Expected Federally Set Carbon Limits Already Causing Concern in Wyoming

(Casper Star Tribune, May 30) – Anxiety reigns in Wyoming, America’s top coal-producing state, ahead of President Barack Obama’s expected announcement of new carbon dioxide limits for coal-fired power plants.

The new rules, which are scheduled to be unveiled Monday by U.S. Environmental Protection Agency Administrator Gina McCarthy, have been the subject of considerable debate at energy forums across Wyoming in recent weeks.

Speaking at a conference in Cheyenne earlier this month, the chairman of the state Public Service Commission warned utilities may be forced to close coal plants before the end of their useful life. A week later, speakers at an energy summit in Casper predicted a spike in electricity rates because of the rules.

“We’re just very concerned. We see it as part of a grander strategy on the part of the Obama administration to eliminate coal as an energy source,” said Travis Deti, associate director of the Wyoming Mining Association, an industry group which represents the state’s mining interests. “If you take away our customers, you take away our industry.”

Wyoming produces nearly 40 percent of the country’s coal. It is also heavily reliant on coal generation for its own electricity needs and depends on tax revenue from the industry to support its budget.

Not all agree the rules will be bad for the state. They could spur the development of next-generation coal technologies capable of curbing carbon emissions while preserving the fuel’s place in the country’s energy portfolio, said David Wendt, president of the Jackson Hole Center for Global Affairs.

“I do think it is important action being taken by the administration. I think it is critical these technologies get deployed because that is the only way the costs come down over time,” Wendt said. “I think it is a sector that needs to be addressed, but needs to be addressed in a responsible way and in a way that treats industry as a partner.”

Monday’s announcement promises to be the start of what is widely expected to be a protracted battle over emissions standards.

The president’s announcement represents the unveiling of what will be a proposed limit on carbon-dioxide emissions, regulated by EPA under the Clean Air Act. The agency will take public comment on the proposal before finalizing the rule. Legal challenges are expected to follow, analysts said.

The political posturing has already begun. The U.S. Chamber of Commerce released a report Wednesday claiming the rules would cost the American economy $50 billion annually between now and 2030. The analysis was quickly lambasted by Public Citizen, a consumer advocacy organization, which argued energy efficiency and cheaper solar power will help constrain costs. The American Wind Energy Association, an industry lobbying group, released its own report showing wind as a viable alternative to coal.

“Really the devil is in the details,” said Robert Godby, an associate professor of economics and finance at the University of Wyoming who specializes in energy trends. “What level will they have to reach, in terms of the amount of CO2 emissions, and how long they have before they have to meet that standard.”

A more stringent standard and shorter time compliance period raises the likelihood of coal plants shutting down. By contrast, utilities will likely be able comply with the rule if given a longer compliance period and some flexibility in meeting the requirement, he said.

Jim Orchard, senior vice president of marketing and governmental affairs at Cloud Peak Energy, a Wyoming-based mining company, said coal’s importance to the country’s electrical generation capacity provides a practical backstop against the rule from going too far.

“I don’t think anyone is going to do anything that is going to impact significantly the reliability plus the need the country has for low-cost energy,” he said.

The regulations may prompt older, smaller coal-fired power plants to shut down, Orchard said. At the same time, newer coal plants could be asked to run at higher capacity. Many of those newer plants buy their coal from Wyoming’s Powder River Basin.

“We do believe the PRB is the best basin to be in from a mining point of view,” Orchard said.

Still he expressed worry over the new rules, pointing to EPA’s proposed limits on new coal plants announced last year. Those rules call on making coal-fired facilities essentially as clean as efficient natural gas plants.

The technology for achieving those limits essentially requires carbon capture and sequestration, which is expensive and commercially unproven, Orchard said.

Utilities expressed trepidation about the plan, saying they hope the rules would allow for the use of existing technologies and a reasonable time frame to meet the requirements.

“One of the things we are really good at is planning,” said Rocky Mountain Power CEO Richard Walje. Utilities can meet the standards economically if they are given the flexibility to do so, he argued. “The more you provide directives that bind you to certain outcomes, the less able we are to use our skills in a way that balances the speed of transition with the cost and impact to the system.”

Black Hills Power made a similar argument in its written comments to the EPA. The Rapid City-based utility requested that power companies be allowed to use the best existing technology to comply with the standards and be given a well-defined compliance period. The utility, which owns Cheyenne Light, Fuel and Power, also asked that the EPA acknowledge power companies’ previous efforts to reduce emissions, either through the retirement of coal facilities or the addition of renewable generation to their fleets.

States, meanwhile, should be allowed to consider the remaining useful life of a facility when applying the new standards, Wyoming Public Service Commission Chairman Alan Minier wrote in a December letter to the EPA. He estimated it would cost Rocky Mountain Power $6.9 billion to replace the power lost from its coal plants if they were all retired by 2020, or $4.9 billion if they were all retired by 2035. Black Hills would face $529 million in replacement costs if its coal facilities were retired by either the 2020 or 2035 date, he wrote.

“The statements made in this paper are illustrative of possible effects on electricity rates and are meant to inform the EPA of the economic consequences that could result from a poorly drafted regulation or poor consideration to the discretion afforded to states in the Clean Air Act,” Minier wrote.

Original article here.