Regulation

Wyo. Gov. Mead discusses coal-heavy state's plans for compliance, litigation on power plan

As a major coal producer, consumer and exporter, what are Wyoming's plans for complying with U.S. EPA's Clean Power Plan? During today's OnPoint, Wyoming Gov. Matt Mead (R) discusses the questions and concerns he has with the targets EPA has established for his state. He talks about the role natural gas, wind energy and emissions trading could play in a compliance mechanism. Mead also addresses Wyoming's plans to litigate the power plan.

Transcript

Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Gov. Matt Mead, Republican of Wyoming. Governor, thank you for joining me.

Gov. Matthew Mead: Monica, thanks for having me on. I appreciate it.

Monica Trauzzi: Governor, Wyoming is a major coal producer in the United States. Your state uses majority coal for power generation, and you also send coal to more than half the states in the United States. What happens to your state's robust coal industry under the Clean Power Plan?

Gov. Matthew Mead: Well, Monica, it's devastating. I mean -- and you're right. We export roughly 400 million, 390 million tons per year. We're by far the largest coal producer, 30-plus states we supply coal to, and so when we see the Clean Power Plan, what it will do to our state, it will be -- not only be so detrimental to the coal industry in our state, but we think it's going to hurt the country by our inability to provide affordable energy source for so many states. As we see where Wyoming is, you know, in the draft plan, we had reduced CO2 by 19 percent. We, like a lot of other Western states, commented, and we were rewarded by upping it to 44 percent. It would require us to increase use of renewables by about 1,400 percent, effectively causing us to have a 55 percent renewable energy portfolio. It is not doable.

Monica Trauzzi: With your current energy mix for power production, you've been able to maintain low electricity prices in your state as compared to all states in the country. Do you have a sense yet of what impact the Clean Power Plan will have on rates for consumers?

Gov. Matthew Mead: Well, we know they're going to go up, and it's funny, I had a chance during the hearing to ask the administrator about that, and her answer was they'll initially go up, but they're going to go down. I don't see how that is possible. We have about the lowest electricity costs in the country. We're usually in the top five, top 10, about 7 cents. And what that has allowed us to do is to be -- remain competitive in manufacturing, it's allowed us to increase our technology business by attracting things such as data centers, and about 90 percent of the electricity we use in the state is coal-fired generation. So it's impossible yet to know the exact numbers, how much it will go up, because we don't know what we are going to be able to trade or not trade under a SIP or a FIP, and so we don't know, but we know it's going to go up, and we think it's going to go up dramatically.

Monica Trauzzi: So you have some tools at your disposal, like natural gas. How do you plan to harness the abundant natural gas supplies in your state to comply with the Clean Power Plan?

Gov. Matthew Mead: Well, fortunately we have some very good infrastructure already in place in terms of natural gas. We're usually in the top two or three in terms of natural gas production. We love the opportunity to use and develop natural gas, but the challenge is, you know, to do this fuel switching from coal to natural gas, there's this huge expense then, not only in the switching itself, but in stranding assets. In other words, we've already made so many improvements on these coal-fired plants, have so much invested into them, and to say you're just going to set them to the side and get a natural-gas-fired plant, not only the cost of that change, but stranding assets is not just left on the utility company. It's going to be passed on to the consumers, and so we'll pay for it both for the change and pay for the past stranded assets if it's able to go through.

Monica Trauzzi: Was there a retraction, do you think, from the draft to final rule in terms of how EPA handles natural gas and how much you can use natural gas in compliance?

Gov. Matthew Mead: We think that at least there was a change. I don't know if we'd call it a retraction, but I think that when you look at North Dakota, when you look at Wyoming, when you look at other states where they had more than double increase from the draft to the final, it calls into question, you know, how do they even come up with the draft numbers or the final numbers? I mean, that is a significant change and calls into question, in my mind, their ability to even assess the assets or how this plan is going to work. And with regard to natural gas, you know, we certainly have plenty of natural gas, but I think it's a very dangerous situation for the federal government to be in the business of saying this is what you're going to use for a fuel source because had they done that in the past, they would have inevitably been wrong on this.

Monica Trauzzi: Well, but they're not just looking at natural gas. There's also a Clean Energy Incentive Program built into the plan, and your state is a strong producer of wind energy. Are you looking to tap into the Clean Energy Incentive Program to expand your state's use of wind energy?

Gov. Matthew Mead: Yeah, we're -- as a matter of fact, we're getting ready to build what we think is, at least in the nation if not the world, the largest wind farm. It's going to be a 3,000-megawatt wind farm, and -- which is all very good, but in terms of the Clean Power Plan, in that context, the question is who gets credit for it, because the way it looks to us now is, if we produce electricity via coal to another state, that state gets coal -- or that state gets credit. If we produce electricity via wind, say to California, California gets credit. There's no scenario that we can find where we get credit, whether we're producing with coal or producing with wind. And so, you know, what's the incentive of ours to go to renewable if we're -- if we don't get the production credit in terms of reduction of CO2?

Monica Trauzzi: Well, unless you're using it in-state.

Gov. Matthew Mead: Unless using it in-state, but, you know, the amount of wind we have, best onshore wind in the country, you know, for us to get the benefit in terms of money back to our taxpayers, you know, we can provide some of that in-state, but you still have to recognize, whether it's wind or solar, it's not windy all the time and it's not sunny all the time. You still need that baseload ability.

Monica Trauzzi: You mentioned trading earlier. How good, how likely is that multistate trading option looking for you?

Gov. Matthew Mead: Well, it's difficult to tell because, you know, one of the challenges is we could reach an agreement, say, with one, two, three other states if we were inclined to do so, but then you also have the utilities. I mean, how are the utilities going to operate with one another? What agreements are they going to make? And that's where it gets very complex is we could reach agreements with states, but are the utilities, some of which, you know, operate in multiple states, you know, how do they design it? And is the state's design going to be consistent with what they need to do in order to stay in business?

Monica Trauzzi: What are your plans for litigation?

Gov. Matthew Mead: Well, we're going to litigate. It's -- even at 19 percent in the draft, it just didn't look doable to us. And secondly, when it's up to 44 percent, even if I said this is really what I want to do, I don't even know, infrastructure-wise how we would get this done in the time frame that they allocated for us. That's No. 1. No. 2 is what it will cause is not only stranded assets in terms of the coal-fired plants, but we have this wonderful resource, coal, that not only helps Wyoming and other states, but really is an opportunity for the country to stay competitive, to add to our energy security and thus our national security. It makes no sense to me to try to, by manipulation of rule, cut off coal because it's a great resource for our country.

Monica Trauzzi: So you're planning to litigate, but on a separate track, you're also working towards creating a compliance mechanism so that you don't fall in that category that has to comply with the FIP.

Gov. Matthew Mead: I'm not quite ready to say that yet, but we don't want to be leaving our utilities, our citizens flat-footed, so we are -- option is certainly we're going to litigate, but we are trying to see what a SIP would look like, a state implementation plan, because all things being equal, I'd much rather have state regulations than the federal regulations. So we're trying to provide as many options as possible, but hopefully we're successful in litigation.

Monica Trauzzi: You serve as chair of the Western Governors' Association. Is there a broad agreement among the governors on the Clean Power Plan and its impacts?

Gov. Matthew Mead: Well, I think there is. I mean, I don't know that I've talked to every one of them, but you know, what I do know is there's consensus among Western governors. Listen, we all have an interest in making any energy source as clean, as efficient as possible. This is not the way to go about it. The better way is to incentivize innovation and technology as we're doing in Wyoming, looking at capturing a slipstream off a coal-fired plant, seeing if it could be used for petrochemicals, things like graphene. Certainly to capture enhanced oil recovery. Those are the areas where I think the solutions are going to be found rather than this regulation because this regulation is going to suppress coal to the degree, who's going to want to invest in innovation and technology if it looks like it's a dying industry. So Western governors, we pride ourselves on clean environment, and we want to continue that, but you've got to go about it in the right way, and this looks like to us the wrong way.

Monica Trauzzi: All right. The debate continues. We'll end it there, Governor. Thank you for coming on the show.

Gov. Matthew Mead: Thanks very much. Appreciate it.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]

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