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Clean Power Plan

UPDATE: On September 27, ten judges of the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments from lawyers representing states and industry, including NRECA, challenging the legality of the Clean Power Plan. The court also heard from the Justice Department, representing EPA, and lawyers representing states and other parties supporting the rule.

At issue for the co-ops is whether it is legal for EPA to use the Clean Air Act to force the closure, or curtail the operations, of billion-dollar power plants, many of which have outstanding loan obligations.

 

Main Issues Argued
Arguments lasted nearly seven hours, roughly twice the amount of time originally set by the court. The judges’ main questions focused on the following issues:

  • Does the Clean Air Act Section 111(d) permit EPA to force utilities to shift generation away from existing coal-fired generation to sources such as wind and other generation not yet built?
  • Does utility regulation for hazardous air emissions under Section 112 pre-empt regulation under 111(d) for greenhouse gases?
  • The rule forces states to take actions that only they can take to achieve compliance. Does this amount to a commandeering of their constitutional powers and thereby violate the U.S. constitution?
  • Did EPA violate the Clean Air Act when it issued a final rule that significantly departed from the proposal without providing an opportunity for the public to comment on those departures?
  • Assuming EPA has the legal authority to issue this rule, and the above questions notwithstanding, was the rule itself arbitrary and capricious, thereby requiring that it be struck? This would be the case if the underlying factual assumption made by EPA regarding its implementation is found to be deeply flawed and unsupported by the rulemaking record.

A recurring contention throughout the day made by rule supporters was that the electric grid was more than capable of handling any significant changes and additions required to comply with the rule.   In this context those advocates specifically referenced that even the smaller generators such as the co-ops would find compliance easily achievable. In reality, of course, this creates great difficulties for co-ops.

 

The Takeaways

  • The court clearly is taking this litigation very seriously, as evidenced by the fact the arguments were heard by the full court, rather than by just a three-judge panel as originally planned, and the arguments lasted about twice as long as expected.
  • The judges clearly had serious questions about the legality of EPA’s effort to regulate “beyond the fence” by requiring substantial changes across the entire power sector instead of simply imposing emissions requirement on power plants. Forcing utilities to buy electricity from competing generators is not contemplated by the Clean Air Act. 
  • Despite assertions to the contrary during the arguments, small co-ops will have great difficulty complying with the rule, which is one of the main reasons the Supreme Court granted the stay. Small systems with only 1 or 2 generation assets do not have the compliance options of larger, multi-state utilities
  • As a result, the rule will force the premature closure of coal-fired power plants, leaving co-ops with huge stranded assets. Member-consumers of these co-ops will be forced to pay for their electricity twice—once to pay off the remaining debt on the shuttered power plants and again to purchase replacement power.
  • We’re especially concerned about the burden on low-income consumers. Electric cooperatives serve 93 percent of the nation’s persistent poverty counties, so we recognize first-hand the importance of affordable power.

We expect the court to issue a decision this winter with a ruling addressing the individual issues raised by the petitioners.

 

In early August 2015 the final version of the Environmental Protection Agency's (EPA) Clean Power Plan (CPP) was issued. In an effort to address global climate change, the CPP aims to reduce carbon dioxide emissions nationally by issuing individualized reduction levels on a state-by-state basis.

In the plan's initial proposal in 2014, North Dakota's reduction level was projected to be 11%. However, the final plan assigns North Dakota a 45% reduction requirement—over quadruple the proposed requirement.

This change has stunned North Dakota’s elected leaders and energy industry officials.

The problems:

  • Roughly 60% of the power used by Cass County Electric members comes from coal resources because their reliability, availability, and affordability. Initial analysis of the CPP shows that there’s no way North Dakota can comply without shutting down coal plants or running them at severely reduce capacities.
  • Over the last 10 years, Minnkota Power Cooperative, the power supplier for Cass County Electric, has invested over $425 million into technology to reduce emissions from coal plants as required by previous EPA regulation. These efforts are not recognized under the CPP.
  • Roughly 30 percent of Minnkota’s electric generation capacity comes from wind—one of the top percentages among electric cooperatives in the nation. Another 10 percent comes from emissions-free hydropower. Because these resources were installed prior to 2012, they will also not be recognized by the CPP.
  • If Minnkota is forced to shut down our power plants to comply with the rule, hundreds of millions of dollars in assets will be stranded. In addition, millions more will have to be invested into new sources of electricity.
  • These costs to comply and create new sources of generation will fall directly onto rate-payers. As it looks right now, the CPP guarantees to increase electric rates.

 

CO2 reductions by state - Clean Power Plan final ruling:

CO2 reductions by state

North Dakota Attorney General, Wayne Stenehjem, along with 26 other states, has filed suit against the EPA over the final ruling of the CPP. As the legal process begins, the North Dakota Department of Health, led by Dave Glatt, has begun working on a plan for North Dakota to comply with the rule.

Cass County Electric, Minnkota Power, and utilities from across North Dakota are a part of the conversation. It is the mission of Cass County Electric to provide affordable, reliable electricity to our members. That remains our goal as the CPP continues to develop.

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