Climate regs won’t crimp energy boom, McCarthy tells worried North Dakotans

Source: Erika Bolstad, special to E&E • Posted: Tuesday, March 4, 2014

BEULAH, N.D. — Surrounded by strip mines in North Dakota coal country, and inside a plant that not only burns coal but converts it to natural gas and commercial carbon dioxide, the U.S. EPA chief was asked directly: “Is there a war on coal?””No,” she said.

EPA Administrator Gina McCarthy was surrounded by skeptical people who believe there’s a presidential agenda to bring the industry to its knees. But she was also in North Dakota, and any disagreement with their guest was polite.

People are nice here, her host, Sen. Heidi Heitkamp, assured her guest after a Friday news conference (although Heitkamp herself referred to the Obama administration’s climate policy as one that’s “hell no to coal”).

The Democratic senator had invited McCarthy to come to North Dakota after EPA snubbed the state on its list of 11 sites the agency is visiting to gather input about limiting greenhouse gas emissions for new power plants.

The draft regulations, which are at the heart of President Obama’s climate plan, are expected to be released in June.

McCarthy began her day in Bismarck, where she met with a panel of corn growers and ethanol producers and retailers who have concerns about EPA’s adjustment to the federal renewable fuel standard. The state’s congressional delegation has been vocal in its opposition to proposed rules that scale back how much ethanol is blended into gasoline.

Most of the attention has been on the state’s oil boom, but North Dakota has been skilled at developing its renewable energy resources, too, said Sen. John Hoeven (R-N.D.). North Dakota has four working ethanol plants and one under construction, and gas stations across the state sell high-ethanol-content blends.

EPA needs “to work with us, not against us,” he told McCarthy. “The key is to get regulators to work with us, and to get regulation that is common sense and understandable and provides certainty, so that you empower investment … rather than hold it up.”

“We have to be up front about this,” Hoeven said. “With EPA, they are holding up investment.”

Oil state powered by coal

If McCarthy was looking to learn more about the sort of energy mix Hoeven was talking about, her 80-mile journey from the morning’s renewable fuel discussion in Bismarck to the afternoon round table at the coal plant in Beulah might have been the best education available.

She, like Interior Secretary Sally Jewell on her visit to the state last summer, told everyone she was delighted to see the wind farms whirling away below her as her plane landed in North Dakota.

Nearly 15 percent of the state’s electricity comes from wind. And while oil rigs and pumpjacks are scarce on the eastern edge of the Bakken oil patch, in her drive from Bismarck to Beulah, McCarthy would have seen evidence of the oil boom whizzing along the highway: trucks loaded with the heavy equipment underpinning energy’s infrastructure.

McCarthy also passed dried-out, snow-dusted winter cornfields devoted to ethanol production, and in the approach to the gasification plant, she drove through the surface lignite mines that supply it.

Beulah is home to the Dakota Gasification Co., the largest coal gasification plant in the world. Here, coal mined in the surrounding lignite fields is converted into natural gas and other synthetic fuels and fertilizers; some of the CO2 produced in the process is captured and sold.

About 3 million metric tons of CO2 is piped to the Canadian oil fields, where the gas, an Earth-warming pollutant in the atmosphere, is injected underground to force more petroleum out.

Heitkamp, who showed McCarthy a room-sized model of the plant, served on its board of directors before her election to the Senate in 2012.

The plant was built in the early 1980s, at a time when the government feared natural gas shortages and was in search of innovations that would tap the nation’s vast coal reserves. Hydraulic fracturing technology changed all that, though. Now natural gas is so plentiful that nearly one-third of oil wells in North Dakota simply flare off the natural gas that emerges from the earth with the more lucrative oil.

The state and industry have pledged to curtail some of those emissions, but North Dakota doesn’t have the pipeline infrastructure to capture all the gas.

North Dakota mines just under 3 percent of the coal consumed in the United States, so it’s not a major producer. Many of the low-quality lignite coal reserves are adjacent to what are known as “mine mouth” plants. At one of the state’s coal-fired plants north of Bismarck, the Coal Creek Station, a conveyor belt carries the coal over U.S. 83 from the surface mine on the other side of the highway.

But even though North Dakota’s coal production and use are small compared to other states’, coal is the main source of fuel for the power plants that heat homes and businesses. About 75 percent of the electricity generated in the state derives from eight coal-fired power plants.

So for North Dakota, the concern is more about how to keep those coal plants operational in the face of new carbon emission rules, power company executives told McCarthy.

Just walk outside and you’ll see why having a stable source of electricity is important, one of the panelists told McCarthy. It was 2 degrees below zero on the last day of February when she visited the plant. The next day, the temperature dropped to 22 below zero in some parts of the state.

Protecting ‘great jobs’

And McCarthy heard one of the familiar refrains from coal seams all over America: The coal mines and the power plants are a significant source of good-paying jobs that support rural communities.

About 60 percent of the students in his schools have parents with coal-related jobs, said Mike Ness, superintendent of the Hazen School District. Mercer County has some of the highest-paying jobs in the state because of the gasification plant, he said. It’s also a significant part of the tax base.

“I think our major concern is about the stability of the coal industry here,” Ness said. “We have great jobs here, and we don’t want to lose them.”

The coal-fired power plants owned by local utilities are valuable to the region, said Mac McLennan, CEO of the Minnkota Power Cooperative, which relies heavily on coal to provide electricity to its North Dakota- and Minnesota-based customers.

The technology may not even be available yet, but in the face of regulatory uncertainty, utilities also cannot get the funding to make the investments needed to upgrade coal plants to new emission rules, he said. They’re still working to comply with regional haze rules that forced them to spend millions of dollars on upgrading aging power stations, he said. Their fear is what the regulatory changes mean for their customers.

“We’re making 25- to 30-year decisions in an environment for which there is zero certainty,” McLennan said.

EPA will set limits on the rates of carbon emissions, McCarthy said, which the agency is able to regulate under the Clean Air Act. It will be done in a way that takes into account the needs in individual states, she said. That’s why she’s on the listening tour, McCarthy told him.

“I’m just trying to assure you that we’re not arbitrarily picking a number that everybody needs to meet,” McCarthy said. “We’re looking at individual states, in that the primary way we regulate pollutants is not to say how much everybody can do, but to try to set a rate that is achievable.”

Lawsuits are inevitable

But her assurances did little to allay the fears of the energy company executives, union representatives, state regulators and elected officials at the round table.

Hoeven told her it sounds suspiciously like the cap-and-trade legislation that Congress wasn’t able to pass.

“What you’re hearing here is that the standard you’re talking about setting is either not achievable or only achievable at such a high price that consumers … would pay a price they just can’t afford to pay,” Hoeven said, in one of the few testy exchanges of McCarthy’s visit.

EPA’s goal is to write a rule that reduces Earth-warming CO2 emissions without threatening energy reliability, McCarthy said. The Obama administration wants its rule to avoid significant price increases for energy, and its aim is to include all fuels in the mix, including coal.

“The last thing we want is to have this rule impact the ability of the economy to grow in any state — never mind nationally,” she said.

“And we’re going to do the best we can to design this so that it is consistent with the direction that you want to head economically, as well as addressing what we believe to be a very significant public health care issue.”

One thing is certain, McCarthy joked. No matter what, she’ll be sued over the new carbon regulations. And probably by environmentalists and power plant owners alike.