Don’t Get ‘Caught Flat-Footed’ On EPA Rules, FERC’s Honorable Tells Arkansas Regulators

Recently appointed to the Federal Energy Regulatory Commission (FERC), Colette Honorable warned Friday that Arkansas regulators should not get “caught flat-footed” and wait until the federal Environmental Protection Agency (EPA) adopts proposed greenhouse gas rules later this year before making plans on how to clean up carbon emissions from the state’s coal-fired power plants.

“This (EPA) rule will come out this summer, and I know Arkansas has certainly joined the litigation effort as there has been several other states who have, but my point has been this … that (legal) tract can move along and it will, but we are not harmed and we are better served if we engage in this effort now,” said the former Arkansas Public Service Commission (PSC) chairwoman.

“We lose optionality if we just sit back and we don’t do anything and this rule is upheld,” Honorable told a roomful of Arkansas regulators and energy stakeholders. “There have been other challenges to EPA rules, (but) the EPA authority to engage in those rule-making activities have been upheld.”

Honorable was nominated to FERC by President Barack Obama in August, and confirmed by the U.S. Senate in December for a term that expires in June 2017. The former PSC chairwoman was in town this week to attend the funeral of a personal friend, and as a guest lecturer at The Clinton School of Public Service, speaking on the topic “The Clean Power Plan and the Evolving Power Grid.”

During her 30-minute speech at the Little Rock Chamber of Commerce, Honorable alternately offered details of “her new hat” as a FERC commissioner and her personal views on the president’s controversial plan to cut carbon emissions. In between, she offered funny anecdotes and asides about many former co-workers and associates in the audience that she worked with at the PSC and as a longtime cabinet member with former Gov. Mike Beebe.

STAKEHOLDER PROCESS GOOD FOR ARKANSAS
Toward the end of her speech, however, Honorable shared her strong views on the stakeholder process that she oversaw following after the EPA’s proposed guidelines that mandates a 30% reduction in carbon dioxide emissions from existing power plants by 2030 from 2005 levels were handed down in May 2014.

At the time, Gov. Mike Beebe ordered the Arkansas Department of Environmental Quality (ADEQ) and PSC 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.

Altogether, four stakeholder meetings were held throughout the summer where the key arguments centered on the state’s fleet of coal-fired power plants, which supply 53 percent of the state’s electric generation. The last meeting was held on Oct. 1.

“We were able to bring together a very diverse group,” Honorable told representatives of many of those stakeholders groups who were in the audience Friday. “Everyone came to the table seriously with an effort to roll up your sleeves and carry out this work in a way to focus singularly on Arkansas – on reliability, on costs and to talk honestly and have a wonderful, robust exchange. I just talked with a group who said Arkansas led the way nationally in that regard.”

However, Gov. Asa Hutchinson has halted those stakeholders meeting since taking office in January. He also wrote a letter to EPA administrator Gina McCarthy in December questioning the legality of rule 111(d), saying that the Obama administration’s environmental mandate will drive up power costs across the state, 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 on Dec. 1. “Such increases will negatively affect the economic growth and well-being of Arkansans.”

In addition, Attorney General Leslie Rutledge filed a motion to intervene in a federal lawsuit against the EPA’s proposed 111(d) rule with 12 other coal-dependent states, including Kentucky, West Virginia, Ohio and Wyoming. The federal D.C. Circuit Court of Appeals in Washington, D.C., will hear the case on April 16.

But earlier this week, Hutchinson left open the door that his administration may have to change its strategy if federal regulators go ahead and put the new rules in place later this summer.

Hutchinson told reporters following the ribbon-cutting of $22 million, state-of-the-art Midcontinent Independent System Operator (MISO) command center on Tuesday that he had recently gave thought about what might happen if Arkansas would have to “bear the brunt” of the EPA order to reduce carbon emissions by 44%.

“I have considered that possibility, but we are hopeful that the EPA will delay the implementation of its rules,” Hutchinson told reporters. “But yes, we may need to plan in the event that the ruling does not go in our direction.”

After her speech on Friday, Honorable stressed that she was not criticizing Gov. Hutchinson, or advocating that his administration should not seek a legal path to delay the new rules.

“Certainly the governor’s decision here in Arkansas has prerogative, and my comments are not to take issue with his position,” Honorable told reporters. “I am certainly well acquainted with what the Arkansas comments were, and I signed off on them. And I stand by the issues we took with how the goals were computed, and whether we could meet those goals in the time specified.”

Among the 2 million comments that have been sent to the EPA concerning the proposed guidelines, Arkansas regulators sent a letter to the EPA on Nov. 26 saying the 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.” The letter was written and signed by Honorable and then ADEQ interim director J. Ryan Benefield.

Honorable said that as FERC commissioner, she is involved in high-level meetings with top EPA officials where many of the issues concerning the EPA carbon emission rules are brought to the table by all sides. However, she said, the EPA alone will make the decision whether or not to delay or change the proposed 1,600-page regulations that were handed down 10 months ago.

The EPA has said it expects to issue final rules on the president’s so-called “Clean Power Plan” on June 1. States will then have a year to create their own long-term strategies to reduce emissions, whether through cutting coal consumption, increasing renewable energy, or implementing a cap-and-trade program. Similar to the Affordable Care Act, if states don’t make a plan of their own, then the federal government would step in and create one for them.

Honorable would not comment on whether or not she thinks her colleagues at the sister federal agency will delay the new rules in June. However, she reiterated her stance that Arkansas regulators and stakeholders should go back to the table and begin planning ahead.

“It does you no harm to have this discussion, you need to have,” Honorable advised several representatives of stakeholder groups who attended the luncheon address, including MISO and Southwest Pool representatives. “I hate for us, as we say down South, to be caught flat-footed if there is a rule and we are not ready to move forward.”