May 21 Colorado Energy Roundup: capitulating to the EPA, sage-grouse protections, and lazy fracktivists
Filed under: Archive, CDPHE, Environmental Protection Agency, Legal, Legislation, PUC
Gov. John Hickenlooper intends to capitulate to the Environmental Protection Agency’s “Clean Power Plan,” rejecting a suggestion by Sen. Mitch McConnell (R-KY) to avoid implementing the new federal rules:
Gov. John Hickenlooper rejected Senate Majority Leader Mitch McConnell’s call for states to defy new federal pollution controls on coal-burning power plants, saying Colorado has a long history of protecting its environment — despite its heavy reliance on coal.
In a letter to McConnell dated Thursday, Hickenlooper also disputed McConnell’s contention that the rules would cause electric rates to soar. Hickenlooper said Colorado is cutting pollution while keeping energy affordable.
In a letter dated May 14, Hickenlooper told McConnell that compliance with the EPA’s proposal would be “a challenge,” but said “states tackle problems of this magnitude on a regular basis.”
“We think it would be irresponsible to ignore federal law, and that is why we intend to develop a compliant Clean Power Plan,” Hickenlooper said in his letter.
About 64 percent of Colorado’s electricity was generated by coal in 2013; when the state ranked 11th nationwide in overall coal production, according to the federal Energy Information Administration.
Hickenlooper said the state has “a long-standing history of investing in our natural environment, with the engagement of local business and civic leaders.”
“We have made immense strides in eliminating the ‘brown cloud’ for which Denver and the front range of the Rockies were once famous; stunning, clear views of the Rocky Mountains have been restored to our residents and the tens of millions of visitors who come here annually,” he said.
The Colorado Assembly entertained SB 258–the Electric Consumers’ Protection Act–this past legislative session, passing the State Senate in a bipartisan vote, but ultimately dying in a Democratic House kill committee late in the session. The bill would have called for any state implementation plan for the EPA Clean Power Plan to be reviewed by the Public Utilities Commission in a public, transparent manner with heavy input from the public as well as agencies such as the Colorado Department of Public Health and Environment, with a final review and vote by the full state legislature, instead of a policy written behind closed doors by CDPHE and implemented unilaterally at the executive agency level, with input offered only after the fact.
Opponents of the bill called the transparency measure “red tape.”
Appealing for broad inclusion and procedural transparency, the Colorado Mining Association’s Dianna Orf hopes that CDPHE and the Governor’s administration will ensure that Colorado’s plan include those most affected by the rule–energy producers and consumers:
“We ask that it be as inclusive and transparent a process as possible,” Orf said. “The magnitude and significance of the plan, and how it’s implemented, is so far reaching that we’d ask that they not only include utilities, but consumers and fuel suppliers as well as the larger business community.”
On the other hand, late last week, Gov. Hickenlooper issued an executive order on behalf of the greater sage-grouse that is designed to shield the state from expanded federal efforts to list the animal as threatened or endangered, which would have a devastating economic impact on the western part of the state, and many surrounding states as well:
Colorado Gov. John Hickenlooper issued an Executive Order on Friday (May 15) directing state agencies to take additional conservation measures for the greater sage-grouse.
“Our actions, in conjunction with the efforts of our local governments, landowners and many others to protect the greater sage-grouse, have been extensive,” Hickenlooper said in a press release that accompanied the order. “With this Executive Order we are directing our state agencies and our partners to do even more to protect this treasured species.”
Hickenlooper directed state agencies to take a number of actions designed to reduce impacts to the greater sage-grouse and its habitat, including taking inventory of — and improving habitat within — state lands with grouse populations.
“We firmly believe that state-led efforts are the most effective way to protect and conserve the greater sage grouse and its habitat,” said Gov. Hickenlooper in the release. “Conversely, a decision by the federal government to list the greater sage grouse under the Endangered Species Act would have a significant and detrimental economic impact to the state, as well as threaten the very state-led partnerships that are working to protect the species.”
The Fish and Wildlife Service has until September 30, 2015 to render its decision on any listing action for the greater sage-grouse. Full text of Gov. Hickenlooper’s executive order can be read here.
Outgoing Colorado Oil and Gas Association President and CEO Tisha Schuller had some thoughts on anti-energy fracktivists in Colorado:
On what she sees as a hypocrisy by those who want to ban fracking
“Communities that use oil and gas can’t ban it and say someone else has to produce it for them… We are consumers demanding a product and demanding it at a very affordable price. We know how sensitive consumers are to changes in their heating bill and their gasoline bill… I think a better paradigm is we are totally interdependent on oil and gas, and vilifying it is simply silly and a very lazy way of trying to address climate change.”
Filed under: CDPHE, Environmental Protection Agency, Legislation, New Energy Economy, preferred energy, renewable energy, solar energy, wind energy
Energy In Depth’s Simon Lomax pokes holes in the American Lung Association’s report on ozone–and the Denver Post’s reporting on it–with input from the Colorado Department of Public Health and Environment:
Citing its own April 29 “report card” on the region’s air quality, the ALA told the Denver Post that levels of ground-level ozone – sometimes called smog – are deteriorating rather than improving. But the ALA went much further, claiming that while the air above the Denver metro area “looks cleaner than in the 1970s,” the region actually has “higher ozone” and the gains made since the 1970s “are going away.”
In the same news story – authored by the Post’s environmental writer Bruce Finley – the Colorado Department of Public Health and Environment (CDPHE) warned the ALA’s report card was “both inaccurate and misrepresents air quality in Colorado.” But Finley’s story didn’t detail what those inaccuracies and misrepresentations actually were.
In a follow-up interview with Energy In Depth, CDPHE’s Air Pollution Control Division (APCD) Director Will Allison revealed that the ALA report card ignored a full year of air quality data from 2014, which shows ozone levels getting better, not worse. To claim there’s higher ozone now than back in the 1970s also ignores decades of air quality data that show “it’s gotten a lot better,” Allison said.
To say the ALA took a liberal look at its own conclusions to bolster an argument for increased ozone regulation appears correct.
“If you look at 2011-2013 averages, we had 10 monitors in the Denver North Front Range that exceeded the ozone standard of 75 parts per billion. But if you look at the 2012-2014 averages, only four monitors exceeded the federal standards. So there was a significant drop from 10 noncompliant monitors to four,” Allison told EID.
Colorado’s 21-member oil and gas task force, which concluded its meetings in February, received modest support (about $2 million) in the Colorado legislature for a handful of its recommendations:
The budget includes:
$1,364,713 to pay for 12 new employees for the Colorado Oil and Gas Conservation Commission (COGCC), the state agency charged with overseeing the state’s multibillion-dollar oil and gas sector.
$360,910 for the Colorado Department of Public Health and Environment (CDPHE) to create a hot line and website with information about the industry, and a chance to raise concerns about its operations.
$402,859 for the CDPHE to create a mobile air monitoring unit to watch for air pollution from industry operations and a person to operate it.
These small changes stand in contrast to some of the more pointed and disruptive resolutions the committee considered, and to the ballot measures that tripped off the Governor’s “compromise” move last August.
Fracking opponents, of course, decried the legislative session’s activity on oil and gas issues, while the industry hailed the results, according to Valerie Richardson at The Colorado Statesman.
Kicking the can down the road to 2016 on fracking issues–with Democrats sidestepping a fractious debate, as Richardson put it–may still not prove advantageous to Democrats split over the issue. With eco-left activists vowing to work hard again next November and having felt betrayed by maneuvering in 2014, Sen. Michael Bennet’s re-election efforts might not get the smooth ride his party was hoping to craft. It certainly didn’t help former Sen. Mark Udall, who carved a more eco-friendly niche in his term, but ultimately suffered defeat last year.
Speaking of Sen. Bennet–an attempt to bolster his green credibility with new legislation aimed at a national renewable energy standard:
The bill unveiled Tuesday that would require utilities to generate 30 percent of their electricity from renewable energy sources by 2030, starting with an 8 percent requirement by 2016 followed by gradual increases.
Sen. Tom Udall has introduced this legislation in every session of Congress since 2008. The bill is based on his bipartisan initiative that passed the House in 2007. Co-sponsors this time around include Sens. Edward Markey (D-Mass.), Martin Heinrich (D-N.M.), Michael Bennet (D-Colo.), Jeff Merkley (D-Ore.), Sheldon Whitehouse (D-R.I.) and Mazie K. Hirono (D-Hawaii).
“A national Renewable Electricity Standard (RES) will help slow utility rate increases and boost private investment in states like New Mexico — all while combating climate change,” Udall said in a news release. “Investing in homegrown clean energy jobs just makes sense, and that’s why I’m continuing my fight for a national RES.”
Colorado’s western slope counties may avoid economic devastation if the Fish and Wildlife Service decides not to tap the greater sage-grouse with a designation as threatened or endangered:
The Interior Department has said it wants to reach the point that the Fish and Wildlife Service can find that no listing is warranted. Much of that decision lies with the way the BLM manages its lands and both agencies report to Jewell.
“We are very, very close to avoiding a listing altogether,” Hickenlooper said, noting that he spoke to [Secretary of Interior Sally] Jewell 10 days ago.
Finding that the bird should not be listed is Jewell’s goal, Hickenlooper said.
“I believe her. I don’t think she’s posturing.”
A listing by the FWS would be a critical blow to Colorado’s western counties, along with 10 other states, as one county commissioner told Gov. Hickenlooper.
“All of Moffat County is out of business,” Moffat County Commissioner Chuck Grobe concluded, should the listing move forward contrary to Hickenlooper’s claims.
Colorado’s Electric Consumers’ Protection Act (ECPA), a bill to address Colorado compliance with the EPA’s proposed Clean Power Plan (CPP), received its first hearing on Thursday, April 9, 2015 in the Senate Agriculture, Natural Resources, and Energy Committee. Senators John Cooke (R-Greeley) and Jerry Sonnenberg (R-Sterling) are the prime sponsors of SB15-258. A number of people and organizations testified in favor of it including Catholic Charities, the Colorado Consumer Coalition, TriState Generation and Transmission Association, and our own Michael Sandoval. All made compelling arguments to support the ECPA. Below is the written testimony of one of the most compelling witnesses air regulatory attorney Mike Nasi.
The bill did pass out of committee with bi-partisan support on a 7-2 vote. Now it moves to Senate Appropriations.
For more information on the CPP and the ECPA, read the Independence Institute’s latest Issue Backgrounder “Colorado and the ‘Clean Power Plan’: Expensive, Ineffective, Illegal, and Impossible” by intern Lexi Osborn.
Also read Sen. Cooke and Sonnenberg’s commentary “No regulation without representation.”
Illegality of EPA’s Clean Power Plan & Benefits of the Electric Consumers’ Protection Act (ECPA) SB15-258
April 9, 2015
TESTIMONY OF MICHAEL J. NASI
Jackson Walker, L.L.P – Austin, Texas
My name is Mike Nasi. I am a partner at the law firm Jackson Walker, located in the firm’s Austin, Texas office where I head up the firm’s air regulatory practice. I am honored to be here before you today. I have been asked to testify here today because I have been a practicing air quality attorney working with EPA air quality regulations for over 22 years and represent power generation interests, including rural electric cooperatives, in pending DC Circuit and U.S. Supreme Court cases regarding a number of recently-promulgated EPA air regulations targeting the electric generation sector.
As proposed, EPA’s Clean Power Plan is illegal. This is not just my opinion, but the position of thirty-two states’ elected officials; huge swaths of the electric power, manufacturing, and chemical industries; various businesses and community organizations; and even those in the President’s inner circle. As recently stated by Laurence Tribe – the renowned scholar and close advisor to the President:
“EPA is attempting [in the Clean Power Plan] an unconstitutional trifecta: usurping the prerogatives of the States, Congress and the Federal Courts – all at once. Burning the Constitution should not become part of our national energy policy.”
The Clean Power Plan (CPP) is an unprecedented and unconstitutional attempt at a power grab by the EPA. In direct conflict with the 10th Amendment of the U.S. Constitution, EPA intends to take over roles reserved to the states and remake them in their vision – including a takeover of electricity production, consumption and distribution. Under the guise of “state flexibility,” EPA hopes to coax states, or, if necessary, coerce them to develop state plans that would create authority EPA does not otherwise have to enforce the “outside the fence” elements of the CPP.
The Clean Air Act places limits on EPA’s authority; specifically, to “defining” the best system of emissions reduction – BSER – and promulgating a guideline document. It does not provide EPA the authority to set binding state-specific emissions rate targets or regulate electricity markets under the auspices of a federally enforceable state plan. By setting such stringent emissions limits under incredibly compressed timelines, and by preventing states from considering actions they’ve already taken before the 2012 baseline year – including retirements, significant build out of renewable generation and reductions in end-user demand – EPA has failed to provide the states with any of the state-led authority or flexibility required in the Clean Air Act. This authority and flexibility is central to the cooperative federalism required by the Clean Air Act.
At its core, EPA does not have the authority to require states to undertake the actions contemplated in its BSER model – the so-called four building blocks of the rule. Block 1 – increased coal power plant efficiency – is unreasonable and technologically impractical, if not impossible. The remaining three blocks, however, are where EPA truly contravenes the Clean Air Act by looking “beyond the fence” for emissions reductions. The plain language of Section 111(d) makes it clear that a standard of performance should only apply to an “existing source” “which emits or may emit an air pollutant.” There is no discussion of “groups of sources” or “markets related to an existing source,” but rather, requires that standards apply to individual “existing sources” in isolation – “within the fence.” Blocks 2 through 4 completely contradict the within-the-fence requirements. Regarding Block 2, EPA has no authority to require re-dispatch of generation, which is left largely to the free market or the regional transmission organizations (“RTO”) and independent system operators (“ISO”) that oversee dispatch [and Public Utility Commissions]. EPA simply is not provided the authority under the CAA to set mandatory state emission budgets based on the emission reductions it calculates are possible from fuel switching, renewable generation increases, or end-user energy efficiency. This is also in direct contravention of the Federal Power Act, which leaves to the states exclusive jurisdiction over intrastate electricity matters.
The legal problems with EPA’s rule start well before reaching the question of their “beyond the fence” state budgets, however, as EPA has three significant statutory hurdles it has not and cannot clear. The explicit language of the Clean Air Act prevents EPA from promulgating this rule. The Act states that EPA is prevented from applying Section 111(d) standards to source categories already regulated under Section 112 of the Act; fossil fuel power plants are regulated through Section 112 by the Mercury and Air Toxics Rule. EPA claims that the Act is ambiguous due to drafting errors, but the language as codified in the United States code is clear. Even accounting for drafting errors, the language still clearly prohibits EPA’s actions. Furthermore, the Supreme Court has already spoken on this issue, in a note to its decision in AEP v. Connecticut, in which it stated: “EPA may not employ [Section 111(d)] if existing stationary sources of the pollutant in question are regulated under the…the “hazardous air pollutants” program, [Section 112.]”
The Clean Air Act also requires a valid new-source 111(b) rule to be in place before EPA may proceed to an existing source rule under Section 111(d). These rules are still in the proposal stage, and even if finalized, are riddled with technical and legal flaws that in my opinion will result in the rules being vacated, which will remove this necessary legal prerequisite to any 111(d) rule. As recently pointed out by 13 state attorneys general (see attached March 25, 2015 letter), EPA also failed to finalize the 111(b) rule within one year of proposal in violation of its mandatory duty to do so under 111(b)(1)(B) of the CAA. As explained more fully in the AG letter, this violation stands to undermines EPA’s current schedule for finalizing the 111(b) and (d) rule this summer given that the 111(b) rule must be re-proposed and finalized before the 111(d) rule can be finalized. EPA has also failed to make a necessary Section 111-specific endangerment finding based on CO2 emissions from the fossil fuel source category. EPA attempts to rely on its endangerment finding for GHG emissions from motor vehicles as the endangerment finding for this rule. But this motor vehicle endangerment finding is based on a completely different section, even title, of the Clean Air Act; it was an endangerment finding for six separate greenhouse gases, not just CO2 as the Clean Power Plan addresses; and the statutory language of the endangerment finding itself is different, with the Section 111 standard imposing a greater burden on EPA. EPA attempts to say that there is a “rational basis” for this rule, but this is simply not true; the rule, even if fully implemented, will have an almost imperceptible impact on global climate.
Colorado’s ability to comply with the Clean Power Plan is in serious question, though due to no fault of your own, but it is why any attempt to comply should be transparent for every Coloradan to see. The sheer enormity of the emissions reductions and the incredibly short time constraints of the rule alone would be a daunting, if not impossible challenge, but the legal authority of state agencies to implement the rule is simply not there in many respects. As an initial matter, the Air Quality Control Commission’s authority, as implemented by the Colorado Department of Public Health & Environment, is limited to drafting regulations directed at sources of air pollutants. There is no authority to go “beyond the fence,” which, like the federal government, significantly constrains the ability to develop any plan addressing Blocks 2 through 4 of EPA’s BSER model. The Public Utilities Commission is also subject to limitations on breadth of authority, that precludes it from addressing the environmental components and entities necessary to meet EPA’s budget.
I certainly would not recommend that Colorado create a plan that establishes authority that EPA itself does not have. Having said that, I see value in the passage of SB 258 the Electric Consumer Protection Act because it would ensure the PUC’s oversight and actions to ensure that rates stay competitive and reliability is maintained. Given the price increase and reliability risks in question, it makes good sense that the ECPA requires both PUC approval followed by the General Assembly’s approval because it will ensure that the public may participate in a transparent process and Colorado legislators have oversight over the submission of any plan.
I was encouraged to see that – the Colorado Department of Public Health and Environment, the Public Utilities Commission and the Colorado Energy Office – in official comments to the EPA about the CPP acknowledge that, “legislation may be needed to clarify or direct state agencies on their respective roles and authorities.” There will be lawsuits, and the ECPA contains a smart safety valve provision that suspends or terminates any further action on a State Implementation Plan if the regulations are not adopted, are suspended, or are found to be contrary to law.
The ECPA is simply good government that provides a transparent framework. Without the ECPA, CDPHE has indicated that it will draft a plan and implement it behind closed doors, without public or legislative oversight. Without the ECPA, you will be ceding your authority, your responsibility, to unelected air quality regulators.
By Syndi Nettles Anderson, guest writer for the Independence Institute Energy Policy Center
Earlier this week Todd Shepherd of Complete Colorado reported that before thin-filmed cadmium-telluride solar panel manufacturer Abound Solar declared bankruptcy it was the subject of a Colorado Department of Public Health and Environment (CDPHE) investigation after an anonymous tip raised concerns about cadmium contamination.
Shepherd provided documents showing that the now abandoned Weld County plant produced monthly 630 pounds of highly toxic cadmium waste that was shipped to Deer Trail in Arapahoe County for storage.
Because of the recent interest in cadmium, below is a primer on the rare earth element used in so many products besides solar panels.
Cadmium, one of the 17 rare earth elements (REE), is a soft silver-grey metal, commonly found in ores containing zinc. Products that use significant cadmium include rechargeable batteries, solar cells and protective steel coatings. Recently cadmium has been priced about a dollar per pound.
Cadmium is a byproduct when zinc is refined from zinc ore, or recycled from nickel-cadmium rechargeable batteries. The largest producers of cadmium are China, South Korea, Japan and North America. The concentration of cadmium in the earth’s crust is between 0.1 and 0.5 parts per million (ppm). This is about one hundred times more common than gold.
Cadmium is very useful in rechargeable batteries and solar cells. In the U.S., about 27 percent of cadmium-nickel batteries are recycled, which requires batteries to be taken apart.
However, cadmium is also very poisonous. Exposure is most dangerous when breathing in dust or vapors containing cadmium. Other methods of exposure are also dangerous, as cadmium can be absorbed through the skin or by ingestion.
People can absorb cadmium through inhalation, absorption or by eating it. The cadmium is transported through the body by blood cells and plasma. Cadmium goes into the kidneys, resulting in kidney failure. Before toxic levels are reached, kidney function will start to deteriorate. Generally a third to half of the cadmium that is in a body will be found in the kidneys. Cadmium will also move to the liver and muscles. In the liver, the half-life of the cadmium is 5-15 years, in the muscles-30 years and in the kidneys 10-30 years.
During ore smelting processes, cadmium is released into the air. It may also be released into the atmosphere by burning cadmium-containing garbage. Cadmium exposure can cause throat and lung irritation. Lower levels of exposure also cause shortness of breath, and with prolonged exposure resulting in bronchiolitis and emphysema with lung damage, bloody coughing, and accumulation of fluids in the body. One highly concentrated exposure can cause lifetime damage to lungs. 
Metal fume fever can be caused by inhaling cadmium during the welding and metal heating processes of older silver solder. Metal fume fever can cause flu like symptoms with fainting, sore throats, coughs, and headaches. Working with cadmium requires extremely well ventilated areas, respirators, and extreme care. Regular blood and urine checks are required to monitor the amount of cadmium that can get into the body. 
Phosphate fertilizers, sewage sludge and contaminated water can deposit cadmium into food sources. Growing rice and wheat can absorb Cadmium. Large ocean fish can also take up a lot of cadmium. Smokers also intake cadmium into their bodies and have about double the cadmium levels that non-smokers have. Cadmium is associated with breast cancer, lung cancer, prostate cancer, heart disease, and kidney dysfunction. 
As a result of the increased awareness of the danger of cadmium to humans, the EPA released a new report December 3, 2012, expanding the regulations and proposing new regulations regarding cadmium.
This final rule requires manufacturers (including importers) of cadmium or cadmium compounds, including as part of an article, that have been, or are reasonably likely to be, incorporated into consumer products to report certain unpublished health and safety studies to EPA. 
Occupational Safety Health Association (OSHA) also highly regulates workers contact with cadmium stating,
Cadmium and its compounds are highly toxic and exposure to this metal is known to cause cancer and targets the body’s cardiovascular, renal, gastrointestinal, neurological, reproductive, and respiratory systems.
Requirements to protect workers from cadmium exposure are addressed in specific OSHA cadmium standards covering general industry (1910.1027), shipyards (1915.1027), construction (1926.1127) and agriculture (1928.1027).
In conclusion, Cadmium is critical to the solar cell and rechargeable battery industry but extreme care must be taken to prevent cadmium from getting into the air, water or plant life. Cancer, lung damage and kidney failure are real risks for cadmium exposure.
 Wilburn, D.R., 2007, Flow of cadmium from rechargeable batteries in the United States, 1996-2007: U.S. Geological Survey Scientific Investigations Report 2007–5198, 26 p., available at http://pubs.usgs.gov/sir/2007/5198/.
 Common environmental contaminant, cadmium, linked to rapid breast cancer cell growth. ScienceDaily. Retrieved February 14, 2013, from http://www.sciencedaily.com /releases/2012/04/120423184203.htm
American Association for Cancer Research (AACR) (2012, March 15). Dietary cadmium may be linked with breast cancer risk. ScienceDaily. Retrieved February 14, 2013, from http://www.sciencedaily.com /releases/2012/03/120315094506.htm
Cell Press (2012, September 12). Studies shed light on how to reduce the amount of toxins in plant-derived foods. ScienceDaily. Retrieved February 14, 2013, from http://www.sciencedaily.com /releases/2012/09/120912125517.htm
The disgraced former EPA regional official forced out after Senator James Inhoff (R-Oklahoma) posted a video of his enforcement philosophy for fossil fuel companies has found a home with the Sierra Club and its anti-coal campaign.
Al Armendariz will take over leadership of the group’s “Beyond Coal” campaign office for Austin, Texas, on July 15.
He’ll coordinate efforts to move the Lone Star State away from coal-fired electric generation and toward wind, solar and other low-carbon alternatives, said Beyond Coal director Bruce Nilles in an interview.
Armendariz, former administrator of EPA Region 6, resigned last spring after a video surfaced revealing his “enforcement philosophy” for oil and gas developers to be analogous to the Roman crucifixion of the “first five villagers” in a conquered territory.
Just two years ago, the Rocky Mountain Chapter of the Sierra Club was instrumental in getting the Colorado General Assembly to pass HB10-1365 mandatory fuel switching away from coal to natural gas. That love affair ended abruptly last month when the national headquarters announced that it no longer supported natural gas as a “bridge fuel” for electricity generation.
Senator Inhoff told EENews that Armendariz’s new position was no surprise to him, “At least at the Sierra Club, he won’t get into so much trouble for telling the truth that their agenda is to kill oil, gas and coal.”
A bill to repeal Colorado’s “phantom carbon tax” was heard today in the Republican-controlled House Agriculture, Livestock, and Natural Resources Committee. It’s the second time in as many years that State Representative Spencer Swalm (R-Centennial) has sponsored the pro-ratepayer legislation. Both times it was heard in the House Ag Committee. Last year, we documented how some Republicans in the committee voted to keep the carbon tax in tact, which is de facto support for the theory of man-made global warming.
The usual suspects, including Xcel Energy, the Colorado Department of Public Health and Environment (CDPHE), and the Public Utilities Commission (PUC), lined up against relief for ratepayers this year.
Fortunately for ratepayers, the Independence Institute stood by their side and against corporate welfare. As I stated in my testimony in support of HB 1172:
It’s true that the carbon tax is not a line item on a ratepayer’s bill, but is in included in the modeling of costs for resource acquisition. Costs dictate rates. The higher the costs, the higher the rates. The higher the rates, the more Xcel Energy makes.
The “phantom carbon tax,” as we call it, increases costs and therefore rates. Xcel customers pay Xcel for a tax that doesn’t exist. It is a redistribution of wealth from ratepayers to shareholders. (Full testimony is below)
Conventional political wisdom suggests that most Democrats would support carbon taxes while most Republicans would oppose them, especially in an election year, and that a party-line vote would have moved this bill out of committee. But after close to two hours of testimony, no vote was taken. Vice-Chairman Randy Baumgardner laid over HB 1172 until a later date. Colorado ratepayers will have to wait a little longer to see which lawmakers have the courage to provide relief from needlessly high electric rates.
Two members of the committee were absent from today’s hearing, Republican Chair Jerry Sonnenberg and Democrat Wes McKinley, which didn’t shift the balance of power. The bill still should have moved out of committee on a 6-5 vote, unless someone doesn’t want this bill to go to the floor of the House for an open debate.
So the real question is how will the House Ag Committee vote on HB 1172? Will some Republicans turn their backs on ratepayers and throw their support behind carbon taxes, the theory of man-made global warming, and corporate subsidies as they did last year? And if some do, which ones?
Republicans members of the House Agriculture, Livestock, and Natural Resources Committee:
- Jerry Sonnenberg, Chair
- Randy Baumgardner, Vice-Chair
- J. Paul Brown
- Don Coram
- Marsha Looper
- Ray Scott
- Glenn Vaad
Democrat members include:
- Randy Fischer
- Matt Jones
- Wes McKinley
- Su Ryden
- Edward Vigil
- Roger Wilson
Any guesses on how the vote will go?
Testimony on behalf of
HB 1172 No Imputed Carbon Tax
February 8, 2012
House Agriculture, Livestock and Natural Resource Committee
Mr. Chairman and Members of the Committee:
My name is Amy Oliver Cooke. I write on and direct the energy policy center for the Independence Institute, 727 E. 16th Ave, Denver, CO 80203
Thank you for allowing me the opportunity to testify today on behalf of HB 1172.
At the Independence Institute, we are agnostic on energy resources. It is our strong belief that the choice of energy resources should come from the demands of the free market, and not from the preferences of policymakers, lobbyists, or special interest groups.
HB 1172 is simple in nature, unless a carbon tax is passed at the federal level, ratepayers should not be disadvantaged financially by paying the phantom carbon tax to an Investor Owned Utility such as Xcel Energy.
We haven’t been able to find any other state that has a carbon tax in statute. Colorado’s is based in HB08-1164, which says the Public Utilities Commission:
may give consideration to the likelihood of new environmental regulation and the risk of higher future costs associated with the emission of greenhouse gases such as carbon dioxide when it considers utility proposals to acquire resources.
HB 1172 would change the wording ever so slightly to the PUC
may give consideration to the existence of new environmental regulation and the costs imposed by current federal law or regulation on the emission of greenhouse gases such as carbon dioxide when it considers utility proposals to acquire resources.
When the 2008 bill passed, Colorado Conservation Voters explained it HB 1164 this way:
By giving the PUC the ability to use carbon as a value in resource planning decisions, HB 1164 represented the first time that the Colorado General Assembly took a substantive step forwards in giving regulators the tools they need to explicitly address global warming.
Three current members of this committee (Reps. Sonnenberg, Vaad, and Looper) voted against that bill in 2008. I commend them for doing so. It is a selective, regressive tax – selective on resource (coal) and selective on customers (IOUs such as Xcel Energy), although pass through costs affect almost everyone in the state.
To tax or not to tax?
While it’s prudent for the PUC to consider the risks of Congress passing a cap-and-trade scheme that would put a price on carbon, it is, in equal measure, rash to include the cost of a federal carbon tax in resource planning that covers a time frame in which these costs don’t exist.
To its credit, the PUC staff registered second thoughts about the application of a carbon tax. Alluding to the $20 ton carbon tax during hearings for Xcel’s 2010 renewable energy compliance plan, PUC staff witness William Dalton expressed concern about “including costs that do not exist.”
Even Xcel Energy doesn’t believe that a carbon tax will be passed at the federal level any time soon.
As early as June 2010, Xcel petitioned the PUC for permission to renege on a commitment to build a 250 megawatt solar thermal power plant due to “changed circumstances,” among which the utility cited “the expectation that carbon legislation won’t be enacted for several years,” which would, “erode the economics of solar thermal” [Direct Testimony James F Hill, Xcel Witness, 4 June 2010, Docket 10A-377E]
In the 2012 Renewable Energy Compliance Plan, In Section 7 — Retail Rate Impact and Budget, Xcel acknowledges that I was correct in February 2011 when I testified in front of this committee on HB 1240, there would be no national carbon tax in the near future:
The carbon assumptions approved by the Commission in Docket No. 07A-447E assumed carbon regulation would be enacted in 2010; such regulation was not enacted and the prospects for near term carbon regulation appear to be slim.
Because Xcel assumes there will be no carbon tax in the near future, it presents a cost model that excludes the carbon tax and another model that does include the tax but not until 2014:
Due to the uncertainties related to the timing associated with possible carbon emission regulation, the Company did not include any carbon cost imputations in the model runs and other calculations set forth on Table 7-3. However, as discussed later, Public Service also presents with this Compliance Plan, as Table 7-4, a sensitivity case that assumes the same carbon imputation costs ($20 per ton, escalating at 7% annually) as approved in the 2007 Colorado Resource Plan but on a delayed implementation schedule of 2014.
The cost differences are substantial.
Colorado Legislative Council Staff wrote in the fiscal note for HB 1164, “the bill will not affect state or local revenue or expenditures, and is assessed as having no fiscal impact.” But including a non-existent $20 per ton carbon tax that adds millions of dollars to the cost of otherwise inexpensive fuels such as coal, has an impact on ratepayers. Currently, according to DOE statistics Colorado has the highest electric costs of any neighboring state, second highest in the Rocky Mountain West.
It’s true that the carbon tax is not a line item on a ratepayer’s bill, but is in included in the modeling of costs for resource acquisition. Costs dictate rates. The higher the costs, the higher the rates. The higher the rates, the more Xcel Energy makes. The “phantom carbon tax,” as we call it, increases costs and therefore rates. Xcel customers pay Xcel for a tax that doesn’t exist. It is a redistribution of wealth from ratepayers to shareholders.
If the state legislature wants to tax Coloradans to pay for global warming, they should make their case to voters — all voters – and not just penalize Xcel Energy ratepayers, who have no other place to go, no recourse.
As I stated at the beginning it is the strong belief of the Independence Institute that the choice of energy resources should come from the demands of the free market, and not from the preferences of policymakers, lobbyists, or special interest groups and we believe that HB 1172 is consistent with that principle.
President Barack Obama put a halt to the Environmental Protection Agency’s (EPA) proposed air-quality standards just before the Labor Day weekend. The Wall Street Journal opined that the president cited the struggling economy as his main reason for not wanting to tighten ozone regulations at this time:
Come January 2010, the Obama EPA said it wanted to lower the ozone standard more, to between 0.060 and O.070 ppm. Problem is, this would have put 85% of monitored U.S. counties (628 out of 736) into “non-attainment” status. And the problem with that is that under current law, non-compliance effectively forces many utilities, businesses and agricultural operations in those counties to shelve expansion plans.
Translation: no new jobs.
WSJ called the president’s decision a “rebuke” of EPA Administrator Lisa Jackson:
whose decision to tighten the standard was based on an advisory-board recommendation that the Bush administration had rejected. In a statement, Ms. Jackson said the agency would “revisit the ozone standard,” but she pointedly stopped short of endorsing the president’s decision.
But the president’s decision is also be a rebuke of Governor Bill Ritter, Colorado lawmakers on both sides of the aisle, environmental special interest groups, the Colorado Department of Public Health and Environment, Xcel Energy, Public Utilities Commission and industry that all employed the EPA regulation scare tactic as a reason to pass HB 1365, the fuel switching bill, and HB 1291, the State Implementation Plan (SIP). And this isn’t the first time that the federal government has blown the justification that Colorado lawmakers used to ram through the disastrous energy legislation.
Energy policy analyst William Yeatman of the Competitive Enterprise Institute and contributor to this blog, pulled no punches in this exclusive interview on the Amy Oliver Show on News Talk 1310 KFKA. Yeatman says lawmakers got duped. Obama cites economic reality of the job killing regulations while Colorado lawmakers and the CDHPE cite the bogus excuse of “reasonably foreseeable” air-quality standards that never materialized. Other points from the Yeatman interview:
- The PUC cited bogus deadlines due to “reasonably foreseeable” regulations and compressed the “accelerated Electric Resource Plan” from 18 to 30 months into 3 months.
- Rush was also to ensure Ritter’s environmental legacy
- The “big lie” was “obvious” and not the first for CDPHE
- Xcel ratepayers are the big losers because they will pay $1 billion for an unnecessary energy plans.
- Ritter won’t be hurt by any of this because he isn’t “encumbered by the truth.”
Basically Colorado lawmakers bought into these phony deadlines and threats of EPA usurping state authority, while Xcel ratepayers got stuck with bill. We’d like to say we enjoy the annoying chorus of “we told you so, we told you so!” But vindication is bittersweet because some of us are Xcel ratepayers.
Lawmakers (including those in leadership on both sides of the aisle), Xcel Energy, environmentalists, Colorado Department of Public Health and Environment, the Public Utilities Commission and any other group that championed Colorado’s needlessly expensive, likely illegal Regional Haze State Implementation Plan (SIP) have A LOT of explaining to do. We were told repeatedly that if we did not implement our own SIP via HB 1291, the Environmental Protection Agency will do it for us. Here’s just one example:
Consider this HB 1365 direct testimony from Ritter administration air quality official Paul Tourangeau (p 3), director of the Air Pollution Control Division,
Q: What if the Regional Haze SIP is not submitted to EPA by January 2011?
A: If the Regional Haze is not submitted to EPA on time, EPA will take over the Department’s regional haze program and regulate utilities and other large sources of nitrogen oxides and sulfur dioxide in the state through an EPA-promulgated Federal Implementation Plan. An EPA FIP would impose federal mandates on the large NOx and SO2 sources in the state, including Xcel facilities.
Turns out that wasn’t true as energy expert William Yeatman exposes in a recent post:
Last Wednesday, the lawyers were proven wrong, when the EPA announced that it would get around to deciding on Colorado’s RHSIP…in March 2012. Thanks to the lies peddled by special interests, Colorado ratepayers are $120 million poorer.
We hate to say “we told you so” but truly we did.
Xcel Energy enjoys great success at the state Capitol. It seems that whatever Xcel wants legislatively, Xcel gets. Relief for ratepayers is met with opposition.
According to the Secretary of State’s online lobbying information, through March 2011, the utility company has taken positions on 28 different bills this year: opposing 14, supporting 3 and “amending” or “monitoring” 11. So far, bills the utility company supports have either passed or are making their way through the General Assembly.
Most interesting are the 14 bills Xcel opposes, including pro-consumer legislation such as transparency on ratepayers’ energy bills and reducing energy costs through utilization of a “least cost principle.”
Under the leadership of Speaker Frank McNulty (R-Highlands Ranch), the House has done its part by killing all seven bills Xcel opposed in that chamber, including HB 1240 which would have repealed Colorado’s carbon tax and restricted Xcel’s rate of return on capital construction. The “phantom carbon tax,” as my colleague William Yeatman and I have labeled it, is:
a central component of his [Governor Bill Ritter] New Energy Economy…a big, hidden energy tax that makes customers pay for the controversial theory of global warming.
In order to make Ritter’s New Energy Economy appear affordable, the Public Utilities Commission (PUC) allows Xcel Energy to incorporate at least a $20-per-ton carbon tax into the economic models the utility uses to make resource acquisition decisions. The tax is used in the models, and the models dictate spending.
Ritter’s carbon tax is the worst kind of virtual reality because it leaps from the computers to your wallet.
Representative Spencer Swalm garnered bi-partisan support for the repeal, but Republicans killed it in the House Agriculture Committee with “NO” votes from Representatives Glenn Vaad (Greeley), Ray Scott (Grand Junction), and Committee Chairman Jerry Sonnenberg (Sterling). Sonnenberg and Scott were even listed as sponsors of the legislation.
The all-Republican Weld County Board of Commissioners also joined the Ag Committee Republicans, going on record as supporters of Colorado’s phantom carbon tax. Commissioner and Chairwoman Barbara Kirkmeyer, testified that her “entire board” opposed HB 1240 and thus opposed the repeal of the phantom carbon that is so costly to ratepayers.
Furthermore, in 2008, Vaad, Sonnenberg and McNulty opposed the initial legislation that enabled the carbon tax that they now support.
The State Senate, under the leadership of Senate President Brandon Shaffer, also has done its part to appease Xcel. So far, it has killed five Xcel-opposed bills, including the “least cost principle,” and two more are languishing in committee.
Monday the House continued its anti-ratepayer policy with passage of HB 1291, which would approve Colorado’s State Implementation Plan (SIP) for regional haze costing ratepayers an additional $1 billion according to Xcel’s 2010 annual report. The plan is both expensive and likely illegal. The $1 billion price tag is of little concern to Xcel because it recovers the entire cost from ratepayers. Xcel customers can thank Representatives David Balmer, Don Beezley, Kathleen Conti, Don Coram, Robert Ramirez and Spencer Swalm for their courageous “NO” vote.
Mr. Yeatman, our energy policy analyst, has written extensively on the SIP. In particular, he has detailed the plan’s unnecessary inclusion “of two small coal fired power plants near Steamboat Springs, Hayden 1 and Hayden 2, because it mandates controls that are at least $100 million more expensive than what is required by the Environmental Projection Agency.”
- Costs of the plan exceed benefits by a 40:1 ratio.
- Even the EPA concedes that the chosen technology, Selective Catalytic Reduction (SCR), is not cost effective for smaller plants such as Hayden 1 and Hayden 2.
- Utah determined that SCR is not cost effective.
- Evidence suggests that the Colorado Department of Public Health and Environment grossly overestimated visibility benefits.
- The threat of a federal takeover if the plan was not submitted by January 2011 was greatly exaggerated, rushing the deliberative process.
- Under Colorado law (§25-7-105.1(1) C.R.S.), a SIP cannot impose emissions controls that are more stringent than what the EPA requires.
HB 1291 must be important because the Colorado Oil and Gas Association (COGA) is saturating television and radio with ads encouraging Republicans to approve it. Leaving nothing to chance, sponsorship includes two heavy hitters – Speaker McNulty and Senate Majority Leader John Morse – essentially guaranteeing passage at the expense of ratepayers.
The prevailing paradigm on Colorado’s energy policy is that industry, the utility, politicians, environmentalists and bureaucrats have come together to forge a united “clean energy” path for Coloradans. However, there’s one group that has been noticeably absent – ratepayers, those fools who actually pay the bill.
Yeatman conservatively estimates that the four most prominent aspects of the New Energy Economy will cost Colorado ratepayers an additional $212.3 million in 2011 alone. Add millions more for the SIP that the Colorado General Assembly does not have the courage to challenge along with tiered seasonal rates, and Colorado ratepayers are in for an expensive 2011.
There is good news. Two State Senators Kevin Lundberg (R-Berthoud) and Lois Tochtrop (D-Adams County) are challenging leadership and providing a voice for consumers. Senator Lundberg introduced SB 237 to require state to consider the cost-effectiveness of the SIP and be more energy-neutral.
Energy experts say that either Lundberg’s or Tochtrop’s bills likely would save ratepayers between $100-200 million dollars, which means they probably don’t have a chance in this state legislature.
While it’s not surprising that an investor-owned, state-sanctioned monopoly would seek favor with the legislature, it is surprising that elected officials expected to represent the interests of their constituents would simply rubber-stamp Xcel’s political and financial agenda.
But with this General Assembly, Xcel gets its way.
I’ve written before about the Air Quality Control Commission’s outrageous Regional Haze Implementation Plan. In particular, I objected to the plan’s treatment of two small coal fired power plants near Steamboat Springs, Hayden 1 and Hayden 2, because it mandates controls that are at least $100 million more expensive than what is required by the Environmental Protection Agency.
(For a Regional Haze primer, click here. In a nutshell, Regional Haze is unique among the provisions of the Clean Air Act for two reasons: (1) It is an aesthetic regulation meant to improve visibility at national parks, whereas other Clean Air Act provisions are meant to protect public health; and (2) it affords states—and not the EPA—primary authority, especially for power plants smaller than 750 megawatts.)
Back then, when I wrote those posts, I thought that the AQCC’s Hayden controls were egregious; however, I’ve since learned that they are almost certainly illegal. Under Colorado law (§25-7-105.1(1) C.R.S.), a State Implementation Plan cannot impose emissions controls that are more stringent than what the EPA requires. For Hayden 1 and Hayden 2, the AQCC mandated nitrogen oxides controls, known as Selective Catalytic Reduction. But in its Regional Haze guidance document, the EPA states, “We have not determined that Selective Catalytic Reduction is generally cost-effective” for smaller power plants (less than 750 megawatts capacity) like Hayden 1 and Hayden 2. (This quote is in the first paragraph of the first column of page 39136 of the link.)
To recap: (1) Colorado law forbids emissions controls more stringent than what the EPA requires; (2) the Regional Haze State Implementation Plan mandates ultra-expensive Selective Catalytic Reduction for Hayden 1 and 2 power plants; (3) the EPA says that Selective Catalytic Reduction controls are not cost effective for small power plants like Hayden 1 and 2; (4) therefore, the Regional Haze State Implementation Plan is likely in violation of Colorado statute.
The AQCC submitted this (likely illegal) Regional Haze State Implementation Plan in mid-January. Colorado statute allows lawmakers to request a review of any revision to the State Implementation Plan by the bi-cameral, bi-partisan Legislative Council. On February 11 Reps. Jim Kerr and Marsha Looper made such a request; on February 14, they were joined by Sens. Scott Renfroe, Kevin Lundberg, Shawn Mitchell, Keith King, Jean White, Ted Harvey, Mark Scheffel, and Kent Lambert. All Coloradans owe thanks to these legislators.
Last Friday, the Legislative Council held a hearing on the AQCC’s Regional Haze State Implementation Plan. The Council allowed lawmakers until April 4 to submit legislation to revise the Plan; if no such legislation is put forward, the Plan will be sent to the Environmental Protection Agency for final approval. The clock is ticking for a lawmaker to bring the Regional Haze State Implementation Plan in line with Colorado law, by forbidding ultra-expensive controls at Hayden 1 and 2. Otherwise, Xcel ratepayers will be on the hook for at least $100 million in unnecessary costs.
William Yeatman is an energy policy analyst at the Competitive Enterprise Institute.