased. A plan has been put in place to burn switchgrass as a feedstock for fuel and heat at the Piedmont Geriatric Hospital. Mr. Walz also reviewed a number of events that serve to heighten awareness about energy across the Commonwealth. A number of commissions and research entities are addressing energy issues of the future including the Governor's Commission on Climate Change.

    Senator Wampler questioned whether smart meters, which allow homeowners to manage their electricity consumption, will be used by homeowners in the Commonwealth. Mr. Martin noted that Dominion plans to distribute 200,000 smart meters as part of a move towards smart grid technology. Mr. Walz added that, in addition to educating consumers, it was critical to educate other industry participants such as installers, contractors, and retailers. Senator Wampler also asked Mr. Walz to elaborate on the role of nuclear energy and questioned whether the Coal and Energy Commission or the executive branch has the independent authority to study the feasibility of uranium mining in the Commonwealth. Mr. Walz responded that the administration would work with the Coal and Energy Commission to determine whether a study might move forward with the agreement of all parties.

    Mr. James Martin, a member of the Commission and Senior Vice President for Business Development and Generation Construction at Dominion Resources, began his discussion by pointing out that the future demand for electricity in Virginia requires an additional 4000 MW over the next nine years, which will be met by the development of additional generation and advancing conservation efforts. New generation projects will reflect a diversified strategy of infrastructure development including clean coal, advanced nuclear, natural gas, biomass, and transmission upgrades. Conservation efforts are predicted to save $1 billion over the next 15 years. Dominion supports the goal that 12% of power supply will come from renewable resources by 2022 and expects to deploy 750 MW of wind power.

    R. Daniel Carson, Jr. is vice president for Appalachian Power Company, a subsidiary of AEP that operates in Virginia, West Virginia and Tennessee. As of today, AEP owns 310 MW of wind capacity and has long-term power purchase agreements with wind producers totaling 467 MW. Hydroelectric capacity in Appalachian's region is almost 800 MW. As a result, AEP expects to meet the goal set by the General Assembly two years ago that 12% of power supply come from renewable resources by 2022. Additionally, AEP has asked that the State Corporation Commission approve a "green" tariff that allows retail customers to designate renewable energy for their monthly electricity needs.

    Dr. Michael Karmis is a Professor in the Department of Mining and Minerals Engineering at Virginia Tech and he is the Director of the Virginia Center for Coal and Energy Research. Dr. Karmis gave the Commission an overview of work being done at the Center to advance carbon capture and sequestration. Initial tests of carbon capture technology will begin shortly, but a large volume test is needed. Dr. Karmis notes that Virginia is fortunate and to have geologic formations that are suitable to store carbon and that policy makers should view such formations as a natural resource. Large volume tests are essential to prove the value of these resources to investors. The Department of Energy will provide $65 million towards the large volume tests, leaving an additional $40 million in cost share commitment to be raised from other sources in the next few months. Dr. Karmis stressed the urgency and importance of identifying these funds for the project so that the Commonwealth will not lose its competitive advantage. Senator Wampler questioned the role of Virginia Tech to fund coal and energy research.

    Mr. James Martin returned to update the Commission on the progress of the Virginia City Hybrid Energy Center and the possibility of adding a third nuclear reactor to the North Anna Power Station. The Air Pollution Control Board recently approved a permit that includes numerous emissions controls including limestone injection, flue gas scrubbers, low-temperature combustion, SNCR, fabric filter "baghouse," and activated carbon injection. The permit requires that the plant burn at least five percent biomass after three years, an amount that will eventually increase 10 percent. Dominion will also convert the coal-burning plant at Bremo to natural gas. Dominion also has proposed a third unit at North Anna that would provide 1500 MW of new electricity—enough to power 375,000 homes. The reactor could potentially be in service as early as 2016. Dominion awaits contract negotiations with GE for the reactor and a Certificate of Public Convenience and Necessity from the State Corporation Commission.

    The Commission held its second and final meeting of the full committee for the year on November 6. After a call to order from Chairman Kilgore, Senator Wagner opened the meeting by providing the Commission a review on the background and importance of domestically supplied natural gas. Senator Wagner made a certain point of noting that purchases of foreign energy total more than $700 billion each year.

    Renee Orr from the federal Minerals Management Service ("MMS") introduced the legal framework applicable to offshore drilling and exploration. The controlling law is the Outer Continental Shelf Lands Act, which provides that "the Outer Continental Shelf is a vital national resource . . . which should be made available for expeditious and orderly development, subject to environmental safeguards. . ." For its part, the MMS operates a Five Year Plan that sets forth the size, timing, and locations available leases. In recent years, the Five Year Plan has been accelerated. The current Five Year Plan applicable to the years 2007-2012 plan may be replaced, before its fulfillment, by another Five Year Plan applicable to the years 2010-2015. Virginia is the only Eastern state with offshore leases available off its coast and is uniquely positioned with a three to four year advance on any other states that might be included in a future Five Year Plan. Delegate Kilgore asked about the length of time required to accomplish a specific sale. Ms. Orr responded that the arrangement of a lease sale may require between 18 months and two years. Operations on the lease may also then require further administrative approvals. Senator Wagner pointed out to the Commission the general triangular shape of the parcel of land off the coast of the Commonwealth and noted that there is disappointment with the area designated for Virginia. The MMS applied internationally accepted standards for drawing boundaries to determine the offshore parcels and the respective states with which that parcel would be associated. Whether a coastline is convex or concave can have a significant effect on the area contained in the offshore parcels and, therefore, the amount of any royalties available from revenue sharing programs.

    Carl Hobbs from VIMS provided the Commission with background on the environmental issues that should be considered if offshore drilling in federal waters off the coast of Virginia becomes a reality. The environmental issues are far reaching and numerous aspects of the drilling operation must be considered: production platforms; transportation of the gas or oil to the shore; consequences of submarine pipelines; and the interface of the pipeline and the shore. Mr. Hobbs also noted the various regulatory parties that might oversee offshore drilling activities.

    Mr. Sullivan from the Society of Petroleum Engineers discussed the significant improvements made in the drilling industry over the past fifty years. He predicts that technology will evolve to a full zero impact by 2012 based upon what we see today in Norway. In fact, technology for drilling, completion, and production rivals that found at NASA and in the U.S. military for its safety, security, and efficiency. One of the great challenges to the industry is the availability of training of the workforce. The knowledge cohort that joined the industry in the late 1970s will retire soon. Virginia has an opportunity to begin training its workforce sooner rather than later if offshore drilling is pursued.

    Mr. Kibler of AGL Resources spoke to the Commission about opportunities for the natural gas industry if drilling is pursued offshore of Virginia. The vast majority of existing production comes from the Gulf of Mexico, an area vulnerable to hurricanes and waning discoveries. New production areas will require a skilled workforce and infrastructure to deliver the gas to market. Downstream economic benefits to the Commonwealth would include stabilized natural gas supplies, jobs, investment, tax revenues, and royalties.

    Mr. Grantham of the Virginia Oil and Gas Association presented the Commission with an overview of the natural gas industry in Virginia. The resources found in Southwest Virginia are varied and include coal bed methane recovery, tight gas sands, and gas shale. While many wells in Virginia would be needed to produce the same amount of gas as one well in Texas, the economies of scale do not necessarily weigh in favor of fewer, larger wells. The cost of inputs, maintenance, and skilled labor may be less when managing many smaller wells.

    After the completion of presentations, Delegate Kilgore introduced the issue of uranium mining to the Commission and discussed some of the questions that have arisen in the local communities before opening the floor to the public.

    After hearing public comment, Delegate Kilgore introduced the motion of the Commission to appoint a subcommittee to study the issue of uranium mining. The Commission voted unanimously to approve the motion. The membership of the subcommittee is as follows:

    Delegate Ware
    Delegate Carrico
    Delegate Abbitt
    Delegate Amundsen
    Delegate Janis
    Delegate Philips
    Senator Watkins
    Senator Puckett
    Senator Wagner
    Harry Childress

    The motion states:

    That the Commission hereby urges the Virginia Center for Coal and Energy Research (the Center) to enter into an agreement with the National Academy of Sciences (the Academy) or other comparable scientific or academic institutions, independent of the Center, to conduct a wide-ranging study on the impact of uranium mining in the Commonwealth;

    That the Commission appoint a subcommittee of its members to oversee the study;

    That the subcommittee review and provide comment on all aspects of the study prior to the Center's execution of any agreement;

    That the Commission's request that the Center enter into an agreement for the conduct of the study is contingent upon the terms of the proposed study being acceptable to the subcommittee;

    That the Commission shall, through its subcommittee, with the assistance, if necessary, of the Center, undertake the study of other economic, environmental, public health and social issues affecting the nearby communities, the region and the Commonwealth as a whole; and

    That the subcommittee is directed to coordinate its efforts with those of the Center and hold sufficient public hearings to assist the full Commission in its determination and recommendation of the appropriate policy for the Commonwealth.

    The subcommittee on Uranium Mining held two further meetings to receive public comment on the proposed study. The first meeting was held in Richmond on December 12 and the second was held in Chatham on January 6. The subcommittee also received public comment though January 19th. The public comment has been compiled and may be viewed in any of several locations including: Halifax County Library; South Boston Library; Pittsylvania County Public Library at the Chatham Branch, Gretna Branch, Brosville/Cascade Branch, and Mt. Hermon Branch; Danville Public Library; Pittsylvania County Administration Building; Halifax County Administration Building; and the Division of Legislative Services.

    Additional information regarding the Coal and Energy Commission's activities is available through its website at http://dls.state.va.us/cec.htm. The Commission does not intend to submit a further report for publication.