EPA Open to Revising Power Plant Proposal, McCarthy Says as States Raise Concerns

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By Andrew Childers and Anthony Adragna

Sept. 25 — The Environmental Protection Agency is open to revising its proposed carbon dioxide emissions standards for existing power plants as it gathers public input, Administrator Gina McCarthy said in a speech at Resources for the Future.

The EPA's proposal would set state-specific carbon dioxide emissions rates for the power industry, but McCarthy said Sept. 25 that those targets could change as the agency continues to evaluate its rule.

“You may see adjustments in state levels. You may see adjustments in the framework,” she said.

At a separate Bipartisan Policy Center event Sept. 25, states and utilities said the EPA proposal would actually penalize states that have already taken steps to reduce their carbon dioxide emissions by not giving them full credit for those programs.

The EPA proposed the rule (RIN 2060-AR33) June 18 (79 Fed. Reg. 34,830). States would be required to submit plans to the EPA to administer the carbon dioxide standards through a process similar to that used to approve state implementation plans for other air pollutants.

McCarthy said the goal is to give states as much flexibility as possible to allow them to determine for themselves how best to achieve their proposed emissions rates.

“We're allowing every state to do what they want in terms of developing their own plans that they can send to EPA that say, ‘I can get here this way best,' ” McCarthy said.

EPA Hears State Concerns 

However, some states have raised concerns with their proposed emissions rate targets that could lead the EPA to revise the requirements in the final rule, McCarthy told reporters after her speech.

“We've received a lot of suggestions that really fall within that category of fairness: Are we being asked too much, is somebody else not being asked enough? We'll take a look at those comments, and I think there are some adjustments that will be made,” she said.

McCarthy also said states have raised issues with how new natural gas-fired power plants, which have lower carbon dioxide emissions than coal-fired facilities, will be credited and how the proposed rule would credit states with nuclear power plants.

The EPA also plans to issue additional guidance to states that are interested in converting their proposed emissions rate into a mass-based emissions standard to facilitate emissions trading programs.

Early Action Penalized 

States that have already taken steps to reduce their carbon dioxide emissions said that the EPA's decision to measure reductions from 2012 penalizes early action.

At the Sept. 25 Bipartisan Policy Center forum, David Thornton, assistant commissioner for the Minnesota Pollution Control Agency, said his state's utilities have already taken steps to transition from coal-fired power to cleaner generation sources. However, many of those actions took place prior to 2012, which means Minnesota won't be allowed to count that toward meeting the EPA's proposed emissions rate for the state.

“Our utilities that have spent a lot of money, and our public utility commissioners that are looking out for ratepayers are concerned that our ratepayers invested in this and should get a little more return,” Thornton said.

Some states are also penalized for new nuclear generation, Ray Harry, senior director of governmental affairs at Southern Co., said. Southern anticipates beginning operation of two new nuclear generating units at its Vogtle power plant in 2017 and 2018. However, the emissions reductions from adding those two units has already been included into Georgia's emissions rate target, making its emissions rate 14 percent more stringent than it would have been otherwise.

“You certainly shouldn't be penalized for doing things that reduce carbon even though the decisions were made prior to the beginning point,” Harry said.

Thornton also said that the EPA's proposal needs to clarify how states should take credit for purchasing renewable energy. For example, Minnesota has set a goal of getting 25 percent of its electricity from renewable generation sources. However, some of that power is purchased from North Dakota. The EPA's proposal doesn't clarify how states would be allowed to take credit for such energy purchases.

“Our ratepayers are paying for that energy,” Thornton said. “Our state law requires our utilities to generate in that manner. We think it's only right to be allowed credit for that.”

McCarthy told reporters the EPA has heard similar concerns raised in its discussions with state officials.

“The reason why I'm excited about it is that they're gelling around some really concrete things that the agency really needs to think about,” she said. “They're exactly what you hope for in a rulemaking process.”

Final Rule in June 

The EPA has already received more than 1 million comments on the proposed rule, McCarthy said, and the agency recently extended the comment period until Dec. 1 to allow for more public input.

Despite the extension, McCarthy said the EPA still expects to issue the final rule in June 2015 as required by President Barack Obama as part of his climate action plan.

“I actually made the decision to extend the comment period because we had more to talk about and in the kind of setting that we're allowed to do in a comment period,” McCarthy told reporters. “We're still working to the June deadline, but I don't want anyone to think that we're arbitrarily cutting off discussion for any purpose. [Our] focus is on implementing it as quickly as possible.”

Natural Gas a ‘Game Changer.'

McCarthy called the rise of natural gas as an integral part of electricity generation a “game changer” for the nation. She said natural gas provides benefits nationally to the U.S. and to air quality.

While the rise of natural gas as an affordable fuel source has changed the utility industry, McCarthy told reporters coal would remain an integral part of America's energy supply for the foreseeable future.

“Coal is not going to be out of the system,” McCarthy said. “It's still going to have a significant part of the portfolio.”

Separately, Christine Tezak, managing director of ClearView Energy Partners, told the Natural Gas Roundtable Sept. 25 the EPA's regulations for existing power plants would almost certainly boost demand for natural gas within the utility industry.

Tezak said the EPA couldn't have envisioned five years ago that natural gas would make up such a large fuel source within the electricity industry and that it would become so cost competitive.

To contact the reporter on this story: Andrew Childers and Anthony Adragna in Washington at achilders@bna.com and aadragna@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com