Bucking GOP Trend, Michigan’s Governor Adopts Pragmatic Stance On ESPS

Source: By Lee Logan, Inside EPA • Posted: Friday, February 6, 2015

Michigan Gov. Rick Snyder (R) appears to be one of the few Republican governors who is not calling for EPA to scrap its proposed rule setting greenhouse gas (GHG) standards for existing power plants, with the governor endorsing a shift away from coal generation and the state’s formal comments largely focusing on specific concerns with the plan.

During his recent State of the State address, Snyder urged state lawmakers to develop a state-crafted electricity policy in the face of pending federal requirements from EPA.

“If we don’t set our own policies here in Michigan, decisions will be made for us in Washington, D.C., and we won’t like them,” Snyder’s office said in an energy fact sheet issued alongside the Jan. 20 address. “We need a state-driven plan to ensure we make enough power in the right places to keep the lights on.”

And earlier this month, at a conference hosted by the Michigan Conservative Energy Forum, the governor called for a “long-term transition away from coal,” suggesting the state was well positioned to replace that lost generation with cleaner sources, such as natural gas and wind, according to press reports.

The Great Lakes State could provide an example of a pragmatic response to the politically charged existing source performance standards (ESPS), especially given the sharply critical reactions from many GOP federal and state officials, as well as coal-state Democrats.

Snyder’s stance could stem in large part from its ability to comply with the ESPS, given that it has one of the country’s oldest coal fleets, with many units slated to retire in the coming years.

Officials are also considering an update to the state’s renewable portfolio standard (RPS) after it recently met its goal to procure 10 percent of generation from renewables by 2015. A recent report says expanding that goal could be a major component of a plan to meet EPA’s target.

And Snyder, who was re-elected to a second term in November, is term-limited, suggesting he may not be subject to the same political pressure to oppose EPA’s rule as other GOP officials may be. For example, Michigan’s Republican Attorney General (AG), Bill Schuette, has signaled that he is likely to join other state officials in challenging the rule.

Snyder may still have a tough battle ahead convincing the state’s GOP-controlled legislature to support the state’s ESPS compliance plan.

One informed source describes the state as “in a good position, potentially, to meet” its ESPS target, adding that it is “still up to the legislature and the governor.”

Noting that the state has “renewable energy opportunities and . . . energy efficiency opportunities,” the source says utilities have announced “a number of shutdowns of coal-fired facilities,” and that while some of that generation must be replaced, renewable generation is starting to look “very attractive” financially. The source adds that Michigan must also look at expanding transmission and gas pipeline capacity.

More Details

Snyder, who plans to unveil more details about his energy proposals in a March speech, echoed this in his State of the State speech, saying that Michigan has “an especially good foundation for fuels of the future: natural gas and renewables. And we can achieve an enormous amount just by eliminating energy waste.”

He said the state has a “robust and growing natural gas infrastructure” and that it achieved “an aggressive [RPS] on time and at a lower cost than we expected.”

The governor’s message appears aimed at members of his own party, some of whom might otherwise be inclined to oppose EPA’s efforts to curb GHGs from the power sector. Following the 2014 election, there are 27 Republicans in the state Senate, compared with 11 Democrats, and the GOP controls the state House 63-47.

Regardless of the reasons for Snyder’s stance, environmentalists are praising his recent remarks, as well as the state’s constructive stance toward the ESPS. “What he has been signaling has been extremely positive, extremely productive,” said Patrick Kenneally of the Natural Resources Defense Council (NRDC). He added that Michigan has the potential to “crush the goals that have been set by EPA.”

Kenneally says that Snyder has framed the issue in terms of “Michigan-confined answers to Michigan energy questions,” noting that many of the issues stemming from an aging coal fleet would have to be addressed regardless of EPA’s rule.

He adds that the governor’s pragmatic stance on the ESPS means he “has the potential to be a leader on this issue in the Midwest,” arguing he could help persuade GOP governors in Ohio, Illinois, Indiana and Wisconsin — three of whom, John Kasich (OH), Scott Walker (WI) and Mike Pence (IN) are said to be mulling presidential runs — to collaborate on a compliance plan. “We’re hoping there may be an opportunity for regional leadership from Michigan.”

Such optimism may be misplaced. While newly inaugurated Illinois Gov. Bruce Rauner (R) has been relatively silent on EPA’s rule, other Midwestern GOP governors, notably Walker, have been sharply critical. During his State of the State address, Walker announced that he was working with the state’s attorney general to “prepare a lawsuit challenging the newly proposed federal energy regulations,” adding the rules could have a “devastating impact on Wisconsin.”

Ease Compliance Burden

In contrast, Michigan’s formal comments on the rule seek to soften the compliance burden — including by recognizing pre-2012 GHG cuts and eliminating the proposed interim GHG reduction target — though they do not echo calls from other states that the proposal is unlawful and should be abandoned.

The Dec. 1 comments also urge EPA to include a mechanism to ensure electric system reliability, base goals on a three-year average of power sector data, and account for regional differences when setting renewable targets.

“We encourage the USEPA to give thoughtful consideration to our suggestions for improvements of the final Clean Power Plan,” say the comments, which are signed by the Michigan Department of Environmental Quality, the Michigan Public Service Commission and the state Economic Development Corporation.

Michigan officials also signed on to separate consensus comments, along with two other Midwestern states, environmental groups and utilities, that urge EPA to allow states to get credit for early actions, improve its methods for setting state targets and ease deadlines for states that choose to develop regional compliance plans, among other things.

Other states to sign on to the comments were Illinois and Minnesota. States with observer status in the process are Wisconsin, Kentucky and Missouri.

However, in separate Nov. 24 comments, Michigan’s Schuette joined 16 other Republican AGs in urging EPA to withdraw the proposed ESPS over six “legal deficiencies,” issues that are likely to form the basis of certain litigation over the rule.

The proposed ESPS would require Michigan to reduce the carbon intensity of its generation fleet from a 2012 level of 1,814 pounds of carbon dioxide per megawatt hour (lbs/MWh) to an interim standard of 1,227 lbs/MWh on an average basis from 2020 to 2029, along with a final goal of 1,161 lbs/MWh in 2030.

NRDC’s Kenneally in a recent blog post says the final goal translates to a mass-based reduction of 21 million tons. The blog notes that roughly 12.6 million tons of GHGs come from plants that have announced they will close by 2020.

And a November 2012 report from the Union of Concerned Scientists identifies another 10 million tons from plants that are “ripe for retirement,” based on the cost of installing necessary pollution controls compared to building a new gas plant, or public statements from a utility that the plant could close by 2030.

Kenneally says replacement power could come from an extended RPS, as well as energy efficiency measures that could reduce the state’s demand by roughly 15 gigawatt hours by 2024. “And there is so much more that could be done like making coal plants more efficient and replacing coal with natural gas,” he writes.

While neither Snyder nor state lawmakers have floated a goal for expanding the state’s RPS, a 2013 state reportidentified a 30 percent goal as theoretically technically feasible, though aggressive goals would require additional transmission infrastructure.

And a Jan. 13 report from the University of Michigan Energy Institute notes that a 25 percent goal by 2025 would meet nearly half of the difference between EPA’s targets and a business as usual scenario. It also finds that such a policy would increase an average residential customer’s monthly bill by roughly $2.60, which is “far smaller” than recent fuel price variations, as well as efforts to keep coal plants compliant with other environmental rules.

The study’s results “demonstrate the potential to fundamentally improve the environmental performance of [Michigan’s] power sector in a cost-effective manner,” the study says.