New EPA regs: Too early to tell cost

BRICE WALLACE

The Enterprise

A new federal regulation will cause Utah’s existing power plants to cut carbon dioxide emissions, but the ultimate effect on the wallets of Utah ratepayers — residential and business — is as murky as a winter inversion.

Panelists gathered last week for the first-ever Utah Air & Energy Symposium said it is simply too early to assess the cost of the new Environmental Protection Agency (EPA) regulation, called the Clean Power Plan Final Rule. It requires Utah to cut CO2 emissions at the plants by the year 2030 by 23 percent by mass or 37 percent by rate — reductions one panelist described as “substantial.”

Jeff Burks, a partner at Energy Strategies, said understanding of the rule and its impacts on western states “is just now starting to take shape” as stakeholders pore over hundreds of pages of the rule and await the EPA’s release of technical documents related to it.

Chad Teply, vice president of strategy and development at PacifiCorp, Rocky Mountain Power’s parent company, said PacifiCorp is focused on customer impacts of the rule and will work with the nine states in its operating territory as they develop plans to comply with the rule.

“Each state is basically in its infancy, if you will, with respect to how they’re going to develop a plan,” Teply said.

Chris Parker, director of the Utah Division of Public Utilities, was succinct regarding cost impacts: “We don’t know yet what that means, what it looks like to protect Utah ratepayers under this rule.”

“It’s still very much still up in the air,” said Mason Baker, general counsel at Utah Associated Municipal Power Systems (UAMPS). “We’re still trying to get our arms around this rule. It’s a behemoth of a rule, and it’s still taking a lot of digestion for us to get comfortable with it.”

UAMPS has 45 members in eight states, including Murray, Springville, Kaysville and St. George. He did predict that the rule could result in the agency changing the mix of its power generation resources — it currently gets 21 percent of its electricity from coal-fired plants and buys 45 percent of its power from the market, much of it from coal facilities. It might build a small nuclear reactor to replace market purchases and power from coal plants that may go off-line, he said.

Regardless, the cost of compliance is uncertain, he said.

“Since there’s so much uncertainty around the rule, we’re still trying to figure out — and I guess what everyone’s trying to figure out — is, what is it going to cost to comply with the rule? We don’t know that,” Baker said.

Bryce Bird, director of the Utah Division of Air Quality, said stakeholder groups will soon meet to start work on a Utah plan to meet the rule’s requirements.

“In this case, this is a long and detailed regulation and … we’re looking at many sources to understand the implications both within the state, within the utilities, regionally and nationally, as we look at selecting a strategy from among the possible choices,” he said.

Initial compliance with the rule would begin in 2020.

“We don’t know yet,” Bird said about the rule’s economic impacts, “but the plan is to identify the issues that we need to address as part of the planning process, and then bring in the people with the best information to make that decision.”

The process calls for informational meetings to discuss the final rule, listening sessions throughout the state, an update to the Legislature in May and initial plan submittal next September. The plan will address reliability, efficiency, renewable energy, costs and trading programs.

On the plus side, panelists said states will have options when developing compliance plans. Some feature trade-off components with other states to meet the rule’s requirements, and the EPA is developing model trading rules. Under the mass-based approach, Utah appears to be at or near compliance in 2030, Burks said.

Earlier in the event, Cindy Crane, president and chief executive officer of Rocky Mountain Power, vowed to keep the company’s plants operating. “Our coal plants in Emery County have a long and cherished history in our company and in the great state of Utah,” Crane said. “We are committed to continue working on keeping those plants and jobs viable in a new regulatory landscape.”

Utah, however, didn’t take long to respond to the new Clean Power Plan rule. After the rule was published in the Federal Register, Utah joined 23 others states in filing a lawsuit challenging the EPA’s legal authority in the matter in what some people have called executive branch overreach.

But several panelists insisted that states should not only pursue the litigation route but also develop their own plans if the lawsuit fails.

Complicating matters is that some components of the rule are not yet completed and a particular state’s plans likely will affect other states.

“It’s a chicken-and-egg problem,” said Peter Ashcroft, resource and policy analyst at the Governor’s Office of Energy Development. “States don’t know how to proceed because they don’t know what all the others states are doing. It’s a big poker game.”

Another focus of the symposium was an EPA regulation reducing allowed levels of ground-level ozone, cutting it from the current level of 75 parts per billion (ppb) to 70 ppb. Speaking via video recording, U.S. Sen Orrin Hatch, R-Utah, said changes to the standard should be based on science “and should take economic impacts into consideration.”

He described the change as “well-intended” but neglecting the science indicating that much of the ozone is naturally occurring — a characteristic that varies from region to region. That standard would disproportionately affect western communities, “including those in the Uinta Basin, in costly, negative ways,” he said.

An area being designated as not attaining the standard “can result in significant and detrimental consequences for a community,” he said. “At a time when Americans across the country are struggling to regain their footing, to make ends meet, the federal government should be facilitating job creation and economic expansion, not stifling these efforts.”

Hatch supports a program allowing communities to have voluntary, locally based agreements with the EPA as a way of meeting federal standards.

Alan Matheson, executive director of the Utah Department of Environmental Quality, said that most of Utah can meet the new ozone standard, but it will be a challenge along the Wasatch Front and Uinta Basin.

“The fact that we’ve been able to meet new standards in the past and continue to grow our economy, gives me hope that we can do the same going forward,” he said.

Gov. Gary Herbert stressed a need for state-based, collaborative solutions to address environmental and energy issues. He and others said Utah can have cleaner air while advancing the energy sector and the state’s overall economy. Herbert said Utah cannot have a strong economy without energy.

“We have to protect health to the greatest extent we know how and are able, and yet, at the same time, we have to be pragmatic in our approach so that industry can continue to grow,” said Scott Anderson, president and chief executive officer of Zions Bank.

Utah’s energy sector accounts for about $21 billion, or 14.8 percent, of the state’s economy and about 37,900 jobs.

The symposium was presented by the Governor’s Office of Energy Development, Zions Bank, Tesoro and Rocky Mountain Power. Other panels focused on reducing transportation emissions and recognizing buildings’ role in local air quality.