Climate Change Bill Clears Washington Senate

It's now the House's turn to craft Washington's potential climate change mitigation law.

Senate Bill 6001 cleared the Senate March 10 by a 35-13 vote, but several important and hotly debated provisions of what would be a landmark piece of legislation were left open for either House to fix, or to be punted even deeper and decided by several state departments.

What SB 6001 does make clear is that emissions from baseload generation will be capped at 1100 pounds/MWh, not to exceed the emissions of a combined-cycle combustion natural gas-fired power plant.

Utilities would be barred from entering into long-term contracts for baseload generation that exceeds the performance standard, but the bill gives the Utilities and Transportation Commission the power to approve some contracts in the event of financial emergencies or if system reliability questions arise.

But the bill doesn't directly address the future integrated gasification combined-cycle technology.

Carbon emissions that are sequestered will not count toward a project's emission totals, according to the bill. But the Department of Ecology is given wide-ranging authority to evaluate a project's carbon sequestration plan.

And the bill alludes to "provisions for financial assurances," and "potential penalties" if emissions are not sequestered within five years of a plant's operations.

Developers worry that the bill gives ecology too much authority, and question what a "financial provision is." They don't want to be required to put money upfront to insure that sequestration happens, and that issue is sure to occupy much of the debate in the House.

Nancy Hirsh, policy director at the Northwest Energy Coalition, said the Senate bill is not the death knell for IGCC technology.

"This bill doesn't say 'No to IGCC'," she said. "This says you can build new resources, but they have to be clean and move us on the path to reduced emissions."

The Northwest Energy Coalition will likely continue to push for some kind of financial assurances to insure that sequestration happens, Hirsh said.

"Having money in the bank somewhere--I don't know what kind of financial mechanism it will be--but some money set aside is something we have pushed for," she said.

IGCC developers weren't as confident in the bill.

The prospect of having to pony up "financial assurances" could add millions of dollars to a project's price tag. And the thought of the House punting the sequestration rulemaking to the Department of Ecology has industry lobbyists working overtime.

"The Senate's bill fails to encourage IGCC and that's regrettable. We were looking for an alignment of interests behind IGCC as a real solution and it just wasn't there," said Robert Divers, of United Power, the development group considering a gasification project in western Walla Walla County.

"Still, it doesn't rule out development of the site we are investigating," Divers said. "We're definitely looking much more closely at our sequestration option."

Brad Peck, spokesman for Energy Northwest, which has proposed building the 600-MW Pacific Mountain Energy center at the Port of Kalama in Washington, said the bill leaves several questions unresolved.

"In reading through it, a number of issues came up that we need to look at," Peck said. "Energy Northwest needs to study it, to see if we can live with it or not, and what options are involved."

The bill is now in the House Energy, Technology and Communication Committee.

The idea of mitigating emissions as a way of meeting the performance standard is also expected to be at the top of the debate in the House.

The environmental lobby quickly rejected earlier proposals in the Senate bill to allow for mitigation of emissions, and they aren't expected to change their minds. But Jeff Morris, chair of the House Energy, Technology and Communication Committee, has sponsored a House bill that would allow developers to mitigate emissions.

"We have been pretty clear on our perspective on mitigation," Hirsh said. "We have a specific cap on emissions and until a trading mechanism is in place that will work--a real market for large-scale mitigation becomes an alternative to capture and storage--our position will be we aren't ready for mitigation."

Under the Senate bill, "an electric utility may not make or renew long-term financial investments in baseload generation that does comply with the performance standard. All such investments must be reviewed by the WUTC, or the governing board of a consumer-owned utility."

All baseload generation in operation before July 2008 is exempt from the Senate's bill.

Utilities will also be allowed to defer the costs of long-term contracts that meet the standard, and may seek a two-percent increase in the rate of return on common equity to help meet the financial costs of meeting the standard.

Collins Sprague, manager of state government relations for Avista Corp, said the bill opens the door to a new regulatory world.

"Until now, a utility had a broad array of technology options to allow them to choose the most cost-effective resource," Sprague said. "This bill changes the rules and makes it clear that certain coal technologies--conventional and super-critical pulverized--are off the table, even though they are the lowest-cost resource" [Steve Ernst].