Arkansas’ energy producers, regulators await new EPA emission rules

No one knows exactly how the Environmental Protection Agency’s “dirty air” rules will shake out next week, but Arkansas stakeholders are anxiously waiting to hear the details of President Barack Obama’s controversial proposal to reduce carbon emissions.

The EPA is expected to issue its long-awaited, wide-ranging proposal to reduce greenhouse gases from existing power plants on Monday (June 2). The controversial plan to cut pollution at many of the nation’s older coal-fired plans, under the federal Clean Air Act, is a key part of President Obama’s overall Climate Action Plan.

The federal government has said it will finalize the standards by June 1, 2015. States, including Arkansas, must submit their implementation plans to EPA by June 30, 2016. Some stakeholders have asked the federal government for more leeway on those deadlines.

This week, Arkansas energy companies, state regulators, environmental groups, manufacturing executives, politicians and others affected by the rules are busy preparing for the anticipated impact from the Obama administration’s environmental policy. Two of Arkansas’ largest electric providers are hoping the plan is fair and allows state regulators a great deal of flexibility to implement.

“There are still a lot of questions, but we won’t know anything until next Monday,” said Sandy Byrd, vice president of member and public relations for the Arkansas Electric Cooperative Corp (AECC).

Chuck Barlow, vice president of environmental policy and strategy for Entergy Corp., added that anticipating what the EPA might do is “pretty wide open.”

“We don’t know any more than anyone else,” he said. “We are going to have to wait and see what the president announces.”

COST TO CONSUMERS?
Byrd said the AECC’s biggest concern is what economic impact the new rules will have on the company’s operating costs, as well as the future rates for industrial and residential power consumers. She said the state’s largest electric cooperative is also interested how Monday’s announcement will affect the “reliability and affordability” of AECC’s energy mix going forward. If the EPA regulations drastically reduce the usage of coal, Byrd said as an example, the reliability of Arkansas’ energy grid system will be at risk.

“Coal is the lowest cost source for energy for our members and that is obviously a concern to us,” said the AECC spokeswoman. “For many years, coal has been our workhorse.”

According to the U.S. Energy Information Administration, coal-fired electric power plants in Arkansas supplied more than half (53%) of the state's electricity in 2013 and relied almost entirely on coal deliveries via railcar from Wyoming. Coal provides power for nearly 80% of Arkansas' 17 electric distribution cooperatives, Byrd said.

AECC has run baseline estimates showing that if coal is eliminated from AECC’s energy mix, industrial and residential electric users in Arkansas could see drastic rate spikes, jobs may be lost and economic development across the state could be stunted, Byrd said.

Worst-case scenario, the EPA regulations could push costs in some Arkansas industrial sectors as high as 20%, Byrd said, specifically noting the impact on the state’s agriculture industry and burgeoning steel trade.

FLEXIBILITY FOCUS
However, Steve Patterson, president of the Arkansas Advanced Energy Foundation, believes the new EPA rules will give state regulators and stakeholders an opening to implement a plan design that is unique to Arkansas.

“We don’t think it has to be a fight between coal and no-coal,” Patterson said. “It can be an opportunity to modernize an electrical system that was once time state-of-the-art, but is now outmoded.”

Likewise, Glen Hooks, spokesman for the Sierra Club of Arkansas, called the new carbon pollution protection “a giant step forward in fighting climate disruption.”

“Carbon emissions from dirty power plants cause significant risks to our public and environmental health, and we applaud efforts to combat those risks,” Hooks said. “Power plants in Arkansas emitted almost 41 million metric tons of carbon pollution in 2013, with 85 percent of that pollution coming from just 5 coal-fired power plants.  Arkansas can meet its carbon reduction goals by phasing out dirty coal-fired power plants, ramping up our use of clean energy, and focusing aggressively on energy efficiency programs.”

No matter how the rules pan out, one issue all of stakeholders agree on is that Monday’s announcement should give Arkansas and other states the flexibility to craft their own plans to comply with the EPA’s Clean Air act.

“The impact will be different depending on what part of the country you are from. A lot of states that have really good renewable resources, but not the MidSouth,” Entergy’s Barlow said. “It is really expensive to commercially scale wind or solar, so we need to have more flexibility.”

Barlow added that Entergy’s other main concerns are that the new rules should be “legally defensible,” and the EPA gives some consideration to utilities who include “nuclear megawatts” in their energy mix.

“(The EPA) has got to give us credit for our nuclear megawatts,” Barlow said of Entergy’s nationwide nuclear fleet, including the Nuclear I and II power plants in Russellville. “We use coal, but we also (produce) a lot nuclear and it has zero carbon emissions.”

STATE REGULATORS READY TO REACT
In the meantime, state regulators and members of Arkansas’ Congressional delegation are anticipating the EPA’s ruling on Monday. The Arkansas Public Service Commission and the Arkansas Department of Environmental Quality (ADEQ) held meetings Wednesday afternoon (May 28) to give Arkansas stakeholders an overview on the  upcoming federal air rules.

“This meeting and others like it will provide a unique opportunity for interested Arkansas parties to obtain information and provide input into the  development of the statewide implementation plan to comply with the new EPA  regulations,” said Public Service Commission Chairman Colette Honorable. “It is important for the affected power plant operators, regulators, and the public at large, to understand the issues involved and how they will be affected by the new standards.”

Once the new rules are laid out next week, PSC officials said rulemaking will be the subject of additional meetings as Arkansas’ plan takes shape. Those meetings will be announced as they are scheduled.

In addition, U.S. Sen. Mark Pryor, D-Ark., and U.S. Sen. John Boozman, R-Ark., were part of a bipartisan group of U.S. senators who sent a letter to the EPA last week asking for a 120-day public comment period for the federal government’s proposed greenhouse rules for existing coal-fired plants. The letter, which 45 senators signed on May 22, said local utilities, rural electric cooperatives, industry workers, and consumers need sufficient time to analyze the rule and its possible impact.

“The upcoming proposal will be far more complex and critical for the industry to deal with than the proposal for new plans, and stakeholders will need time to analyze the rule and determine its impact on individual power plans, reliability and consumer cost, and on the electric system as a whole,” the letter noted.

To date, the EPA has held 11 public listening sessions across the country to solicit ideas and input from the public and stakeholders about the best Clean Air Act approaches to reducing carbon pollution from existing power plants.

Following Monday’s announcement, the EPA will seek additional public input during its “notice and comment” period.