AMPed Up Energy

An Electric Fight over Power

Turk Power Plant
Paul McDonnold
Written by Paul McDonnold

Discussing the future of the Clean Power Plan in the wake of declining use of coal

In its first draft of the Clean Power Plan, the Environmental Protection Agency saddled Arkansas with one of the highest goals in the nation for reducing emissions of carbon dioxide from 2005 levels. But in its final draft, the agency eased up slightly, decreasing the goal from a reduction of 44 percent to 36 percent. This reduction must be achieved by 2030.

By that date, the Clean Power Plan calls for the entire United States to cut carbon dioxide emissions from electricity-generating plants by 30 percent from 2005 levels. Each state is assigned a share of this goal based on a state’s emissions compared to the amount of electricity it produces.

Arkansas may have brought the EPA’s strict goal on itself, according to attorney Ross Noland, after SWEPCO opened its John W. Turk, Jr. Power Plant in Hempstead County in December 2012.

“When everybody else was moving away from new coal-fired plants, we built one,” said Mr. Noland of the Noland Law Firm in Little Rock. “So our emissions per the amount of electricity generated looked really high.”

Mr. Noland has represented two of the stakeholders who support the Clean Power Plan — Arkansas Public Policy Panel and the Audubon Society.

The plan offers emission-reducing options to states, such as increasing the efficiency of existing power plants, increasing the use of plants with lower emissions, and by promoting more efficient use of electricity.

The EPA considered the plan a concession to states because of the flexibility it offers. But Arkansas and 26 others disagreed and sued to stop the plan, considering it federal overreach. Democrats hail the plan as a critical step in the fight against climate change. Republicans deride it as an illegal expansion of the EPA’s power and a needless war on coal, which emits high levels of carbon dioxide compared to alternative fuels such as natural gas and nuclear.

At this point, however, the Clean Power Plan is in limbo. In February, the U.S. Supreme Court issued a stay against the plan until the 27-state suit plays out. The stay was issued on a 5-4 vote along the conservative-liberal line of the court. The U.S. Court of Appeals for the D.C. Circuit  is scheduled to hear the case this month.

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Ray Dillon Photo

Ray Dillon

Ray Dillon is the CEO of Deltic Timber Corporation. At his company’s Waldo sawmill, they pile logs to the sky in broad, low hills. Jets of water arc across the stacks. This part of Arkansas is blessed with forests of towering pine and hardwood. Like all plants, they breathe carbon dioxide — both a necessity for life and something the U.S. Environmental Protection Agency (EPA) has deemed a greenhouse gas requiring regulation.

Mr. Dillon sees the issue in practical terms. He fears the Clean Power Plan may increase the cost of electricity. A diversity of electricity-generating fuels is important to keep rates down, he says, and low rates are important to the Arkansas economy, particularly the manufacturing sector in which his firm operates.

“Our largest use of electricity is at our sawmills and our MDF (medium density fiberboard) plant in El Dorado. Sawmills today are very computerized. Electricity is powering our computers, our scanners and our saw-banks that both cut and trim the lumber. Electricity is powering the refiners that grind the chips into wood fiber, and the equipment that forms and presses the MDF sheets.”

Randy Zook, president of the Arkansas State Chamber of Commerce, echoes Mr. Dillon’s concerns:  “The starting point is that we have a mix of fuel sources in Arkansas that is very cost effective and results in our having some of the lowest electric rates in the country. Rates are attractive for companies wanting to do business in Arkansas, and affordable for consumers.”

Data from the U.S. Energy Information Administration confirms this. Arkansas’ average residential electricity price — 10.19 cents per kilowatt hour as of May 2016 — is less than in all but three states. Hawaii’s rate of 26.87 cents is the most expensive. The most expensive rate in a mainland state, Connecticut, is 21.63 cents. Arkansas’ commercial rate of 8.20 cents is the sixth lowest, and its industrial rate of 5.62 cents is the 11th lowest.

As the Clean Power Plan was being developed and finalized, coal’s share of electricity production in Arkansas, 54 percent in 2014, was among the higher rates nationally, which helps explain why the EPA required a larger reduction of carbon dioxide in Arkansas than in most other states.

This is akin to economic warfare on Arkansas, says Mr. Zook. He notes America’s supply of coal will last at least 250 years, and that cutting our use would damage the economy while barely reducing carbon dioxide levels globally because the United States would probably export its excess to countries that continue to burn it for fuel.

“If we want to do something about that,” Mr. Zook says, “we need to persuade nations like China to adopt similar standards to what we have.”

Teresa Marks, former director of the Arkansas Department of Environmental Quality and now an advisor to the EPA, counters such criticism by noting that the U.S. contributes 17 percent of the world’s carbon dioxide emissions. Any meaningful reduction of that is important, she says.  “It would [also] send a message that the United States, the most powerful nation in the world, recognizes the need for carbon dioxide reductions and is taking a real step to curb them. Hopefully, such action would assist in opening the door for other countries to make such efforts.”

_MG_5046-ByJanetWarlick

Glen Hooks, photo by Janet Warlick

The benefits of the Clean Power Plan go beyond the reduction of carbon dioxide,  says Glen Hooks, director of the Sierra Club’s Arkansas chapter.

“If we get our state off coal-fired power, there are a number of ancillary benefits,” he said. “Other pollutants would decrease, like cadmium, like lead, like mercury. With less of these kinds of pollutants,  we could improve both our public and our environmental health, not to mention creating thousands of good-paying jobs in the clean energy and energy efficiency fields

“The coal industry likes to talk about how it is the cheapest source of electricity,” Mr. Hooks says. “But that is only true if we ignore the costs that don’t show up on our electric bills. Burning coal results in thousands of premature deaths, heart attacks, and asthma attacks each year, along with mercury-laced waterways and dangerous toxic coal-ash spills. … It’s time for us to move away from dirty coal-fired power and toward cleaner sources of energy.”

The precise impact on our electric rates and the state economy is far from certain. But even if electricity rates rise under the Clean Power Plan, the EPA claims the average family’s electric bill will fall by 8 percent by 2030 because of improved  “end-use efficiency,” through such things as improved building insulation and more energy-efficient appliances.

Such efficiency is the specialty of the Washington, D.C.-based non-profit American Council for an Energy Efficient Economy (ACEEE). Their chief economist, Jim Barrett, has crunched the numbers on what Arkansas could accomplish strictly through the efficiency the Clean Power Plan requires. The draft version of the plan “would create net economic benefits to the state of between $50 million and $100 million of GDP annually,” he said. His model does not yet reflect the final version.

Investment in the plan would pay off, Mr. Barrett adds. “From a macro context, if you spend some on energy efficiency … the efficiency allows you to shift resources from the electric industry, which doesn’t support many jobs, to industries that do support jobs, such as construction. You’re shifting resources to more job-intensive sectors. For the end-use consumer, it represents an investment in becoming more productive.”

The ACEEE report isn’t clear about who would bear the cost of these efficiency investments. And the ACEEE study doesn’t look at the supply side of the Clean Power Plan, which is the most contentious, and potentially costly, part of the plan, particularly for the state’s manufacturers.

Mississippi County, in the northeast corner of Arkansas, is the second-largest steel-producing county in the nation. At the Nucor-Yamato plant near Blytheville, energy accounts for up to 20 percent of the cost of producing a ton of steel, says Katherine Miller, communications manager for Nucor. Her company is concerned about the effect of the Clean Power Plan. The plant melts scrap metal that it then converts into structural steel products such as pilings and beams.

“Even an increase of a few cents in electricity rates can cost our company millions of dollars,” she says.

The global market for steel is extremely competitive, she says; domestic steel competes with subsidized steel from other nations such as China. Passing along higher costs to buyers is not an option, she adds.

“If higher electricity rates make it less profitable to do business in the U.S., more of our industrial base could be forced overseas to countries with less-stringent environmental regulations for air pollutants and no regulations for greenhouse gas emissions. This would be bad for both the U.S. economy and the global environment.”

The new U.S. president come January 20, 2017 could pull the plug on the Clean Power Plan, says Mr. Noland, the attorney.  But, he asks: “What are you going to replace it with? There’s still the Clean Air Act, and the cases that led up to all this still call for regulation of greenhouse gases, specifically carbon dioxide. What do you do instead, would be the big question then.”

One option is to let market forces work. As the analytical, political and legal wrangling has dragged on, the price of oil and natural gas has plummeted. This has led utilities, including those in Arkansas, to rely more on natural gas, and less on coal, to produce electricity. The result has been a decrease in carbon dioxide emissions since the Clean Power Plan was announced. The state’s emissions have already dropped below the target level the plan sets for 2030, according to EIA data published in the Arkansas Democrat-Gazette.

But that doesn’t mean the fight has been for nothing, Mr. Noland says. “The price of natural gas could spike back up,” he says. “That’s the bottom line. … At any moment, those coal-fired electricity generating units could go back up to 80 (percent), 90 percent capacity.”

(This article originally appeared in the September/October 2014 issue of AMP. The information has been updated.)

     Paul McDonnold is a freelance writer with a master’s degree in economics who lives in southwest Arkansas. He has written for The Christian Science Monitor, Texas Highways, and Arkansas Life. He is the author of The Economics of Ego Surplus, a novel about the global economy and economic terrorism. 

About the author

Paul McDonnold

Paul McDonnold

Paul McDonnold is a freelance writer living in southwest Arkansas; he is also a former financial analyst with a master’s degree in economics. He has written for The Christian Science Monitor, Texas Monthly, and Arkansas Life. He is also the author of “The Economics of Ego Surplus,” a novel about the global economy and economic terrorism.

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