Is Texas considering bucking power plant rule?

Source: Jean Chemnick, E&E reporter • Posted: Monday, August 11, 2014

Texas is mulling another challenge to U.S. EPA carbon limits, possibly by refusing to implement the agency’s proposal for existing power plants.

Bryan Shaw, chairman of the Texas Commission on Environmental Quality (TCEQ), was quoted in an article inThe Texas Tribune yesterday saying that his agency might consider refusing to promulgate a state plan for the June 2 proposal, as it did for EPA’s greenhouse gas permitting rule.

Shaw said in an email to Greenwire today that he did not “intend to suggest we are moving that direction.”

“I hear some states are considering all options including that one,” he said. “We have not even begun to consider how we will respond to a final rule. Instead, we will continue to work through the process to encourage EPA to modify the rule to accurately follow the Clean Air Act and not dramatically expand federal control over state implementation approach.”

He reiterated in the email that Texas would challenge what he called EPA’s “overreach” in the rule.

“However, it is much too early to suggest that would be through suing EPA,” he said. “We are still working through the administrative process to encourage EPA to improve the rule.”

The Lone Star State was the only state that ultimately refused to implement EPA’s permitting requirement for very large stationary sources of carbon dioxide after 2010, leading the federal agency to take responsibility for those permits. This caused a paperwork backlog that finally spurred state lawmakers to reverse course last year and allow TCEQ to begin issuing Title V permits for CO2.

But Kathleen Hartnett White of the conservative Texas Public Policy Foundation (TPPF)– which hosted the event this week at which Shaw made his remarks — said another such refusal seemed to be “under consideration” at the state agency.

But White, who is a former TCEQ chairwoman, said Texas might see fewer ill effects from refusing to implement the existing power plant rule than it did the permitting rule.

By the time EPA steps in with a federal implementation plan (FIP) for the power plant rule, she said, the courts might have asserted that EPA had overreached in promulgating a rule that seeks to reorder the power grid. Opponents of the proposal have accused EPA of trying to usurp authorities delegated to states under the Federal Power Act.

If courts do throw out all or part of the rule, EPA’s FIP for Texas might be limited to what power plants can achieve inside their own fence lines, rather than requiring the systemwide actions that would lead Texas to reduce its greenhouse gas output by 40 percent — as the current proposal would do. This might make it worth Texas’ while to wait, she said.

“The performance goal given to Texas is so, so strict for us that it would give us no option but to try to massively deploy natural gas and renewables,” she said. EPA bases its proposal on assumptions that Texas has plenty of both, but White said the agency is underestimating the cost and difficulty of ramping up the use of peaking natural gas units and deploying other resources.

Texas Public Policy Foundation staff is working with state lawmakers on legislation that seeks to limit any state strategy to carry out the rule. Eight states have enacted laws related to the rule, though they vary in scope. Kentucky and Kansas have put in place constraints that the rule’s supporters warn could make it difficult for them to write approvable plants, opening the door for EPA intervention. Other states have adopted resolutions and laws that are narrower and that stakeholders hope will not interfere with those states’ ability to meet EPA requirements.

For example, Missouri approved legislation earlier this year that directs its Air Conservation Commission to base performance standards on a “case by case” analysis of what fossil fuels units can achieve and gives state lawmakers a role in approving the plan.

Missouri Electric Cooperatives Vice President David Klindt said in an interview yesterday that when state utilities backed the bill, they assumed it would not complicate the state’s ability to meet EPA targets.

“We were very careful about how we put it together,” Klindt said. “We didn’t want to put it together to the point that the state couldn’t meet the EPA’s guidelines, because if that was the case then EPA could step in and force a [federal implementation plan].”

But although Shaw and White say the rule would hurt Texas’ economy as well as violate the law, a recent study by the Rhodium Group and the Center for Strategic and International Studies found the opposite — that EPA had crafted a proposal that would give Texas’ gas developers a windfall.

The study released last month found that although a four-state region dominated by Texas would pay about $1 billion a year more in power costs, it would also see $4 billion to $17 billion in additional natural gas producer revenue each year as states across the country shift away from coal and toward gas-fired generation.

“That region of the country is well-endowed with substantial natural gas resources that are poised to really benefit from the Clean Power Plan,” said John Larsen, a senior analyst at the Rhodium Group.

Texas should engage with EPA’s process to maximize that upside, he added.