SEATTLE — The Environmental Protection Agency’s new rules requiring states to cut carbon emissions from power plants are likely to change the energy landscape in Northwest states, even though they have far fewer coal-fired power plants than most of the U.S.
The new rules bolster the role of the states in curbing carbon pollution — something the governors of Oregon and Washington embraced, as the are already working on carbon-reduction strategies of their own. Both states have investor-owned utilities that rely on coal burned in nearby states, which will have to bring their operations into compliance with the new rules once they’re adopted.
The EPA on Monday released the details of a much-awaited set of rules under the Clean Air Act that represent the most significant action on climate change yet by the Obama administration.
The rules will require states to cut carbon emissions from power plants by 30 percent below 2005 levels by 2030. Each state faces its own reduction-rate target — and they vary widely. Washington’s is the highest at 72 percent. Oregon’s target is 48 percent and Idaho is expected to cut power plant carbon emissions 31 percent.
The rules will trigger emissions reduction strategies, as well as anticipated spending for renewable energy at the state level.
Under the new rules, states will be given control over how they achieve the CO2 reductions, be it from increased energy efficiency, bringing more renewables online or joining regional carbon trading or cap-and-trade systems, as have been instituted in California and nine northeastern states.
“We’re on the verge of one of the most exciting opportunities that we have which is addressing emissions from the existing fleet of power plants around the country,” said Dennis McLerran, regional EPA Administrator for the Northwest. “About 40 percent of the nation’s climate emissions come from that existing fleet of power plants.”
The EPA Rules stem from a section of the 1970 Clean Air Act that allows states to set performance standards and reduce emissions from coal plants and other existing sources of pollution. In 2007, the U.S. Supreme Court held that greenhouse gases are “air pollutants” under the act.
Past CO2 emissions in the U.S. and projected goal
Credit: Tony Schick
Under the new rules, some states will be given higher CO2 limits than others, based upon their current energy mixes.
About 8 percent of the power generated in Washington and Oregon comes from coal. But when the amount of electricity brought in by utilities like Puget Sound Energy, Portland General Electric and PacifiCorp is taken into account, the amount of electricity generated by coal for Northwest customers jumps.
Oregon gets a little more than one third of its total electricity from coal, which is purchased from a handful of western states, including Wyoming, Montana, Colorado, Utah, Arizona and Nevada. Washington gets roughly 15 percent from coal.
State by state emission rates and goals
Vermont and the District of Columbia are excluded because the EPA is not proposing goals for those jurisdictions. Source: EPA
Credit: Tony Schick
The one coal plant left in Washington, located in Centralia, is set to be phased out by 2025. Boardman, Oregon is home to the sole coal plant in that state, which is on track to stop burning coal by 2020.
The Boardman plant is owned by Portland General Electric, which serves 836,000 customers in Portland and the Willamette Valley. Company spokesman Steve Corson said the new rules raise many questions for utilities like PGE. One of the biggest: how will such efforts already underway be taken into account by regulators? Carson pointed not just to PGE’s plans to stop burning coal at the Boardman plant, but also to its expanding reliance on wind power and its push for energy-efficiency upgrades.
“We really need to figure out how the things we’re already doing fit into the direction this rule wants us to go,” he said.
One of the biggest single sources of coal-fired power for PGE and Puget Sound Energy is a plant owned by multiple utilities in Colstrip, Montana. Puget Sound Energy spokesman Grant Ringel said the company has looked at the possibility of halting its use of electricity from the Montana coal plant.
“And certainly in the context of these rules, (it) would be something that certainly has to be discussed,” he said. First though, the utility would want ensure it could replace that electricity with a reliable and affordable source of energy.
The new rules target coal that is burned within the United States, but when asked whether the rules will have any impact on proposals to export more than 100 million tons of coal through the Northwest each year, Dennis McLerran, Northwest administrator of the EPA, said they would not.
One predicted outcome of the stricter limits on U.S. coal plants is the phasing out of more aging plants around the country. That could further incentivize the coal industry to look to export terminals as a way to sell their product abroad.
Stock price for Peabody Energy, the largest coal company in the U.S., has dropped by roughly 15 percent in the past two weeks. Stock of Cloud Peak Energy, another Powder River Basin coal company, is currently trading at $18 dollars per share, a decline of roughly 5 percent over the past two weeks. Arch Coal, as of Monday morning, has also declined 20 percent over the past two weeks. All three companies are looking to export coal through proposed terminals in the Northwest.
Washington Gov. Jay Inslee, like President Obama, has tried to introduce climate change legislation that would target CO2 emissions, but thus far he has been unsuccessful. The EPA rules represent a potential bypass of the resistance the two leaders have faced in the federal and state legislative branches.
Before this strategy can play out, the EPA will most likely be taken to court over the new rules, which should be finalized in 2015. Last week, in anticipation of the new rules, the U.S. Chamber of Commerce released a report that says the EPA’s rules will cost the U.S. economy $51 billion annually. Climate change skeptics in the Washington Legislature have vowed to continue opposing any mandatory limits or carbon pricing schemes.
The rules will reinforce state-level efforts to put a price on carbon — either in the form of a carbon tax, as has been instituted in British Columbia, or a cap and trade system, as has been instituted in California and nine eastern states (under the Regional Greenhouse Gas Initiative).
“The money gets recycled to the economy and to individuals, but it is going to mean that fossil fuels are more expensive,” said Yoram Bauman, an economist and fellow at the Sightline Institute in Seattle. Bauman has been pushing for a state tax on carbon in Washington for the past five years. “As Al Gore says, ‘We need to tax what we burn, not what we earn.’”
Last fall Washington state joined with Oregon, California and British Columbia in a regional agreement to lower CO2 emissions. Just over a month ago, Inslee signed an executive order which created a task force to decide how to tax and/or cap carbon emissions at the state level. The task force will present a plan to the state Legislature at the beginning of 2015.
“My executive order also calls for an end to the importation of coal power generated in other states and for the development of policies that drive energy savings for businesses, renewable deployment for economic growth, and more,” the Democratic governor said in a statement released Monday. “Washington state and the Pacific Coast are moving forward on climate action, and our work will be much more effective with committed federal allies.”
Oregon Gov. John Kitzhaber also applauded Obama’s proposed rules. He issued a statement praising the proposal’s emphasis on giving states flexibility to build on their carbon-reduction strategies already underway. The Democratic governor noted that his state’s approach, which includes the reduction of carbon in transportation fuels like diesel and gasoline, is in the early stages of being implemented.
On a recent visit to the Northwest, EPA Administrator Gina McCarthy said that the goal of the new rules are “not to preempt governors but to enable them.”
“I think we can build on the work of the states and use that to launch a federal program that will really provide consistent emphasis and investment in the kinds of technologies that will keep this country competitive,” she said during her May 22 stop in Seattle.
Once the new rules are adopted, states will have up to three years to develop plans to come into compliance and 15 years to implement those plans.
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