EPA’s power plant rule wouldn’t mess with Texas — analysis

Source: Jean Chemnick, E&E reporter • Posted: Friday, July 25, 2014

U.S. EPA’s proposal for existing power plants greenhouse gases will be a windfall for states that produce natural gas and a blow to those that produce coal, according to a study released today by the Center for Strategic and International Studies and the Rhodium Group.The two research organizations found in preliminary study results the draft rule’s impact on a state’s fossil fuels extraction industries will be a more significant economic predictor than its effect on electricity prices or the relative greenhouse gas abatement responsibilities assigned to that state.

In fact, the report says, some states that would have to make the deepest cuts in carbon dioxide emissions under the proposal still stand to profit from it, the researchers said, because it will boost sales of the natural gas they produce.

The gas-producing region of Texas, Arkansas, Oklahoma and Louisiana stands to gain the most in new gas revenues stemming from the proposal, even though it also faces the toughest emissions reduction responsibilities in the country, an average cut of 3 percent a year.

The states would gain a combined $17.7 billion a year between 2020 and 2030, the report says. Even when the loss of coal-related revenue is taken into account, the four states would still stand to gain a net $16.7 billion in fossil fuel revenue annually during that decade to offset a scant $1.1 billion net increase in household and business energy costs.

This finding appears to fly in the face of those states’ claims that the rule would sink their economies.

Texas must reduce its utility-sector emissions by a hefty 40 percent by 2030 under the proposal, and its Gov. Rick Perry (R) has called it “the most direct assault yet on the energy providers that employ thousands of Americans and fuel both our homes and our nation’s economic growth.”

Oklahoma has already become party to a legal challenge against the draft rule brought by Murray Energy Corp., and its senior Republican Sen. James Inhofe has decried it as the latest and worst front in the Obama administration’s “war on coal.”

At a Senate Environment and Public Works Committee hearing yesterday, ranking member David Vitter (R-La.) questioned EPA Administrator Gina McCarthy about the draft’s impacts on his state’s manufacturing boom, which will drive increased demand for electricity.

Regulators in Arkansas and Texas have been quoted in recent news accounts as saying their states are well positioned to meet the standard, but that has done little to change the rhetoric of their elected officials against the rule.

The picture is not quite as rosy for the Rocky Mountain West — Colorado, Idaho, Montana, Nevada, Utah and Wyoming — even though that region faces an average annual 1 percent emissions reduction requirement, according to the CSIS-Rhodium Group report.

The region stands to gain $5.1 billion a year between 2020 and 2030 from increased gas sales, but it could lose $7.5 billion in value from coal sales for a net loss of $2.4 billion a year. That’s likely to fuel the ire of EPA critics like Sen. John Barrasso (R-Wyo.).

The report also assessed the role energy efficiency crediting would play in determining the rule’s effects. By granting credit for efforts to curb power demand, states would keep more coal-fired generation in operation and would reduce the natural gas advantage. It would also lessen the carbon abatement effect of the rule and its effect in increasing nuclear and renewable energy deployment.

The researches plan to issue a final report in October ahead of the close of EPA’s public comment period on the rule.