An opinion survey commissioned by the Sierra Club supposedly shows that Oklahoma voters overwhelmingly favor the expansion of wind and solar power and the phase out of coal-fired power plants. An obvious implication is that Oklahoma Sen. James Inhofe, the Senate’s leading critic of the Obama administration’s anti-coal policies, is out of step with his constituents.

This is an old trick (see my post on a similar, NRDC-sponsored poll of Michigan voters in House Energy and Commerce Chairman Fred Upton’s district). When a pollster asks leading questions, he can usually elicit the answers his client is paying for.

In the Sierra Club-sponsored survey of 500 registered Oklahoma voters, 78% of those polled said they generally support expanded use of renewable energies like wind and solar power, and 62% said they would support phasing out some of the State’s coal-fired power plants.

The Sierra Club’s polling strategist waxed enthusiastic about the results, Greenwire reports:

“The results of this poll are remarkable,” Sierra Club polling strategist Grace McRae said in a statement.

“Across the nation, support for clean energy is high, but in Oklahoma, nearly 8 out of 10 voters support expanding use of clean energy resources like wind and solar. Oklahoma’s leaders and utilities should take note: Oklahomans want clean energy.”

Okay, let’s look at how the survey reaches those ”remarkable” results.

The first question sets the predicate for the rest. It reads:

Q1 In Oklahoma there are a number of different energy sources that we could use to meet our growing energy needs. Generally speaking, do you support or oppose the expanded use of renewable energy sources such as solar energy and wind energy?

The content of this question largely predetermines the answer. The question refers to Oklahoma’s “growing energy needs” and a “number of different energy sources” available to the State. The question evokes the familiar bipartisan pablum that America needs an inclusive, “all of the above,” policy to meet the nation’s energy needs. By definition, all-of-the-above includes wind and solar. And Voilà, you get 78% of respondents saying they “generally” want more wind and solar.

Here’s the next question dealing with voter attitudes:

Q 3 Currently, there are six coal-fired power plants in Oklahoma. Would you strongly support, somewhat support, somewhat oppose, or strongly oppose phasing-out some of these coal-fired power plants and replacing them with clean, renewable energy sources such as wind and solar?

This question employs two tricks. First, because most people feel they must give consistent answers, those who said they “generally” favor expanded use of wind and solar may now feel they have to support ”replacing” some coal plants with wind and solar. The second trick is to combine ”renewable energy” with a term of praise: “clean.” Who doesn’t want energy to be cleaner, other things being equal?

The problem, of course, is that other things are not equal. Wind energy is inferior to coal-generated electricity in many respects. It is intermittent, often unavailable when most needed (hot summer days when the wind doesn’t blow), costs more per unit of output, occupies much more land per unit of output, requires the construction of new transmission lines (because the best wind sites are typically distant from population centers), and kills far more birds than coal power plants do. Few wind farms would be built absent Soviet-style production quota (“renewable portfolio standards”), a special tax break (wind energy production tax credit), and billions in outright taxpayer-funded grants. Solar power, for its part, is even more costly than wind, and does not generate any electricity when the Sun isn’t shining.

Sixty-two percent of respondents said they support replacing some coal with wind and solar. But how many would give the same responses if, instead of describing renewable energy as “clean,” the question described renewables as “intermittent, unreliable, costly, sprawling, and corporate-welfare-dependent,” or described wind turbines as ”dangerous to migratory fowl”?

The next question:

Q 4 According to the American Wind Energy Association, Oklahoma ranks eighth in the country for installed wind energy capacity. And according to the National Renewable Energy Laboratory, wind in Oklahoma could provide more than 31 times the state’s current electricity needs. After hearing this, do you believe Oklahoma utility companies should invest more in wind power, or not?

That 69% of respondents answered yes is unsurprising. The question is one-sided. The only experts cited are the lobbying arm of the wind-energy industry and a federal agency whose budget critically depends on the extent of public support for renewable energy. No experts opposed to wind energy mandates are mentioned, nor is any information they might provide included.

Worse, the question presents impressive-sounding numbers apart from any practical economic context. How much viewshed degradation would Oklahoma sustain if the State were actually to obtain half of its electricity from wind, let alone all or 31 times the amount of electricity it currently consumes? How much natural gas generation would have to installed to backstop all those additional wind facilities? How many new miles of transmission would have to be built to deliver the wind power to customers? What would it all cost? What would be the impacts on electric rates, the cost of doing business in Oklahoma, and employment rates in non-wind-related firms? Mentioning those concerns might have changed dramatically the responses to the question.

Oklahoma, the survey claims, ranks 8th in the country for installed wind energy capacity, and has enough wind resources to meet more than 31 times the State’s current electricity needs. The implication is that much of the State’s electricity already comes from wind, which could easily provide even more. Let’s look at Oklahoma’s electricity consumption in a high-demand month.

Source: Energy Information Administration

In July 2011, only 3.5% of the State’s electric generation came from wind, compared to 37% from coal and 58% from natural gas. Those percentages reflect the well-known economic and technical disadvantages of wind compared to coal and natural gas. By presenting big-sounding numbers out of context, the survey leaves the false impression that the only barrier to greater reliance on wind is lack of political will rather than wind’s inherent shortcomings.

Another question from the survey:

Q 5 Because Oklahoma’s coal is hot-burning and high in sulfur, most of the utilities don’t burn Oklahoma coal at their facilities, and instead ship in coal from Wyoming to burn in their coal plants. This sends $494 million dollars out of state every year – money that could be invested in Oklahoma. After hearing this information, do you strongly support, somewhat support, somewhat oppose, or strongly oppose utilizing more of Oklahoma’s natural energy resources, like wind, to keep money in the state?

Seventy-six percent of respondents said they support using more Oklahoma resources, “like wind,” to keep money in State.

This question appeals to the protectionist fallacy that buying goods from outsiders is a “wealth transfer” and money down the drain. In fact, the gains from trade are mutual (otherwise it would not occur). If imports did not also benefit the importer, there would be no global marketplace, most of us would not be alive, and those who remained would be stuck in Medieval squalor. If the ‘logic’ underpinning this question were valid, each State — indeed each village and household — would be better off boycotting all goods and services produced in national and international commerce so as to have more money to invest in itself.

Consumers benefit when they get a good buy, regardless of whether the seller lives next door or in Timbuktu. The fact that most States mandate the sale of renewable electricity is prima facie evidence that wind is not a good buy. If wind energy delivered more bang for our electricity buck than coal or natural gas, there would be no need to shield it from market competition.

If the survey were balanced, the question would also mention that ramping up wind energy would force Oklahomans to pay for large quantities of steel, rare earths, and components produced out of State and overseas. But again, where parts and materials are sourced is irrelevant from a consumer perspective. By implying that Oklahoma consumers are better off buying wind power, simply because it is not imported, the question again biases respondents in favor of the Sierra Club’s preferred answer.

The survey is curiously silent about natural gas, the main source of Oklahoma electric power in periods of peak demand. Oklahoma has significant conventional and shale natural gas plays. Should policymakers allow more hydraulic fracturing to expand shale gas production and keep more dollars in State? You won’t find that question in the survey because the Sierra Club wants to ban hydro fracking and would not like the result.

In short, the Sierra Club-sponsored poll is rubbish. It is designed not to reflect public opinion but to manufacture it for the purpose of advancing an agenda that would benefit one industry — wind developers — at the expense of Oklahoma consumers and the State’s overall economy.

Despite the disappointing decision yesterday, it would be well to remember that the real damage was done in the Supreme Court’s 5-4 Massachusetts decision, where EPA was found to have authority to regulate GHGs under the CAA so long as it determined that GHGs endanger the public health and welfare. 

. . .the Massachusetts decision was a real travesty.  It is impossible to review the history of the public debate on GHG regulation in this country beginning in the 1980s, when potential climate change first came to prominence, and conclude that authority to regulate GHGs was always available, hiding in plain sight in the CAA as first enacted in 1970. The Supreme Court said in the 2001 American Trucking Associations decision, in language that is often cited, that Congress does not “hide elephants in mouseholes.”  Evidently, in the case of EPA GHG regulation, Congress did.

In the end, the most rational thing for the country to do on GHGs is for Congress to enact legislation that gets EPA out of the GHG regulatory business entirely.  — Peter Glaser

In Massachustts v. EPA, the 5-4 majority argued: (1) The Clean Air Act (CAA) defines “air pollutant” as any airborne substance whatsoever; (2) the EPA has a mandatory duty to regulate air pollutants emitted by automobiles if the associated “air pollution” “may reasonably be anticipated to endanger public health and welfare”; and (3) “welfare” effects include changes in “weather and climate.” Given these premises, the Court basically left the EPA one way to avoid regulating GHGs: Cancel its membership in the self-anointed “scientific consensus” — the climate alarm movement – that the agency had spent years promoting and leading. No chance of that happening.

For reasons discussed here and here, the lynchpin of the Massachusetts Court’s argument, premise (1), was a misreading of the CAA definition of “air pollutant.” At a minimum, respondent EPA’s opinion that carbon dioxide (CO2) is not an air pollutant was a “permissible construction” of the statute and thus should have been accorded deference under the Court’s Chevron Step 2 test. If the GHG regime EPA is building were proposed in legislation and put to a vote, Congress would reject it. Congress would surely have rejected the EPA’s GHG agenda in 1970, when it enacted the CAA and defined “air pollutant.” The terms “greenhouse gas” and “greenhouse effect” do not even occur in the CAA. Only as amended in 1990 does the CAA even obliquely address the issue of global climate change. Congress considered and rejected regulatory climate policies in the debates on the 1990 CAA Amendments. The very provisions tacitly addressing climate change – CAA Secs. 103(g) and 602(e) – admonish the EPA not to adopt “pollution control requirements” for CO2, and not to regulate substances based on their “global warming potential.”

With the case law on GHG regulation hopelessly botched by the Supreme Court, only Congress can rein in the EPA — and only if there is a change of management in the White House and the Senate in November.

Peter Glaser’s full commentary on the D.C. Circuit Court decision follows.

The Morning After:
Some Personal Thoughts on Yesterday’s D.C. Circuit Greenhouse Gas Decision
and the Future of EPA GHG Regulation

There’s no sugar-coating it.  Yesterday’s decision was an across-the-board smack-down for industry and the states that sought to overturn EPA’s first foray into GHG regulation following the Supreme Court’s 2007 Massachusetts v. EPA decision.  Not only did the Court reject every argument petitioners made, the tone of the decision suggested real hostility.

I had personally grown pessimistic about our chances when the panel was appointed, but had thought there were arguments we could win and that we might get a good dissent from Judge Sentelle at least on the authority of EPA to “tailor” the statutory PSD permitting thresholds.  Such a dissent would have enhanced the prospects of a motion for the full court to rehear the case en banc and a petition for certiorari to the Supreme Court.

In the end, we got nothing.  Known as a bear on standing, Judge Sentelle did not dissent from the panel decision that none of the petitioners had standing to challenge EPA’s tailoring of the statutory thresholds, since (in the panel’s view) none are injured by EPA narrowing the class of sources subject to GHG regulation.  Hence, petitioners’ strongest argument and the most glaring legal defect of the rules never got decided on the merits.  I don’t think the Court correctly characterized industry petitioners’ arguments as to standing and therefore never confronted those arguments head on, but by the time the opinion got around to that issue the overall direction the Court was going was clear.

Despite the disappointing decision yesterday, it would be well to remember that the real damage was done in the Supreme Court’s 5-4 Massachusetts decision, where EPA was found to have authority to regulate GHGs under the CAA so long as it determined that GHGs endanger the public health and welfare.  For someone like me, who has been involved in the issue of potential EPA regulation of GHGs under the CAA since the Clinton Administration (when then EPA Administrator Carol Browner casually mentioned in a House Committee hearing that the Senate didn’t need to ratify the Kyoto Protocol in order for the country to regulate GHGs; EPA could do so under the CAA), the Massachusetts decision was a real travesty.  It is impossible to review the history of the public debate on GHG regulation in this country beginning in the 1980s, when potential climate change first came to prominence, and conclude that authority to regulate GHGs was always available, hiding in plain sight in the CAA as first enacted in 1970.  The Supreme Court said in the 2001 American Trucking Associations decision, in language that is often cited, that Congress does not “hide elephants in mouseholes.”  Evidently, in the case of EPA GHG regulation, Congress did.

I had two reactions to the Massachusetts decision that are still pertinent today.  First, EPA regulation of GHGs is really concerning.  Carbon dioxide is the inevitable byproduct of combusting fossil fuels (of oxidizing carbon).  Fossil fuels constitute 85 percent of the energy Americans use.  Hence, EPA authority to regulate carbon dioxide is essentially the authority to regulate everything.

The danger in EPA’s authority to regulate GHGs is amplified by the fact that EPA’s source of regulatory authority is the CAA.  To trigger regulation under the CAA, EPA must make a finding that GHGs “may reasonably be anticipated to cause or contribute” to the endangerment of public health or welfare.  We learned again from yesterday’s decision what a permissive standard this is.  At oral argument, one of Judge Sentelle’s first statements to petitioners’ counsel was something to the effect of “I hope you’re not going to ask us to make a judgment on the science.”  Personally, I am a climate skeptic – I have read through the climategate emails and have been appalled.  But the courts continue to show reluctance to truly engage EPA’s science findings (or even to allocate sufficient words to adequately brief these highly technical issues).

And the concern about EPA GHG regulation does not just stem from the CAA’s very permissive “endangerment” standard.  The CAA programs under which EPA can regulate also grant EPA great discretionary authority in setting standards.  Some CAA programs (the NAAQS, for instance) do not authorize consideration of costs; others do authorize consideration of costs but give EPA authority to weigh cost and environmental factors in its judgment.

To make matters worse, no matter what regulation EPA adopts, it will make no meaningful difference to overall global atmospheric GHG concentrations, as the developing world continues to develop and take advantage of fossil fuels.  So the benefits of EPA GHG regulation will be all symbolic, while the costs may be immense as the country risks losing its ability to take advantage of what should be one of its great competitive strengths – abundant domestic supplies of fossil fuels.

Having said all that, my second reaction to Massachusetts, which I still have today, is that it is like being back in 1970, when Congress first enacted the CAA, all over again.  Reflecting the mentality of that time (and the significant pollution problems this country had), the 1970 CAA mandated clean air in five years.  It didn’t happen, because the goal was unrealistic.  What followed since 1970 has been a long hard continuing fight to balance the desire for clean air and the need to maintain the economy.  There have been countless EPA rulemakings over the decades since 1970, most of which were appealed, many of which were upheld, and some of which were not.

That’s where we are now with GHGs.  We are going to get more or less GHG regulation over time depending on who is in the White House and whether the particular GHG regulations that EPA issues are legally defensible.  Thus, each regulation is going to have to be attacked (or defended) on the merits.  My own view is that EPA’s latest GHG proposal, for new source performance standards for coal-based electric generation, is not legally defensible and will be overturned in Court.  But there will be many more GHG regulations to come, and we are in for another long, hard rule-by-rule slog under the CAA, in this case to shape the timing and stringency of GHG regulation in this country.

Of course, as we move forward with more EPA GHG rulemaking, it matters critically who the President is.  But even if Mitt Romney is elected President, he will find it very difficult to eliminate EPA GHG regulation completely.  To do so, he would have to pull the endangerment finding, which would be difficult to accomplish both legally and politically.  However, the discretion that the CAA gives EPA to fashion GHG regulations, while dangerous in the wrong hands, also presents an opportunity to an EPA Administrator who wishes to have a moderate approach to GHG regulation.

In the end, the most rational thing for the country to do on GHGs is for Congress to enact legislation that gets EPA out of the GHG regulatory business entirely.  Even proponents of GHG regulation don’t believe that the CAA is suited to that purpose.  We must therefore keep pushing on the legislative front, since new legislation is the right thing to do.  Still, the alignment of political forces is such at this time that comprehensive GHG legislation seems out of reach, although more targeted legislative approaches may be possible.  Without some intercession from Congress, we are left with possibly decades of hand-to-hand combat on GHG regulation.

In sum, it would have been good if we had won yesterday and even better if we had gotten that fifth vote in Massachusetts (that is also likely to be the decisive vote in the health care decision tomorrow).  We didn’t.  Petitioners will now at least ask the Supreme Court to take the case and may also seek rehearing en banc from the full panel.  Absent the Supreme Court granting certiorari and reversing the panel decision, we will have broad EPA authority over GHG emissions under the CAA.  If that is the case, there is nothing we can do but to continue fighting on a rule-by-rule basis with all the ammunition we have, political, legal, technical and scientific.

Peter Glaser
June 26, 2012

PJM Interconnection is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia. My colleage, Troutman Sanders attorney Peter Glaser, just sent around a memo on the impacts of EPA’s regulatory surge on electricity prices. The memo is based on PJM auction reports (here and here).

Peter’s memo is too juicy not to share with a wider audience. I reproduce it below with his permission. — Marlo 

Reality has interceded in EPA’s attempt to play down the impact of its train wreck regulations on the electric utility industry.  First came the widely reported news that Louisville Gas & Electric had filed for a 19% rate increase by 2016 to pay for the upgrades that the regulations will require.
 
Now, we have the results of the capacity auction that PJM just conducted for the 2014-15 capacity year.  The resulting capacity prices were about 4.5 to 8 times as high as prices paid in the last two auctions and 2.5 to 3 times as high as market analysts had predicted. 
 
According to PJM, most of this increase can be laid at the feet of EPA.  Based on PJM information, we calculate that the portion of the increase attributable to EPA will cost load (customers) in the PJM region $2-3 billion just in capacity costs and just for a one-year period (2014-15).  
 
Here are the details.

 
The PJM Capacity Auction
The PJM Interconnection is a FERC-approved regional transmission organization that manages the high-voltage electric grid and the wholesale electricity market that serves 13 states and the District of Columbia.  In PJM, the “Reliability Pricing Model” (or “RPM”) is a forward auction of electric generating capacity that occurs annually, three years ahead of the year for which capacity is procured.  PJM procures enough capacity to cover the anticipated demand for electricity in the region plus a reserve margin.  Generating units bid into the RPM auction based on their anticipated costs.  Every generating unit that clears the auction receives a capacity payment based on the market-clearing price, which is set by the marginal (i.e. most expensive) unit.  PJM then assesses the costs for those capacity payments on load (customers) in the PJM region. These capacity payments are in addition to payments that generators receive for the energy they sell from their generation.  
 
The May 2011 Capacity Auction
In May 2011, PJM conducted the capacity auction for the 2014/2015 capacity year.  Market analysts predicted the May 2011 auction would clear at moderately increased levels in comparison to the last two years (which cleared at $16 and $27 per megawatt/day, respectively).  Specifically, Macquarie Equities Research reportedly estimated that the RTO price would clear at $40.  Barclays Capital reportedly predicted the price would clear at $50.  Instead, PJM announced that the market clearing price skyrocketed to $125.   These results even surprised the analysts who watch these markets (See Platts Megawatt Daily, May 17, 2011, “PJM Capacity Market Stuns Market Analysts”).  In its report on auction results (see attached), PJM concluded that:
 
On March 16, 2011, the U.S. Environmental Protection Agency (EPA) issued a notice of proposed rulemaking in a proceeding to promulgate final maximum achievable control technology (MACT) emissions standards for hazardous air pollutants (HAP) from coal‐ and oil‐fired electric utility steam generating units, pursuant to section 12(d) of the Clean Air Act. A final rule is due by November 16, 2011.  Compliance from existing resources would be required approximately three years later, likely in early 2015, which implicates the 2014/2015 Delivery Year.
 
Compliance with increasingly stringent environmental regulations requires generation resources to install emission mitigation technology which increases the avoided cost offers of these resources. These increased costs were a significant contributor to the increase in clearing prices in the western part of the PJM RTO. The increasingly stringent environmental regulations had a two-fold impact on western PJM clearing prices: (1) generation resources affected by the increasingly stringent rules, the majority of which are located in the western part of the PJM RTO, could include the cost of investment needed to comply with the new regulations in their cost-based offer price and (2) the amount of offered MWs from generation resources decreased because the resource owners decided the resources were not viable to comply with future regulations and therefore will deactivate as opposed to installing equipment to comply with the new rules.
 
The Impact on the Clearing Price
• The May 2011 auction cleared over 142,000 MW of capacity for the unconstrained areas of PJM.
• The System Marginal Price (the basis for the market clearing price) was over $125 per MW/day.
• This represents an increase of over $97 dollars per MW/day over the clearing price from the last annual auction and a $75 increase from the price expected by Barclay’s. 
• PJM concluded that “60 to 80%” of the increase in generators bid costs in the May 2011 auction was due to environmental regulations.
• Even if one assumes that the market price would have cleared at higher levels than the last auction (e.g. the $50 price expected by Barclay’s), the proposed EPA Regulations just caused an increase in electric capacity prices of approximately $2-3 Billion for a one year period, in the PJM region alone. 
• Analysts have concluded that these prices are not “likely decline meaningfully anytime soon, and thus, we expect the clearing price levels to remain relatively elevated (versus the 2013/2014 auction) for the foreseeable future.”