Minn. legislation to protect coal towns from Obama climate rule

By Daniel Cusick | 04/15/2016 09:16 AM EDT

ST. PAUL, Minn. — Concerned that the federal Clean Power Plan will send hundreds of coal plant workers to the unemployment lines, a Minnesota lawmaker is seeking to reserve up to 10 percent of the rule’s bankable assets for communities where coal plants have been shuttered.

ST. PAUL, Minn. — Concerned that the federal Clean Power Plan will send hundreds of coal plant workers to the unemployment lines, a Minnesota lawmaker is seeking to reserve up to 10 percent of the rule’s bankable assets for communities where coal plants have been shuttered.

Jim Newberger (R), a two-term representative from Becker, a Mississippi River city about 50 miles northwest of Minneapolis, is pushing the pre-emptive action against the Obama administration’s signature climate measure. The rule seeks to reduce Minnesota’s power-sector carbon dioxide emissions by 41.7 percent from 2005 levels by 2032.

Nationally, the Clean Power Plan calls for a 32 percent reduction in power-sector carbon emissions in 16 years. But each state has its own requirement based on U.S. EPA modeling. Minnesota has one of the toughest targets in the nation for CO2 reduction on a per-megawatt-hour basis — behind only Montana, North Dakota, Wyoming, Kansas and Illinois.


For Newberger, whose hometown’s largest employer is Xcel Energy Inc.’s Sherburne County Generating Station, the Clean Power Plan represents a regulatory bullet that will deeply wound the economies of Becker and other coal-dependent communities in the state. He contends that EPA, with backing from the governor and the Minnesota Pollution Control Agency, is tone-deaf to such concerns.

"In my opinion, there’s a race to shut down coal plants," Newberger told members of a Minnesota House committee this week. "That’s my opinion, and I think it’s well-founded."

But for Newberger’s bill to make it to a floor vote, it must overcome considerable obstacles, including opposition from House Democrats, executive branch agencies and Minnesota utilities that have their own ideas about how emissions allowances should be distributed.

Over two days of committee hearings this week, members of the House Job Growth and Energy Affordability Policy and Finance Committee jousted over a variety of issues, including the merits of the bill and whether the Clean Power Plan helps or harms the state’s electric utilities, ratepayers and citizens.

Building coal-town resilience

Minnesota is one of a handful of states where the Clean Power Plan discussions have remained active since the Supreme Court issued a stay of the regulation in February. Gov. Mark Dayton (D) and senior regulators have said they will proceed with compliance planning for the carbon rule on the expectation that the plan will survive a legal challenge in federal court.

Randy Fordice, a spokesman for Minneapolis-based Xcel, which announced last October that it would close two of three coal-fired units at the 2,200 MW plant known as "Sherco" by the mid-2020s to reduce its carbon footprint, said the utility is aware of the bill but does not necessarily support it.

Xcel Energy’s Sherburne County Generating Station
Xcel Energy Inc.’s Sherburne County Generating Station in Becker, Minn. The plant is scheduled to close two of its three coal-fired units over the coming decade, drawing concern from legislators. | Photo courtesy of Xcel Energy.

"We always work with legislators to explain how legislation may affect our communities and our customers, and we’ll continue that work to shape future regulations and laws related to the Clean Power Plan," Fordice said.

Newberger did not return calls for comment this week. But he told House colleagues that his bill’s purpose is to shield coal-dependent communities from the long-term negative economic impacts of the rule. Such downsides would be felt most acutely in rural and small-town Minnesota, he said, where power plants are engines of employment and tax revenue.

"In all of the paperwork that I’ve read from MPCA and the Department of Commerce, and I’ve seen a fair number of reports on how these plans are unfolding … I have yet to see anything that addresses how they’re going to help the communities that are affected," he told the committee.

In addition to Becker, Newberger pointed to possible future coal plant closures in 10 other Minnesota communities, including Fergus Falls, where the planned closure of the 140 MW Hoot Lake Plant by Otter Tail Power Co. is expected to shed 40 jobs. That’s roughly 40 percent of the town’s tax base. A short-line railroad that carries coal to the plant is also expected to be shut down.

"Hoot Lake in Fergus Falls, that’s the first domino to fall," he said.

The measure would also provide assistance to communities that retrofit coal plants to burn natural gas because such conversions usually result in job cuts, since utilities require fewer employees to operate a gas-fired power station.

But who owns the allowances?

Newberger, an opponent of cap-and-trade approaches that allow polluters to comply with environmental mandates by either reducing emissions at the source or purchasing emissions credits from other regulated entities that overcomply, said his bill would compensate Becker and other coal plant communities that will have little choice but to shut down coal units to comply with the rule.

As drafted, the bill would require that the state allocate 9 percent of all emissions allowances created under a Minnesota carbon-trading program to communities where coal-fired power units have closed. An additional 1 percent of the allowances would go to workers laid off by utilities that own affected coal units.

But before the bill can even reach a floor vote, Newberger must convince fellow legislators, including members of his own GOP caucus, that such an allocation carve-out is feasible, given the tenuous state of the Clean Power Plan in the courts.

It also remains unclear who would be the rightful owners of emissions allowances that are produced by carbon-reduction activities. EPA has suggested that utilities should own the allowances, but some environmental groups have argued that such a standard would create windfall profits for fossil fuel utilities (ClimateWire, March 1).

Rep. Pat Garofalo (R), the House committee chairman who will decide the bill’s fate, said this week that he was undecided about whether to advance the legislation. He said he would consider the views of the other 19 members of the panel, including Democrats, some of whom are dismissive of the idea of giving special compensation to communities that lose power plant jobs.

Rep. Tim Mahoney, the senior Democrat on the panel, declared Newberger’s proposal dead on arrival in the Democratic-controlled state Senate and "an exercise in blowing hot air."

But Garofalo, a six-term incumbent known for sharp rhetoric and combative politicking, struck back, noting that companion legislation in the state Senate is backed by senior Democrats.

"Your prediction of the bill not having a path forward are greatly exaggerated," he told Mahoney.

Critics: Bill is ‘premature’

Garofalo acknowledged that Newberger’s bill has a tough path forward, partly because of the many questions looming over the Clean Power Plan. But it’s also because pending state and national elections could put the Clean Power Plan in the hands of executives with very different views on energy and climate change than those of the Obama or Dayton administrations.

Changes at the White House and governor’s mansion, as well as a Supreme Court vacancy that may last until 2017, are "casting a shadow over the entire discussion" about Clean Power Plan compliance, Garofalo said in an interview.

Still, Garofalo sees Newberger’s bill as an opportunity for Clean Power Plan critics in the Legislature to push back against the Dayton administration’s compliance approach, which he believes gives too much authority to the executive branch in deciding how carbon allowances would be parceled out.

"The executive branch is saying they can give these allowances to whomever they want," Garofalo said. "That is scary, and it is dangerous." Garofalo further stressed that giving the executive branch unchecked authority to distribute Clean Power Plan carbon allowances could result in huge sums of money being handed out to support pet projects or groups.

"These allowances have the potential to be worth hundreds of millions of dollars," Garofalo said. "We’re talking about pallets of money that the governor thinks he can just give to people."

Other critics of Newberger’s bill say it is a solution looking for a problem, especially since Minnesota’s compliance strategy remains a work in progress. They also stress that there is no market — or even a framework for a market — that would allow Clean Power Plan emissions allowances to be monetized, distributed or traded among eventual recipients.

"At this point, we think it’s very premature to start carving out allocation set-asides for particular communities," said Melissa Kuskie, an air policy specialist with the Minnesota Pollution Control Agency, which is coordinating the state’s Clean Power Plan compliance strategy.

"In order for there to be an actual fiscal benefit to these communities, they’d have to be able to sell the allowances to someone else, either within Minnesota or in a neighboring state," Kuskie added. But as of yet, Minnesota has not created any trading system, nor has EPA approved market rules that spell out how such a cap-and-trade system would work.

As for Newberger’s contention that coal plant communities will take a disproportionate hit from the Clean Power Plan, Kuskie said, "It is a concern we share among many other concerns."

But, she added, trying to pre-emptively solve a problem whose dimensions are not fully known would be a mistake.

"These are all really complicated decisions that will benefit by having a lot more information and a lot more stakeholder input," she said.

Click here to read more about Minnesota and the Clean Power Plan.