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Montana and Wyoming See EPA Coal Rules Differently

The country's top coal producers are pursuing radically different approaches to the Clean Power Plan

WHEATLAND, Wyo. – Like many residents here, Dan Brecht boasts a personal connection to the Laramie River Power Station.

Several relatives have, at various points, worked at the coal plant on the outskirts of town. His sister’s family moved back to Wheatland after the plant was built in 1980. He sees the facility as vital to the local economy.

Laramie River Power Station towers above Platte County, a community of 8,000 where the majority of people work in agriculture. The sight of steam rising from the plant’s smokestacks is visible for miles in every direction around Wheatland. The 1,710-megawatt facility employs around 350 people and pumps millions of dollars in tax revenue into county coffers every year.

It also belched 14 million tons of carbon dioxide into the atmosphere in 2013, making it the 17th largest emitter of carbon in the United States, according to the U.S. Environmental Protection Agency.

Laramie River Power Station is hardly unique among its regional counterparts, in both economic terms and environmental ones.

The 2,100-megawatt Jim Bridger Plant in southwestern Wyoming sent 16 million tons of CO2 into the atmosphere in 2013, placing it 12th on the EPA’s list of the country’s top carbon emitters. Farther to the north, the 2,100-megawatt Colstrip Generating Station in eastern Montana sent almost 15 million tons of carbon skyward. That made Colstrip the country’s 14th-largest carbon emitter in 2013.

The Obama administration had plants like these in mind when it unveiled the so-called “Clean Power Plan” last year. The proposal, which represents the United States’ most ambitious effort yet to tackle climate change, aims to reduce American carbon emissions by 30 percent of their 2005 levels within the next 15 years.

In communities like Wheatland, the plan has been a source of considerable anxiety.

“There were a lot of rumors going around that the plant would close down,” said Brecht, the owner of Wandering Hermit Books and Gifts on Gilchrist Street, the town’s main thoroughfare. “It wasn’t a concern of mine, but a concern I heard.”

Brecht, by his own admission, is something of an outlier among his neighbors. He believes climate change is real and should be addressed. But that doesn’t mean he wants to see Laramie River Power Station close.

“I want things to be fair for the big coal plants,” Brecht told the Casper Star-Tribune (http://bit.ly/1ziFOXZ).

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The sentiment underscores the difficulty facing policymakers in Wyoming and Montana. Both are among the country’s top coal producers, and both rely on coal for the majority of their electricity generation.

Despite this, the western neighbors are pursuing radically different approaches to the Clean Power Plan. Wyoming plans to fight the regulations. Montana is looking to comply with them. The diverging path of two coal states has important implications for the mining industry’s future and the makeup of the western power grid.

Wyoming is involved in two lawsuits seeking to block the EPA from moving forward with the regulations. Gov. Matt Mead, in his State of the State address, said he would fight with “bulldog determination” to protect the state’s coal industry.

The chairman of the Wyoming Public Service Commission predicted Wyoming would need to close four coal-fired power plants in order to meet the terms of the proposal.

Montana, by contrast, estimates it can comply with the plan without closing any of its coal-fired plants. The state Department of Environmental Quality envisions five compliance scenarios using varying combinations of renewable energy generation, energy efficiency measures and upgrades to Montana coal plants to meet the EPA targets.

Gov. Steve Bullock has expressed concern the regulations could harm his state’s coal industry but also argued climate change needs to be addressed. In his public comments, he has sought to cast the proposal as a boon to Montana’s renewable energy sector.

The difference in approach may be a reflection of simple politics. Mead is Republican, Bullock a Democrat. But Wyoming is also far more reliant on coal than its northern neighbor.

The Cowboy State mined some 400 million tons of coal in 2012, the most of any state and about 40 percent of the nation’s total. Coal generation made up 93 percent of its electricity generation that year, according to the U.S. Energy Information Agency. Renewables were second, with roughly 6 percent of Wyoming’s total.

Miners in Montana produced 36 million tons, or 4 percent of the national total. That was good for eighth in the country. Coal made up 67 percent of Montana’s electrical generation, with hydropower accounting for nearly 30 percent of the state total.

Montana officials have held earlier discussions with other states about the prospect of cooperating to meet the EPA’s targets. Their Wyoming counterparts have thus far rejected regional advances.

The regional avenue offers several benefits, the chief of which is it could lower the cost of compliance, Montana officials and analysts said.

The western power grid spans state lines, said Robert Godby, an economics professor at the University of Wyoming who specializes in power generation. A regional approach to reducing carbon would be more effective, he said, because it mirrors the existing system.

“The arbitrary state lines are what gets in the way,” Godby said. “In effect you’re incurring an additional cost. Saving might be just over the line. That is why Montana is going around saying, ‘How can we do this? We need regional partners.’ Wyoming isn’t going to do that. They have to keep up appearances. They are anti-Clean Power Plan.”

Why does that matter? Under the EPA plan, each state is responsible for meeting a carbon reduction target. Montana’s target is a 21 percent; Wyoming’s is 19 percent. The target is based on each state’s electricity portfolio and its potential use of other energy sources like natural gas and renewables, among other things.

The federal government offered states four basic options for how to achieve their goal: make coal plants more efficient, use more natural gas, generate more renewable power or employ energy efficiency measures. It also gave states the option to work together.

The problem for Montana and Wyoming is that options one and two offer little promise. Neither currently boasts much in the way of natural gas generation and their coal plants are relatively efficient compared with those of their national counterparts.

The EPA assumed coal plants nationally could, on average, improve their efficiency by 6 percent. Yet that number was derived in large part from eastern coal plants, which tend to be older and less efficient. Plants in Montana and Wyoming can likely achieve 1 to 2 percent improvements, according to projections by regulators in both states.

Utilities share the concern. Coal is the Laramie River Power Station’s greatest cost, said Myron Singleton, an engineer at the facility.

“If we could be more efficient, then we would,” he said.

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Montana and Wyoming regulators have thus turned much of their attention to the third part of the EPA’s plan: renewable energy. And on that point, there is widespread disagreement.

Some say the state that produces the power will get the credit. Others argue the state that consumes it will. The question is particularly important because Montana and Wyoming both export more energy than they consume.

Montana officials base much of their assumptions for meeting the EPA’s goals on the state getting credit for new renewable power generation.

Others take the opposite point of view.

Noah Long, an attorney at the Natural Resource Defense Council, an environmental group that championed the proposal, said consuming states should get credit for buying renewable power. The appeal of renewables is the electricity and their low carbon emissions, he said.

“To the extent it is counted in Wyoming’s compliance plan, it can’t be counted elsewhere. And if that’s the case, that would should shut down the market for that power,” Long said.

Which is one of the reasons why the topic of regional cooperation looms so large. If states work together to reduce carbon emissions, proponents of a regional approach say, the subject of who gets credit for renewable power generation matters less.

“I think first and foremost, it might prove to be the least costly option when there are more folks in the mix,” said Dave Klemp, bureau chief for Montana DEQ’s air quality program. “Contain the costs, and, for instance, if there’s opportunity for energy generation to help meet someone else’s goal, there is a positive economic benefit associated with that.”

He noted Montana is still evaluating its options and has to first weigh the potential benefits and drawbacks of a state-only plan. The EPA also has yet to finalize the rule – a decision is expected sometime in the summer – and Montana may change its approach based on how the final plan turns out, he said.

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Coal interests see things differently. Colin Marshall is CEO of Cloud Peak Energy, a mining firm that works in the Powder River Basin. The basin stretches across southeastern Montana and northeastern Wyoming. Cloud Peak operates mines in both states.

“The Powder River Basin is definitely the best-placed basin in terms of low cost, reserves and low-sulfur coal,” Marshall said. “But if you burn less coal in America, you’re going to produce less in the Powder River Basin. And with that comes less jobs and tax revenues to Wyoming and the feds.”

Bob Lake, a Montana Public Service Commissioner, in an op-ed in the Missoulian, pointed to a study commissioned by mining interests, which predicted large rate increases.

The analysis, done by NERA Economic Consulting, found electric rates would increase between 16 and 19 percent in Montana and 18 and 34 percent in Wyoming. The discrepancy depended on whether states used all four compliance options available to them or were only able to employ two alternatives.

Others expressed doubts about Montana’s prediction it can avoid coal plant closures.

“I don’t think they have looked at it as hard as we have,” said Al Minier, the Wyoming Public Service Commission chairman, in a November interview. “It basically says it is all rosy. I think they might have made some political decisions about whether they cooperate.”

Anne Hedges, deputy director of the Montana Environmental Information Center, disagreed. Montana has the second greatest potential for wind energy in the country, boasts opportunities for solar and has done little to improve energy efficiency.

“It’s just not that hard to achieve,” Hedges said of the state’s 21 percent carbon target. “We have opportunities that have been unrealized and terrific resources.”

She also dismissed the argument implementing the plan will be expensive, pointing to Montana Public Service Commission figures which show two of NorthWestern Energy Corp. wind farms boasting lower costs than coal.

“Those are trend lines, those are not one-time occurrences. They are likely to continue,” she said.

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