Gov.-elect Hutchinson, Stakeholders Weigh In On EPA Rule As Deadline Passes (UPDATED)

As the federal Environmental Protection Agency’s public comment period ended Monday on the controversial proposed rules to cut the nation’s carbon emissions, Gov.-elect Asa Hutchinson made it clear he does not plan to go along with President Obama’s far-reaching action that targets Arkansas’ fleet of coal-fired power plants.

In a letter to EPA administrator Gina McCarthy on Dec. 1, Hutchinson urged the administration to postpone the president’s so-called “Clear Power Plan,” which proposes a 30% reduction in carbon dioxide emissions from existing power plants by 2030 from 2005 levels.

Unlike current Gov. Mike Beebe, who largely remained neutral on the EPA’s new rules handed down in early June, Hutchinson is keeping his campaign promise that he will side with coal-friendly opponents who say that the Obama administration’s environmental mandate will drive up costs, reduce jobs and lower the standard of living for most Arkansans.

“This means that additional mandates … that close coal powered plants or increase the cost of generating power from coal will cause an increase in costs to Arkansas’s residents and manufacturers,” Hutchinson argued in his letter to McCarthy. “Such increases will negatively affect the economic growth and well-being of Arkansans.”

Hutchinson also said he steadfastly objected to replacing coal-fired electric generation with natural gas.

“Natural gas could be a replacement for cheaper, reliable coal, but without increasing supply and improving the infrastructure of natural gas and other sources of power, the additional demand for natural gas during winter and other cooler months will increase costs … because many Arkansans use natural gas to heat their homes,” the governor-elect wrote.

Hutchinson closed his one-page letter by questioning whether or not EPA has the legal authority under the Clean Air Act to regulate so-called “dirty air” emissions outside the boundaries of the power plant. That same “outside the fence” argument has also been raised by a coalition of 15 Republican governors that filed a federal lawsuit in September to overturn the proposed rules.

“By proposing a wide reaching mandate that includes the electrical system and alters consumer behavior, (the) EPA has overstepped its legal authority,” Hutchinson asserted. “I am requesting that the (Obama) administration withdraw the proposal until the federal government has developed an informed plan of action to address the concerns raised by this letter.”

EPA RESPONDS
EPA spokeswoman Liz Purchia responded to Hutchinson’s letter and concerns about rising costs and declining reliability that some Arkansas stakeholders have expressed.

During the development of the Clean Power Plan, EPA devoted significant attention to ensuring that the Clean Power Plan’s public health and environmental protections can be achieved without interfering with a reliable supply of electricity. We can cut pollution while keeping our energy affordable and reliable. Any small, short-term change in electricity prices would be within normal fluctuations the power sector already deals with.

Any small price increase — think about the price of a gallon of milk a month — is dwarfed by huge benefits. This is an investment in better health and a better future for our kids. If states are smart about taking advantage of efficiency opportunities, we predict that when the effects of this plan are in place in 2030, average electricity bills will be 8% cheaper.

It is too early to make claims regarding reliability when states have yet to develop plans and the Clean Power Plan is incredibly flexible and will allow states to address concerns about reliability. A large toolbox is available to planners to ensure adequate electricity supply and states have proven again and again that they can meet environmental requirements while also maintaining a reliable grid.

Our plan reflects our continued commitment to ensuring reliability as standards and programs move forward. In the Agency’s 40-year history, emissions from power plant pollution have decreased dramatically, improving public health protection for all Americans, while the economy has grown. And there have been no instances in which Clean Air Act standards have caused the lights to go out.

ADEQ, PSC PROPOSE RULE DELAY
Given his opposition to the EPA proposed guidelines, Gov.-elect Hutchinson has given no indication if he will continue the same format for stakeholder meetings that were convened this summer following the EPA’s announced mandate.

In late June, Gov. Beebe ordered the Arkansas Department of Environmental Quality (ADEQ) and state Public Service Commission (APSC) to bring together about 20 stakeholder groups representing utilities, state agencies, environmental advocates, energy efficiency experts, consumers and other interested parties to discuss the EPA’s proposed guidelines.

Although no consensus was reached during several panel meetings held over the summer, the ADEQ and PSC submitted a letter to the EPA on Nov. 26 that largely supports delaying the EPA proposed greenhouse gas rules. The letter, written and signed by ADEQ interim director J. Ryan Benefield and PSC Chairman Colette Honorable, said the EPA’s proposed rule would give Arkansas “one of the most stringent goals in the country for reducing the rate of carbon emissions from its electric generating units.”

“As a state small in population, and which is a net exporter of electricity and is home to the nation’s only super ultra-critical coal-fired power plant, Arkansas presents unique circumstances which are not adequately accounted for in the goal setting-formula within the Proposed Rule,” Benefield and Honorable wrote.

In closing the one-page appeal to the EPA, which includes another 96 pages of supporting documents, the Arkansas regulators say that the goal to reduce carbon emissions in Arkansas by 2030 is “technically flawed and is unattainable under the contemplated timeframe.”

“The Agencies urge changes in the Proposed Rule to avoid unreasonable and inequitable results that may include disruptions to electric service and significant cost impacts in Arkansas and in neighboring states,” the Arkansas regulators wrote. “Also, the Proposed Rule should be clarified and changed in various ways to better enable compliance, particularly for states like Arkansas that can reasonably be expected to rely on net imports from renewable energy generators for some or all of their renewable electricity generation.”

Interestingly, both Benefield and Honorable are unlikely to play a role in future discussions of the EPA proposal in Arkansas. Benefield is serving as interim director of the ADEQ after longtime director Teresa Marks stepped down from her post in Nov. 1. Hutchinson has signaled that he plans to name a new director at the environmental regulatory department as the incoming administration announces across-the-board leadership changes at most top state agencies.

In August, Honorable was nominated by President Obama to the powerful Federal Energy Regulatory Commission. On Thursday, the U.S. Senate Committee on Energy & Natural Resources will begin hearings to consider her nomination. If approved by the committee, Honorable will face confirmation by the full U.S. Senate at a later date.

FUTURE OF STAKEHOLDER MEETINGS STILL IN QUESTION
Meanwhile, the future and the effectiveness of the stakeholder meetings could be called into question as the Hutchinson camp considers how it will take on the EPA’s proposal. Under the current administration’s guidance, Beebe’s neutrality allowed stakeholder groups on opposing sides to freely offer their views on the EPA’s pending regulations.

For example, Duane Highley, president and CEO of Arkansas Electric Cooperatives Corp., stated publicly that the EPA’s proposal should be delayed because it could shut down the state’s coal-powered power plants, which supply more than 53% of the state’s electricity demand.

Highley told the stakeholder panel in late August that the White Bluff Electric Power Plant in Jefferson County and possibly the Independence (County) Electric Station could close if the proposed rules don’t allow for some flexibility in handling coal-fired power.

He said the cost alone to convert the AECC’s electric generation from coal to gas would be nearly $74 million a year by 2020 and $184 million annually by 2030. Highley closed his presentation by pointing out that the EPA has made no attempts to consult with the Federal Energy Regulatory Commission on the rule’s impact on the nation’s grid system.

“We are asking for more time,” he said.

Likewise, Randy Zook, President and CEO of the Arkansas State Chamber of Commerce/Associated Industries of Arkansas, said he could think of no other public policy issue that is more critical to the economic future of Arkansas than the outcome of the EPA proposed guidelines in Arkansas.

He said the EPA’s mandate, if implemented, will drive up costs, reduce jobs and lower the standard of living for most Arkansans.

“This is, in our view, bad public policy, driven by ideology – not science and certainly not economics,” Zook said.

On the other side of the issue, the Arkansas Advanced Energy Foundation (AAEF) has made the case that the EPA rules would benefit Arkansas consumers by reducing carbon emissions nearly 40% through efficiency measures.

Local economist James Metzger, CEO of Histecon Associates, appeared before stakeholder group this summer and presented preliminary findings from an AAEF-sponsored report that recent energy efficiency programs implemented by state utilities have resulted in more than $1.5 billion in sales activity and more than 12,500 high-paying jobs.

“We already knew that energy efficiency programs had the potential of having a positive effect on the overall economy in Arkansas,” Metzger said. “With this report, we are able to document for the first time that the potential is already being realized and even more positive impacts have taken hold in Arkansas.”

Also, Arkansas Sierra Club Director Glen Hooks said Arkansas must avoid inaction on the EPA rules.

“We can best achieve the goals of the Clean Power Plan by transitioning away from the older, dirtier pieces of our coal-fired power fleet and ramping up our investment in clean energy and energy efficiency,” Hooks said during the August stakeholder meeting. “It makes a ton of economic sense as well as being better for our public and environmental health.”

In his presentation, Hooks said that Arkansas spends nearly $650 million annual to import Wyoming coal to power the 85% of state’s existing power plant fleet. He said the state could save billions by reducing its dependency on coal and adopting energy efficiency and renewable energy resources.

Since the deadline, Hooks offered additional thoughts on where he hopes the state goes from here.

“The Clean Power Plan presents a significant opportunity for Arkansas in terms of more jobs, better health for our citizens, and a cleaner environment. Sierra Club would welcome the chance to work with our new Governor to bring thousands of good-paying jobs to Arkansas in the energy efficiency and renewable energy fields — implementing the Clean Power Plan is a great way to do that,” Hooks said. “It’s disappointing to hear that Governor-elect Hutchinson is opposed to this positive economic and environmental policy. I look forward to the chance to meet with the new administration and explain how the Clean Power Plan means great things for our state.”

Now that Hutchinson has publicly stated opposition to the EPA’s proposed rules, along with the fact that top agency heads at ADEQ and the PSC have not been announced for the Republican governor’s administration, future stakeholder meetings could be seen as unnecessary.

On Tuesday, Highley said once a final EPA rule is issued in 2015, the Arkansas’ electric cooperatives will work with the ADEQ and APSC to develop a state implementation plan that would then be submitted to the EPA for approval.

“The Electric Cooperatives of Arkansas advocate a plan that preserves our ability to provide reliable and affordable electric service to our members,” he said. “That process would begin with EPA’s adoption of a realistic timeline and achievable carbon dioxide reduction goals.

Highley said electric cooperative members in Arkansas have submitted more than 18,000 comments to the EPA ahead of Monday’s public comment deadline in opposition to the agency’s draft proposal to dramatically reduce carbon dioxide emissions from existing power plants within a few short years.

Editor’s note: Talk Business & Politics has reached out to the EPA and a number of additional stakeholder groups for comment. This story will be updated later today.