2013

Oklahoma has had a somewhat schizoid response to EPA’s war on coal. On the one hand, Attorney General Scott Pruitt and the state’s largest utility are fighting EPA in federal courts. On the other, the state’s second largest utility, PSO, sought a settlement.

Unfortunately, PSO’s settlement gave away the farm to EPA and the Sierra Club, which was involved in the negotiations. In order to achieve compliance with the agency’s ridiculous regulations, the utility agreed to shutter almost 1,000 megawatts of coal-fired electricity capacity, decades early.

Last week, Americans for Prosperity-Oklahoma published a study by me on the PSO-EPA-Sierra Club fuel switching plan. Relative to retrofitting existing coal units, PSO’s settlement will:

• Increase costs to PSO ratepayers by $529 million in net present value and $3 billion in nominal dollars;
• Reduce PSO system capacity by 210 megawatts, thereby stressing reserve margins—a key reliability metric—through at least 2021; and
• Eliminate fuel diversity on the PSO system, rendering ratepayers vulnerable to rate shock.

I posted the entire study below. On Thursday last week, I spoke about the study in Oklahoma City at a panel discussion with Oklahoma Attorney General Scott Pruitt and Rep. James Lankford (R-Okla.). Click here, here, and here for news accounts of the panel discussion.

What can PSO ratepayers do? At this point, the settlement agreement is in EPA’s hands. Last Wednesday, the Agency opened a public comment period on the fuel switching plan. Click here to comment. Meanwhile, Attorney General Pruitt continues to fight EPA’s nonsensical regulations in court. I wrote about the most consequential of his legal battles two weeks ago. The litigation remains in flux.

Ratepayers’ best hope is to win over Oklahoma Governor Mary Fallin. She signed off on the settlement at the outset, before it became apparent how costly it would be. Given that PSO used a number of budget gimmicks to suppress the actual cost of fuel switching–this is the subject of the report below–Governor Fallin would have plenty of cause to change her mind.

William Yeatman – EPA Overreach: Higher Cost, Less Energy, Greater Risk

Greenwire reporter Emily Yehle this week broke the news that then-EPA Administrator Lisa Jackson intentionally used her private e-mail account to conduct official business, which is contrary to federal transparency and record-keeping laws.  In an e-mail to Alison Richards, a lobbyist for Siemens Corporation, Jackson wrote, “P.S. Can you use my home email rather than this one when you need to contact me directly? Tx, Lisa.”

This e-mail was made public as part of the latest tranche of “Richard Windsor” e-mails released by the EPA in response to federal court order enforcing a Freedom of Information Act request filed by the Competitive Enterprise Institute last year.  Chris Horner, my CEI colleague who filed the FOIA request, commented that the e-mail to the Siemens lobbyist is the smoking gun that proves Jackson was deliberately evading the rules in order to conceal some of her official business from public scrutiny.

In another FOIA lawsuit against the EPA, federal District Judge Royce Lamberth ruled on 14th August that the Landmark Legal Foundation can question top EPA officials about their use of private e-mail accounts to conduct official business.  Lamberth wrote that, “The possibility that unsearched personal email accounts may have been used for official business raises the possibility that leaders in the EPA may have purposefully attempted to skirt disclosure under the FOIA.”

As Chris Horner told the Washington Times, “FOIA works on an honor system, and those systems only work with people of honor. So you see the problem.”

And in related news, Representative Darrell Issa (R-Calif.), Chairman of the House Oversight and Government Reform Committee, has sent a letter to IRS official Lois Lerner asking her to turn over all e-mails from her private account in which official government business was conducted. Lerner is a central figure in the scandal over IRS targeting of Tea Party groups.  The committee’s investigation turned up evidence that Lerner was forwarding official IRS documents to her “Lois Home” account at msn.com.

The White House Council of Economic Advisers and Department of Energy have released a report titled, Economic Benefits Of Increasing Electric Grid Resilience to Weather Outages. The report calls for increased public and private spending on infrastructure aimed at hardening power lines from wind damage. In addition, the report argues in favor of increased funding towards the expansion of the nation’s energy storage capacity, and recommends the construction of sensors to monitor power fluctuations.

While some of the suggestions mentioned in the report are positive such as the hardening of existing power lines to protect from storm damage, many of the recommendations raise serious concerns. The Obama Administration claims to want to improve grid resiliency, but their anti-energy agenda and support for renewable subsidies show otherwise.

Last year, CEI Policy Analyst William Yeatman described the problems that would arise should renewable energy be incorporated into the grid:

There is no economy of scale for renewable energy. The electricity grid is a humongous, complex engineering project. At any given time, the electricity flowing into the grid must equal that consumed from the grid. The sun doesn’t always shine, the wind doesn’t always blow, and when these unreliable energy sources crap out, it sends grid operators scrambling to purchase backup power from reliable sources of power like coal and gas

What is the report’s solution? Energy storage.

If this were possible it might indeed solve the problem. However, there is a significant obstacle in the way. Energy storage technology of utility-scale energy does not exist. In addition, the report offers no suggestions as to how it might be developed demonstrating that the proposed solution is merely wishful thinking of government bureaucrats.

The report also claims:

“Since 1980, the United States has sustained 144 weather disasters whose damage cost reached or exceeded $1 billion. The total cost of these 144 events exceeds $1 trillion. Moreover, seven of the ten costliest storms in U.S. history occurred between 2004 and 2012. These “billion dollar storms” have rendered a devastating toll on the U.S. economy and the lives of millions of Americans.”

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Last week I wrote about a wonderful interview conducted by Platts Energy Week’s Bill Loveless with Devon Energy CEO Larry Nichols. In the course of celebrating the life of entrepreneur George Mitchell, the father of fracking, Mr. Nichols put the lie to the notion that the federal government was the primary impetus in the development of the drilling technologies that led to the American oil and gas boom. In addition, he posits that George Mitchell could never have perfected hydraulic fracturing had he operated in today’s regulatory environment. Watch the whole interview here. Below, we’ve provided a transcript.

MR. BILL LOVELESS: Hello, I’m Bill Loveless. Welcome to Platts Energy Week.

He was called the father of fracking, a man who found the way to blast natural gas from shale deposits using water, sand, and a mixture of chemicals. George Mitchell died recently at 94, but not before leaving a legacy as a man who put hydraulic fracturing on the map and paved the way for today’s resurgence in U.S. gas and oil production.

Joining me to discuss this industry pioneer is a man who knew George Mitchell well. In fact, his company bought Mitchell Energy Development in 2001. Larry Nichols, executive chairman of Devon Energy, joins us from Oklahoma City. Welcome to the program, Larry.

MR. LARRY NICHOLS: Glad to be here.

MR. LOVELESS: Larry, fracking has been around for decades, but Mitchell began to draw more attention to it in the 1980s when he experimented in the Barnett Shale in Texas. What difference did he make?

MR. NICHOLS: Well, yeah, fracking has been around for about 60 years. Clumsily done when it was first done, but over time, people experimented with it. And George Mitchell had this almost fanatical belief that he could frack the Barnett Shale and get gas out of it. We all knew the gas was there, but could not produce it, and he relentlessly over years and years kept pounding away, experimenting with different techniques, different refinements until he finally started making it work.

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