May
26
2016

Final EPA Rule Could Cost Half Billion More Than Expected

Earlier this month, the EPA released its latest rules for cutting methane emissions from the oil and natural gas industry, setting new standards for methane leaks at production lines for pumping and drilling at new or modified wells. The primary component of natural gas, methane is considered by EPA to have 25 times more global warming potential than carbon dioxide. 

“The common-sense steps we are rolling out today will help combat climate change and reduce air pollution that will immediately help improve public health,” says EPA Administrator Gina McCarthy. 

EPA’s first attempt at a methane rule came last August via a proposal by the president. This latest, finalized rule is even tougher, aiming to reduce 540,000 short tons of methane from the atmosphere by 2025. That’s a 35% increase from last year’s proposal of 400,000 short tons. 

The agency also removed proposed exceptions for low-producing wells and will require monitoring for leaks and demand quicker repair when those leaks are found. Estimates say the updated rule could cost the oil and natural gas industry as much as $530 million more than anticipated. The rule will impact around 22,000 owners and operators. 

There can be no doubt that raising costs for drillers will hurt the American shale industry that has made America a leader in oil and gas production worldwide and driven down energy prices across the U.S. For that reason, the energy industry is contemplating legal action against the EPA over the rule. The American Petroleum Institute said in a statement that the rule “put the shale revolution at risk” by increasing costs and reducing incentives.

In addition to the current finalized rule, EPA also plans to begin work on a rule to cut methane leaks at existing wells. That rule will require more research and time and likely won’t be written until a new president assumes office next year. 

 

The natural gas industry warns that these additional regulations will also hurt production. The rules also might be unnecessary, since natural gas producers already have a strong motivation to keep methane from escaping their wells. According to the American Petroleum Institute, for example, the industry has already reduced methane emissions by 11 percent from 2005. 

“If these ‘commonsense standards’ for the EPA’s methane rule are anything like the ‘commonsense standards’ used for their power plant rules, we’re in for another long battle of correcting the agency’s mistakes,” said Myron Ebell, the director of Competitive Enterprise Institute’s Center for Energy and Environment.

Controlling methane emissions is important. However, EPA should focus on supporting the current efforts of the oil and natural gas industry to control emissions, as opposed to stifling innovation with more heavy-handed regulation. Doing so will help ensure the benefits of the U.S. energy boom and protect American jobs in the process.

May
18
2016

Clean Power Plan Raises Concerns in Louisiana

For months, PACE has reported on the various ways that EPA’s carbon reduction mandate, dubbed the Clean Power Plan, has drawn backlash from leaders across the country. In late February, more than two hundred members of Congress filed a brief in opposition to the new mandate. In addition, attorneys general from nearly 30 states, led by West Virginia and Texas, have filed a legal challenge to the mandate, arguing that EPA’s rule exceeds the legal authority granted the agency by the Clean Air Act.

Louisiana Flag Map

Although the rule was stayed by the U.S. Supreme Court pending judicial review, many state leaders are growing concerned about the way that a potential carbon mandate could affect local and regional economies. For example, many Louisiana industries are beginning to worry that the rule could significantly increase business costs. An article published recently by Sam Barnes in the Greater Baton Rouge Business Report outlines those concerns.

“It will end up driving up energy costs, we believe, so that’s going to be a problem for our industry,” says Greg Bowser, Executive Vice President of the Louisiana Chemical Association. “We’ve agreed to listen and to take a look at it and run it through our process internally with our membership to see exactly what it will do to us.”

Unlike less industrialized states that may not be as impacted by the Clean Power Plan, Louisiana is heavily dependent on manufacturing and heavy industry. Other states in the Southeast have industrial economies with similar sensitivities to air regulations. Leaders in those states remain concerned that EPA’s carbon rule could not only hurt existing businesses, but could keep away foreign investment that creates jobs.

“A lot of these regulations have a tendency to increase our regulatory environment,” explains Louisiana Senator Bill Cassidy. “Therefore, a company wanting to make an investment decides to invest in China, India or Mexico, and not in Louisiana.”

PACE has expressed similar criticisms of the EPA’s Clean Power Plan, describing the rule as a bad bargain for American consumers. The organization explained to EPA leaders in November of 2015 that the rule will raise power prices and endanger reliability, all while having little to no effect on global temperatures.

While the judicial review continues, the Louisiana Department of Environmental Quality (DEQ) is taking steps to comply with the rule even though Louisiana is a participant in the lawsuit opposing EPA’s mandate. States were originally required to submit a preliminary compliance plan in September. However, with Louisiana changing from a Republican to a Democratic governor earlier this year, the DEQ reconsidered its involvement in the lawsuit. It was eventually decided that the state would remain part of the lawsuit while still working to meet the September deadline. Other states face similar dilemmas about how – or whether – to prepare for a new EPA rule addressing carbon emissions.

“The challenge to EPA was that they don’t have the authority to tell us how to use our resources,” remarks Louisiana DEQ Secretary Chuck Carr Brown. “The states [in the suit] contend the EPA’s authority is limited to controlling what comes out of that stack or piece of equipment.”

One thing that remains undisputed is that Louisiana is preparing to meet even greater energy demand. In February of this year, PACE reported on lessons learned from the MISO South Regional Conference in New Orleans, an event that looks, in part, at the future of electricity generation in the region. At the event, Phillip May, President and CEO of Entergy Louisiana, explained that the power demanded by his utility’s 1.1 million customers in the state continues to grow. He concluded that Entergy Louisiana must move forward with building or acquiring new power generation, as current assets are aging and demand continues rising. According to May, putting more power on the grid in the Lake Charles area is very important, with about a thousand megawatts needed to meet growing demand in that area.

If nothing else, EPA’s carbon rule frustrates the efforts of utility planners to prepare for the future. It seems likely that EPA will implement some version of carbon dioxide regulation, but what exactly will it look like? While that answer remains elusive, all signs point to any new carbon regulation restraining industry and slowing economic growth. Federal officials should continue listening to officials in Louisiana and elsewhere to find a solution that works for everyone.

May
16
2016

If You Build a Roof in San Francisco…

In 2012, the California Public Utilities Commission unanimously passed new energy efficiency standards for residential and commercial buildings. Among the new rules? By 2014, all new buildings under 10 floors must be equipped to accept solar panels. In its 13-page guidance on the new rule, the Commission laid out a variety of rules that govern how construction must allow for shade-free zones on rooftops and proper orientation to allow for the operation of solar photovoltaic systems.

San Fran

See the Compliance Rules Here

The new rules, of course, have come with a cost for home and building owners. At the time, the new measures were expected to increase construction costs by an average of $2,290. PACE wrote about the Commission’s decision in a June 2012 blog piece, saying that for the people of California, “That giant thing looming over your head? It’s not a roof. It’s a regulation.”

If you thought the California Public Utilities Commission’s solar-ready mandate was excessive, you’re really going to be shocked at what San Francisco decided just days ago. Now, people building homes or commercial buildings in San Francisco don’t just have to comply with the state rule to have solar-ready rooftops; they now have to actually have solar panels installed on the rooftops.

The San Francisco Board of Supervisors one-upped the state law in late April, with the city’s new rule going into effect in January 2017. San Francisco is the first major American city to mandate solar rooftops.

“By increasing our use of solar power, San Francisco is once again leading the nation in the fight against climate change and the reduction of our reliance on fossil fuels,” San Francisco Supervisor Scott Wiener said in a statement. “Activating underutilized roof space is a smart and efficient way to promote the use of solar energy and improve our environment.”

There are many ways to reduce carbon. Wiener is right that Increasing the use of solar power is certainly one of them. But mandating that new homes and commercial buildings must install solar panels? That seems like a real stretch, even for San Francisco. Homes and businesses, even in the heart bed of American liberalism, still belong to their owners, not the government. We can only hope that leaders in other major cities recognize the value of personal choice and realize that other, less draconian, measures can still make a real difference in helping the urban environment.