REGULATION

State agencies that rarely work together do to prepare for EPA's power plant rule

Twenty years ago, the work of state air and utility regulators aligned about as often as Earth and Comet Hale-Bopp. But the historical separation between state agencies has eroded in recent years as U.S. EPA has sought to regulate power-sector emissions under the auspices of the Clean Air Act (CAA).

Now, with the launch of EPA's Clean Power Plan, which would regulate greenhouse gas from the power sector under the CAA's Section 111(d), agencies have found themselves working shoulder to shoulder to understand and respond to the rule.

When Wyoming Public Service Commissioner Al Minier needs to coordinate with his counterparts at the state air regulatory office, he doesn't ask his staff to set up a meeting. "Around here, if you need something from someone, you pick up the phone and you call them," he said.

While agency heads may be on a first-name basis in Wyoming, they typically respect the institutional distance between them, he said. "Normally, I don't do [the air administrator's] job, and he doesn't do mine," he said.

"The planning process for 111(d) is unlike any we have endured since the CAA was passed in 1970," explained Bill Becker, executive director of the National Association of Clean Air Agencies (NACAA), which represents the majority of state air agencies charged with carrying out the rule. Complying with the rule will require a new level of coordination and outreach between state air regulators, who have the ultimate responsibility for developing a compliance plan, and utility overseers, he said.

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It will also require a new injection of federal resources, he said. "There's no question that state air pollution agencies will require more of everything under this rule," he said.

Scrambling to get out ahead of the rule

Many states are already well along on the path to inter-agency cooperation. In Michigan and Kentucky, specially-appointed "czars" oversee state action on Section 111(d). In Arkansas, a multi-agency working group meets regularly to discuss the rule. In many Northeastern states, inter-agency ties were cemented during the development of the Regional Greenhouse Gas Initiative, a nine-state cap-and-trade program that kicked off in 2008.

"This is part of the recognition or the credit we get for being early actors; we don't have to forge new relationships," said Kelly Speakes-Backman, a Maryland public service commissioner who is also chairwoman of RGGI's board of directors.

Many are receiving guidance from the "3N" alliance of NACAA, the National Association of Regulatory Utility Commissioners (NARUC) and the National Association of State Energy Officials (NASEO), an alphabet soup that collectively represents most air and utility regulators in the country.

But the unprecedented scope of the EPA rule means that states and EPA alike are headed into uncharted territory. "Putting together comments on EPA's plan -- which is what most regulators have been collaborating on up to now -- is one thing," said Matt Larson, an attorney with the law firm Wilkinson Barker Knauer LLP. "Putting together a legally enforceable plan is going to be something else entirely. You can imagine, there are going to be disagreements."

Speaking different languages

Before the 1990s, state air and utility regulators "would meet about once a decade," said Ken Colburn, a senior associate with the nonprofit Regulatory Assistance Project. A movement toward comprehensive energy legislation by the Clinton administration led to the initial meetings of the 3N associations, as well as early partnerships between state air and utility regulators.

Those partnerships were revived years later when EPA passed a suite of regulations, including its Mercury Air Toxics Standards and Cross State Air Pollution rules. In Kentucky, the new rules compelled regulators to reach out beyond their typical jurisdictions, said John Lyons, who headed the Kentucky Department of Air Quality at the time.

Utility regulators "didn't have the staff over there familiar with the environmental side of the rules, and we didn't have the power sector expertise," he said.

The prospect of significant new climate regulation from the Obama administration strengthened those ties, and Lyons was promoted to the post of assistant secretary for climate policy in 2013, charged specifically with overseeing Kentucky's response to EPA carbon rules.

Participation between environmental and energy-sector air regulators will be critical to meeting the CPP's targets cost-effectively, experts said. While the regulatory authority of the CPP falls to air regulators, the impacts of the plan fall primarily on the electrical sector. And unlike past air regulations, which simply set standards for power plants, the CPP looks beyond power plants to include fuel switching, carbon-free energy and demand-side energy efficiency as potential "building blocks" toward state emissions rate targets.

Understanding how those building blocks can be most cost-effectively employed will require the expertise of a wide range of stakeholders from the electrical sector, utility regulators chief among them.

Public utility commissions have their own powerful incentive to come to the table and work on a final compliance plan, Larsen said. "If PUCs don't have a hand in the process, they're going to be stuck with the air regulator's decision," he said. "That's not to their advantage if they're the ones who are ultimately stuck handing ratepayers the bill."

Legislatures and governors will 'get involved'

Air and utility regulators won't be the only parties coordinating on a final plan. In places where the CPP goes beyond the scope of previous air quality regulation, it's likely that agencies will have to seek new authority from state governments. Adoption of additional renewable energy could require more ambitious portfolio standards, for example, or new laws could be needed to bring municipally and cooperatively owned utilities into a state plan.

"You're going to see some transfer of authority under this rule," said Clint Woods, executive director of the Association of Air Pollution Control Agencies. "State legislatures are going to get involved."

That could complicate the work of state agencies if legislatures are looking to send a political message on EPA's regulatory authority.

Some governors are also showing an interest in the high-profile rule and could have a hand in its final development, said Richard Sedano, director of U.S. Programs at the Regulatory Assistance Project. "It can be hard for agency heads to get their colleagues to focus on things outside their primary focus unless the governor makes it a priority," he said. "What a governor can do is lead, to set an example, to set a tone."

And while most PUCs are intentionally removed from the hierarchy of the governor's office, they tend to be "very respectful" of the administration, said Doug Scott, chairman of the Illinois Commerce Commission and a former director of the Illinois EPA.

"From what I've seen, there's pretty good communication" between them, he said.

Still, regulators are "on uncertain ground and of course don't want to run crossways of any political leadership either," Colburn said.

That means agencies may have to be pragmatic. "They're having to ensure that each one of those choices is approvable not just by EPA but by their governors, by their state legislatures and potentially by a whole suite of other state agencies that will be involved in the process," Woods said.

But regardless of the position of state governments, agencies have for the most part begun to work on the rule, said NACAA's Becker.

"Even among the states that are currently suing EPA over its rule, those same states' officials are rolling up their sleeves," he said. If the lawsuits fail, states will still need a way to comply with the plan, or face a federal implementation plan from EPA, he said.

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