POWER May 2015 - 20

Clean Air Act Section 111(d):
The Case for Multi-State
Compliance
Walker Kuch-Stanovsky
T
his summer, the Environmental Protection Agency (EPA) will
finalize its Clean Power Plan under Section 111(d) of the
Clean Air Act, requiring existing fossil fuel-fired electric generating
units (EGUs) to cut carbon dioxide emissions to 30% below
2005 levels by 2030. The rule will require states to meet specific
reduction goals and also allow states to pool their compliance efforts.
While the Clean Power Plan faces serious legal challenges,
they will not be resolved until long after states must submit their
implementation plans or face EPA implementation. Utilities and
state regulators would best serve their customers and constituents
by starting now to develop multi-state compliance responses.
Regional approaches will facilitate least-cost emission reductions,
maximize certainty of achieving state goals, and minimize friction
between greenhouse gas (GHG) reduction and existing power infrastructure
and markets.
Pooling Efforts to Ease Transition
Even modest levels of coordination in developing emission reduction
programs will reduce the compliance burdens on individual
states and the power industry, especially multi-state utilities.
The benefits of cooperation increase as the number of states
and scope of coordination grow. At the maximum level of integration,
regional cap and trade would leverage states' diverse
circumstances to reduce emissions at least cost. Participation
in a larger, regional pool of emitters will offer states access to
more diverse emission reductions and funding sources. Certain
states will be able to meet stringent goals less expensively, while
others internalize the benefits of " excess " reductions that would
otherwise go unrealized.
The regional structure of the electric transmission system
naturally lends itself to a regional approach to GHG mitigation.
Dispatch within a region is primarily driven by variable costs, and
environmental regulations add an increment to those costs. Most
notably, acid rain in the Northeast has been reduced dramatically
by incorporating the price of tradable pollution allowances into
power pricing-and at much lower costs than originally projected.
For the same reasons, combining existing least-cost dispatch
with a price on carbon promises to reduce GHG emissions with
minimal added cost and regulatory apparatus.
Challenges for Multi-State Cooperation
Substantial challenges face any regional system, particularly if it includes
politically diverse states. The most obvious barriers arise if
states simply refuse to submit implementation plans. For example,
states determined to fight the regulations might view any degree of
joint planning as undermining their opposition to the EPA's overall
effort. But even states willing to engage in a regional approach are
likely to need new state legislation enabling them to do so.
Successful implementation will also require cooperation among
20
state agencies. Within each state, environmental agencies and
public utility commissions (PUCs) often discharge their respective
responsibilities with little interaction or cooperation, and sometimes
even engage in jurisdictional turf battles. Across state lines,
these complexities are multiplied by variation in regulatory structure,
mission, and culture. In addition, differences among renewable
portfolio standards could hinder the liquidity of renewable
energy credits within a region or otherwise impede integration of
new renewable energy projects into a multi-state plan.
Suggestions for the Path Forward
Despite these challenges, regional leaders in both the public and
private sectors should pursue this path. The first step should be
to open communication among states, led by governors, with
policy advice and technical support from their respective environmental
agencies and PUCs. Most importantly, state environmental
agencies and PUCs must align their agendas (environmental protection
and economic regulation, respectively) so that owners of
EGUs can be confident that they will not be caught between the
two. And that will only happen if the owners of those EGUs-
especially those with facilities and/or customers in more than
one state-engage in those discussions with their regulators.
As the EPA's oversight role evolves through future administrations
and litigation, a bipartisan group of states may hold advantages
over a group or an individual state that appears wedded to
one political party or the other. Not only would such states likely
receive more deference from the EPA on innumerable discretionary
determinations, but they will be better positioned to protect their
interests if and when Congress legislates on GHG mitigation.
As partnerships emerge, participating states should enter into
a memorandum of understanding (MOU) to guide development of
a regional plan. A key provision of an MOU will be a commitment
by each state to assure its own legal authority to participate in
the agreed program. An MOU will also need to address program
design elements, especially allocation of the substantial resulting
revenues, and whether a new regional entity is required to
administer the regional program.
Ultimately, uniform state enabling legislation would align state
regulatory authority, streamline administrative requirements, and
assure transferability of emission reduction compliance instruments.
Adoption of uniform legislation may be a bridge too far
in the current political environment, but should remain as a goal
for the full integration of participating states. ■
-Walker Kuch-Stanovsky (walkerstanovsky@dwt.com) is a thirdyear
law student at the University of Washington and a law clerk for
Davis Wright Tremaine's energy and environmental practice group in
Seattle, Wash. This article is based on work with Craig Gannett (craiggannett@dwt.com),
co-chair of the energy and environmental practice
and a partner in the firm's Seattle office.
www.powermag.com
POWER | May 2015
http://www.powermag.com
POWER May 2015

Table of Contents for the Digital Edition of POWER May 2015
