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Primer: HB 1291, an Illegal Rip-off

What is HB 1291?

On Monday, by a 58-7 vote, the Colorado House of Representatives passed HB 1291, legislation that approves the Air Quality Control Commission’s Regional Haze State Implementation Plan. HB 1291 comes before the Senate State Affairs Committee next Tuesday, April 19.

What is a Regional Haze State Implementation Plan?

In the 1977 Clean Air Act Amendments, Congress created a regulatory program, known as “Regional Haze,” to improve visibility at national parks and wilderness areas. Due to the high uncertainty of visibility science, however, the EPA didn’t have the technical understanding necessary to enforce the Regional Haze provision. In 1980, EPA deferred promulgating Regional Haze regulations until the science improved.

Ten years later, the Congress appropriated funds for a scientific study of visibility that could be used to create Regional Haze regulations. The resultant study provided sufficient scientific grounding for the EPA to promulgate substantive regional haze regulations, in 1999.

As is always the case whenever the federal government issues a new regulation, affected interests immediately litigated. Due to the ensuing delay, it wasn’t until December 2007 that states were required to submit to the EPA a strategy to reduce emissions that impair visibility in order to comply with regional Haze. Such a strategy is known as a Regional Haze State Implementation Plan.

However, only a couple states bothered to submit a Regional Haze State Implementation Plan by the December 2007 deadline. On January 9, 2009, the EPA made a finding of failure to submit all or a portion of their regional haze State Implementation Plans (SIPs) for 37 states. This notice started a two-year countdown to a new deadline for regional haze state implementation plan submissions. January 9, 2011 was the second deadline. As was the case with the previous deadline, most states failed to meet it, although all Regional Haze State Implementation Plans are expected to be submitted to the EPA this spring.

Key facts about Regional Haze:

  • It’s an aesthetic regulation—NOT a public health regulation
  • States have an unusually large discretion under Regional Haze compared to other Clean Air Act Provisions

Why Did the House Move So Fast on HB 1291?

From wire to wire, HB 1291 was introduced and enacted in 13 days, with virtually no serious debate. The absence of substantive deliberations is notable, in light of the fact that billions of dollars were at stake, and, moreover, that the legislation likely violates existing Colorado statute (more on that later).

Both the speed with which HB 1291 passed through the House and the bipartisan support it enjoyed are due to the same fact: The bill is the #1 priority of Xcel Energy and the gas industry.

The “magnificent” seven lawmakers in the House who voted against HB 1291 deserve kudos for political bravery. They took on the most powerful special interests in Colorado. They are: Reps. Balmer, Beezley, Conti, Coram, Looper, Ramirez, and Swalm.

Why Do the Gas Industry And Xcel Care So Much about Regional Haze?

They don’t. Rather, the gas industry and Xcel care (a great deal) about HB 1365, the Clean Air Clean Jobs Act, legislation enacted in April 2011 that mandates fuel switching from coal to natural gas for almost 1,000 megawatts of electricity generation along the Front Range. For the gas industry, fuel switching is a no-brainer. Xcel, for its part, stands clear at least $140 million from favorable rate treatment included in the legislation.

As has been detailed in this blog, these two special interests, in cahoots with the Ritter Administration, wrote the Clean Air Clean Jobs Act, without input from any of the adversely affected parties. Of course, these special interests couldn’t justify the law as a sop to themselves. Instead, they claimed that fuel switching was a “cost effective” strategy to meet “reasonably foreseeable” federal air quality requirements. When it came to defining “reasonably foreseeable” federal regulations, Regional Haze figured most prominently. In written testimony to the Public Utilities Commission, Xcel Energy Vice President Karen Hyde, said that Regional Haze “precipitated” the Clean Air Clean Jobs Act.

The upshot is that Regional Haze and Clean Air Clean Jobs Act are intertwined. The fuel switching plan was incorporated into the Regional haze State Implementation Plan. Enacting HB 1291 is the final step in enacting the Clean Air Clean Jobs Act.

Why Is the Regional Haze SIP Almost Assuredly Illegal?

Under Colorado statute, Section 25-7-105.1(1), it is illegal for the AQCC to impose emissions controls pursuant to the Clean Air Act that are more stringent than what the federal government requires. As interpreted by the Legislative Council, “…the federal floor for State Implementation Plans becomes, in effect, a state ceiling.”

To be sure, fuel switching from coal to natural gas is far more stringent than what the EPA requires in order to comply with Regional Haze. However, the General Assembly has the authority to create an exemption to Section 25-7-105.1(1) C.R.S., and, by enacting the Clean Air Clean Jobs Act, Colorado lawmakers explicitly provided for fuel switching in order to meet “reasonably foreseeable” federal air quality regulations. As such, the Clean Air Clean Jobs Act implementation plan approved by the Public Utilities Commission last December, and subsequently included in the Regional Haze State Implementation Plan, probably isn’t illegal (although it is terrible policy).

Yet this exemption does not apply to those power plants that are not a part of the Clean Air Clean Jobs fuel switching plan. And, for at least two of these non-exempt power plants (Hayden 1 and Hayden 2 coal power plants near Steamboat Springs), the AQCC selected Regional Haze controls that far exceed federal requirements. These controls are almost certainly illegal.

How is it that the AQCC’s Controls for Hayden 1 and Hayden 2 Exceed Federal Requirements (and therefore violate Colorado law)?

In the Federal Government’s Regional Haze Implementation Guidelines for states:

  • The Environmental Protection Agency considered $1660/ton emissions reduced to be a cost ceiling; the AQCC based its decisions on a $5000/ton reduced cost threshold based on criteria established for public health regulations. Regional Haze is an aesthetic regulation.
  • Regarding the type of nitrogen oxides control selected by the AQCC, the Environmental Protection Agency wrote that, “we have not determined that [it] is generally cost-effective…”
  • Hayden 1 and 2 would comply with the Environmental Protection Agency’s “presumptive limits” (suggested federal emissions requirements) with the installation of controls that are at least $100 million less expensive than what the AQCC imposed.

It’s not difficult to understand why the Environmental Protection Agency concluded that the AQCC’s preferred controls are not cost-effective. For $140 million, the “benefit” is that Coloradans would have a 17 percent chance of perceiving an otherwise imperceptible visibility improvement at the Mt. Zirkel wilderness area, for 34 days a year. Mind you, this is a highball estimate–the AQCC inflated the emissions baseline for its calculation of benefits by using a theoretical maximum rate, as opposed to actual data.

Unequivocally, the AQCC’s Regional Haze State Implementation Plan exceeds the Environmental Protection Agency’s Regional Haze requirements, despite a statutory prohibition on state controls more stringent than federal controls.  This glaring conflict never came up in deliberations before the AQCC; I don’t know why. The first I heard of Colorado’s (wonderful) statutory prohibition on controls more stringent than what the feds require was the Legislative Council hearing, on 29 March 2011. Perhaps that was also the first time the AQCC heard of it.

The situational irony is that the Hayden 1 and 2 power plants are about as clean as it gets. Xcel ratepayers already have spent scores of millions of dollars on top of the line controls for sulfur dioxide and fine particulate matter. Both coal plants also are outfitted with nitrogen oxides controls that capture 54 percent of emissions at Hayden 1 and 33 percent at Hayden 2.

Can Anything Be Done?

Yes! Senator Kevin Lundberg has introduced S. 237, legislation that would effectively remand to the AQCC the Hayden 1 and 2 components of the Regional Haze State Implementation Plan.

Sen. Lundberg’s legislation is just plain common sense. In its Regional Haze deliberations, the AQCC never addressed Colorado’s statutory prohibition on controls more stringent than what the federal government requires; that’s problematic, because the AQCC’s Regional Haze strategy includes controls that are far costlier than what the Environmental Protection Agency requires, in apparent violation of Colorado law. Until the AQCC can explain why these controls are not a violation of existing Colorado statute, they should not be approved.

William Yeatman is an energy policy analyst at the Competitive Enterprise Institute