Clean power and the divided states of America

By Peter Behr | 08/03/2015 07:41 AM EDT

U.S. EPA’s Clean Power Plan is opening new fault lines among sparring states across the country and the federal government, triggered by sharp political differences over climate policy.

U.S. EPA’s Clean Power Plan is opening new fault lines among sparring states across the country and the federal government, triggered by sharp political differences over climate policy.

At first glance, the Obama administration’s principal climate policy initiative seems to have landed in the same political bucket as health care and immigration, with blue states and red ones respectively aligned for or against Washington-led policies. "The Clean Power Plan will be a driver in a new chapter in the debate over federalism, without question," said Peter Fox-Penner, chairman emeritus of the Brattle Group consulting firm. But there is a lot more going on, he added.

Opposition to EPA’s plan appears to have hardened in GOP-led states. At the same time, grid managers and utility executives in both "pro" and "con" states have come together to consider common compliance plans, Fox-Penner noted.


The final CPP released today encourages regional compliance strategies that permit trading of renewable energy generation output from states with surpluses into states that need it to meet compliance targets. "I think EPA will want to facilitate those kinds of developments," said Ken Colburn, a principal at the Regulatory Assistance Project, which advises state officials on environmental and energy policy.

Collaboration will be embraced in parts of the country and shunned in others, raising a long-term question, experts say: Will the CPP further divide the nation along state and political lines, pushing possible consensus on a global climate threat further into an indefinite future? Or will the CPP serve to tighten regional linkages, eventually pulling the country closer to a more common view?

"It is a shame things have become so polarized and that looking to states to carry out their responsibilities under a federal standard is so controversial," said Kevin Kennedy, deputy director of the World Resources Institute’s U.S. Climate Initiative.

Shortly after EPA delivered the proposed CPP a year ago, governors in 15 states had signed onto legal action opposing the plan. All but one were headed by Republican governors.

A states’-rights argument resonates in protests by governors and attorneys general. "Rather than limiting itself to EPA’s narrow mandate of air pollution control, the proposed rule forces states to abandon their sovereign rights in favor of a national energy consumption policy," said Oklahoma Attorney General E. Scott Pruitt (R), one of 13 state chief legal officers who stated opposition to the EPA plan last August. All were from GOP-led states.

Opposing states have vowed to fight EPA, arguing that the Clean Air Act cannot be used to regulate a state’s power plant carbon dioxide emissions. The Ohio Environmental Protection Agency protested to EPA: "Nowhere is U.S. EPA delegated authority for states to usurp the Federal Power Act and mandate generation dispatch based on CO2 emissions rather than cost."

On the other side, attorneys general from 11 states and the District of Columbia, and New York City’s corporation counsel, applauded EPA in a December 2014 comment. The CPP "puts states in the driver’s seat to implement and enforce the required emission reductions," stated the attorneys general, all Democrats. The plan was also endorsed last year by environmental officials and regulators from 15 states, 13 headed by Democratic governors, plus two from GOP-led political swing states.

Doug Scott, former chairman of the Illinois Commerce Commission and a vice president of the Great Plains Institute, told ClimateWire in May that environmental and air regulators from 41 states have participated in discussions of collaborative approaches to the CPP (ClimateWire, May 18). "Our experience from states that are going to make a legal challenge, they have said nothing publicly, but still behind the scenes they’re saying, ‘OK, what are our options?’" Scott said.

Regional identities

Support and opposition to the CPP along political lines departs from the old maxim preached by former Sen. Jeff Bingaman (D-N.M.) and other congressional veterans. They observed that on major energy legislation, the critical alignments typically were not by political party but by geology; more precisely, they were between states that generate and export energy and states that are mainly energy consumers.

In this view, the United States is a nation of regions, with the particular energy profile of each part woven into its region’s culture. The Texas-Oklahoma oil patch is different from Appalachian or Rocky Mountain coal states, and in turn, both are unlike the hydropower-rich Pacific Northwest. All of these resource-endowed regions think differently about energy than states dominated by urban customers.

Texas is the prime example of a state defined by its resources. The Lower 48 states are divided into three separate electric power grid networks, each with tightly synchronized power flows inside its boundaries. The Eastern and Western interchanges are separated with geological logic by the Rocky Mountains. Texas split itself off into its own grid to ward off Washington, D.C., energy regulation and keep other states’ hands off its cheapest power resources — including its deposits of lignite coal. Richard Cudahy, a 7th U.S. Circuit Court of Appeals senior judge and former state energy regulator, wrote about a Texas utility official response in a 1976 confrontation that could have subjected Texas to federal energy regulation: "The sons of bitches are trying to steal my lignite!"

Opposition to the CPP is centered on coal. A recent article in the journal of the Federalist Society argued, "for many States, the rule will create real hardship for the States’ citizens. EPA’s proposal is built on a fault line, with California and northeastern and northwestern States, which do not use much coal, on one side, and most Midwestern and southern States, which use much more coal, on the other." Compliance costs will fall most heavily — and unfairly — on coal-dependent states, the article authors argued. The United States are divided by competition for jobs, and states with relatively cheap power covet their advantage.

The CPP debate goes beyond a simple model of resource-based politics, however. It combines a paramount energy issue — the future of the nation’s electricity supply — with an emotional environmental debate — greenhouse gas emissions and climate change. Political differences harden when energy and environment intertwine. The auto bumper stickers that appeared in Wyoming and Texas in 1973, "Let the bastards freeze in the dark" or "Let the Yankee bastards freeze," were a retort to Eastern environmentalists opposing oil production at a time when energy prices were escalating, according to news reports at the time.

When it comes to environmental issues, the Bingaman regional rule of thumb isn’t the decisive element, said Daniel Matisoff, an assistant professor at the Georgia Institute of Technology’s Strategic Energy Institute. Studies of why states take different paths on environmental policy lead to a single, most dominant reason, he said.

"The No. 1 factor over time is definitely politics. Specifically, with RPS (state renewable energy portfolio standards) and other state energy policies, the choices tend to be dominated by a liberal-conservative divide," he said. According to the U.S. Energy Information Administration, the District of Columbia and 31 states have enacted renewable standards (and six have non-mandatory goals). Another 13 states, 10 of them in the South, did not adopt RPS rules or goals. A Gallup polling analysis ranks 11 of those states among the most conservative in the United States.

But the influence of a state’s natural resource endowments can push historical alignments in new directions. The Governors’ Wind Energy Coalition, which advocates for wind energy interests, lists 22 members — eight of whom are Republican chief executives. Five of the eight GOP members come from states with large wind power output.

Ohio and Pennsylvania still contribute a large block of members to the House Coal Caucus, and the Ohio EPA cited coal’s contribution to cheaper electricity as a foundation of the state’s historical manufacturing base. "Any increases to electricity cost, which Ohio EPA expects will occur under this proposal, could be very costly and damaging to the manufacturing industry in Ohio," the agency said.

However, coal’s economic importance to Ohio loses ground as production grows from the Marcellus and Utica shale gas plays. They are delivering royalties to state residents and creating a wide range of new jobs, from drilling to steel pipe manufacturing, road and pipeline construction, engineering services and — officials hope — petrochemical manufacturing in the future. reported last month, "Coal is on the way out and cleaner burning natural is moving in," noting new gas-fired generation projects drawing on the state’s new gas resources.

Regional facts of life

The upheaval from shale gas technology is not the only lever for change that lies beyond governors’ control, Fox-Penner said.

Regional coordination is a fact of life today for power networks, recognizing the shared nature of electricity, which travels across state boundaries on transmission lines, obeying laws of physics, not voters’ choices. Collaboration among state grid operators occurs naturally among the regional transmission organizations (RTOs) and other multi-state grid planners and managers, Fox-Penner said.

New technology is steadily upsetting the status quo, as well, he added. Renewable power costs continue to decline. The traditional line between transmission and distribution networks has started to blur. The potential of large utility-size solar power installations is steadily expanding. "The technology and cost shifts in the industry are everywhere," he said.

"These are common drivers that all states will have to adapt to. The CPP comes on top of that," he said. Because of these trends, he added, "my gut feeling is that there won’t be an acceleration of states splintering in a bad way. They are more likely to learn from each other, not because the CPP is making them, but because so much is changing in the industry in every realm. You can’t afford to put blinders on and try to build a fortress around yourself."

Jennifer Macedonia, a senior policy adviser at the Bipartisan Policy Center, said she expects to see a lot of states take up an option under the CPP to follow an emissions trading approach, allowing companies access to lower-cost reductions outside the plant and potentially outside the state. "Various studies show multistate trading would be beneficial from a cost and reliability standpoint," she said.

"You’re likely to see a lot of states with interest in that approach, as long as EPA better accommodates a trading-ready plan that doesn’t require detailed negotiations between states. I would expect more agreement, in the sense that things should be more settled. When they are settled, even if you don’t like it, there is certainty and more likely acceptance," she said.

"States being laboratories of experimentation is a great idea," Matisoff said, citing U.S. Supreme Court Justice Louis Brandeis’ famous formulation. "And we see a lot of it. We see states learning lessons from others states. We might end up having these regional plans that allow compatible responses, and the effect is a national plan, although it’s more complex and less efficient."

Opposing the potential of the CPP to push states toward collaboration over energy is the need for new regulatory decisions and policies and new markets in many states to trade carbon, boost renewable energy production and efficiency programs, and expand transmission. Some state governors vow to "just say no" to the CPP. The shortest path to comprehensive nationwide energy policy still appears to run through Congress, where partisanship rules.

"Few [economists] would disagree that a national carbon price or a national plan would be more efficient. The EPA pushed [the CPP] because there wasn’t action by Congress," Matisoff said. The agency is constrained by a "clunky" law from the 1970s, he added. "Faced with that, there is hope that Congress might be encouraged to do something more efficient. I wouldn’t discount it in the future."

The political strife surrounding the CPP makes that future even harder to read. The World Resource Institute’s Kennedy cautioned, "I wouldn’t say I’m an optimist that the CPP by itself, as it’s implemented, will start to look like a nationally coherent program. But I’m hopeful — recognizing this is as much hope as hard-nose thinking — that you will see a lot of regional cooperation."