This message has been cross posted to the following eGroups: Global Warming Solutions and Carbon Pollution Rule Campaign .
——————————————-

http://www.eenews.net/greenwire/2013/10/07/stories/1059988439
EPA offers ‘blank slate’ to states, utilities as it preps rule for existing power plants
 
U.S. EPA is asking states, utilities and other stakeholders to step up and suggest ways to use a rarely employed Clean Air Act provision to spur reductions in heat-trapping greenhouse gases from existing power plants without driving up electricity prices or inviting litigation.
 
At issue is the Clean Air Act’s Section 111(d), which assigns states the task of writing emissions plans to meet an EPA standard.
 
After proposing a rule for new power plants’ greenhouse gases on Sept. 20, EPA quickly asked stakeholders for feedback on using Section 111(d) for existing power plants.
 
The agency posted four questions<http://www2.epa.gov/sites/production/files/2013-09/documents/20130923statequestions.pdf> asking — among other things — what states have already done to ratchet down carbon dioxide emissions and what they’ve learned from it. EPA was also meeting with state officials and other stakeholders before the government shutdown took effect Tuesday.
 
Joseph Goffman, senior counsel for EPA’s Office of Air and Radiation, said at a recent Washington, D.C., forum hosted by the Bipartisan Policy Center that the agency’s outreach demonstrates that EPA is open to all input at this stage of the game.
 
“Eventually, we’ll start a formal rulemaking process and analyze the information we have,” Goffman said on the event sidelines. “Think of this phase as a sort of extra time for public and state information exchange with the agency as being added on to the front.”
 
Section 111(d) has rarely been used, he noted. “There is something of a blank slate for us and the states to write on in developing a nationwide network of programs.”
 
EPA has little time to spare before beginning a formal rulemaking under the directive issued by President Obama that says EPA must propose a rule by June 1, 2014, and finalize it within a year.
 
States would have a little more than a year to submit plans for EPA’s approval, meaning the agency would have to vet 50 proposals during Obama’s last six months in office.
 
Obama’s memorandum requires EPA to pursue “direct engagement” with states and other stakeholders and to “develop approaches that allow the use of market-based instruments, performance standards, and other regulatory flexibilities.”
 
The agency has emphasized that it is not considering requiring existing power plants to take the same steps to reduce CO2 as new power plants would have to under its proposed rule.
 
Janet McCabe, EPA’s acting air chief, said in an August webinar on Section 111(d) that the statute “recognizes that existing sources do not have as much flexibility to build emissions controls into their designs.” Administrator Gina McCarthy has all but promised that the agency will not conclude that carbon capture and sequestration is the best system of emissions reduction for existing power plants, as it did for new ones (Greenwire<http://www.eenews.net/greenwire/stories/1059987697>, Sept. 23).
 
In his formal remarks at the Bipartisan Policy Center event, Goffman said the goal “is a system that optimizes for a number of factors. Not just carbon dioxide emissions reductions, but the ongoing delivery through clean energy and a modern system of affordable and reliable electricity.”
 
While some stakeholders are still mulling what their response to EPA should be, others have offered principles they say could help EPA craft a legally sound rule to make meaningful reductions at reasonable cost.
 
Environmentalists and advocates of more stringent regulation say EPA shouldn’t set emissions-reduction limits based on what a plant can achieve within its own fence line but should assume that utilities can find opportunities to lower emissions elsewhere in the power system.
 
The Natural Resources Defense Council has shopped around a proposal to the agency and utilities since December that advises EPA to craft a rule assigning emissions targets to states based on their current power portfolio. States with more coal plants would face a less stringent initial reduction target than those that rely on lower-emitting technologies, like gas or hydropower.
 
States could then craft an implementation plan drawing on tools including demand- or consumer-side energy efficiency measures, dispatching more power from gas plants, or state renewable energy and carbon trading programs they may already have in operation.
 
NRDC proposes targets for emissions reduction that are much stricter than what a generator could achieve from simply making efficiency improvements at its own plant. But David Doniger, the group’s policy director for climate and air, said the Clean Air Act allows EPA to consider the extra emissions reductions that flexibility allows utilities to make at lower cost.
 
“The law actually compels this, because the law says you have to achieve the degree of emissions reduction that is achievable, taking into account cost,” Doniger said.
 
‘Inside the fence line’
 
But industry advocates say EPA should base its standard on what utilities can achieve “inside the fence line” at their own plants, and states should then look to offer compliance flexibility and to reward companies that have already taken steps to rein in their emissions.
 
Steve Corneli, a senior vice president at NRG Energy, said in a recent interview that the NRDC proposal would improperly propose one standard for coal- and gas-fired power plants — something EPA moved away from in its proposal for new power plants.
 
While coal-dependent states would be assigned a less stringent initial emissions standard under the NRDC proposal, coal facilities within that state would be placed at a disadvantage compared with gas plants, which would emit less than their state’s limit and could sell credits to the coal plants.
 
Corneli supports a proposal by the National Climate Coalition — a group of energy companies that includes Midwest Generation and Alstom — that advises EPA to propose separate standards for coal- and gas-fired utilities based on reductions that can be made at the plant.
 
EPA would promulgate a model rule based on those standards, under that proposal, with an implementation plan that allows trading of emissions credits across state lines.
 
States could adopt that model rule or craft their own implementation plan to reward investment in renewable energy, demand-side emissions reductions, retirement of high-emitting power plants and other voluntary measures.
 
EPA would be responsible for ensuring that these alternative compliance options resulted in genuine emissions reductions.
 
“States would have a lot of flexibility, but they wouldn’t have the flexibility to sort of make stuff up,” Corneli said.
 
Dallas Burtraw of Resources for the Future said EPA would be on the firmest legal ground if it based its standards on emissions reductions that can be achieved by individual plants.
 
“We do recognize that it is legally least risky for the EPA to itself initially suggest crediting [reductions] within the fence line of the regulated source category,” he said on the sidelines of last week’s International Emissions Trading Association’s Carbon Forum North America in Washington, D.C.
 
States offer ‘more common-sense approach’ — McCarthy
 
But Burtraw envisioned a scenario whereby states and EPA could find some additional emissions reductions by estimating the cost to coal plants of those onsite upgrades — which would amount to about a 4 percent improvement in plant efficiency.
 
Burtraw estimated that those upgrades would cost around $33 per ton of CO2 avoided. But rather than just requiring plants to make those improvements on site, EPA could encourage states to consider giving credit for a suite of options — like shifting load to natural gas plants or co-firing with biofuels or natural gas — that might be cheaper than the on-site improvements and yield more emissions reductions.
 
“In this situation, EPA could expect about four times the emissions reductions as would be achieved from efficiency measures at coal-fired plants only,” he said.
 
The approach could also allow trading of emissions allowances across the fossil fuels power fleet.
 
That kind of rule should keep EPA “still pretty much in the green zone” of its legal authority under Section 111(d), he said, while affording utilities the compliance flexibility they crave.
 
The scenario would not erase the advantage to gas-fired power plants over coal-fired power plants, he acknowledged.
 
“That problem is endemic,” Burtraw said. “When you have flexibility, there’s always going to be units that are winners and units that are losers relative to the performance standard.”
 
McCarthy hinted last month at a breakfast with reporters that she envisions a systemwide approach to emissions reduction — though she did not say whether EPA would propose a tighter standard to go with it, as NRDC urges.
 
“What we’re really trying to do is explain that when we’re looking at existing facilities, it’s really about looking at a state level about electricity infrastructure,” McCarthy said.
 
By working with states, she said, EPA could “get a much more common-sense approach to looking at not only facilities, but how they fit into this larger energy picture and allow states to do the plans that are going to be meaningful to them.”
 
States are assigned a leading role in Section 111(d) rulemakings, though just how much latitude they have is a subject of some debate. The statute assigns EPA the task of approving or rejecting state plans — “so they will have to be rigorous,” McCarthy said.
 
But some industry representatives say the law actually gives EPA scant authority to reject state plans.
 
And the sector has much to gain from states taking the lead on the rule rather than adopting an EPA boilerplate, said Frank Prager, vice president of environmental policy and services at Xcel Energy Inc., at the IETA event (ClimateWire<http://www.eenews.net/climatewire/stories/1059988196>, Oct.2).
 
States are better positioned to craft a rule that takes into account what utilities have already done to bring down emissions, often in compliance with state laws, he said. Xcel operates in Colorado, where state laws and a booming gas production industry have conspired to reduce utility emissions by 35 percent compared with 2005 levels by the end of the decade.
 
Jeanette Pablo, director of federal affairs for PNM Resources Inc., said her company would expect to get credit under the CO2 rule for shuttering coal-fired units in New Mexico to comply with that state’s implementation plan for regional haze. Failing to do so would discourage companies from making similar agreements in the future, she said.
 
“Once you disrupt the certainty that you’ve created, you start to encounter issues with your investors,” she said.
 
‘As long as they meet the target’
 
And state officials say they want EPA to grant them broad discretion to use their current laws as a mechanism to implement the new rule.
 
Collin O’Mara, the secretary of environment and energy for Delaware and current chairman of the Regional Greenhouse Gas Initiative’s board of directors, said at the IETA event that the regional cap-and-trade program should be EPA’s “benchmark” for how the rule should be implemented.
 
“RGGI really is the most plug-and-play system in the United States right now,” he said.
 
Conrad Schneider of the Clean Air Task Force said state renewable energy and carbon programs should be an integral part of the rule.
 
“Different states are going to have different approaches,” he said. “But as long as they meet the target that EPA is setting, they can achieve that. They’ll satisfy and comply with and demonstrate equivalency to the standard that EPA is setting.”
 
But even states like California and the nine RGGI states might need to do more, Schneider said.
 
“It’s possible to credit states for what they have done but recognize that there’s still more to do,” he said. “I think that’s where a lot of the discussion is going to be over the next few months, is how to treat states that have done a lot versus how to treat states that haven’t.”

——————————————-
Sarah Ann Shanahan
Midwest Clean Energy Coordinator
Clean Wisconsin
634 W. Main St. Suite 300
Madison, WI 53703
sshanahan@cleanwisconsin.org
608.251.7020 x26
http://www.cleanwisconsin.org
reamp.org

——————————————-