CLIMATE

Same-state regulators and lawmakers approach existing power rules from opposite angles

Coal-state champions in Congress have expressed grave concerns about how U.S. EPA's forthcoming carbon emissions rule for today's power plants might affect their home-state utilities.

But although Republicans and some Democratic members from states heavily reliant on coal -- including West Virginia, Kentucky and Missouri -- say their states' power sectors may not survive the plans EPA has in store for them, the air quality regulators and public utility commissioners who will implement that rule back in their home states take a less dim view.

Rep. Ed Whitfield (R-Ky.), who heads the House Energy and Commerce Subcommittee on Energy and Power, said EPA would likely use its proposal next year to shift power generators in states like his own away from coal and toward new natural gas. The agency would do that by forcing plants to retire prematurely, he said.

"From what they've said in hearings, and from other actions of the administration, we do think that they want to close a lot of the existing plants," he said on Capitol Hill last week.

Whitfield is planning a pre-emptive strike in the form of legislation with Energy and Commerce Chairman Fred Upton (R-Mich.) that would sharply restrict EPA carbon emission regulations.

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EPA has already shown that it plans to move very aggressive rules, Whitfield said. The agency issued a proposal last month that would effectively ban new coal-fired power plants by requiring them to use carbon capture and storage, he added.

"Then we know they're going to existing, then they're going to refineries, industrial boilers and the rest of society," he said. "So we, on the very first leg of this, want to make a national debate out of it so that the American people have a full understanding of the implications of this and what this actually means."

Whitfield plans to hold a hearing on EPA's recently issued power plant rule soon after Congress deals with pressing budget legislation. He then plans to introduce his and Upton's bill, which will have Democratic co-sponsors, he said.

Whitfield argued that the administration and the courts were improperly setting national climate policy, which should be the purview of the people's representatives on Capitol Hill. "We want an acknowledgement by the public of exactly what the ramifications are, and we want votes on the floor of the House and the Senate on this issue," he said.

Whitfield and Upton are not alone in fearing that EPA's rule for existing power plants could harm industry. Earlier last week, Rep. Shelley Moore Capito (R-W.Va.) introduced a resolution calling on EPA to hold hearings in coal country, so that the agency could hear firsthand how damaging the rulemaking could be to her state's iconic mining industry and the jobs it supports (E&E Daily, Oct. 8).

But it is unclear what kind of rule EPA might ultimately propose for existing power plants or whether it will have the kind of ramifications coal-state representatives envision. The agency is in an information-gathering phase before the rulemaking process begins, and both the president and EPA have pledged to consult states and utilities throughout.

The agency has been forced to suspend listening sessions in the states due to the federal government's shutdown, but EPA has promised that will not hinder its ability to propose a rule by the president's June 1 deadline (Greenwire, Oct. 10).

But what is clear is that the statute itself gives states substantial latitude to decide how EPA's emissions-reduction guidelines will be met. States must submit their implementation plans to EPA for approval, but state air regulators and public utility commissioners say EPA is already reaching out to them about what kinds of emissions-control options might be available that will not drive up costs or jeopardize reliability.

"The states are taking EPA's assertion that they are equal partners in this very seriously," said Bill Becker, executive director of the National Association of Clean Air Agencies.

EPA personnel spent three hours at a recent meeting with NACAA's members, asking for input from the state regulators who will implement the existing power plant rule, Becker said. Another meeting is planned for the near future.

Seventeen state attorneys general, led by Jon Bruning of Nebraska, signaled in a letter to EPA Administrator Gina McCarthy in September that they would be watching for signs of statutory overreach by her agency.

But Becker noted that the same thing happened in 2011 when EPA required states to revise their Clean Air Act permitting plans to include greenhouse gas emissions for the first time. Although several states joined a lawsuit spearheaded by Texas, the vast majority moved ahead with permitting.

"At the same time they were fighting it in Congress and in the courts, [these states] recognized that for the time being, this is the law of the land," he said.

Texas was a holdout, but it has since enacted a law of its own governing greenhouse gas permitting. And two years into the program, "we're hardly hearing a yawn" of protest, Becker said.

The existing power plant rule will be more controversial, Becker predicted, but state regulators and industry are also likely to see whether they can work with it.

"There will be some legal, regulatory and administrative bumps in the road, but my prediction is that this program will move forward," he said.

"We can get emissions reductions," said John Lyons, Kentucky's assistant secretary for climate policy. "They're out there, and they're occurring already."

Lyons and Whitfield both serve a state that relied on coal for 97 percent of its electricity last year -- inexpensive power that fuels its economically important manufacturing base. But coal will provide only 83 percent of the Bluegrass State's power in 2016, as cheap natural gas and a suite of other EPA rules spur coal plant retirements and fuel switching.

Lyons wants to make sure Kentucky gets credit for those reductions when it comes time to comply with EPA's existing power plants rule. The state is also making gains in energy efficiency throughout its power system. These "outside the fence line" reductions should put Kentucky on track to help meet even President Obama's goal of 17 percent reductions compared with 2005 levels by 2020.

"You can get that," Lyons said. But it depends, he added, on how EPA approaches the rule and whether Kentucky can count reductions that are already happening. What Kentucky cannot do, he said, is meet a stringent rate-based standard of the kind EPA put forward last month for new power plants.

And that's what Lyons said he is communicating to the federal agency. "We're trying to take EPA at their word and work with them and offer suggestions for how this regulation should be formulated in the end," he said.

Lyons said he is strongly advocating to EPA that it allow states to average emissions over time and that it offer additional flexibilities to make it easier for utilities to comply.

"All the states are asking for flexibility," said Vinson Hellwig, air quality division chief for the Michigan Department of Environmental Quality. Hellwig said he hoped EPA would allow states to count reductions made through their renewable energy standards and efficiency measures.

Chairman Upton's home state currently requires 10 percent of its power to come from renewable energy. Hellwig is also involved in Gov. Rick Snyder's (R) new initiative to find ways to boost energy efficiency across Michigan.

Hellwig said that if EPA instead comes forward with rigid guidelines that only take into account what can be achieved on-site at the plant, the rule would be costlier and yield fewer results.

He brushed off questions about the apparent disconnect between his views and those of lawmakers like Upton. He was not trying to comment on the merits of a policy, he said.

"I think it's typical of the air regulators; they're pretty pragmatic," he said. "You have to be prepared if it does take effect. That's just a practical aspect of it."

Although air regulators will have a chief role in implementing the rules, public utility commissions across the country will be called on to ensure that state plans don't undermine reliability of power supply or cause rates to skyrocket.

The National Association of Regulatory Utility Commissioners has held two Web-based seminars in the past few weeks, aimed at educating its members about the rule and helping them formulate recommendations for how EPA and states can best approach it.

Asked whether he thought EPA would propose a rule that threatened reliability, NARUC Committee on Energy Resources and Environment Chairman Robert Kenney said, "I don't anticipate that they will."

EPA has publicly said it plans to allow states substantial flexibility to craft implementation plans that allow their existing fleets to operate, he noted. That should help protect power supply.

One way to inject flexibility into the standard is to allow states to comply with a rule by implementing a cap-and-trade program, something Northeastern participants in the Regional Greenhouse Gas Initiative and California are likely to propose.

Cap and trade continues to be very unpopular with Republicans, who note that a comprehensive cap-and-trade bill failed to clear the Senate in 2009 and 2010 despite powerful Democratic majorities in both chambers.

Whitfield said that EPA's interest in a "flexible" existing power plant standard is code for the agency's effort to impose a cap-and-trade model nationwide.

"They are really trying to stress flexibility because that's where they want to go, that's what we believe, on existing plants," he said. He promised his bill would "address that."

But Kenney, who heads the Missouri Public Service Commission, said some form of trading or averaging mechanism would actually help coal-reliant states like Missouri or Kentucky offset their coal plant emissions with reductions elsewhere, allowing them to keep operating.

Cap and trade may not fly in the Show-Me State, he said. "I don't have a lot of confidence that something like that would be viewed favorably, for no other reason than it's just a politically charged phrase, frankly," he said. But he said EPA should allow states that wish to use a cap-and-trade approach to comply with the rule to do so.

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