Hutchinson: State may need a plan if EPA adopts ‘dirty air’ rules in June

While Gov. Asa Hutchinson has made it clear that he opposes President Obama’s new carbon emission rules that would shelve much of the state’s coal-fired power generation, he said Tuesday his administration may have to change its strategy if federal regulators go ahead and put the new rules in place later this summer.

At the same time, the chief executive at the Midcontinent Independent System Operator (MISO) said the regional grid operator will remain neutral concerning the ongoing Environmental Protection Agency (EPA) debate on the stringent “dirty air” rules, despite the fact the costs to comply with the president’s mandate could reach as high as $90 billion over 20 years.

Hutchinson and MISO CEO John Bear made their comments during separate interviews with Talk Business & Politics during the grand opening of the grid operator’s $22 state-of-the-art command center in West Little Rock.

Hutchinson told reporters following the MISO ribbon cutting that he has thought about what might happen if Arkansas would have to “bear the brunt” of the EPA order to reduce carbon emissions by 44%. Critics of the EPA proposal say it should be delayed because it could shut down the state’s fleet of coal-fired power plants, which supply more than 53% of the state’s power.

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

The “brunt” of the EPA’s 1600-page 111(d) rule mandates a 30% reduction in carbon dioxide emissions from existing power plants by 2030 from 2005 levels. The other part of those rules that have drawn criticism stems from the fact that 26% of the reductions are to take place in the first decade, or by 2020.

ADEQ, PSCMEETINGS PLANNED
Before he took office in January, Hutchinson wrote a letter to EPA administrator Gina McCarthy 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.”

Hutchinson told reporters he plans to meet soon with his newly appointed directors at the Arkansas Department of Environmental Quality (Becky Keogh) and Public Service Commission (Ted Thomas) and make a decision on how to proceed if efforts to halt the president’s controversial “dirty air” plan don’t bear fruit.

“Our first priority was to communicate our disagreement, but a final determination has not been made yet on how to move forward,” the governor said.

Following the announcement of the EPA’s proposed guidelines nearly a year ago, Gov. Mike Beebe ordered the ADEQ and PSC in June 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. Hutchinson did not indicate whether he plans to restart stakeholder meetings. While governor, a more neutral Beebe encouraged groups on opposing sides to freely offer their views on the EPA’s regulations.

The EPA has said it expects to issue final rules on the president’s so-called Clean Power Plan that will be available for public review and comment 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.

Last month, Attorney General Leslie Rutledge filed a motion to intervene in a federal lawsuit against the EPA’s proposed !!!(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.

$3 BILLION PRICE TAG
Meanwhile, MISO’s Bear told Talk Business & Politics that the nonprofit grid operator will maintain a neutral stance concerning the EPA rules. However, Bear did say MISO has conducted an internal analysis that estimates potential costs to comply with the EPA order will top $3 billion annually to cut carbon emissions at existing power plants in the grid operator’s 15-state footprint across the U.S.

“Our view is that the rules are going to be what the rules are going to be,” Bear said. “We are going to figure out the most efficient and reliable way to implement it, whatever it comes out to be.”

But, Bear added: “We have been very loud to Congress and the EPA that the draft rule they have come out with is not reliable. They have to relax the glide path. We need more time.”

According to MISO officials, coal-fired resources account for almost half of MISO’s generating capacity and provided over 66% of total 2013 generation. Bear said it would be nearly impossible to maintain a reliable reserve of power if MISO had to replace 14 gigawatts (GW) of coal-fired generation within its system, including the White Bluff Electric Power Plant in Jefferson County and the Independence Steam Electric Station in Independence County.

“We can get to 2030, but (not) 2020,” Bear said. “You can’t take plants offline and put new plants online fast enough.”