Jan 23, 2015 - 4:30pm

A Bunch of States Tell EPA: Your Carbon Regulations are Nuts

Senior Editor, Digital Content


Power lines at the coal-fired John E. Amos Power Plant in Winfield, West Virginia.
Power lines at the coal-fired John E. Amos Power Plant in Winfield, WV. Photo credit: Luke Sharrett/Bloomberg.

As EPA has developed its proposed carbon regulations, it has praised itself for how well it has worked with states.

EPA’s “Clean Power Plan” sets carbon emissions goals for each state (except Vermont) to meet by 2030. Each state has to develop its own plan to reach its goals.

To EPA Administrator Gina McCarthy this is a high level of “collaboration” between both levels of government, giving states “enormous flexibility” to comply:

“There is enormous flexibility in the definition of a state plan and our ability to look at a timeline for achieving that, for submitting the plan, and for achieving the reductions,” she said.

“It is an absolute collaboration between the federal and state government,” McCarthy said of the process. “This is a partnership if there ever was one.”

That’s spin. That's not how state officials see it.

The fact is states aren’t pleased with EPA’s proposed regulations and its take-it-or-leave-it attitude. For instance, EPA plans to impose a “model rule” on states that don’t submit plans.

A report from the U.S. Chamber’s Institute for 21st Century Energy summarizes states' displeasure with EPA’s proposed carbon regulations.  They question its legality, its fairness, and its dangers to power grid reliability, state economies, and jobs.

Here are three key numbers from the report that undercut McCarthy’s claims of federal-state kumbaya:

  • 32 states have raised fundamental concerns with the rule’s legal foundations
  • 28 states warned of negative economic impacts
  • 32 cited threats to electricity reliability

As Karen Harbert, president and CEO of the Energy Institute, said:

What is truly striking is the level of concern many states have regarding EPA’s rule—whether they are blue states, red states, or purple states. Keeping the power on and keeping electricity affordable are not partisan issues, and indeed those responsible for critical functions in many states of all political stripes are telling the Obama administration that major changes must be made to this rule.

The report makes clear that, if EPA is truly committed to the collaborative spirit it claims to support, it has its work cut out for it.

Here are some of the common complaints and concerns highlighted in the report [all emphasis mine]:

1. The Carbon Regulation’s Legality

Attorneys General of AL, FL, GA, IN, KS, LA, MI, MT, NE, ND, OH, OK, SC, SD, UT, WV, and WY:

[T]he Clean Air Act generally and Section 111(d) specifically do not give EPA that breathtakingly broad authority to reorganize states’ economies. ‘Congress . . . does not, one might say, hide elephants in mouseholes.’ . . . Congress did not hide the authority to impose a national energy policy in the ’mousehole’ of this obscure, little-used provision of the Clean Air Act, which EPA has only invoked five times in 40 years. The proposed rule has numerous legal defects, each of which provides an independent basis to invalidate the rule in its entirety.

2. Its Harmful Effects on Electricity Prices, Jobs, and the Economy

Florida Public Service Commission:

[T]he Commission is confident that if EPA’s proposed BSER is not revised, the stringent emission performance requirements will require substantial compliance costs for Florida . . . Preliminary estimates from the Florida Electric Power Coordinating Group, Environmental Committee, support the conclusion that EPA may have understated the potential range in its estimated direct and indirect costs. These preliminary estimates show that average statewide retail rates could increase 25 to 50 percent by 2030 as a result of the Proposed Rule.

3. It Threatens Power Grid Reliability

North American Electricity Reliability Corporation:

The proposed timeline does not provide enough time to develop sufficient resources to ensure continued reliable operation of the electric grid by 2020. To attempt to do so would increase the use of controlled load shedding and potential for wide-scale, uncontrolled outages.

4. It Isn’t Technological Achievability

Nebraska Department of Environmental Quality:

[T]he Building Blocks contain inaccurate assumptions and unrealistic expectations that informed EPA's goal for Nebraska. The EPA has said the Building Blocks included in the proposal are guidelines, not mandatory requirements, and that states are free to use any emission reduction strategies they wish, so long as their final emission reduction goals are met. However, a goal that has been established with flawed assumptions results in a rule that is inflexible and overly burdensome.

5. The Regulations are Based on Mistakes and Errors

Wyoming Department of Environmental Quality:

EPA proposes state goals based on a state-specific analysis of available efficiency gains from each of the four building blocks. Wyoming's state goal as proposed by EPA is based upon clear errors and irrational assumptions….  If EPA does not use reliable data, then it is acting in an arbitrary and capricious manner.

6. There are Unrealistic Timelines to Implement the Regulations

Wisconsin Department of Natural Resources and Public Service Commission of Wisconsin:

Given the amount of attention this proposal has received, it is unrealistic to expect the state to submit a complete plan within EPA’s proposed timeframes. EPA must provide more time, or, at a minimum, provide guidance on what EPA will accept at the plan due date short of a complete and final plan.

7. There are Unrealistic Timelines to Meet Interim Targets

Iowa Department of Natural Resources, Iowa Utilities Board, and Iowa Economic Development Authority:

As proposed, there is very little difference between the interim goal and the final goal.... Effectively, the EPA has set a 2020 compliance deadline with no appreciable phase-in. The option offered by EPA to over-comply in later years to make up for lack of compliance in the early years is not realistic and may impose unnecessary costs and adverse effects on reliability.

8. It Gives Little Credit for Previous Carbon Reductions

New Jersey Department of Environmental Protection:

New Jersey’s enormous progress in cutting CO2 emissions should be recognized by the federal government. Instead, this Proposed Rule would punish our state—and others who have been leaders—for its success. By failing to provide credit for past emission reduction measures, the Proposed Rule would provide a clear and enduring disincentive against early action in the future, absent a federal mandate. It would convey exactly the opposite message that the federal government should be sending to the states and the private sector. Rather than encouraging progress, it would hinder it, as parties would hesitate to act knowing that their progress might be penalized in the future.

9. It Doesn’t Treat Nuclear Power Adequately

South Carolina Department of Health and Environmental Control:

It is important for the EPA to understand that, to date, less than one half of the costs of the new nuclear units in South Carolina have been incurred, so a significant cost remains to support the completion of these units. Further, only the financing costs are currently being paid and the principal will be paid off over the estimated 60 year lifetime of the new nuclear units. There is clearly an incremental cost for these new units that will be added to customer bills to pay for the zero carbon emitting units once they come online.

10. There is Little Consideration for Stranded Costs

Kansas Corporation Commission:

The state of Kansas has spent in excess of $3 billion on environmental compliance projects for our coal-fired generation fleet, and these projects were approved by the EPA under state implementation plan(s). For the EPA to now assert, under its Clean Power Plan, that the generation from Kansas’s coal-fired fleet must be significantly reduced or eliminated results in significant stranded costs to Kansas ratepayers.

11. Standards for Existing Power Plants are Tougher than for New Power Plants

Virginia Department of Environmental Quality:

EPA’s proposal “compound[s] the problem created by establishing inequitable state carbon emissions goals by setting those goals for some states, including Virginia, at a level well below that which EPA has proposed for new fossil-fired electric generating units as NSPS under §111(b) of the Act. The second paragraph of EPA’s ‘The CAA in a Nutshell: How it Works’ for 2013 says, ‘The law calls for new stationary sources to be built with the best technology, and allows less stringent standards for existing stationary sources.’”

12. It Doesn't Properly Estimate Power Plant Generation Capacity

North Carolina Public Utility Commission

EPA’s methodology for calculating a unit’s capacity value is completely foreign to the electric utility industry. North Carolina electric utilities develop their resource plans to secure capacity to meet the single coincident peak demand modeled over the planning horizon. In North Carolina, this is typically the summer seasonal peak. However, from time-to-time, North Carolina utilities have observed all-time system peak demands during the winter months. While utilities are obligated to meet the peak demand regardless of when it occurs, they typically must plan for more generation in the summer than winter periods. This is due to the physical conditions that reduce the amount of available capacity from a generation facility in summer months.

State officials have spoken. Will EPA listen?

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.