Marlo Lewis

Post image for Kemper CCS Project: 3 Years Behind, $3.9 Billion Over Budget. How’s that for ‘adequately demonstrated’?

Southern Company announced this week that its carbon capture and storage (CCS) coal-fired power plant in Kemper, Mississippi, will cost almost three times more and take three years longer than originally planned. Initially budgeted for $2.2 billion, the project is now expected to cost $6.1 billion.

This news does not bode well for EPA’s Carbon Pollution Standards rule, which relies on a handful of subsidized projects, with Kemper as pride of the fleet, to make the case that CCS technology is “adequately demonstrated.”

The rule establishes a carbon dioxide (CO2) new source performance standard (NSPS) for new coal power plants of 1,100 lbs. CO2/MWh. As EPA admits, today’s state-of-the-art coal plants emit 1,800 lbs. CO2/MWh (79 FR 1468).

This means the standard effectively bans investment in new coal generation, a policy that would be dead on arrival if introduced as a bill in Congress.

EPA says not to worry, because new coal units can meet the standard by installing CCS technology, which the agency certifies is “adequately demonstrated,” i.e., commercially viable.

Yet Kemper, which EPA mentions 13 times in the rule, now costs 88%-107% more than an advanced pulverized coal power plant without CCS and 496% more than an advanced natural gas combined cycle (NGCC) power plant.

power plants capital costs EIA report table 1 larger

 

 

 

 

Source: EIA, Updated Capital Cost Estimates for Utility Scale Electricity Generating Plants (April 2013)

New NGCC units, moreover, easily meet the standard (1,000 lbs. CO2/MWh) EPA proposes for that type of facility (79 FR 1486). So, absent generous subsidies, utilities won’t invest in coal with CCS when they can invest in much cheaper NGCC. I’ll take that as a demonstration CCS is not “adequately demonstrated.”

Even with subsidies (Kemper received a $270 million grant from DOE), utilities following EPA down the primrose path expose their investors and ratepayers to significant financial risk. Bloomberg reports:

The increased Kemper County costs will crimp third-quarter profit by $258 million, the company said today. The project has already surged past the $2.88 billion limit that can be billed to customers under an agreement with Mississippi regulators. Today’s charge adds to $963 million shareholders have already shouldered from project cost overruns in four of the prior six quarters.

Heritage Foundation economist David Kreutzer posts a witty commentary today on Kemper’s latest cost overrun, exposing the conflict-of-interest in EPA’s “adequately demonstrated” determination with the aid of a football metaphor: [click to continue…]

Post image for EPA’s Clean Power Plan Targets for Virginia: Unlawful Six Ways

Last Friday I posted excerpts from a Richmond-Time Dispatch article on the Virginia State Corporation Counsel’s (SCC’s) blunt comments on the Clean Power Plan – EPA’s proposed rule to reduce carbon dioxide (CO2) emissions from state electric power sectors. To recap, SCC staff argue the Plan exceeds EPA’s statutory authority, raises “alarming regional reliability concerns,” and would “substantially” increase consumer electric bills.

Over the weekend, a colleague sent me the SCC comment letter. Although 57-pages long, the letter is accessible and well worth reading. The SCC has been regulating Virginia electricity markets for more than 110 years to ensure reliable service at reasonable prices. These folks know whereof they speak. Today’s post delves into the SCC staff’s argument.

First, some quick background. EPA proposes to establish, for each state, existing source performance standards (ESPS) for power-sector CO2 emissions. The statewide standards, expressed in tons CO2 per megawatt hour, translate into statewide CO2 reduction targets. Clean Air Act §111(a)(1) defines “standard of performance” as:

a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated [emphasis added].

SCC staff identify six main reasons EPA’s proposed CO2 reduction targets for Virginia are not valid performance standards.

[click to continue…]

“The idea that climate change poses an existential threat to humanity is laughable,” climate economist Prof. Richard Tol stated in the Financial Times earlier this year. I was reminded of Tol’s acerbic comment by a graphic on today’s Watts Up With That – one of those pictures worth a thousand words:

People with no or partial electricity, Pachauri, Nature 2014

 

 

 

 

For the 1.3 billion people who have no electricity, energy poverty is indeed an existential threat. For the additional 2.3 billion people facing chronic electricity shortages, frequent blackouts, and limited hours of service, energy poverty is a decisive obstacle to development.

Those 3.6 billion people need access to plentiful, reliable, affordable energy as soon as possible, and for the foreseeable future, that means carbon-based energy. Yet the pampered elites at the UN, the EU, and the White House want all countries, including India and China, where hundreds of millions still have no electricity, to make ‘politically-binding’ commitments to limit their carbon dioxide (CO2) emissions, the inescapable byproduct of carbon-energy use. [click to continue…]

Post image for “Topsy-Turvy” Clean Power Plan Could “Substantially” Raise Electric Bills — Virginia State Corporate Commission

In a comment letter filed this week, the State Corporation Commission (SCC)* cautioned that EPA’s Clean Power Plan could “substantially increase” consumer electric bills in Virginia. The Richmond-Times Dispatch reports:

Complying with the EPA’s proposed carbon emission rules would likely cost Dominion Virginia Power customers alone an extra $5.5 billion to $6 billion, the State Corporation Commission’s staff said in an unusually bluntly worded statement.
 
The EPA’s proposed regulations would “increase substantially” the bills that all 3.6 million Virginia electricity customers pay for their power, the commission staff said, and could significantly affect the reliability of electric service.

The SCC staff anticipates electricity bills would go up significantly because the federal rules would require much of today’s electricity production be replaced with costly generation and expensive programs to decrease energy use.

“Those higher costs will be reflected in the electric bills paid by customers,” said the commission’s staff, emphasizing that statement with italic type.

SCC staff also expressed concerns about electric supply reliability. Again, from the Times-Dispatch[click to continue…]

Post image for EPA’s Clean Power Plan: Huge Electric Sector Impacts, Undetectably Small Climate Benefits — Study

Hot off the presses –

A new report by NERA Economic Consulting finds that EPA’s Clean Power Plan will:

  • Be the most expensive environmental regulation ever imposed on the electric power sector. The rule will cost state power sectors between $41 billion and $73 billion per year (EPA estimates ‘only’ $8.8 billion annually), and $336 billion to $479 billion over 15 years.
  • Cause double digit electricity price rate hikes in 43 states. Electricity prices will increase by an average of 12% to 17%. Fourteen states will face price increases up to 20%.
  • Retire 45,000 megawatts (MW) of coal generation capacity (more than the electricity output of all New England states combined). That’s on top of 70,000 MW of coal-fired generation in 42 states already slated to retire due to other EPA policies and low natural gas prices.
  • Have disproportionate impacts on low- and middle-income households and seniors on fixed incomes, who already struggle with high energy costs.
  • Have no measurable effects on climate change. By 2050, the Plan would, in theory, reduce sea-level rise by 1/100th of an inch (the thickness of three sheets of paper), and reduce average global temperatures by less than 2/100ths of a degree. [click to continue…]
Post image for The Divestment Movement’s Heart of Darkness

In Real Clear Markets today, economist Ben Zycher of the American Enterprise Institute calls out the hypocrisy of the divestment movement.

The movement urges colleges, foundations, local governments, and other large investors to sell their stock in 200 coal, oil, and gas companies with the highest reported “carbon” reserves. Supposedly, this will depress the capitalization and asset value of the fossil-energy sector, hastening its demise.

Zycher skewers the hypocrisy of those pledging to divest their holdings but only over a 3-5 year period so they can sell energy stocks at the highest price, and of pledge takers whose families made their fortunes in oil or whose incomes derive from companies with fossil-fuel investments.

More importantly, Zycher exposes the misanthropic logic of the movement’s preening moralism.

Fossil energy companies exist only because other industries — manufacturing, agriculture, telecommunications, etc. — require energy to create products and services. Governments, too, are large energy consumers. So if investors have a moral imperative to bankrupt carbon-energy production, they should dump all their stocks and bonds.

Nor is that all. Companies that consume energy exist only because ordinary people want their products and services and are wealthy enough to buy them. So if bankrupting Big Carbon is a moral imperative, governments should adopt policies to make people poorer. Choking off access to affordable energy would, of course, do just that.

What’s more, since human capital formation leads to wealth creation and, thus, to carbon-fueled products and services, divestment logic demands that investors cancel their “investments in people, in particular in a third world desperate to emerge from grinding poverty.”

If I might embellish a bit, the irony cuts pretty close to home. Higher education is all about human capital formation, yet many college presidents, teachers, and students are in the divestment movement vanguard. Logically, they should demand that donors stop supporting college and university endowment funds.

Zycher’s reductio ad absurdum is worth reproducing in full: [click to continue…]

Post image for EPA’s Clean Power Plan: Strategy for One-Party Rule? (Updated 10-17-2014)

EPA’s Clean Power Plan would compel each state to reduce its power-sector carbon dioxide (CO2) emissions by a specified percentage by 2030. As discussed previously on this blog, the Plan is climatologically irrelevant.

According to EPA’s own scientific assumptions, the mandated emission reductions will avert less than two-hundredths of a degree Celsius by 2100 — too small a change for scientists to detect or verify. The alleged climate benefits in the policy-relevant future (between now and 2030) would be even more miniscule.

So what’s the point — power (centralized control) for power’s sake? Well, sure, regulatory agencies exist to regulate, and ‘progressives’ believe more government is better. However, the Plan has a deeper diabolical cleverness.

An eye-opening analysis by Mike Nasi, an attorney with Jackson Walker, reveals that the Clean Power Plan will wreak havoc on the economy Texas. The Lone Star State is, of course, the Red State economic, energy, and political powerhouse. Whether measured in job creation, GDP growth, cost of living, energy affordability, or population gains/losses due to people voting with their feet, the Texas Model is clobbering the California Model. If your political goal is to replace robust two-party competition with one-party rule, sabotaging Texas is a must. The Clean Power Plan is fundamentally a strategy to do just that.

Nasi doesn’t discuss the Plan’s political implications, but that’s what we may reasonably infer from his presentation. Let’s look at some of the slides.

[click to continue…]

Will eBay Stand with ALEC?

by Marlo Lewis on October 8, 2014

in Blog

Post image for Will eBay Stand with ALEC?

On Tuesday, some 80 ‘progressive’ organizations (including Sierra Club, Greenpeace, Environmental Defense Fund, League of Conservation Voters, MoveOn.org, Common Cause, Public Citizen, and AFL-CIO) sent a letter to eBay’s CEO, Chairman, CFO, and General Counsel urging them to end the company’s support for the American Legislative Exchange Council (ALEC), the national association of conservative state legislators.

This just in. . . .The New Republic reports that eBay has declined to honor (capitulate to) this request (pressure). Abby Smith, eBay senior director of corporate communications, reportedly told the New Republic:

It should be noted that it’s a business reality that some trade associations and other external groups that advocate for non-environment-related polices that are material to the success of eBay Inc. and our customers may at times hold and/or advocate for positions that conflict with our strategy with respect to climate and energy. As these conflicts are identified, our team of internal stakeholders meets regularly to assess the best approach for resolving these issues.

I’m not sure exactly what that explanation means, but at least for now eBay is not joining the ALEC bashers. Nor does the company go all gooey green just because it recently built the world’s first fuel-cell powered data center.

The aforementioned letter reprises the standard left-wing allegation that ALEC “threatens our democracy” by bringing together “state legislators and corporate lobbyists behind closed doors to discuss proposed legislation.” As I explained in a post about the defame-ALEC campaign when it first launched in July 2011, ALEC’s business-legislator task forces are evidence of skulduggery only on the anti-capitalist premise that corporations are evil and have no legitimate place in the legislative process.

In fact, few ALEC critics actually practice what they preach, because ‘progressive’ politicians also routinely huddle with lobbyists when drafting legislation. For example, the corporate coalition called the U.S. Climate Action Partnership wrote the blueprint for the Waxman-Markey cap-and-trade bill.

The difference is that whereas ‘progressive’ legislation typically aims to rig the marketplace to confer windfall profits on politically-correct companies and impose windfall losses on politically-incorrect companies, ALEC bills aim to remove impediments to free enterprise. ‘Progressives’ aren’t against business lobbying per se. It’s only pro-market businesses they seek to drive out of the marketplace of ideas. [click to continue…]

Post image for Good News on Air Quality Not Featured on EPA’s Web Site

Here’s what EPA features as “News” on its Web site today:

  • EPA Releases Greenhouse Gas Emissions Data from Large Facilities
  • Final Cleanup Plan for NJ Superfund Site
  • CA Wastewater Treatment Plant will Produce 100% Renewable Energy
  • Economics of Climate Change Speech
  • Great Lakes Restoration Plan

None of those items is a national headline grabber. EPA has bigger story to tell but you’ve got to use the agency’s search engine to find it.

This week EPA updated its annual Air Quality Trends, and the news is fanastic. “National average air quality continues to improve as emissions decline through 2013,” EPA reports.

EPA provides several charts illustrating the nation’s ongoing progress in cleaning the air. Here’s the first graphic:

EPA Air Trends Growth Areas and Emissions 1980-2013

The figure shows that between 1980 and 2013, gross domestic product increased 145%, vehicle miles traveled increased 95%, energy consumption increased 25%, and U.S. population increased 39%. Yet during the same period, total emissions of the six principal air pollutants decreased by 62%. Impressive.

“The graph also shows that between 1980 and 2012, CO2 emissions increased by 14 percent,” EPA adds. Well, to me, it’s all good news. Air pollution emissions are increasingly decoupled not only from GDP, VMT, energy consumption, and population, but from CO2 emissions as well.

In other words, CO2 emissions are positively correlated with increases in wealth, mobility, super-human power at the beck and call of ordinary mortals (i.e. energy consumption), and air quality improvement. Those who argue or insinuate that we need a carbon tax or CO2 regulation to clean the air don’t know what they are talking about.

Let’s look at other EPA charts on America’s improving air quality. [click to continue…]

Post image for How Unlawful Is EPA’s Clean Power Plan?

EPA’s Clean Power Plan, the agency’s proposed rule to reduce carbon dioxide (CO2) emissions from existing power plants, is the centerpiece of President Obama’s climate policy agenda. On the day the Plan was published in the Federal Register (June 18, 2014), Murray Coal petitioned the D.C. Circuit Court of Appeals to bar EPA from further work on the rulemaking. Eight days later, nine states led by West Virginia filed an amicus brief in support of that petition.

Ever since Massachusetts v. EPA (April 2007), when the Supreme Court set the stage for EPA’s transformation into a Super Legislature dictating national policy on climate change, litigation to rein in the agency has generated more billable hours for lawyers than regulatory relief for their clients.

Consider Utility Air Regulatory Group v. EPA (June 2014), in which petitioners challenged EPA’s application of Clean Air Act (CAA) permitting requirements to stationary emitters of greenhouse gases. The absence of anything resembling congressional intent for EPA’s policy was breathtaking. Out of 692 bills containing the term “greenhouse gas” during 1990-2011, none specifically provided authority to apply CAA permitting requirements to greenhouse gas emitters. The only regulatory climate bill ever to pass a chamber of Congress — H.R. 2454, the Waxman-Markey cap-and-trade bill — explicitly exempted stationary sources from permitting requirements based on their greenhouse gas emissions.

EPA sought to regulate CO2 from facilities accounting for 86% of U.S. stationary-source greenhouse gas emissions. The Court in UARG trimmed back EPA’s reach to facilities accounting for 83% (slip op., p. 10). Seven of the nine Justices were either too deferential to agency expertise, too activist, or too reluctant to acknowledge errors in Mass. v. EPA to re-limit EPA in any serious way.

A bare majority in UARG did, however, vote to overturn EPA’s Tailoring Rule, the agency’s brazen attempt to rewrite unambigous (numerical) statutory requirements to avoid an administrative debacle of its own making. Moreover, the Scalia majority admonished EPA against adopting statutory interpretations that would “bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization.” The Court continued:

When an agency claims to discover in a long-extant statute an unheralded power to regulate “a significant portion of the American economy,” … we typically greet its announcement with a measure of skepticism. We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast “economic and political significance” (slip op., p. 19).

Those words are a perfect rebuke to the regulatory coup EPA is trying to pull off via the Clean Power Plan. Will EPA get away with it? I don’t think so, especially after reading Here Be Dragons: Legal Threats to the ESPS Proposal by environmental attorney Eric Groten (Vinson & Elkins). [click to continue…]