ENERGY TRANSFORMATION: CLEAN POWER PLAN AND THE WEST

When candidate Obama was running in 2008, he identified energy as his top priority and described his goal as the “transformation of American energy” to address the threat of climate change. On August 2, 2015, the President and the EPA Administrator announced the final rule to implement his Clean Power Plan. The focus of the rule is the reduction of carbon emissions from 2005 levels by 32% in 2030.

The rule is issued under the authority of the Clean Air Act Section 111(d) in what many acknowledge is a big stretch for language that was drafted long before climate change was an issue. The rule came as the result of a 2012 settlement of litigation brought by environmental groups and several northeastern states against EPA. See a just-released Senate Majority Staff, Environment and Public Works Committee Report, “Obama’s Carbon Mandate: An Account of Collusion, Cutting Corners, and Costing Americans Billons” on this “sue and settle” tactic. http://goo.gl/gLaviN

The rule addresses new and existing power plants and establishes a different carbon target reduction from a 2012 baseline for each state. According to EPA, each state has the flexibility to choose how it meets its own carbon targets, but the rule is built on three EPA “building blocks”:
• Make fossil fuel power plants more efficient
• Increase generation form lower-emitting combined cycle natural gas plants for reduced generation from higher emitting coal/gas-fired power plants
• Increase generation from new zero-emitting renewable energy power sources
If a state refuses to develop a plan consistent with the rule, EPA will enforce a federal model plan. The rule encourages states to work together and to develop a “cap and trade” program, similar to a proposal that failed to pass Congress in the President’s first term.

EPA projects compliance costs for the rule of between $$5.1-8.4 billion, with an individual’s energy costs increasing by 3%-1% early in the compliance period, but dropping to a net “savings” in 2030 as a result of reduced energy consumption.

Winners and losers? Obviously coal is the big loser, but surprisingly natural gas also came up short with the Administration backing away from gas as a “bridge fuel” in favor of incentives to support wind and solar generation and demand reduction.

The rule is voluminous – existing power plants are addressed in over 1800 pages, new and modified plants are covered in 900 pages and the EPA model federal plan clocks in at 755 pages. See http://www2.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants

What does the rule mean for the West? Much to the relief of Alaska (and Hawaii) there is no carbon target for these states, yet. Several western states are already on track to meet their carbon targets by 2030 as the result of state law and/or an energy mix already reliant on renewables: California, Washington, Oregon, Nevada and South Dakota. The biggest loser among the states is North Dakota, which saw its 2030 target quadruple from an initially proposed 10.6% reduction to a 44.9% reduction in the final rule. Democratic North Dakota Senator Heidi Heitkamp described the rule as a “slap in the face.” Wyoming, which supplies 70% of the nation’s coal, saw its target double from the draft rule to a 37-44% reduction in the final rule. Wyoming elected officials uniformly attacked the plan with Wyoming Senator Barasso (R) calling it a “job crushing mandate.” Montana was also hit hard with a doubling of its draft goal to a 41% reduction. Montana’s Democratic Governor Bullock said he was “extremely disappointed” by the change, and Montana’s AFL-CIO, which had planned to attend a rally in support of the rule, withdrew in light of the impact of the changed targets on union jobs.

In Utah, where 80% of its power is coal-fired and its renewable energy is sold out of state, elected officials denounced the plan; Senator Orrin Hatch (R) said the rule is “unjustified and potentially devastating for Utah and the nation.” In Colorado, reaction to the state target of a 28% reduction was divided along party lines, with the Democratic Governor Hickenlooper saying he will work to implement the target while Republican Attorney General Cynthia Coffman is considering joining in litigation to challenge the rule. In New Mexico, Republican Governor Susana Martinez and Democratic Senator Tom Udall were united in their belief that New Mexico was ready to comply with the law. See EPA-prepared charts for good summary of state-by-state impacts. https://goo.gl/4rScB4

Opinion among green groups is divided with Environmental Defense Fund Fred Krupp praising the rule as “historic” and an example of Presidential leadership, while the climate researcher and former NOAA scientist, James Hansen, derided the rule as “practically worthless.” The New York Times, in a front page story this week seemed to be “shocked” (see “Casablanca”) that the coal industry was already planning on how to defeat the rule before the rule was published. http://goo.gl/x0yzd3

There is 100% agreement on one thing — the Clean Power Plan is headed for the courts as soon as EPA publishes the official version of the rule in the Federal Register expected later this month.