Power Plays

Forget Kyoto: U.S. states are making their own plans to cut greenhouse emissions — and Big Coal is fighting for its life.


In the shadow of the climate change summit in Kyoto, many U.S. states are taking matters into their own hands. Oregon, Minnesota, and Illinois are just a few that are moving to combat greenhouse emissions — and finding that coal companies and power utilities are fighting them every inch of the way.

It’s only a hint of what’s to come. With EPA funding, 23 states already have developed action plans — recommendations, really — for controlling greenhouse gases, specifically carbon dioxide (CO2).

And no matter what happens in Kyoto, the energy business is changing. Deregulation begins in California on January 1, 1998, with New York, Pennsylvania, and several other states to follow suit in the next few years. In a competitive market with truly effective greenhouse-gas restrictions, CO2-spewing coal-fired power plants would wither. But if the coal-burners can beat back state curbs, then cheap, unregulated coal power might flourish against more expensive, greener fuels.

With their survival on the line, the coal companies and coal-burning utilities are digging in with an aggressive strategy of statehouse lobbying, court challenges, even hijacking state advisory panels, to kill state regulations before they take root.

Stuck in the Spin Cycle

Taxing pollutants like CO2 is by far the most effective way to reduce greenhouse gas emissions, says Brian Dunkiel, tax policy director for Friends of the Earth. A carbon tax is not industry-specific; it affects anything that uses a high-emissions fossil fuel, from automobiles to businesses to power plants. But nobody likes new taxes. The Clinton administration’s BTU tax sank in ’93, says Dunkiel, “because all it did was raise taxes. There was no concurrent tax reduction.

This kind of reduction, which makes for a tax shift, is exactly what arose in the Minnesota legislature earlier this year. The Economic Efficiency and Pollution Reduction Act of 1997 (EEPRA) would have cut Minnesotans’ income taxes and payroll taxes, offsetting the lost revenue with new taxes against carbon-based pollutants. Proponents say the tax shift would be revenue-neutral for business and could even mean a net gain for the state economy, but the bill has languished, hogtied by industry lobbyists.

Industry groups like the Western Fuels Association — a lobby for coal companies and power utilities, and one of the primary naysayers against the Kyoto treaty — turned up the heat on Minnesota lawmakers. The Lignite Energy Council, a coal trade group based in North Dakota, formed a new lobby called Partners for Affordable Energy specifically to fight the Minnesota carbon tax-shift bill, hiring a PR firm to target businesses and select legislative districts with mailings attacking the bill.

“The coal and utility and oil interests have been largely successful in putting out PR that totally ignores that this is a tax shift. They treat the entire proposal like it was a $1.5 billion dollar tax increase,” says Michael Noble of Minnesotans for an Energy Efficient Economy (ME3).

So far the strategy is working: The bill’s first committee vote was deadlocked, and the measure is now stalled with six months remaining in this session. If it doesn’t pass by May, its backers will have to start over — and the polluters will have bought themselves another gaseous year or two.

We’ll See You in Court

Minnesota’s proposed carbon tax is contentious, but the real struggle in the Gopher State has been over a small accounting measure with huge ramifications for Big Coal.

In 1993, Minnesota’s Public Utilities Commission established an administrative process that requires power utilities to consider the costs of pollution — including CO2 — when petitioning the state for permission to build more generating capacity. “It wasn’t even a regulation, it was just a planning tool, just a consideration,” says Michael Noble of ME3.

The process calls for the state to assign a dollar value to the environmental impact of each ton of CO2 a power plant emits, and then add that cost — or “externality” — to its estimate of the long-term expense of running the plant. Overnight, fossil fuels would become less cost-effective, and less competitive, in Minnesota — a chilling prospect for the captains of the coal industry.

“If [global warming] is real it means the end of coal; it means constraints on oil and gas,” says Peter Ciborowski, a pollution control specialist with the Minnesota Pollution Control Agency. “Everyone’s always known that. Back in the ’50s you can find reports saying, ‘This is the implication, guys.'”

Coal-dependent industries took Minnesota to court, where they denied the scientific and economic validity of greenhouse fears. The state was beseiged by lawyers, lobbyists, and expert witnesses, all in the pay of a coalition of trade groups and utilities, including Western Fuels and the Lignite Energy Council; Northern States Power, Minnesota’s largest electrical utility; and the State of North Dakota itself, with its thriving lignite coal fields and dependent power plants. Together the coal interests spent millions of dollars fighting the externality in an administrative court.

“In the initial proceeding, the Lignite Energy Council funded a large percentage of North Dakota’s case,” says Susan Hedman, a lawyer for the Environmental Law and Policy Center of the Midwest. “We are talking very substantial sums, six-figure sums.” Newspaper reports put the number at $250,000.

A parade of expert witnesses attacked the science of global warming and predicted economic doom. “Western Fuels brought in the whole caravan of global warming skeptics you see in the editorial pages,” says Noble. “They pulled out all the stops.”

But the judge wasn’t buying it; in fact, he rejected every piece of evidence presented by the coal industry’s expert witnesses.

“These people are not representing a scholarly viewpoint,” Hedman says. “They’re being paid by the coal companies…. It would be charitable to call it the minority view. For a scientist to be trying to discredit the world scientific community, I would say that goes beyond junk science. That’s just hubris.”

But the defeat of skeptic-science didn’t really rescue Minnesota’s externality. According to Noble, industry prevailed anyway by winning a severely limited economic valuation on each ton of CO2 emitted. Environmentalists had hoped for a value of $3 to $30 per ton, but the court discounted that amount to a paltry 30 cents to $3 per ton.

Noble says that with the CO2 valuation rendered ineffectual, industry has nothing to worry about. But industry is taking no chances: Under the leadership of the North Dakota interests, the coal-power lobby has taken the case to a state appellate court, claiming that the Minnesota externality, weak as it is, is an impediment to interstate trade under the U.S. Constitution.

Co-opt City

In 1991, the Illinois legislature authorized the creation of a climate change task force that would oversee greenhouse gas inventories and make recommendations for action. It seemed like a visionary idea, but according to task force member Lee Botts, the panel is a do-nothing body that mainly generates greenwashed rhetoric.

“The authorizing resolution called for environmentalists — plural — but I ended up being the only one, to my sorrow,” says Botts, a founder of the Lake Michigan Federation, a regional environmental activist group. Botts sits on the 20-member task force with state officials and coal executives hand-picked by the governor, and it’s no secret who’s in charge. “The coal industry has been the driving force for the task force. They said it in almost this many words: that coal-burning Midwestern utilities had been screwed in the name of acid rain in the 1990 Clean Air Act, and it couldn’t be allowed to happen in the name of climate change.”

According to the state’s own inventory, Illinois is the source of 1/100th of the world’s greenhouse gas emissions. “That’s a lot for a state. There’s a lot of industry and a great deal of [methane-producing] agriculture,” Botts says. What’s more, the depressed economy of southern Illinois is heavily dependent on the coal industry, which feeds the state’s power plants; grandfathered out of Clean Air Act compliance, those plants are among the dirtiest in the nation.

But cleaning them up isn’t a priority for the Illinois panel, which acts as an economic lookout, not an ecological watchdog. The task force was created explicitly to monitor the changing greenhouse situation in relation to Illinois’ economy, says task force member Leonard Gardner, a retired lobbyist with the state Farm Bureau.

Unsurprisingly, Botts says the task force’s 1994 action plan has amounted to nothing more than lip service for energy efficiency projects that have never been promoted. “One analysis for the task force showed the cheapest way to reduce CO2 emissions was to plant trees,” she says. “The state forestry department used this to obtain additional funding for reforestation. But nothing else has really happened.”

“I feel [the task force] has not been a genuine effort,” she says. “There are representatives of six state agencies, they never speak up, they just follow the party line. The governor’s office has not been responsive. The coal interests continually push that the function of the task force should be to make sure anything done to reduce greenhouse gas emissions does not unduly affect Illinois. The task force is not truly serving the interests of the people of Illinois, or the Midwest. It is being used to serve the interests of the coal-burning utilities and the southern Illinois coal industry.”

Botts feels so frustrated that she is severely tempted to quit the panel. “Some of the other members say to me, ‘No, you have to stay on, you’re the only one that raises these issues.’ Well, what’s the point when there’s no response?”

A Winning Compromise?

While other states are mired in controversy, Oregon environmentalists already have won an unusual new electrical utility law which they say establishes the nation’s — and maybe the world’s — first legal standard for cutting CO2 emissions.

“There’s many things about this bill that no one really realized when they passed it,” says Jeff Allen of the Oregon Environmental Council. “I’m not sure industry understood all of it, and I know for a fact that many of the folks in the legislature had no idea what they were passing.”

In fact the power utility industry, led by Portland General Electric and the multistate PacifiCorp, was the chief proponent of the new law, hammered out in complex negotiations with green groups. Along the way, environmentalists made a controversial concession to the utilities: to do away with Oregon’s requirement that a power plant must demonstrate a need for more power before it builds new generating capacity.

Pete West, an economist with Renewable Northwest Project and a principal environmentalist negotiator who helped draft the bill, insists that the “need requirement” was already on the way out, thanks to impending utility deregulation. Formalizing this in the law gave him a powerful bargaining chip: West’s group was able to work an unusually powerful provision into the bill that requires utilities to mitigate 17 percent of the CO2 they generate. That percentage is calculated as if the plant will run at full capacity for 30 years; if the plant only runs at half capacity, says West, the CO2 mitigation is more like 34 percent. Significantly, any new plant must have at least 17 percent less net emissions than the cleanest power facility in the nation; that means a perpetually escalating CO2 mitigation requirement that enforces cleaner, more efficient technology in power utilities — perhaps the first of its kind in the world.

A utility can also achieve compliance by giving money to CO2 mitigation projects sponsored by the Oregon Climate Trust (OCT), a new nonprofit created by West’s bill. The projects can be anything that offsets emissions, from alternative transport to tree planting. OCT’s challenge is to ensure the projects aren’t frivolous: What’s the point of a bike lane if no one uses it? What good is it to plant a tree that will get cut down in 65 years?

West admits some major disappointments. The pathbreaking CO2 mitigation standard doesn’t touch existing utilities. For power plants that choose the OCT option, the value of CO2 per ton will probably work out to only $2 to $10, despite a range that supposedly goes as high as $50. And of course, the bill only addresses power generation: CO2 from automobiles remains conspicuously unregulated.

But West insists that Oregon’s utility law, signed by the governor this past June, is stronger than any other in the Northwest. The per-ton CO2 value can be raised, if it proves inadequate. And the law’s other shortcomings set up a tempting challenge: “Our ardent hope,” says West, “is everyone looks at this and says, ‘You weasels, we can do better,’ and then they do it.

BATTLES TO COME:

Stumpjumpers: Vermont recently released an EPA-funded plan that proposes a carbon tax to be offset by cuts in income taxes and sales taxes.

“It hasn’t been debated enough yet to draw the opposition,” says Jenny Carter, policy director for Vermont Public Interest Research Group. “But as soon as the utilities and other industries see there is a genuine interest in pushing a carbon tax, they’ll be here in full force. We’ll see the gray suits from all over the country landing in Vermont.” Carter says the state’s legislators are an independent-minded bunch, so the national groups have the most clout when they hire local lobbyists. “It happens all the time, and is very effective. They pour a lot of money into buying local lobbyists, [and] flood the legislature with misinformation about their issue of the day.”

Cheeseheads: Wisconsin is completing an action plan with funding from the EPA and feedback from an advisory panel of utilities, paper companies, and environmental groups, says Lloyd Eagan, head of the state’s air management program. The issue is so highly charged that Eagan’s office ranks its recommendations by their potential for political consensus, she says. They run the gamut from simple energy-efficiency programs to a sweeping effort to convert coal utilities to natural gas:

“We could get tremendous reductions in greenhouse gases by doing that,” Eagan says. “I think [utilities] in our state are not saying it’s a stupid idea. They want to approach it cautiously and carefully, because of the big costs, and there’s a number of technical and social issues [that] need to be worked out. It’s not as easy as switching a switch and saying ‘We’re now on gas.'”

As in many states, the looming prospect of federal greenhouse regulations is bringing adversaries to the table, Eagan says. “People feel more comfortable if they get to plan their own destiny, instead of having it dictated to them.”