Texas, Calif. throw their weight around on power plant regulations

By Emily Holden, Scott Detrow | 01/05/2015 07:53 AM EST

The caricatures of the swaggering, independent Texan and the elitist, trend-setting Californian are on full display in the otherwise dry, technical comments the two major economic drivers submitted on U.S. EPA’s Clean Power Plan.

The caricatures of the swaggering, independent Texan and the elitist, trend-setting Californian are on full display in the otherwise dry, technical comments the two major economic drivers submitted on U.S. EPA’s Clean Power Plan.

The states have unapologetically taken starkly different routes in transitioning to a cleaner energy future: California charging ahead with laws and regulations meant to move markets, and Texas eyeing natural gas and wind power for their cash potential as well as their environmental benefits.

Taken together, those opposing vantage points tell a broader story of a country in search of a more deliberate energy policy and the landmark regulation that serves to exacerbate philosophical and cultural divides between states over how to move forward.


While the states each boast unique, nearly stand-alone energy economies that may not reflect the realities that policymakers across the rest of the country are dealing with, Texas’ and California’s approaches to the EPA rules will matter.

"Both have lots of size, lots of political delegation and lots of economic throw-weight," said Ken Colburn, a senior associate at the Regulatory Assistance Project.

Critics say the regulation rewards early actors like California and takes it easy on coal-dependent states without as many options, while asking for leaps and bounds from states like Texas that show room for more change.

The biggest opponents of the rule charge that it is intended to slow down states with healthy economies, a claim EPA and its advocates vehemently deny. Texas regulators say the state’s industries — especially manufacturing and refining — may be energy-intensive and contribute a large amount of carbon emissions, but make products used around the country, not just within the state.

‘Low-hanging fruit’ or a bad apple?

"There’s a long history with the use of federal rules to level the competitive playing field," said Chuck DeVore, a former California lawmaker who moved to Texas to be vice president of policy for the conservative Texas Public Policy Foundation.

Texas is one of the loudest opponents of the proposal, lodging complaints about the need for the rule, its legality and violations of state autonomy. State officials say Texas is being punished for its good deeds — asked by EPA to contribute more than any other state in greenhouse gas reductions after demonstrating its ability to use more natural gas and ramp up renewable energy quickly.

The rule calls for Texas to slash its emissions rate 38 percent by 2030, which Texas says ends up being about 19 percent of the whole country’s cuts.

Texas environmentalists see the rule as an opportunity for the state.

"Texas has a whole lot of low-hanging fruit," said Jim Marston, director of the Texas office of the Environmental Defense Fund, who previously worked on greenhouse gas laws in California. "We’ve got a lot of things we could do, and therefore our number is one of the larger numbers."

But that’s not how Texas officials see the Clean Power Plan.

"The proposed rule will have a severe and disproportionate impact on Texas," say comments from the state’s three regulatory agencies. "Texas has made significant efforts in developing a diversified and balanced energy generation mix. … The EPA is using those efforts to impose a more stringent standard on Texas than other states that are predominantly coal or have implemented little renewable energy."

Calif. to feds: Don’t box us in

California has a tendency to see itself is a trend-setting nation-state. Whether it’s pop culture, demographics or government policy, leaders like to think that what the state looks like today, the rest of the country will look like tomorrow.

That is especially true when it comes to climate change policy. Under its last two governors — who both viewed climate change as a legacy issue — California has leapt ahead of other states when it comes to developing aggressive vehicle emission standards, renewable energy goals, and the nation’s most ambitious economywide cap-and-trade program.

So it’s no surprise that state officials’ main concern isn’t how they can adapt to meet the Clean Power Plan’s goals, but rather how EPA’s rule may affect California’s already-established climate momentum. State comments stress that the new federal rules must "minimize disruption to existing state programs" and "avoid creating cumbersome administrative hurdles for states that wish to create or extend programs that help decarbonize their power sectors."

California officials are worried that if the federal government has to sign off on policies used to reach the Clean Power Plan’s emissions goals, the state could be stuck waiting for approval from Washington, D.C., on every change they make to the state’s aggressive 33 percent renewable portfolio standard or to its cap-and-trade system.

"Because Cap-and-Trade and energy sector programs are complex and regularly adjusted through state rulemakings, adding an additional layer of federal oversight potentially will be difficult to manage," the document said.

"The key task for EPA is creating room for states to innovate, to find ways to work," said California Air Resources Board Senior Staff Counsel Craig Segall. "What we’re certain of is that our system is working. We’re delivering major public health, climate and economic benefits."

EPA set relatively modest emissions reduction goals for California. Thirty-six states have higher goals — percentage-wise — than California’s 23.1 percent target. Neither state officials nor energy experts have expressed any worry about whether the state will meet that goal.

"I don’t think the Clean Power Plan is going to be much of a challenge to California," said University of California, Berkeley, professor Severin Borenstein. "California is pretty far ahead of the not very aggressive standards of the Clean Power Plan. So if we keep doing what we’re doing, we will likely meet those standards."

Recent economic reports show the state’s renewable energy economy is booming, and California has already all but eliminated coal from its energy portfolio.

Texas warns that industry will flee overseas

But while California may not have a need for the Clean Power Plan within its own borders, state officials welcome the plan as a way to spur other states to follow its lead. The comments argue that California’s cap-and-trade market "may be the nucleus that furthers a market-based emissions trading program in the West within the context of the proposed rule."

This is where the gulf between states like California and Texas is most obvious. While climate evangelists like Gov. Jerry Brown (D) cheer the Clean Power Plan as an opportunity for other states to follow California’s lead, Texas officials warn that EPA is forcing it and other skeptical states to adopt policies that could hamstring their economies.

DeVore says Texas is derided as the greatest emitter of fossil fuels, but it houses more energy-intensive manufacturing than other states. If electric prices go up under the rule, DeVore says, those plants could move out of the country completely.

"I just don’t envision countries like China and India, with hundreds of millions of people in abject poverty, agreeing to do anything that would retard their growth to raise hundreds of millions of people into the middle class," DeVore said.

EPA chief Gina McCarthy counters that the regulation would be an economic opportunity for states rich in wind power like Iowa and Texas.

"Look at Texas. How hard is this for Texas? They are making huge amounts of money on wind right now, largest ever. So we can make this economic argument just as well as I can make it environmentally," McCarthy told USA Today last month.

Wind power has rapidly grown in Texas for more than a decade, and the state now produces about one-fifth of the wind power in the country, according to the U.S. Energy Information Administration. But ratepayers in Texas will eventually spend about $7 billion on thousands of miles of power lines for that electricity, as part of a recent infrastructure build-out.

That’s part of why Texas leaders say the state has already done its part in reducing emissions.

Can the big-state experience translate?

But EPA clearly thinks Texas has the resources to do much more. "I suspect opportunity is the real denominator here," the Regulatory Assistance Project’s Colburn said. He pointed not only to the state’s successful wind economy but also its vast natural gas resources as factors that regulators likely considered when setting the state’s ambitious goals.

And that opportunity, Colburn continued, may be a reason why California and Texas may ultimately need to be viewed as outliers when it comes to looking at how states will adapt to EPA’s rules.

"Both states are important," he said. "Both are big. But are they indicative of the rest of the country on any basis?" Colburn said the answer is probably no.

"And that isn’t as easy as left wing/right wing," he continued, but rather because both states are positioned to tap into broad renewable or lower-emission fuel sources like wind, solar and natural gas. "There simply may not be the same opportunity that exists elsewhere," he said.

Still, given how each state has established itself as a leader on its respective end of the energy spectrum, there’s a good chance that other states will be keeping a close eye on how the country’s two largest states embrace or reject EPA’s rules over the coming year.