September 5th, 2010, Editorial, The New York Times

In December 2008, a gigantic storage pond belonging to the Tennessee Valley Authority near Kingston, Tenn., effectively burst at the seams, spilling a billion gallons of mainly toxic coal ash from a T.V.A. power plant into surrounding lands and rivers.

It was the perfect moment to right a long-festering environmental wrong. The Environmental Protection Agency promised tough new regulations governing the disposal of coal ash. Industry complained. The White House hesitated. Nothing happened.

The administration can redeem itself in the weeks ahead. Last Monday, the E.P.A. held the first in a series of regional hearings on two quite different proposals governing how coal-fired power plants dispose of waste.

One proposal, favored by public-interest groups and by agency scientists, would replace a patchwork of uneven — and in many cases weak — state regulations with new national standards. It would formally designate coal ash as a hazardous waste under federal law, require industry to phase out porous sludge ponds, replace them with sturdy, leak-proof facilities, and take other protective steps.

The competing proposal would establish federal guidelines for disposal but leave enforcement to the states. It would also preserve coal ash’s status as a nonhazardous substance. Though the proposal barely improves on the status quo, the Office of Management and Budget — after heavy lobbying by the coal industry — agreed to give it equal billing in the public hearings.

The tougher proposal is obviously better. Coal ash, the byproduct of coal combustion, is a huge problem. Its toxins — which can include arsenic, lead and other heavy metals — can poison local water supplies. America’s power plants produce 130 million tons of the stuff every year, enough to fill a train of boxcars stretching from the District of Columbia to Australia.

Some of this is usefully, safely and profitably recycled to make concrete and other construction materials. Designating coal ash as hazardous would not diminish these uses, despite industry claims. What new rules would do is greatly reduce the dangers from the 60 percent or so of the coal ash that now winds up in lightly regulated landfills.

Just in time for the start of the hearings, three public-interest groups — Earthjustice, the Sierra Club and the Environmental Integrity Project — identified 39 coal ash disposal sites in 21 states where leaking waste has raised water pollution levels beyond those permitted by federal laws. These sites can now be added to the E.P.A.’s own list of 67 dangerous sites.

By any measure, coal ash is a national problem demanding a national response.

By Matthew Berger of SolveClimate.com

The long-awaited draft air permit for a proposed coal-fired power plant in Kansas was released last Wednesday, starting a race against the clock that will determine whether the plant – if approved – will then also be subject to the EPA’s new rules regulating the emission of greenhouse gases that go into effect January 2nd.

The draft permit was released in response to a new application, submitted to the Kansas Department of Health and Environment (KDHE) last January by Sunflower Electric, which is hoping to build an 895 megawatt extension to their current plant in Holcomb, Kans.

Originally, they had sought permission for a 2,100 MW facility, but their air permit for that plant was denied in 2007 by KDHE. It was the first instance of a regulatory agency denying a permit for coal plant construction on the basis of the dangers of greenhouse gas pollution.

Now that the EPA has declared greenhouse gases a danger to human health and welfare and tailored rules for phasing in regulations starting in 2011, Sunflower Electric will likely face yet another hurdle in obtaining approval to break ground on the troubled, controversial coal plant that has been a focus of repeated national attention.

Four Vetos by Sibelius

The Republican-controlled Kansas legislature tried four times to circumvent the KDHE’s authority to obtain a permit for the plant, but ran into a veto from Democratic Governor Kathleen Sebelius each time. A break for Sunflower came last year when Sebelius was confirmed as the new U.S. Secretary of Health and Human Services and then-Lieutenant Governor Mark Parkinson took over. Parkinson brokered a back-room deal with Sunflower – albeit for the much smaller 895 MW plant – a week after taking office.

That was last May. Since then, the EPA has moved the ball on federal regulations, so that starting in 2011 projects with the potential to emit more than 75,000 tons of greenhouse gases a year, such as the proposed Holcomb plant, would need to include an analysis of how they would use the best available control technology, or BACT, to limit those emissions, among other requirements.

Is Sunflower taking the possibility of those rules into account?

Company spokesperson Cindy Hertle said that would be “pure speculation” because those rules are not yet in place and still the subject of some controversy.

But, she says, “We’ve always followed the rules and will continue to follow the regulations, so we will undergo whatever process they deem necessary.”

A congressional effort led by Sen. Lisa Murkowski (R-AK) had tried to strip the EPA of its authority to regulate greenhouse gases. But that effort failed last month. While other congressional measures to block EPA action might be possible, it seems increasingly likely the new rules will go into effect on schedule on Jan. 2.

A Matter of Timing

Whether the Holcomb plant will be subject to those rules, though, is a matter of timing, but time appears to be on the side of “yes”.

“It really depends on when the final permit is issued,” Mark Smith, head of the EPA’s Air Permitting and Compliance Branch for Kansas and neighboring states, told SolveClimate.

“If this permit is issued before [Jan. 2], then these particular rules would not apply. If their final permit is issued after, then they would… and we would view greenhouse gas requirements as applying to the facility, so the state would need to address those in that permit that is issued.”

It seems likely that the final permit would not be issued until after the Jan 2nd deadline. Rod Bremby, head of the KDHE recounted how the last Sunflower permit took 17 months to approve. The state sets an 18-month deadline for issuing decisions on air quality permits.

“We have no idea how long this will take but we’ll try to be as efficient as we can,” he told SolveClimate, but cautioned that “the interest appears to be higher with this permit as opposed to the last.”

This is why his agency created multiple opportunities for public comment. Those opportunities were announced with the draft air permit: a series of public hearings in Overland Park, Salina and Garden City as well as comments received by email and in writing.

The agency received 774 written and oral comments on the 2007 permit, according to KDHE spokesperson Kristi Pankratz. “We anticipate that number or greater for this comment period,” she said.

The Timeline

The timeline, then, looks like this: The 18 month clock began ticking on the day, June 30, when KDHE deemed the permit application complete. Hearings will take place on Aug. 2, 4 and 5 and the public comment period will end Aug. 15. At that point, the comments will be reviewed and responses prepared. A summary of the responses will undergo an internal review. And, finally, a final determination will be announced.

For their part, the EPA has “been working with the state and Sunflower over the past year and looking at drafts as they’re made available to us. Our role really is as an oversight agency,” said Smith, saying that Kansas is the issuer of the permit and thus the main player.

He said the EPA will provide comments just as citizens will. It will also ensure the state responds to comments and that the requirements of the Clean Air Act and state regulations are upheld.

Coal-fired plants have come under attack as out of date, inefficient and excessively polluting by environmental groups and this pressure – combined with the prospect of stricter clean air regulations – has led many proposed projects to be shelved over the past couple years. Plans for 26 were dropped in the last year alone.

But Hertle said the Holcomb plant would be a “super critical pulverized coal plant,” which means it would “burn at higher temperatures and therefore it will use less coal when in operation. Hence, it will have fewer emissions.”

Power Would Go Out of State

But environmental groups are not so sure of the desirability or benefits of the plant.

“For Sunflower’s minimal power needs, building a near 900 MW coal plant is quite possibly the most risky option for ratepayers and the environment,” said Stephanie Cole of the Kansas Sierra Club.

They have also argued that the majority of the power generated in Holcomb would be pumped across state lines to Colorado, leaving local citizens with all the pollution and little of the benefits.

At least, notes Cole, those citizens will now have the opportunity to voice such concerns.

“Citizen input was not allowed in the agreement Governor Parkinson reached with Sunflower last year, and our hope is that the public will recognize that the permit hearings are an important opportunity to have our concerns with this project considered,” she said.

From Solveclimate.org

by Leslie Berliant - May 26th, 2010

A last minute amendment to the Kansas budget bill seeks to bar the Environmental Protection Agency (EPA) from regulating carbon dioxide linked to global warming in that state. If adopted, the effort — led by Republican State Sen. Tim Huelskamp — could quickly turn into a lesson in unintended consequences.

Observers say the poorly written measure could end up giving the EPA unprecedented oversight over coal permitting and other regulation of utilities in Kansas, at a time when fossil fuels are under political attack in Washington.

The issue has sparked outrage on both sides of the aisle. But perhaps the most worried are backers of Sunflower Electric Corp.’s proposed coal-burning facility. The plant is two years from breaking ground in the town of Holcomb, and the EPA still must approve its revised permit application.

Supporters had hoped for a 2010 greenlight from EPA. But in a May 18 letter to Kansas Gov. Parkinson, Sunflower CEO L. Earl Watkins, Jr. warned that the new budget amendment could delay the permit until after the 2011 deadline for the EPA to issue its “tailoring rule.” The rule is expected to outline what sources of carbon emitters will be regulated, and it could put the plant in jeopardy.

“Under the budget bill, if KDHE [Kansas Department of Health and Environment] staff is prohibited from addressing GHG [greenhouse gas] regulations, they could be forced to delay issuing permits on large projects until FY 2011 is expired,” the letter said. “Otherwise, EPA would step in and implement the GHG piece of the CAA [Clean Air Act], or simply refuse to allow KDHE to issue permits for which GHG regulations would apply.”

Measure Revives Long-Running Battle over Holcomb Plant

The controversy marks the latest chapter in a three-year struggle between lawmakers, environmental advocates and utilities over new coal-fired construction in Kansas.

In 2007, the proposed 2,100-megawatt Sunflower coal facility in Holcomb, some 60 miles from the Colorado border, became the first in the nation to be denied an air permit by a state agency based on potential dangers that greenhouse gas emissions pose to human health and the environment.

After four follow-up attempts by the Kansas legislature to push through plans for the two large coal plants — and four vetoes by then Gov. Kathleen Sebelius — the Sunflower saga finally seemed to be drawing to a close last May, when a backroom deal was brokered between the utility and the current governor, Mark Parkinson.

The agreement gave Sunflower the greenlight to build a smaller 895-megawatt plant at the site.

But now the state legislature appears to be back at it. And this latest attempt to intervene in the coal plant’s fate may have fractured a key relationship between Sunflower and one of its chief advocates, State Sen. Huelskamp (picture).

Huelskamp, a Republican who is also running for Congress in the Kansas 1st District, added a late amendment to the budget bill that would prevent any state agency from spending money “to plan, draft, propose, promulgate, finalize or implement any rules and regulations pursuant to the Clean Air Act [CAA] involving the greenhouse gases identified” in the EPA’s endangerment finding.

In stripping the Kansas Department of Health and Environment (KDHE) of its right to control global-warming pollution, observers say, EPA would get that authority instead.

The move would have negative consequences for all utilities in Kansas, including Sunflower. The odd twist to the story is that Huelskamp has long been a vocal supporter of Sunflower and has received campaign contributions from the utility.

Opponents of the amendment, which now include Sunflower and Westar Energy, another Kansas utility, agree it paves the way for the EPA to take over the permitting process for new coal plants in Kansas. Fearing “regulation overkill” from the feds, they have asked Governor Parkinson to use his line item veto power to kill the amendment.

The budget hit Parkinson’s desk last Tuesday. He now has until Friday to use his authority to remove the controversial measure. At this late stage, its fate remains uncertain.

According to Stephanie Cole, a spokesperson for the environmental group Sierra Club, many in Kansas believe Parkinson will veto the amendment, but there is no guarantee.

“Parkinson has been unpredictable in terms of his energy and environmental policy,” said Cole. “He’s somewhat of a wild card.”

The Clean Air Act Enters the Mid-Term Elections

For the Sierra Club and other environmental groups largely on the sidelines of the dispute, the purpose of the amendment is hazy. According to Cole, what is clear is that it’s a “risky” political tactic on the part of Huelskamp.

“There is speculation that this could simply be a political move to boost [Huelskamp's] campaign,” Cole said.

“However it’s a very risky move if the goal is to please those who want the coal plant built. While he is describing the EPA as radical, this very amendment could lead to more EPA oversight. It’s a very risky strategy that could backfire.”

Scott Allegrucci, executive director of the Great Plains Alliance for Clean Energy (GPACE), a Topeka-based nonprofit group, agrees that the amendment may have been politically motivated.

“You have to consider that there is an egregious amount of pandering to the far right,” Allegrucci said. “In Kansas we have three parties — Democrats, moderate Republicans and conservative Republicans. The most vitriol is between conservative and moderate Republicans.”

One of Huelskamp’s opponents in the Congressional primary, Rob Wasinger, another Republican, is already making the potential EPA takeover of the state permitting process a talking point in his campaign. He has been accusing Huelskamp and Jim Barnett, who is also running in the primary and has not come out for or against the amendment, of political grandstanding.

Paving the Way for an EPA Takeover in Kansas: Why Utilities are Opposed

Amanda Goodin, an attorney at Earthjustice, a California-based law firm, says the amendment is consistent with legislation coming out of Kansas that aims to circumvent the EPA. But it goes much further by revoking all Kansas authority to administer the CAA under its state implementation plan.

Instead, it would leave the EPA as the direct enforcer and issuer of air permits. This is a situation, Allegrucci says, that both state rights advocates and emitters don’t want to see happen.

“There are all sorts of regulatory and litigation implications,” he says.

According to Cole, federal standards will be enforced in Kansas one way or another, if the past provides any indication. When state agencies previously have been denied this authority, she said, the EPA has stepped in.

“The last time the legislature passed legislation that restricted Secretary [Roderick] Bremby [of KDHE] with a provision that restricted KDHE from enforcing regulations stronger than any federal guidelines, the EPA stepped in,” Cole said.

“It would seem that we are taking a gamble again. Once again the state is risking the EPA stepping in and taking over the state’s control for regulating air quality.”

Clare Gustin, vice president of member services and external affairs for Sunflower, says that the company did not know about the amendment in advance.

“We believe there are some unintended consequences and that there may be some confusion about the status of greenhouse gas regulations and how that impacts all sources of greenhouse gases,” Gustin said.

Watkins, Sunflower’s CEO, likewise recognized the bill’s unintended consequences in his May letter to the governor.

“We appreciate the effort of the Kansas legislators to protect Kansas companies from additional regulation. But additional regulation through the Clean Air Act should not be ignored,” he wrote.

The Intent Behind the Amendment

Allegrucci doesn’t believe that Sunflower was unaware of the amendment in advance. He believes that they simply miscalculated.

“Sunflower’s fingerprints have been on every single piece of legislation that has to do wtih air quality,” Allegrucci said. “I find it difficult to believe that given the amount of money and staffing that Sunflower and their allies have applied to this fight that they didn’t know anything about this amendment.”

Huelskamp’s office did not return SolveClimate’s request for comment, but the Kansas Liberty newspaper quotes Huelskamp as saying that he was determined to “oppose the EPA implementation of their cap-and-trade regulatory scheme at every possible opportunity,” although the EPA does not currently implement any carbon trading mechanism.

Huelskamp also referred to the EPA as “radical” in a Lawrence Journal World article.

Sources say that upon adding the amendment in a late-night budget session, Huelskamp mentioned Sunflower and its regulatory struggles several times during his remarks. Sunflower has been saddled with massive debt to Kansas taxpayers. At one point the figure was upwards of $1 billion. The utility still owes $200 million to the Rural Utilities Service (RUS) for its previous coal plant.

Current permitting costs, as well as the pricey legal and legislative battles to get approval for the new Holcomb-based coal plant, have been bankrolled by Colorado utility Tri-State, which will own 80 percent of the plant and its energy output, says Allegrucci.

“The coal plant is Tri-State’s, not Kansas’…Presumably, they don’t want to face the regulatory hurdles and citizen opposition in Colorado,” said Allegrucci, adding that Tri-State is “funneling tens of millions from out of state to fight that battle.”

While Sunflower is now fighting the amendment, Allegrucci said the intention of the measure may have been to help the company more easily build new coal plants, in the wake of its third RUS restructuring in 2002.

“Under current restructuring, Sunflower is incentivized to build three massive coal plants in Holcomb,” he explained.

“In some ways, the worst possible outcome for Sunflower could be one 900 MW plant which is 80 percent owned by a Colorado utility. It’s always been about a three-plant expansion. They are so in debt that they can’t stop [at the 900-megawatt plant]…We have to consider that the intent may have been to clear the way for future power plants from Sunflower.”

Cole agrees with that assessment.

“In the settlement agreement it states that Sunflower is not allowed to submit an application for any additional coal plants until April 30, 2011,” she said. “However, at one point they were proposing 2,100 megawatts. That’s greatly more than what they need. Clearly, Sunflower has a desire for hosting coal capacity for out-of-state utilities as it’s becoming more difficult to build coal in other states.”

The settlement agreement made between Gov. Parkinson and Sunflower, which approved the smaller plant has been questioned on grounds that the governor may not have had the authority to broker the deal and issue the necessary air permit.

In fact, the EPA stepped in last July and mandated that Sunflower resubmit its request for a permit. The agency also said that Kansans should be given an opportunity to participate in public hearings. KDHE is in the midst of that process, and despite Sunflower’s confidence about the permit, it still must be approved by the EPA.

Allegrucci says that the irony is that if Sunflower and the legislature had not tried to circumvent KDHE through the legislative process in the first place, they might already be through the prescribed regulatory and judicial process for reevaluating a permit denial.

“As a citizen of the state, what’s sad is that this is the third year in a row that Sunflower’s political allies have done whatever they want to do with the legislative process in Kansas in an attempt to host an unnecessary, polluting coal plant that benefits Colorado,” he said.

Karl Brooks Selected to Lead EPA’s Region 7

From the Environmental Protection Agency

(Kansas City, Kan., Jan. 13, 2010) – Today, U.S. Environmental Protection Agency Administrator Lisa P. Jackson announced President Barack Obama’s selection of Karl Brooks to be the Agency’s Regional Administrator for EPA’s Region 7. This region encompasses Iowa, Kansas, Missouri, Nebraska, and 9 Tribal Nations.

“I look forward to working closely with Karl on the range of urgent environmental issues we face, in region 7 and across the nation,” said EPA Administrator Lisa P. Jackson. “At this moment of great challenge and even greater opportunity, I’m thrilled that Karl will be part of our leadership team at EPA. He will certainly play an instrumental role in our Agency’s mission to protect our health and the environment.”

Regional Administrators are responsible for managing the Agency’s regional activities under the direction of the EPA Administrator. They promote state and local environmental protection efforts and serve as a liaison to state and local government officials. Regional Administrators are tasked with ensuring EPA’s efforts to address the environmental crises of today are rooted in three fundamental values: science-based policies and programs, adherence to the rule of law, and transparency.

Karl Boyd Brooks has taught History and Environmental studies at the University of Kansas for the past decade. Previously, Brooks was the Executive Director of the Idaho Conservation League and served six years in the Idaho State Senate. Brooks holds a B.A. from Yale University, a Masters in International Relations from the London School of Economics, a law degree from Harvard University and a Ph. D. from the University of Kansas.

From First Enercast Financial
Obama’s EPA Faces Legal Minefield Over CO2 Regulation
Dec 23, 2009
By Ian Talley
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)–Environmental lawyers say the Obama Administration is walking through a legal minefield as it plans to regulate greenhouse gases.

But despite the possible explosion of court challenges, petitions and law suits, they say Obama’s Environmental Protection Agency still has a chance of charting a regulatory course that prevents critics’ worst fears of sustained economic damage.

Politically, however, the EPA’s action may have put the president and his Democratic party in a very tight spot.

Under President Obama’s climate czar, Carol Browner, the EPA has officially declared greenhouse gases a public danger through the Clean Air Act, a necessary precursor for regulating such emissions. The agency is expected to finalize a new emission rule for light-duty vehicles by the end of March.

Once that rule is approved and enforced, it automatically triggers regulations for emitters above a 100-ton to 250-ton-a-year threshold across the economy. Large bakeries, hospitals, dairy farms, churches, refiners, power stations, chemical plants, apartment buildings and any other facilities that emitted over those amounts would be subject to regulations under the Clean Air Act. The EPA said an estimated four million to six million facilities could become subject to regulation, permitting and cutting their emissions.

In an attempt to avoid the subsequent avalanche of permitting and the potential to harm the economy, the EPA proposed to “tailor” the threshold in the first few years to emitters of more than 25,000 tons a year, covering only around 13,400 of the largest emitters. – Political analysts say the EPA’s endangerment decision was meant to pressure Congress into crafting and passing a legislative solution to cutting greenhouse gases, especially after the Administration said it preferred legislation over regulation under the Clean Air Act. Though the House passed such a bill, efforts in the Senate have all but died, postponed to March-April at the earliest. Exacerbated by a weak, non-binding international climate agreement and by vulnerable Democrats heading into an election year, political analysts say passage of a climate bill by Congress is increasingly unlikely.

Without congressional action, that leaves the onus on the EPA to regulate greenhouse gases under the Clean Air Act.

Groups across the political spectrum are already preparing to challenge the EPA’s actions. The Chamber of Commerce has said the endangerment finding was based on faulty premises. Less main-stream environmental groups such as the Center for Biological Diversity have said they’re prepared to press the Administration to regulate at lower thresholds, petitioning for a new, very stringent national air quality standard for greenhouse gases.

While legal experts say the courts are unlikely to block the endangerment finding during any legal challenge–calling it a heavy lift–the EPA’s other actions are potentially more vulnerable to challenge.

“The EPA is on a tightwire without a net with this tailoring rule,” said Patrick Traylor, a partner at the Washington office of Hogan & Hartson. “There’s a very real risk a court could vacate the rule and a higher-than- normal risk they could stay it.”

In particular, the EPA is using an obscure legal doctrine that ostensibly gives the agency flexibility to craft new rules under existing law. If the agency were to draft new greenhouse-gas rules at the much lower thresholds as stated in the law, the EPA says there would be “absurd” results in terms of the bureaucratic process and potential economic impact.

Under existing case law, particularly the Chevron vs Natural Resources Defense Council decision, federal agencies are subjected to a two-part test, however. The first step is determining whether the statutes are unambiguous.

“There’s a real risk a court’s going to say the law’s unambiguous” and could disallow the tailoring rule, forcing regulation at the lower thresholds, Traylor said.

Jason Schwartz, a Legal Fellow at the Institute for Policy Integrity at New York University School, said “the EPA doesn’t have a slam-dunk case.”

“Neither the absurd-results canon nor the doctrine of administrative necessity will allow the EPA to create exemptions to those requirements,” Schwartz and his Institute for Policy Integrity colleague, Inimai Chettiar, wrote in an April policy article.

One potentially saving argument, Schwartz says, is the EPA’s plan to phase in different threshold-level emitters, allowing five years to study streamlining the permitting process for facilities under the 25,000 level. The courts may defer to the agency’s action on that account.

Adding to the pressure on the EPA is the fact that many states already have the lower thresholds on their books. Because the tailoring rule doesn’t preempt state laws, that could automatically expose any small emitters to regulation and potential lawsuits.

The Clean Air Act gives any citizen the right to charge potential polluters with violation of the Act’s regulations. Not only environmentalists, but unions and business competitors could use the law to prevent new construction or modifications of emitting facilities.

State-level challenges are already shaping the regulatory process, with environmentalists’ challenges seeking application of new source-review rules to consider greenhouse-gas emissions. Schwartz said challenges are a “definite” likelihood, especially once the vehicle-emissions regulations become effective.

Coincidentally, it’s a local-level challenge that may end up temporarily saving the EPA from the dangerous political impact of regulating greenhouse gases through the Clean Air Act. As a result of a petition for a coal-fired power plant in Deseret, Utah, the EPA administrator under the George W. Bush Administration, Stephen Johnson, issued a memo that restricted permits from considering carbon-dioxide emissions.

Often called “shadow law,” such memos give the Obama Administration the chance to outline what greenhouse-gas facilities and sectors should be regulated. Current Administrator Lisa Jackson–who has said the agency is reviewing the Johnson memo–could direct the agency to regulate greenhouse-gas emissions for stationary sources only if they are part of specially designated categories.

Although the EPA could choose to use this concept as a “Plan B” when finalizing the tailoring rule next year, Traylor says it would be seen as fundamentally inconsistent with EPA’s primary legal theory and is unlikely to be included.

Instead, the EPA may wait to revisit that option, potentially buying a year’s delay in greenhouse-gas regulations by declaring the vehicle-emissions law will become effective in 2011 instead of when the final bill is published in 2010.

“That gives the EPA time to litigate in courts, and if it loses, it can institute the alternate plan later,” Traylor said.

By Karl Mortished in The Times

Carbon dioxide is dangerous, says Lisa Jackson, administrator of the US Environmental Protection Agency (EPA). It is dangerous, like the growling exhaust pipe of a 25-year-old Chevy Corvette or the sulphurous plume from a coal-fired power station. Overnight, America has decided: carbon-dioxide pollution is a public health hazard and emitters will be shunned like cigarette smokers.

The EPA’s decision on Monday to treat CO2 as if it were a noxious poison was craved and dreaded in equal measure by climate activists and industrialists. It is a bombshell, more than just a public relations ploy to make President Obama look cool at the Copenhagen summit. It unleashes one of the toughest US regulators and gives it a mandate to go after heavy industry with compliance orders and fines. Power generators, oil refiners, chemical manufacturers and cement makers have been warned: the bloodhounds of the EPA will hunt you down and curb your emissions.

This is politics, of course. A lot must happen before the EPA begins to slap fines on recalcitrant power companies. The agency needs to draw up regulations that work — a monumental task. It needs to decide which CO2 abatement technologies are effective and affordable — at present, there are no commercial carbon-capture technologies, only government-subsidised pilot projects.

But make no mistake: this is the beginning of America’s puritanical crackdown on carbon. If you are surprised that the atmospheric gas that feeds the roses in your garden is being labelled a dangerous poison, remember that America doesn’t regulate its citizens with the gentle persuading hand of the Queen; it does so with the passion of the religious convert. If the EPA is unchallenged, carbon will be hunted down, in the tailpipes of cars in Los Angeles and in the stacks of power plants in Virginia.

America’s electricity industry has reacted with alarm to Ms Jackson’s decision. The US is mostly powered by coal, a fossil fuel that accounts for 80 per cent of America’s abundant greenhouse gas emissions. America has enormous coal reserves — indeed Warren Buffett has just made a big bet on the coal industry, buying a controlling interest in Burlington Northern Santa Fe, a railroad group that trucks coal from mines in Wyoming to Texas and southern California.

There is an alternative to the EPA’s bloodhounds: two climate change Bills making their way through the US Congress would create cap-and-trade systems to offer incentives to industry to curb emissions. The two Bills are similar and both give huge exemptions to power companies in the form of free emission allowances. The American legislation is, in microcosm, what a new Copenhagen climate treaty might look like: a hotchpotch of complex regulation, extravagant concessions, get-out clauses and bribes to politically sensitive groups.

On the one hand, America has the hydroelectric-powered Washington State, where Democratic Senator Maria Cantwell waves the climate-change hockey stick. At the other end of the country, you have coal-fuelled states, such as Georgia, where a federal tax on top of the monthly utility bill spells political death. So, inequality in the carbon burden means taxing Pacific Coast liberals in order to subsidise coalmining rednecks.

It begs the question whether a climate change Bill is possible. That is where the threat of the EPA looms. In a landmark case in 2007, the Supreme Court found that CO2 was an air pollutant within the meaning of the America’s Clean Air act, opening the door for Monday’s statement by Ms Jackson. Climate activists have been waiting for this moment, when the EPA would aim its guns at Big Oil and Big Coal.

Mr Obama is probably not keen to let the EPA do its job. It would be a blunt instrument and politically dangerous, for the important reason that the EPA would be “fair”. Unlike a congressional Bill, with its tweaks, trade-offs and bungs, the EPA would regulate carbon, everywhere. There would be no concessions: every tonne, whether emitted by car, cow or chemical plant, would have to be measured and fined.

The impact on US industry would be harsh and investment would flee from energy-intensive industries. Carbon leakage to Asia would become a flood and, quickly, a hue and cry would build for stringent US tariffs on Chinese goods.

There would be another important consequence of an EPA audit of US industry and that would be a huge rush to natural gas. Coal has secured a get-out for the time being in the congressional Bills. Without special treatment, however, the only quick lower-carbon solution available to US power utilities is huge investment in efficient gas-fired generation plant. Gas produces a third of the CO2 emissions of coal and, after new discoveries, gas in the US is extremely cheap. If Ms Jackson has her way, this could be America’s big dash for gas.

carl.mortished@thetimes.co.uk

The following statement was issued on 12/17/09 by Scott Allegrucci, executive director of the Great Plains Alliance for Clean Energy, in reaction to an announcement that the EPA has determined that greenhouse gases pose a danger to human health and the environment. 

Today’s EPA announcement is good news for Kansans, who are uniquely positioned to capitalize on the advanced energy economy of our nation’s future.

New data from the National Renewable Energy Laboratory shows that our state is now the second-windiest state in the union. Kansas has the native talent, business initiative and workforce capacity to put wind power to work for Kansans and energy users throughout the Midwest.

Kansas also is home of the Hugoton gas field, one of the world’s largest reserves of natural gas, an energy asset that generates half the carbon dioxide of coal. Natural gas can only grow in abundance and importance with new, proven gas extraction methods.

Wind and natural gas partner in Kansas to form a native foundation for a future central utility grid to serve growing power demands throughout the Great Plains and the nation. As stewards of resources available to us, Kansans are poised to take the lead in the energy future that the EPA launched today. This is a significant development for the economy and for energy jobs in our state.

EPA Administrator Lisa Jackson said today that the EPA finding “continues our work towards clean energy reform that will cut GHGs (greenhouse gases) and reduce the dependence on foreign oil that threatens our national security and our economy.” We in Kansas owe it to ourselves and future generations to begin now to move from past fuel sources and embrace this energy future.

For further information see:

By Steven Mufson and David A. Fahrenthold – The Washington Post
Republished from the Lawrence Journal-World

Washington — The Obama administration moved closer Monday to issuing regulations on greenhouse gases, a step that would enable it to limit emissions across the economy even if Congress fails to enact climate legislation.

The move, which coincided with the first day of the international climate summit in Copenhagen, seemed timed to reassure delegates there that the United States is committed to reducing its emissions even if domestic legislation remains bogged down. But it provoked condemnation from key Republicans and from U.S. business groups, which vowed to tie up any regulations in litigation.

In Monday’s much-anticipated announcement, the Environmental Protection Agency said that six gases, including carbon dioxide and methane, pose a danger to the environment and health of Americans and that the agency would start drawing up regulations to reduce those emissions.

“These are reasonable, common-sense steps,” said EPA Administrator Lisa Jackson, adding that they would protect the environment “without placing an undue burden on the businesses that make up the better part of our economy.” At the same time, however, EPA regulation is no one’s preferred outcome — not even the EPA’s. Jackson said her agency and other administration officials would still prefer if Congress acted before they did.

Sen. John F. Kerry, D-Mass., a leading proponent of a Senate climate bill, issued a statement after the EPA’s announcement saying, “The message to Congress is crystal clear: Get moving.”

The EPA’s “endangerment finding” — a key bureaucratic step in the regulatory process — was seen as a message to Congress and Copenhagen, but it was also a belated response to an order from the U.S. Supreme Court, which ruled in April 2007 that carbon dioxide should be considered a pollutant under the Clean Air Act. As a result, the court said, the EPA had not only the power but the obligation to regulate the gas.

Michael Morris, chief executive of American Electric Power, a utility that is the nation’s largest emitter of greenhouse gases, said Monday that “we have been a proponent … to a congressional approach to this undertaking. This is the most awkward way we could go about it.” The EPA had to comply with direction from the courts, Morris said, but “there are better approaches, more cost-effective approaches and more productive approaches.”

It remains unclear whether the EPA’s regulatory cudgel will spur Congress to take faster action on the climate legislation that is now mired in the Senate or whether it will provoke a backlash.

“The stick approach isn’t going to work. In fact, Congress may retaliate,” said Mark Helmke, a senior adviser to Sen. Richard Lugar, R-Ind. “They could stop the funding, and they could change the law.”

By Richard Schlesinger of EnergyCentral

Although the electric industry has endorsed the concept of cap-and-trade as the least onerous approach to carbon regulation, at least one major company endorses it with unalloyed enthusiasm. Exelon not only supports the idea, it stated in a second-quarter conference call to analysts, which it posted to its Web site, that it expects to see a “$1.1 billion and growing annual upside to Exelon revenues from implementation of Waxman-Markey.” Is that number real or simply wishful thinking? Does Exelon know something that’s escaped the rest of us?

Actually, if one makes a couple of assumptions, the potential earnings boost is very real. Here’s how it works. Exelon’s 17 nuclear plants, the largest nuclear fleet in the country, generated just over a record 132 million megawatts-hours of power in 2007. That’s fact. Assumption number one: The Senate follows the House and passes an unchanged version of the Waxman-Markey bill.

At the start of the program, about 85 percent of the permits would be given away. Over time, the percentage of free permits would decline. About 15 percent of the permits would be auctioned off to begin with, and that percentage would increase over time. What concerns us is the value of these permits, because that value translates into increased costs for generation. Which brings us to assumption number two: The EPA estimates that during the early years of the program, a permit to emit one ton of CO2 would cost approximately $15.

In the unregulated markets where Exelon operates, the price of power is set by the last power plant dispatched to meet demand. In the Philadelphia area, for instance, one of Exelon’s markets, the last power plants to be dispatched tend to be gas-fired plants, according to Hugh Wynne, senior research analyst at Sanford C. Bernstein & Co. On average, Wynne said, gas-fired plants emit one-half ton of CO2 per megawatt-hour generated. Assuming the EPA’s estimate of $15 per ton, that means an incremental cost for gas-fired plants of $7.50 per megawatt-hour.

Coal plants emit twice the carbon as gas-fired plants, or one ton per megawatt-hour generated. In order to level the playing field, Waxman-Markey grants coal-fired plants a half-ton of CO2 for free for every megawatt-hour produced. In other words, coal- and gas-fired plants would each incur an additional cost of $7.50 per megawatt-hour. All things being equal, that means the price of power sold into unregulated markets would rise by $7.50 per megawatt-hour.

Multiply Exelon’s nuclear generation of 132 million megawatt-hours by the price increase of $7.50 per megawatt-hour and — voila! — you get a revenue increase of $990 million. Call it a billion dollars. As time goes on and the carbon cap gets smaller, the price per ton should rise accordingly.

Tim Winter, utility analyst at Gabelli Funds, noted another possible boon to companies with nuclear fleets. Certain coal-fired plants, particularly those older plants that operate inefficiently, could find that once the price of carbon allowances goes beyond a certain point, the price of power might fall below their cost of producing it. In that case, the plant would shut down, tilting the supply/demand equilibrium, creating a shortage of power, and pushing the price of power even higher. Again, Exelon, as the lowest-cost producer in the Northeast, would benefit.

Many Variables

So Exelon, as the low-cost producer, would benefit from the increased price of power under a cap-and-trade scheme, which helps to explain the company’s enthusiasm for cap-and-trade. One would expect that companies such as Florida Power and Light and Entergy, with nuclear capacity and markets that are, at least in part, unregulated, would share Exelon’s enthusiasm.

And so they do. Brent Dorsey, director of corporate environmental programs for Entergy, endorses cap-and-trade as a “good first step” in regulating greenhouse gas emissions, although from a strictly environmental perspective, he would rather see a shorter timeline than Waxman-Markey proposes. FPL Group’s chairman and CEO, Lewis Hay, endorses cap-and-trade, adding, “The sooner we can establish a price on carbon dioxide, the sooner we can tackle climate change and begin the transition to the clean-energy economy of the 21st century.” And the sooner FPL can enjoy the benefits of an increase in the cost of power cap-and-trade would deliver.

But even non-nuclear facilities could benefit under this scenario. Assuming the relative prices of gas and coal remain as they are, the extra cost incurred by coal should encourage companies that can to shift more of their production toward gas, thus increasing margins.

While utilities may be motivated to switch to cleaner burning fuels, some doubt they will be inspired to actually trade the credits. Edward Tirello, managing director and senior power strategist for Berenson & Co., is one such person. “The big money will be made by those that put up the capital, trading folks like Goldman Sachs and Morgan Stanley.”

But any kind of trading assumes a price that makes any risk involved worthwhile. And although the EPA assumes a price of $15 per ton during the early years of the program, the market doesn’t support that price, at least not today. The limited experience gleaned from the small volume of trading that’s taken place so far, such as what the Regional Greenhouse Gas Initiative has sponsored, certainly doesn’t come even close — $3 a ton last spring.

The political odds are also at play here, meaning no bill has yet to pass. So the forecast by Exelon remains, at this point, wishful thinking. Whatever profit actually materializes will depend on the price the market sets for carbon, and on whether cap-and-trade ever becomes more than a theoretical scheme to address the issue of global warming.

More information is available from Energy Central:

• Cap and Trade Is Not Enough: Adopt Carbon Emissions Portfolio Standards, EnergyBiz, Jul/Aug 2009
• Flaws in Carbon Principles – We Don’t Need Financial Engineering, EnergyBiz, March/April 2009
• Carbon on the Block – Industry Watches RGGI, EnergyBiz, Jan/Feb 2009

Big Stone II – Stopping the Unstoppable Coal Fired Power Plant

By John DeCock in The Huffington Post