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EPA Proposes Limits on Carbon Dioxide From Power Plants: What It Means for the Pacific Northwest

June 06, 2014 posted by Eric Christensen

The U.S. Environmental Protection Agency this week issued is long-anticipated proposal to limit carbon dioxide from power plants, dubbed the "Clean Power Plan." Predictably, both industry groups and environmental interests attacked the plan, in some cases even before it was released. A careful review of the proposal suggests, however, that the impacts of the rule, if adopted, are likely to be relatively modest in the Pacific Northwest, chiefly by placing additional economic pressure on already beleaguered coal-fired plants in Montana and Wyoming, while adding the pressure of federal law to break the log-jam in Olympia regarding climate-related legislation. The flexibility provided to states to comply with carbon dioxide limitations also lays the groundwork for interstate cooperation to identify least-cost solutions and may create new and lucrative opportunities for companies involved in energy conservation, clean tech, renewable energy and a variety of other industries where carbon dioxide emissions might be reduced at relatively little cost. The proposed rule has been summarized in greater detail elsewhere. In brief, the proposal at its core would require existing power plants to reduce carbon dioxide emissions by 30 percent over 2005 levels by 2030, with interim limits that would come into force in 2020. The proposal establishes state-specific goals for carbon dioxide emissions, but provides states considerable flexibility to meet these goals using four "building blocks" -- improving power plant heat rates, improving energy conservation, dispatching power from natural gas and other less carbon-intensive resources rather than from coal generation, and encouraging the construction and dispatch of renewable energy resources. The proposal also encourages interstate cooperation and allows for trading of carbon-reduction credits, as already occurs, for example, in the Northeast's RGGI program. The EPA's final rule is due by June 2015, with state implementation plans to be finalized by June 2016. Litigation over the rule is certain to occur, so it is unclear whether these deadlines will be met. The choice of a 2005 baseline, rather than the 1990 baseline generally used in discussions of greenhouse gas reductions, is important because U.S. GHG emissions peaked in that year and have declined 9% overall since then, while power plant emissions have declined 16%, primarily because the "fracking" boom has created cheap natural gas, which has displaced significant amounts of coal used for electricity generation. Georgetown University's Climate Center has published a useful table, which provides an indication of reductions required from 2012 emissions levels rather than 2005 levels. If adopted and implemented, the proposed rule would require Washington's carbon dioxide from power plants to be reduced by 72% over 2005 levels, to an average of 215 pounds of carbon dioxide per MWh of electricity produced within the state. At first glance, these goals appear rather shocking in light of the fact that Washington's vast hydroelectric and wind resources mean that it already has one of the cleanest electricity sectors of any state. But the 72% reduction takes into account the fact that the Centralia coal-fired plant is already scheduled to convert entirely to natural gas by 2025. Hence, early reactions from Washington state officials suggest that even this stringent goal could be met with relatively modest additional measures. The story in Oregon and Idaho is similar. The proposed rule would require a 48% reduction in carbon dioxide emissions from power plants in the state, but Oregon is already well on its way to meeting that target because of the planned phase-out of coal at the Boardman plant. When completed, the Boardman and Centralia transitions will leave Washington, Oregon, and Idaho without any in-state coal generation. The biggest impact of the proposed rule is therefore likely to be on coal-fired plants in Montana, Wyoming, and other inland Western states. While the required carbon dioxide reductions for those states would be relatively modest -- 19% in Wyoming, 21% in Montana -- the predominance of coal-fired plants in those states suggests the proposed rule could have greater impacts there, with concomitant impacts on the significant amounts of power imported into the Pacific Northwest from those states. Regulators in Washington and Oregon have recently called into question whether the significant investments needed to bring older coal-fired units in the interior West into compliance with EPA regulations on "criteria" pollutants such as mercury and sulfur dioxide can be justified from a ratepayer perspective. The proposed rule is likely to add to the pressure to close or transition these units to cleaner alternatives. The proposed rule will also add to pressure to break the political impasse that has arisen in Olympia on climate policy. If the EPA rule is adopted, at least some additional measures will be required in the three Northwest states and may give Washington Gov. Inslee additional avenues to work around legislative gridlock as the Department of Ecology implements the new rule. And, given that the three states will have, by far, the least carbon-intensive power grids of any state, future efforts will need to be focused on the transportation and industrial sectors. In Washington, the transportation sector already emits substantially more GHGs that the power sector, and this imbalance will only rise as the Centralia coal units are phased out. By providing great leeway to the states, EPA's proposed rule provides plenty of room for new and creative solutions. For example, Wisconsin diary farmers are already selling carbon offset credits into the California market, which are created when those dairy farmers capture and destroy methane (a less common but much more powerful GHG than carbon dioxide). Similar creative solutions, involving interstate agreements to swap carbon offsets, could help reduce the burden of EPA's carbon dioxide rules on, for example, fossil-fueled electricity producers in Montana and Wyoming, while creating lucrative new markets for carbon offsets that could be generated by a wide range of industries in the Pacific Northwest states. If you have any questions about EPA's proposed carbon dioxide rule, the Clean Air Act, or other matters involving the energy or environmental law, please contact a member of GTH's Energy, Telecommunications, and Utilities or Environment & Natural Resources practice groups. We're proud that our partner Jim Waldo was recently named 2013 Lawyer of the Year for Energy and Natural Resources Law, and practice group members Don Cohen, Bill Lynn, and Brad Jones were all named among Seattle's Best Lawyers.