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The Supreme Court Dims the Lights on Coal Power

The Supreme Court on Tuesday affirmed the Environmental Protection Agency’s authority to regulate air pollution from coal-burning power plants. The 6-to-2 decision written by Justice Ruth Bader Ginsburg hands the Obama administration what is arguably its biggest environmental victory in its effort to use the Clean Air Act as a tool to fight global warming and reduce carbon emissions.

At issue was whether the EPA could use what are known as good-neighbor rules to regulate emissions that cross state borders. In short, the Supreme Court ruled that a power plant in Ohio whose emissions blow east into New York is liable for the damage caused there, even if it’s hundreds of miles away from the source.

In geographic terms, this is a win for the Northeast and a blow to Midwestern and Appalachian states. But it’s extra bad news for utilities with big coal portfolios such as American Electric Power (AEP), Duke Energy (DUK), Southern (SO), and Xcel (XEL)—all of which had down days in the stock market on Tuesday. Now, even more than before, these utilities must weigh the high costs of cleaning up their coal operations against simply shutting them down.

Given the cheap price of natural gas, today’s Supreme Court decision is likely to push utilities into building new natural gas-fired power plants, a trend that had already been developing over the past few years. Natural gas-fired power plants accounted for half of all the new capacity added in the U.S. last year, and four times the amount of new coal that was added to the system:

More gas, less coalEIAMore gas, less coal

By 2020, the Energy Information Administration estimates, 60 gigawatts of coal-fired power production will be retired—about 20 percent of the total amount of coal-fired capacity in the U.S. If anything, the Supreme Court will quicken that pace of retirements. The majority of those twilight power plants are clustered around each other in eastern Ohio, western Pennsylvania, and West Virginia:

Coal-fired power plants slated for retirementEIACoal-fired power plants slated for retirement

Not surprisingly, those plants are all near the biggest coal-producing parts of the country:

Coal countryU.S. Geological SurveyCoal country

Still, the EIA expects U.S. coal production to grow 4 percent in 2014. After getting crushed by cheap natural gas in 2011 and 2012, coal has stabilized and actually gained back a bit of market share. While the domestic market may be unpredictable, coal’s savior likely lies overseas, where demand remains strong. Even though total U.S. coal exports (PDF) fell 6 percent in 2013, those numbers are expected to flatten this year as demand from Europe, Latin America, and Asia remains strong.

Philips is an associate editor for Bloomberg Businessweek in Washington. Follow him on Twitter @matthewaphilips.

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