Bayh: Utilities Have Not Had “Enough Time To Prepare For” Rule

Bayh: Utilities Have Not Had “Enough Time To Prepare For” Air Toxics Rule. In an op-ed titled “EPA plan potential job killer: Coal-plant retrofit unrealistic,” Evan Bayh -- who was identified as a former Senator and Governor from Indiana -- wrote:

Even though the electric utility industry has invested billions of dollars over the past two decades to reduce emissions, the Utility MACT Rule orders coal-fired utilities to spend additional billions on retrofitting technologies to decrease the amount of emissions released as a production byproduct.

Power plants that cannot reasonably afford these compliance costs will have to shut down and be replaced in a very short timeframe by new generation and transmission at substantial cost to consumers.

[...]

Fortunately, the EPA has heard this message; in the past week, the agency agreed to delay the final issue to allow for 30 more days to hear from stakeholders and review nearly a million public comments on the regulation. While a small step it the right direction, one month is still not enough time to prepare for - and mitigate - the disruptions expected to be caused by the rule's provisions.

[...]

EPA should ensure that, at minimum, the rule is revised to provide adequate time for cost-effective compliance in ways that do not threaten the reliability of Hoosiers' electricity. [Indiana Journal Gazette, 11/15/11]

Air Toxics Rule Has Been Anticipated For Decades

In 1990 President Bush Sr. And Bipartisan Congress Directed EPA To Regulate Mercury And Other Air Toxics. From a December 2010 Greenwire report:

In the first few years after the law [Clean Air Act] hit the books in 1970, U.S. EPA cracked down on airborne lead, soot and smog. Congress had also ordered EPA to figure out the risks posed by toxic contaminants, but the agency did little to stop mercury and other rare but dangerous chemicals from being released into the air.

In two decades, the agency had applied that section of the Clean Air Act to just eight substances.

Lawmakers who wrote the pollution law were fed up; so was President George H.W. Bush. After consultations with environmentalists and industry groups, they prepared a package of amendments that changed the rules for toxic air pollution. It listed mercury and nearly 200 other substances by name and told EPA to regulate them, sparing the agency the challenge of proving that the substances posed a risk.

The amendments sailed through the House, 401-25, supported by many Republicans who are now among EPA's most vocal critics. Bush signed the amendments into law the week before Thanksgiving, saying it was time to “break the logjam that hindered progress on clean air.”

“Every American expects and deserves to breathe clean air,” Bush said at a White House signing ceremony. “And as president, it is my mission to guarantee it for this generation and for the generations to come.”

Fast forward to today. Toxic pollution limits have been set for many industries, but a generation after the last major change to the nation's air pollution laws, EPA still doesn't have standards for coal-fired power plants and other facilities that release most of the nation's mercury. [Greenwire, 12/8/10]

Court Ordered EPA To Develop Mercury And Air Toxics Rules By 2011. The New York Times reported:

The Bush administration E.P.A. faced its own deadlines to devise and put into effect controls for power plant pollution. But rather than issue emissions standards in line with federal law, in 2005, top agency officials instituted a controversial cap-and-trade program for mercury, despite a warning from agency lawyers that the move would throw the issue back into the courts and almost certainly be reversed.

As predicted, a coalition of states and environmentalists sued the agency, arguing that the cap-and-trade program would not limit other toxic emissions like arsenic and would allow the dirtiest power plants to pay for the right to pollute, putting nearby communities at risk. In 2008 a federal judge ruled against the E.P.A., giving the agency three years to develop standards for mercury and other pollutants. [The New York Times, 3/16/11]

Bayh Claims Air Toxics Rule Threatens Reliability

Bayh Suggests That Groups “Generally Agree” EPA Rule Raises “Serious Issues Related To Grid Reliability.” Bayh wrote in the Journal Gazette:

The Utility MACT Rule also affects the reliability of our electricity supply. Maintaining the flow of electricity is more than a theoretical concern when several power companies have announced plant shutdowns in anticipation of the rule. This summer, PJM, the operator of the nation's largest power grid, which serves part of Indiana, expressed concern about maintaining reliability. Five major independent power grid operators - including MISO, the other power grid operator serving Indiana - expressed similar unease about potential reliability effects of EPA's proposal. Reliability concerns from EPA's rules affecting power plants are real, and they have not been properly evaluated by the agency.

Last year, the Federal Energy Regulatory Commission estimated that 8 percent of the country's electric generating capacity and nearly one-quarter of the coal-fired fleet was “very likely” or “likely” to be retired as the result of the Utility MACT Rule and other EPA proposals. Other assessments performed by outside groups generally agree. Forced power plant retirements raise serious issues related to grid reliability. Measures to avoid such disruption, to include building new transmission lines or new power plants, are very costly and may be hard to complete before key plants have to shut down under EPA's proposed timeline. These reliability concerns disproportionately affect Indiana, as coal supplies nearly 95 percent of our state's electricity. Brownouts and blackouts, as seen in Texas, California and Arizona, become more likely as the supply of energy decreases and cost rises. [Indiana Journal Gazette, 11/15/11]

But Independent Studies Predict Reliability Will Not Be Affected

Congressional Research Service: EPA Rules Will Have “Little Effect” On Reserve Power. From a CRS report on the impact of several EPA regulations on coal-fired power plants:

In the early 2000s, in response to the NOx SIP Call, the industry installed 96 GW of SCR in a five-year period while successfully maintaining system reliability. This was a “much more capital and manpower intensive effort” than the Utility MACT will be, according to David Foerter, the group's Executive Director.

If necessary, as shown in Figure 6, the industry is capable of adding new generating capacity in a short time. From 2000-2003, electric companies added over 200 GW of new capacity, far more than any of the analyses suggest will be needed in the 2011-2017 timeframe.

A December 2010 analysis by FBR Capital Markets concluded that even the incremental retirement of 45 GW by 2014 (which appears to be more than EPA's rules will effect) would have little effect on electricity reserve margins: “Summer reserve margins are currently 26% across the U.S. and are likely to decline only to 24% by 2014 in a draconian scenario in which 45 GW of generation is retired.” FBR offers the caveat that electricity reserve margins are a regional, not a national matter; but its analysis of eight NERC regions found reserve margins of 16.8% to 37.8% under its “draconian” 2014 scenario.

Other studies suggest that proper planning can prevent a train wreck, even in worst-case scenarios. Much depends on whether individual utilities have already begun planning for the implementation of the rules, including lining up engineers to design modifications, and conducting preliminary discussions with permitting authorities and grid operators regarding the required steps. [Congressional Research Service, 8/8/11]

Bipartisan Policy Center: “Scenarios In Which Electric System Reliability Is Broadly Affected Are Unlikely To Occur.” A Bipartisan Policy Center report on the impact of EPA regulations on electric system reliability identified tools available to address localized reliability risk. The report also stated:

BPC analysis indicates that scenarios in which electric system reliability is broadly affected are unlikely to occur. Previous national assessments of the combined effects of EPA regulations reach different conclusions, in part because they make quite different assumptions about the stringency and timing of new requirements and about the availability and difficulty of implementing control technologies. In some cases these assumptions deviate from the specifics of EPA's recent proposals in meaningful ways. Moreover, market factors, such as low natural gas prices, are as relevant as EPA regulations in driving coal plant retirements. [Bipartisan Policy Center, 6/13/11]

CRA Study: “Electric System Reliability Can Be Maintained” With Clean Air Transport Rule And Utility MACT Rule. From a 2010 report by Charles River Associates assessing EPA's Clean Air Transport Rule and the proposed regulation of toxic air pollutants from coal and oil fired power plants:

[W]e conclude that electric system reliability can be maintained while the industry complies with EPA's air regulations. The number of projected coal plant retirements nationwide is relatively small compared to historical US net additions of generation capacity, and the electric sector has demonstrated repeatedly the ability to expand the generation fleet at a rate well in excess of projected capacity needs. Although we predict that a handful of areas will have de minimis or modest shortfalls due to predicted retirements, adequate reserve margins can be maintained by better utilizing existing supply capacity, installing new generation, and increasing load management. Additionally, existing federal statutory, state regulatory, and regional transmission organization (RTO) market safeguards can be utilized to maintain a reliable electric system. [Charles River Associates, 12/16/10]

M.J. Bradley & Associates Report: “Without Threatening Electric Reliability, The Industry Is Well-Positioned” To Meet EPA Requirements. From a report conducted by M.J. Bradley & Associates for the Clean Energy Group:

In this paper, we highlight the impact of EPA's upcoming air regulations, with a focus on the issue of possible power plant retirements on electric reliability. We conclude that, without threatening electric reliability, the industry is well-positioned to respond to EPA's proposed road map to “help millions of Americans breathe easier, live healthier,” provided that EPA, the industry and other agencies take practical steps to plan for the implementation of these regulations and adopt appropriate regulatory approaches. [M.J. Bradley & Associates, August 2010]

FERC Said Its Analysis Was “Inadequate To Use As A Basis For Decision Making.” Responding to claims that the FERC found that EPA rules would reduce the U.S.'s electric generation capacity by 8 percent, FactCheck.org wrote:

But FERC's letter also warned not to put too much stock in its estimate of coal-fired plants likely to be retired. The letter called it an “informal, preliminary assessment,” adding that “an in-depth analysis could not be conducted because complete information was not available.” In his Sept. 14 testimony, Wellinghoff pulled the plug entirely on his staff's informal analysis. He told Congress it was an “adequate back-of-the envelope first assessment of the amount and location of potential generator retirements,” but he warned that such an informal analysis “is inadequate to use as a basis for decision making.” For one thing, Wellinghoff said, FERC “did not evaluate any alternatives that might be available to the regions to offset any generator loss such as new or planned generation or transmission, retrofits of coal-to-gas burners, demand-side resources, or energy efficiency strategies.” [FactCheck.org, 11/8/11]

Bayh Blames Regulation For Economic Problems

Bayh: “Regulatory Uncertainty ... Has Slowed Investment And Job Creation Over The Last Three Years.” Bayh wrote in the Journal Gazette:

With Indiana's unemployment rate well above its historic average, we need to avoid the regulatory uncertainty that has slowed investment and job creation over the last three years. Measures that threaten the balance of supply and demand, and the cost, of our electricity do just that. [Indiana Journal Gazette, 11/15/11]

But Experts Say A Lack Of Demand -- Not Regulation -- Is Hurting The Economy

EPI: “The Jobs-Impact Of The Air Toxics Rule Will Be Modest, But It Will Be Positive.” In a June 14 study, the Economic Policy Institute concluded that the job impact of the air toxics rule “will be modest, but it will be positive.” The study specifically found that the rule “would have a modest positive net impact on overall employment, likely leading to the creation of 28,000 to 158,000 jobs between now and 2015.” [Economic Policy Institute, 6/14/11]

CRS: Benefits Of EPA Rules Exceed Costs, Particularly As They Relate To Public Health. A Congressional Research Service report stated:

Frequently overlooked in analyses of EPA regulations are the benefits to public health and the environment that will occur, benefits that for the most part are difficult to monetize. EPA does estimate benefits of individual rules, while acknowledging that it is challenging to quantify benefits due to data limitations and uncertainties in approaches used to value benefits. The costs of the rules may be large, but, in most cases, the benefits are larger, especially estimated public health benefits. [Congressional Research Service, 8/8/11]

Utilities: “Regulations Can Yield Important Economic Benefits ... While Maintaining Reliability.” In a letter to the editor of the Wall Street Journal, CEOs of several major utilities wrote:

Contrary to the claims that the EPA's agenda will have negative economic consequences, our companies' experience complying with air quality regulations demonstrates that regulations can yield important economic benefits, including job creation, while maintaining reliability. [Wall Street Journal, 12/8/10]

Survey Of Business Economists: Vast Majority Of Respondents Feel Current Regulatory Environment Is “Good” For Business. From the National Association for Business Economics' (NABE) August 2011 Economic Policy Survey:

Regulatory activity has gained a lot of attention, with many groups suggesting that American businesses are overregulated by the current administration. With that said, 80 percent of survey respondents felt that the current regulatory environment was “good” for American businesses and the overall economy. [National Association for Business Economics, August 2011]

WSJ: “The Main Reason U.S. Companies Are Reluctant To Step Up Hiring Is Scant Demand.” The Wall Street Journal reported:

The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new Wall Street Journal survey.

“There is no demand,” said Paul Ashworth of Capital Economics. “Businesses aren't confident enough, and the longer this goes on the harder it is to convince them that they should be.”

In the survey, conducted July 8-13 and released Monday, 53 economists--not all of whom answer every question--were asked the main reason employers aren't hiring more readily. Of the 51 who responded to the question, 31 cited lack of demand (65%) and 14 (27%) cited uncertainty about government policy. The others said hiring overseas was more appealing.

Some executives echoed the survey's central finding. [The Wall Street Journal, 7/18/11]

Journal-Gazette Failed To Disclose Bayh's Industry Ties

Bayh Is A “Strategic Advisor” For Lobbying Firm's Clients. McGuire Woods states that Evan Bayh is a “strategic advisor to many of the firm's most significant clients, particularly those whose business goals are impacted by the actions of Congress, the executive branch, or by governors and legislators across the country.” [McGuire Woods, accessed 11/16/11]

Lobbying Firm's Clients Include Several Electric Utilities. According to OpenSecrets.org, several electric utilities have retained McGuire Woods for its services, including Dominion Resources, Duke Energy, Energy Future Holdings Corp, and Progress Energy. [OpenSecrets.org, accessed 11/16/11]

• Three Clients Would Lose At Least 6% Of Their Coal-Fired Capacity Because Of Utility MACT Rule. A Ventyx, EPRI, EIA and Bernstein analysis estimated that, as a result of the rule, Dominion Resources would reduce 6% of its capacity from coal-fired plants, and Duke Energy and Progress Energy would each reduce 7% of their capacity from coal-fired plants. [Bernstein Research, October 2010, via Sierra Club]
• Client Threatened To Close Plant Unless Changes Were Made To The Rule. Duke Energy threatened to decommission all six of its coal-fired generation units at a plant near Cincinnati, Ohio unless changes were made to the Utility MACT rule. [Environmental Leader, 7/21/11]

Chamber Of Commerce Employs Bayh To Promote Its Deregulation Agenda. In a June 2 memo, U.S. Chamber of Commerce President Tom Donohue outlined how the Chamber would make the case for “regulatory reform” focusing on EPA, health care and financial reform regulations. Donohue also announced the Chamber's newest hires:

I'm pleased to report that the Chamber has recently enlisted former White House Chief of Staff Andy Card and former Senator Evan Bayh who will carry a bipartisan message on regulatory reform out around the country through a “road show” of speeches, events, and media appearances at various local venues. [U.S. Chamber of Commerce, 6/2/11]

• New Television Ads Support Chamber of Commerce's Deregulation Push. The Chamber of Commerce released six new television ads this week targeting federal regulations. [Friends of the Chamber of Commerce, accessed 11/16/11]

Chamber Of Commerce Disputed That Mercury Emissions Are Dangerous. In a report on mercury, the Chamber of Commerce disputed the necessity of EPA regulations on the mercury emissions of coal-fired power plants. The Chamber wrote that “current scientific knowledge” does not support the “widespread belief that the amount of methylmercury in fish consumed by Americans is harmful to their health” nor the “belief that limiting mercury emissions from power plants will significantly curtail the buildup of methylmercury in fish that are consumed.” [U.S. Chamber of Commerce, 4/29/04]

SEE HERE FOR THE REALITY ON THE HEALTH RISKS POSED BY MERCURY EMISSIONS FROM COAL PLANTS