CLIMATE

Behind the noise, central states study EPA rule cooperation

Amid the barrage of public criticism, political sword-rattling and legal challenges that surround U.S. EPA's proposed Clean Power Plan, a group of environmental regulators and utility commissioners from 14 states has been quietly at work in the background, in search of ways to cooperate on implementation.

The group, which calls itself the Midcontinent States Environmental and Energy Regulators, or MSEER, formed soon after the Obama administration announced its plan on June 2 to slash carbon dioxide emissions from existing power plants by nearly a third by 2030.

Participants include both utility and environmental regulators. They come from red and blue states, from the Gulf Coast to the Rockies. They come from wind-rich states like Iowa; from Louisiana, where natural gas rules; and from coal-heavy Indiana.

But for all of their differences in fuel mix, politics and geography, they are bound by a common goal -- finding the best way for their state to meet one of the most significant and complex environmental regulations ever proposed.

"You've got states that take wildly varying positions on the need for a rule, or how the proposed rule actually looks," said Doug Scott, chairman of the Illinois Commerce Commission, who has led the meetings. "But those of us who -- if this rule survives the court challenges -- are actually going to be changed with putting together plans, we've got to assemble the best information that we can so that we can put together the best plan that we can or make the best recommendations we can to our governors and our legislatures."

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There are few certainties with the Clean Power Plan, both in terms of what the rule will ultimately say when finalized next summer, or how states will comply with the requirement to cut carbon emissions given the wide latitude offered by EPA.

What is guaranteed is that states that participate in MSEER can walk away from the group at any time.

Scott calls it a "no regrets" approach, and he said it was the only way to bring states together to discuss the proposed rule.

"'No regrets' is really the only way to do this," he said. "You're not asking for anybody to sign on; you're just asking for them to be part of the discussion."

MISO outreach

Scott helped organize MSEER, initially by reaching out to state officials in the footprint of the Mid-continent Independent System Operator, the regional power grid operator.

"We just picked out a few people to see if there was any interest in doing something like this," he said. "There was then and continues to be great interest in at least exploring the issues."

Participants include environmental and utility regulators from Arkansas, Illinois, Indiana, Iowa, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, South Dakota and Wisconsin. As of late October, officials from Kentucky had participated only as observers, and North Dakota had expressed support for efforts to explore implementation options, but hadn't participated in meetings.

The group has gathered for meetings in St. Louis, Chicago and Indianapolis and held conference calls to discuss multi-state compliance strategies. It has worked with the Great Plains Institute and the Bipartisan Policy Center, which is helping with modeling.

"The idea behind the modeling is so people will have an understanding of, at least directionally, if not with all of the specifics that they might need in an individual state, how going it alone would differ from to the extent it does from a multi-state plan," Scott said.

Economists have touted the efficiencies of multistate cooperation since the Clean Power Plan was announced. Grid operators like the Carmel, Ind.-based Midcontinent Independent System Operator have estimated billions of dollars in savings.

Cheryl LaFleur, chairwoman of the Federal Energy Regulatory Commission, referenced the potential benefits of multistate cooperation again Tuesday at an event in Washington. She also hinted at the complexity involved.

"Some regions, of course, have very different political economies and very different resource mixes within states that are quite close to each other, so it's not necessarily straightforward to agree on a plan," she said.

Robert Kenney, chairman of the Missouri Public Service Commission and one of a half-dozen members of MSEER's steering committee, said the group represents a collaboration of environmental and utility regulators that he hasn't seen before.

"To the extent that a regional compliance option is pursued, this is the kind of dialogue we're going to have to have," he said.

The Missouri PSC submitted comments to EPA on Monday that included several specific questions about how the rules would treat multi-state cooperation. Among them: Who gets penalized if a multi-state group is out of compliance?

Kenney said it's too soon to know whether Missouri will seek to join up with other states or go it alone.

"There are still a lot of questions that need to be answered to determine if a regional approach works for us," he said.

A fact-finding mission

Scott said there's no set timetable for MSEER, which more represents a fact-finding mission that will help provide states as much data as possible to base a decision. As proposed, states would have to submit plans to EPA as soon as mid-2016 unless they're part of a multi-state group, in which case they have an additional year.

"If people find common ground, great," he said. "If not, at least all of us will have done what we could to understand it better from a multi-state perspective."

Scott brings a unique perspective to the Clean Power Plan discussion. Before being named to lead the Illinois commission, he spent almost six years as head of the state EPA. And before that, he was mayor of Rockford, Ill., and a state legislator.

While at Illinois EPA, he participated in the Midwest Greenhouse Gas Reduction Accord, a voluntary commitment to cut emissions through a regional cap-and-trade program.

The Midwestern accord was signed by governors of six states and the premier of Ontario in 2007. Together with the Regional Greenhouse Gas Initiative in the East and the Western Climate Initiative, the Midwestern accord was part of a broader effort known as the Three Regions (later renamed North America 2050) that sought to find common ground on greenhouse gas reduction.

But by early 2011, the Midwestern accord petered out -- a victim of political change as control of governor's offices in Iowa, Michigan, Wisconsin and Kansas switched from blue to red.

"The three regions group became two regions and a couple of guys," Scott jokes. "It just ended up with me and Minnesota at the meetings."

Scott said the experience with Midwestern accord involved a few of the same state officials in the Midwest. But he cautioned that comparisons with MSEER end there.

The Midwestern accord was voluntary, involved carbon offsets and extended beyond the power sector, which is the lone focus of the Clean Power Plan.

"You're not talking about a bunch of states volunteering to do something that they don't have to do," he said. "You're talking about it in terms of there's a rule that they may have to comply with and if they do then what's the best option for them. So that's a whole different discussion."

If there is any lesson to be drawn from the Midwestern accord, Scott said, it's this: "If you wanted to design a big, multi-state program, you could, and we've got the template for it. But nobody has even dusted off the old accord."

Time well spent

Perhaps more relevant is another Midwestern effort to find common ground on carbon reduction.

The Midwest Power Sector Collaborative, a project of the nonprofit Great Plains Institute, formed in early 2012 and brought together officials from coal-dependent utilities, environmental groups and state regulators who worked together for almost two years on a set of recommendations submitted to EPA last fall -- ahead of the Clean Power Plan -- regarding potential CO2 regulations.

The group has since drawn additional participants and filed follow-up comments to EPA specific to the rule proposed in June. Members also are conducting some modeling to look at compliance strategies and with an emphasis on how states can work together, said Brad Crabtree, vice president for fossil energy at the Great Plains Institute.

Scott, who also has worked with the collaborative, said there's no timetable for MSEER. And in the end, the meetings could lead to one or more groups of states joining together to comply with whatever EPA rules are finalized.

Even if the meetings produce no regional or multi-state agreement, the meetings and the time spent organizing them will still have been worth the effort, he said.

"Even if every single state decides to go it alone, my theory is all of that collaboration, all of that work, all of that conversation is still worth it," Scott said. "It's worth it to understand where everybody else is coming from. It's worth it to understand what's important to them. It's certainly important to understand how the economics work."

Reporter Emily Holden contributed.

Twitter: @jefftomich | Email: jtomich@eenews.net

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