States divided, wary as rule release draws near

Source: Jean Chemnick, E&E reporter • Posted: Monday, June 2, 2014

The planned release Monday of U.S. EPA’s proposal for slashing heat-trapping emissions from existing power plants will shine a spotlight on how states will meet its mandate.

It’s going to be complicated.There’s no single starting line. Where a state begins will depend on its politics and power supply. And every one of them is concerned that the coming rule won’t fully protect its interests.Opponents of the rule this week said it could hamstring some states.

The U.S. Chamber of Commerce sounded the alarm with a report emphasizing the rule’s potential costs for states that depend heavily on fossil fuel-fired power plants. Prepared for the chamber’s Institute for 21st Century Energy by IHS, the report used the business group’s assumptions about the rule and future power demands to show that its costs would fall heavily on states with the most coal-fired generation.

The Southeastern states stand to lose 60,000 jobs and $10.5 billion in economic development every year through 2030 from the combined effects of EPA’s rules for existing and new power plants, the report warned. The Upper Midwest’s power market — more evenly divided between coal and gas — would lose nearly 32,000 jobs and take an economic hit of $7.4 billion each year, while lowest-carbon markets in New England and on the West Coast would be the best-positioned to meet the standards, it said.

And the National Republican Senatorial Committee quickly moved to tie Senate Democrats running for re-election this fall — notably, Sens. Mary Landrieu of Louisiana, Kay Hagan of North Carolina and Mark Udall of Colorado — to regulations that it said would penalize their states.

“Senate battleground states are largely coal-intensive states, which makes President Obama’s upcoming EPA announcement even more important,” the NRSC said in a blog post this week. “These states will be particularly hard hit by the rate spike that will come from the Obama Administration’s cap-and-trade fiat.”

Texas’ congressional delegation, meanwhile, wrote a letter to EPA this week, charging that the Lone Star state’s growing population and electricity demand could make it particularly vulnerable to the coming rulemakings.

“With a robust manufacturing base, and as the leading producer of oil, gas and petrochemical products, our state is an economic engine for the entire nation,” stated the letter, signed by lawmakers of both parties. “Given such growth and potential, EPA should recognize that Texans require an all-of-the-above approach to power generation, not one that will raise the cost of electricity by selectively eliminating certain types of fossil fuels.”

That’s a message state lawmakers from Georgia, Nebraska and Kentucky tried to deliver yesterday to EPA’s Washington, D.C., headquarters, but they failed to make an appointment and they say no one was available to meet with them.

The delegation — organized by the fossil fuels advocacy group Partnership for Affordable Clean Energy (PACE) — says its members’ constituents stand to lose from the rules, especially if EPA moves to require “systemwide” reductions from sources like demand-side energy efficiency and more renewable energy use.

Kentucky state Sen. Brandon Smith (R) told reporters he was wary of EPA “superimposing their judgment over what we think is good for the state.”

Kentucky, a major mining state, derives about 90 percent of its power from coal. A minor shift toward natural gas is occurring, but Smith and his Democratic colleague, state Sen. Fitz Steele, said coal-mine closures were due at least in part to EPA regulations already on the books. Those, he said, had also affected other aspects of the Kentucky economy.

“They need to quit trying to run our state,” said Steele, a coal miner himself for more than two decades. “They’re trying to micromanage our states. They’re coming in to tell us what’s best for us.”

Steele and Smith said EPA must respect states’ “primacy” — their right to determine how their utilities will be regulated under the Clean Air Act rule. EPA has said repeatedly that states are its partners in the rulemaking and that its guidance to them will be “flexible.” It is expected to set standards, and states must write implementation plans.

But Lance Brown, PACE’s executive director, said that by setting a standard for emissions reduction that can only be achieved through the use of certain technologies or policies, EPA would limit states’ options.

“EPA has the ability to be very prescriptive without being prescriptive,” he said.

‘Measured, reasonable steps’

Several states have considered legislation they hope would limit the EPA rule’s effect on their utility sector.

Nebraska — a coal state that is also a hub for railroads that carry the fuel — enacted such a measure last month by a wide margin.

“What we’re asking is to take measured, reasonable steps in regulations addressing emissions,” said Nebraska state Sen. Jim Smith (R), a participant in yesterday’s fly-in.

While Nebraska is weighing renewable energy and efficiency mandates, he said, “we don’t want to sacrifice our economy and sacrifice jobs to get there.”

But environmentalists emphasize that while EPA has been accommodating to states, it is authorized to issue binding guidelines and to approve or reject state plans.

If states do not submit plans that are acceptable, they say, EPA might be compelled to step in with a less flexible federal plan that would be more onerous than a state plan would have been.

Aliya Haq, special projects director for climate at the Natural Resources Defense Council, said that most of these bills either failed or were weakened because state lawmakers recognized that they would “paint utilities into a corner.”

“By trying to prevent flexible and clean alternatives to coal, these bills would have made it more difficult and expensive to cut carbon pollution,” she said.

In comments submitted to EPA ahead of next week’s release, fossil fuels-heavy states have asked the agency to confine its rule to minor heat-rate improvements that can be achieved inside the fence line of an individual power plant. They also want credit for reductions made since 2005 — even those driven by market conditions — and worry that EPA might go back on its promise to not require carbon capture and storage for existing plants.

But the World Resources Institute released its own analysis this week showing that 10 of the states situated in power markets that the chamber and others deemed to be in the greatest peril of price spikes from the EPA rule comply with even a relatively stringent, “beyond the fence line” rule of the kind environmentalists have urged EPA to adopt.

North Carolina could achieve reductions through its Renewable Energy and Energy Efficiency Portfolio Standard, which is already in place, WRI argued. It could also boost the efficiency of its coal-fired power plants and use its gas plants more.

The Tennessee Valley Authority, Tennessee’s largest utility, already offers demand-side efficiency programs, WRI said.

“If Tennessee commits to achieving 1 percent annual energy savings, Tennessee could reduce CO2 emissions by 10 percent in 2020 compared to 2011 levels,” the institute says.

Said David Doniger, director of the climate and clean air program at NRDC: “We think almost every state has to do something. Some states had planned to do it already.”

Opportunity seen for late-moving states

But while the nine Northeastern states in the Regional Greenhouse Gas Initiative might be able to demonstrate that their existing policies are equivalent to what would be required by EPA, others may need to launch new initiatives.

Doniger said states that have not yet moved to cut carbon may have built-in advantages compared with states that have already plucked their proverbial “low-hanging fruit” of efficiency and renewable energy.

“The states that haven’t done any of these things have opportunities that the states that have done them don’t have,” he said. “A state that hasn’t built up renewables or an efficiency program has a very cheap pathway in front of it.”

States that have already taken significant steps to slash carbon, meanwhile, have urged EPA to adopt a rule that would require other states to achieve similar reductions even if it takes them additional time to get there. In a letter to EPA last December, 15 early-mover states, including the RGGI members and California, asked the agency to propose a rule that takes into account past progress to curb emissions.

EPA should consider setting an emissions intensity target that would require all states to meet the same standard on a per-kilowatt basis — ensuring that early movers would get full credit for their work.

They also asked for a rule that requires reductions across the power system, and not for the “inside the fence line” standard sought by their more fossil fuels-heavy counterparts.

Vicki Arroyo, executive director of the Georgetown Climate Center, has worked with the early movers to help formulate their stances on the rule. In an interview yesterday, she said their experience with carbon cutting and renewable energy and efficiency policies had shown them that a systemwide approach could be cost-effective.

“I think as far as the level of this standard, they would certainly want it to be something that reflects the ambition of some of these previous programs,” she said.

States that have shaved double-digit percentages of carbon from their power-sector emissions in the last few years would not want other states to have virtually no obligations, she said.

“I think it’s a lost opportunity for some of these cost-effective reductions,” she said.