2014 Top Five Energy & Environment Issues to Watch
Below is an expanded version of the Top Five Energy and Environment issues to watch in 2014.
Clean Air Act/Section 111(d) Rulemaking
The EPA is expected to release a rule in June 2014 as part of the President’s Climate Action Plan requiring states to develop implementation plans to regulate greenhouse gas emissions from existing power plants under section 111 (d) of the Clean Air Act. A state implementation plan or SIP, in essence, is a blueprint covering how the state will comply with Clean Air regulations and to what extent certain energy, industrial, and utility activities will be allowed. Developing a SIP is a very significant undertaking for an air agency. EPA’s SIP website acknowledges that under that National Ambient Air Quality Standards (NAAQS) program the production of a state implementation plan is a several year process that requires numerous rounds of input with the public and tribes to meet attainment for emissions under the Clean Air Act. However, under the timeline issued under the President’s Climate Plan these new “SIP-like” plans under section 111(d) must be completed and submitted to the EPA in less than two years. This requirement poses a substantial challenge since states have never been required to regulate carbon emissions under these implementation plans and the overall amounts emitted dwarf the levels of existing pollutants that are currently regulated under federal law (known as “criteria pollutants”). The comparative scope and size of greenhouse gas emissions versus existing criteria pollutants is enormous. For example, according to EPA’s National Emissions Estimates for Common Pollutants and Their Precursors, roughly 83 million tons of all six criteria pollutants were emitted in 2012. By contrast, US greenhouse gas emissions totaled 6,702 million metric tons in 2011. States with large coal fleets and many Midwestern manufacturing states very likely watch the development of this upcoming rule, especially when the guidance is issued. Several important questions are still unresolved for states as they digest the potential action EPA will take under section 111(d). For example, will states be required to reduce emissions at each power plant site or on a system-wide basis? States also don’t know if their existing efforts to promote renewable energy and reduce greenhouse gas emissions will count toward the pending requirements. Some 30 states have adopted renewable energy or portfolio standards and the integration of those efforts will be closely watched for attainment purposes.
In September 2013, EPA posed several questions in a 5-page document to gather feedback from states and other stakeholders on their recommendations for developing section 111 (d) regulations. This part of the Clean Air Act has rarely been triggered and in many ways the agency is moving into uncharted territory with so many moving and complex considerations at hand. Several industry groups, NGOs, and states have also begun to offer their input and suggestions as EPA develops its proposal. The states that make up the Regional Greenhouse Gas Initiative or RGGI offered their formal comments in December 2013 outlining a push to incorporate the cap and trade program and flexible regional efforts they’ve undertaken to reduce emissions from existing sources. The state of Kentucky also issued an extensive whitepaper discussing a range of options for the agency consider when developing its 111(d) rulemaking that will recognize the challenges and economic implications it will face due to its heavy reliance on coal-fired power generation. For those interested in more background on the section 111(d) process and range of policy options available to states, the Nicholas Institute for Environmental Policy Solutions at Duke University has published a helpful resource guide that you can access here.
Cooling Water Intake Rule
The US Geological Survey issued a study in 2005 which found that electric generating power plants use roughly 200 billion gallons of water per day – primarily for cooling. The discharge of heated water from the plant and subsequent withdrawals from coastal areas, lakes, and rivers can pose potential adverse impacts to aquatic wildlife through impingement and entrainment. Impingement occurs when fish or organisms get caught in cooling water intake structures (usually screens) and entrainment occurs when aquatic animals get sucked into cooling water systems and are discharged back into sources. The EPA proposed a rule in 2011 that would require at least 650 older power plants to install closed-cycle cooling intakes when building new units at existing facilities in order to reduce the harm to fish and other aquatic wildlife. According to an industry group called the Business Roundtable, about 43 percent of the country’s electric power plants use open-loop cooling water systems. Closed-cycle systems contemplated in the EPA rule differ from open-loop cooling systems by reusing water through cooling towers that dissipate heat generated by the boilers through evaporation and convection.
The final rule, due in January 2014, has been postponed several times and is very contentious between industry and environmental groups. Many advocacy organizations have opposed the agency’s proposal because they believe it gives state regulators too much discretion to decide in deciding if closed-cycle systems should be installed for all existing facilities on a case-by-case basis. In September 2013, the Sierra Club River Keeper and several other NGOs released a report very critical of certain state regulatory standards and lack of staffing or enforcement funding. Among many claims, the report said, “If EPA’s rule is finalized in its proposed form, the federal agency will have missed a chance to end the staggering fish kills at older power plants and advance the level of technology deployed by the power sector. Instead, EPA will just place heavier burdens on state regulators that already cannot keep up with their water pollution permitting obligations, thereby making the state BTA (best technology available) process more important and less effective than ever.”
More information on the EPA Cooling Water Intake Rule can be found here.
Crude Oil Transportation
The tragic derailment in the small Quebec town of Lac Megantic, Canada, focused public attention on the incredible increase of crude oil being shipped by rail. According to the Association of American Railroads, an industry trade group, U.S. railroads carried just 5,912 car loads of crude oil in 2007; that number escalated to 234,000 car loads in 2012. The industry estimates that number will be substantially larger for 2013 and the Energy Information Administration noted that in first three quarters of 2013 freight rail moved roughly 11 percent of US domestic oil production – up from negligible amounts just a few years ago. The incredible growth is attributable to a lack of pipeline capacity in areas of booming oil production in the Bakken formation in North Dakota as a result of hydraulic fracturing and other market forces. Despite generally higher costs, some refiners and other shippers enjoy the logistical flexibility that rail service provides and the different varieties of available crude oil without the long-term contracts or requirements that some pipelines require. Further, the amount of private capital needed and the regulatory and construction hurdles associated with new pipeline projects often leave few alternatives for producers to immediately move their large supplies of crude to market.
Safety advocates have been pushing the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) to add more requirements to retrofit tank cars moving crude oil and make them more “crashworthy.” Industry officials and opponents of mandatory retrofitting of tanks cars note that mandating a retroactive upgrade would cost $1 billion and remove would remove huge numbers of shipping infrastructure while stranding large amounts of energy resources. Further, the rail industry has countered claims about its safety record and have produced statistics showing only a 2.2 gallons/mile spill rate per million ton miles of product moved from 2002-2012. However, the latest accident involving Bakken crude oil garnered national attention and additional questions from federal safety regulators. On December 30, 2013, a train derailed carrying 104 tanker cars of Bakken crude in North Dakota which struck another train causing a massive explosion. This latest event triggered an investigation from the National Transportation Safety Board (NTSB) and the issuance of a safety alert by PHMSA regarding the proper labeling, packing, and packaging of crude oil shipments. Some outside energy experts have postulated that human error and mislabeling of crude that may carry corrosive or highly flammable additives may not be receiving the appropriate level of scrutiny and thus are not being placed in more secure cars. Also at issue is a concern raised by railroad safety groups and officials over the increase in “unit trains” to move crude oil. These trains carry only crude oil, instead of a mixed loads, which the Chair of the NSTB has suggested may be a gap in existing safety regulations as previous standards were designed for freight cars carrying just a few tank cars with mixed loads. However, the Federal Rail Administration said in a written statement “There is no evidence that unit trains are less safe than mixed freight trains.”
The rate disputes around the country in 2013 are a preview of things to come. More than 40 states have programs incentivizing the use of net metering—most commonly through rooftop solar panels—which has become increasingly popular because it allows homeowners to sell excess renewable power to the utility after meeting their own energy needs. Although the overall number of consumers utilizing these programs is relatively small nationwide (roughly 220,000 in 2012 according to the Solar Energy Industry Association), energy analysts expect the popularity to grow as more interconnected features of the Smart Grid are implemented and more familiarity or customer acceptance grows. Last January, the Edison Electric Institute issued a report highlighting the future potential changes this growth could pose from a financial and strategic perspective for the electric utility industry.
Utilities and solar groups have sparred over implementing higher fees power companies say are necessary for recovering the true costs of providing distribution service when these homes have to reconnect to the grid. Opponents of the fees have argued that it will limit customer options and dampen public enthusiasm for expanding solar power to more homes.
Lingering Drought and Water Infrastructure
States like California, New Mexico and Texas grappled with persistent ongoing drought in 2013. Many Western states may face additional challenges meeting the demand for water with expected dry conditions. Persistent drought conditions in California have forced the state’s Metropolitan Water District to cut expected 2014 supplies for agriculture and urban centers down to as much as 5 percent of the water levels they normally request. Governor Martinez of New Mexico has proposed additional drought and water infrastructure funding totaling more than $100 million in the upcoming legislative session as the state endures its worst drought in more than a century. Texas voters in November 2013 overwhelmingly approved a measure to create a $2 billion revolving loan fund that could be leveraged to pay for water infrastructure projects in the state’s 50-year plan. Supporters of the plan highlight the incredible population growth (80 percent by 2060) means the state will need substantial increases in dwindling water supplies impacted by drought or risk losing thousands of jobs and important economic development. The most recent drought predictions from the National Oceanic and Atmospheric Administration call for continuing precipitation shortfalls well into 2014.