Witnesses rumble over EPA power rule’s consequences

Source: Jean Chemnick, E&E reporter • Posted: Thursday, July 31, 2014

A House panel today tussled over whether U.S. EPA’s premier greenhouse gas rule is an illegal effort by the Obama administration to reshape the electric power system or a stimulus for new industries.Rep. Cynthia Lummis (R-Wyo.), who heads a House Science, Space and Technology subcommittee, blasted the existing power plant proposal as a bid by EPA to “take control of our nation’s electric system without any legal or scientific justification.”

“The rule has the potential to shut down power plants across the nation, raise energy prices and threaten energy security,” she said.

The draft rule — which is the subject of listening sessions this week in three states and the District of Columbia — relies on four “building blocks” to set state standards, and then allows states to satisfy them in any way they choose. The building blocks consider states’ ability to improve heat rates at coal plants, shift base load away from coal and toward existing natural gas combined-cycle units, and boost zero-carbon electricity and energy efficiency.

EPA Administrator Gina McCarthy has said that by allowing states to determine how they prefer to meet the standard her agency has provided substantial flexibility, but utilities note that states have little option but to follow the building blocks or exceed some of them to compensate for skipping others. A few opportunities for carbon mitigation are not included in the blocks, including upgrades to transmission infrastructure.

But Lummis, whose coal-producing state would be among the greatest economic losers from the rule according to a report released last week, said that EPA’s “flexibility” does little but leave states “holding the bag on an expensive overhaul of our electric system to reach theoretical and unproven targets.”

Jeff Holmstead of Bracewell & Giuliani said the rule also plays fast and loose with the Clean Air Act’s definition for best systems of emissions reduction — the method by which it assumes facilities can reduce their emissions.

“Anyone who believes in the rule of law should be troubled by EPA’s proposal,” he said.

Holmstead said the statute requires EPA to set emissions standards on a site-by-site basis — something that would have required the federal agency to do much more on-site analysis and that would have led to emissions limits that could have been achieved by each facility inside its own fence line.

Instead, the agency has claimed a kind of “roving mandate to do whatever it thinks is best,” he said — including requiring fossil fuel-invested utilities to fund a variety of systemwide programs that have nothing to do with reducing emissions at their smokestacks.

Charles McConnell, executive director of the Energy & Environment Initiative at Rice University and a former assistant secretary for fossil energy at the Energy Department, called the rule “all pain and no gain,” a program that “certainly isn’t impactful environmental policy.”

The rule would have almost no impact on climate change, he argued, because its effect on global emissions would be tiny. But it would drive up costs and sabotage development of carbon capture and storage technology by moving the U.S. power grid away from the new coal-fired power that would be a prerequisite for CCS. This would put international efforts to tackle emissions further out of reach, he said.

“The targets that have been set are all about finding a mechanism to eliminate coal and ultimately natural gas from our energy mix, and require renewables to be deployed,” he said.

The rule seeks to limit emissions from a sector that is responsible for 40 percent of U.S. CO2. Environmentalists note that without strong utility sector emissions limits, it would be impossible for the U.S. to meet its international commitments to curb greenhouse gases.

McConnell charged that EPA had given short shrift to its obligation to involve the Federal Energy Regulatory Commission and DOE in crafting its regulations — despite their expertise in grid reliability and CCS development.

EPA’s consultation process was a “box-checking exercise to show that interagency collaboration occurred when it really didn’t,” he said, and EPA had incorporated DOE input with “reluctant acceptance.”

Some FERC commissioners have asked for a more formal role in the rulemaking process (E&E Daily, July 29).

Gregory Sopkin of Wilkinson Barker Knauer LLP argued that the rule’s main impact would be on ratepayers because combined-cycle natural gas units would cost more to operate than coal-fired generation does.

But David Cash, commissioner for the Massachusetts Department of Environmental Protection, said that his commonwealth’s experience with the Regional Greenhouse Gas Initiative showed that reductions could come with benefits for consumers as efficiency lowers rates. It could also help grow the economy, he said, and help guard against extreme weather events that can prove much more costly.

“Businesses are already concerned and are already making plans to deal with climate change,” he said. “And we see huge economic opportunities to address this problem in terms of clean-energy development.”

Opponents of the rule are underestimating industry’s ability to find cost-effective means of incorporating new emissions restraints, Cash said. “There seems to be a lack of confidence that our private sector can step up.”