AEP Bats Clean Up - October 12, 2007


Two great tenets of the founders of the United States were that we would be a nation of laws and the individual had constitutionally protected rights. I believe the most important facet of the EPA/DOJ's New Source Review (NSR) enforcement effort has been the attack on these foundations of our society. NSR was created as part of the 1977 Clean Air Act Amendments. Early on it was recognized that the term "modifications" could mean virtually any physical change to a facility, and that Congress intended for routine maintenance, repair, and replacement (RMRR) activities to be exempt from NSR. Since 1977 the EPA has had the following interpretations of what qualifies for the RMRR exemption:

1. Like kind replacement

2. Routine for sources within the relevant industrial category

3. Routine for the particular source

These terms are somewhat arcane except to environmental regulators, so an automobile analogy may be useful:

1. For like kind replacement - one could replace the 3.8L V-6 in your car with a new engine, as long as it is a 3.8L V-6

2. Routine for sources - one could replace tires or brakes but not the engine because tires & brakes are routinely replaced on cars during their normal lifetime but engine replacement is rare

3. Routine for particular source - one could only replace tires or brakes if one had already replaced tires or brakes on that particular car
It is important to note these three widely varying interpretations of RMRR were all made with NO changes to the enabling legislation.


In its July 21, 1992 "WEPCO" NSR rule making, EPA stated that while the WEPCO NSR rule making did not include a formal rule regarding RMRR, sources should use the "routine within the relevant industrial category" criteria until EPA issued a formal rule making regarding the definition of RMRR. EPA went on to say that it would be providing formal RMRR rules within a year. In the middle 1990's the EPA floated "routine for the particular source" as its proposed new RMRR definition, but did not pursue formal rule making due to opposition to the new definition. Instead, EPA waited until 1999 to begin its high profile prosecutions of utilities for violating NSR based on the "routine for the particular source" criteria.


The founding fathers were so concerned about "ex post facto" laws that Article 1 Section 9 of the U.S. Constitution forbids such prosecution. Yet EPA has proceeded with NSR enforcement actions against utilities for maintenance activities which violated the "routine for the particular source" definition even though these maintenance activities were undertaken years, sometimes decades, ago when the EPA was using either the "like kind replacement" or "relevant industrial category" RMRR definition.


With the AEP settlement we see the federal government continuing to build, case by case in the NSR arena, the precedent that the government can prosecute a citizen for violating an unpublished interpretation of an ambiguous law (e.g. NSR, Patriot Act) as long as the government has never before provided clear interpretation of the law (first sentence page 30 of "New Source Review: An Analysis of Consistency of Enforcement Actions With The Clean Air Act and Implementing Regulations" U.S. Department of Justice Office of Legal Policy, January 2002).


"The people never give up their liberties but under some delusion" - Edmund Burke


This is my personal opinion and has not been reviewed or authorized by the Jacobs Consultancy, Inc.


Ben Ziesmer
Jacobs Consultancy Inc.
 

Banking on Green Energy - October 31, 2007


Since the beginning of the year, crude oil prices have increased over 40 percent with the price per barrel now back above $70. There has been no indication by the Bush administration that this should cause alarm. After all, why should it be any concern to President Bush and his sidekick Cheney who both have extensive portfolios vested in this inflationary dynamic? It's absurd too that we condone war baron-ship in the White House. Thomas Jefferson and the Founding Fathers most likely did not envision democracy of the nature we have presently in Washington.


The USD has lost nearly 70% versus multiple worldwide currencies. The Euro's value vs. USD was $0.86 in 1999 while today it is pushing $1.45. This is Super-Inflation subtly creeping into our pockets. This is absolutely preposterous. Joe American pays twice as much for gasoline as he paid in 2006. This brings me to my point that Green Energy and renewables will only make a difference when initiatives are undertaken on the national policy level to accelerate the process of weaning ourselves from oil and accordingly our leaders are merely followers. Many people in powerful positions postulate futile nonsense. Few have the vision for pertinent adaptation and permanent radical changes to benefit all.


Most players in the Green Energy field dream of the day when they will become the equivalent of Mobil/Exxon, Boston Edison, Con-Ed etc. Taking Mobil/Exxon as an example, that corporation has the inherent ability to remain in the forefront of our energy playing field. For at least four decades, the R&D sectors of companies such as these have enlisted science and economics in preparation for any drastic new technology, which once successfully implemented will indeed be the core of a true Green Revolution. Renewables, once conceived, achieved and implemented, if in fact they can truly be defined as renewables, should be duplicable, hence generated ad-infinitum with diminishing cost quotients. The irony is that most of the players in the renewable field are placing their faith in the utilization of the existing distribution infrastructure to coral the marketplace taking and keeping the distribution megaplex intact. Sorry folks but this is not how the process will successfully make a difference in our economy.


Thomas Edison envisioned individual power generation for industrial plants and individual residences. Mr. Edison likely is restless in his grave given the massive power distribution infrastructure we have today. Windmills and solar panels are ugly to many people. High tension lines are much uglier. Many vistas have been destroyed by the power transmission lines in the midst of many views. How many people realize how "telephone poles" have ruined pristine pictures of people, places and things? Buried cables are an option. If that's acceptable, then there is no need to change, many may say. WE behave to legitimize the status quo.


The True energy solution will place power stations in people's home and businesses to supply the energy necessary to support relative activities. Many technologies will evolve and some can already be viewed on the nearer horizon.


My sense is that just as we have PC's (personal computers) today so too we will have PEP's (Personal Energy Plants) in our midst before 2015. It's simply common sense. Our Supreme Being had not intended for matters to become so complicated. Mankind manages to create its multiple messes (oil spills, chemical spills, gas leaks, etc.) quite well on its own and we have condoned these complexes for decades. It is time for masterful changes. So have a glass of water while you still can find a fresh one and consider some valuable solutions. Economies are created by ideas and creativity has many niche markets.


James Michael Reardon
AquaEnergy, LLC


Digging Coal a Hole - November 2, 2007


I sympathize with the Kansas Department of Health and Environment; they are faced with the reality of a power plant application that they think wrong, and the reality of state and federal green house gas talk without action. But an arbitrary, extra-legal decision is a terrible precedent. And while a coal plant is an easy, feel-good target, the reality is that growth in Kansas of the many dispersed sources of CO2 during the next few years will swamp whatever savings their dubious decision may achieve, and the coal plant will probably be replaced by a gas turban still with CO2 emissions, but also a further strain on a limited resource, and higher cost for electricity.


So what to do? To the extent there is a political consensus emerging, it is for a free market based system of cap and trade. I personally am concerned about the inevitable exceptions, aka loop-holes, that special interests will get, and I am concerned about the difficulty of enforcing regulations on the many small dispersed sources of CO2 down to termites. For these reasons I would add to this policy mix a carbon tax on fuels (with an exception for termites), then use the revenues from this tax to mitigate the societal pain of transitioning to a higher cost reduced carbon economy, and to further fund the CO2 sinks that market forces are expected to produce.


But the point is the Kansas Department of Health and Environment would better spend its energy on participating in the debate and building a consensus, not furthering anarchy.


David Dixon
Engineer, employed by the US Government


It is sad indeed when the "theology" of man-caused global warming crushes real science. Your statement that "most" scientists agree that man-caused CO2 is the reason for global warming is propaganda put out by those who would regulate us into the dark "literally" ages. Many real scientists, not theologians or politicians, question the basic premise of man-caused global warming. Even some of the more honest supporters of this premise admit that all the measures being proposed might possibly maybe perhaps reduce the earth's temperature by a fraction of a degree.


We can't use nuclear because of fear, we can't use coal because of CO2, we can't drill for our own oil because of endangered something-or-other, we can't build wind farms because they look ugly. If we really examined honestly the impact of large areas of solar collectors, we would discover a tremendous impact on plants and animals that can no longer live under the collectors because the sun is blocked. Nothing we can do is satisfactory to the theologians of this new religion, and the best thing we could possibly do is collectively cease to exist, thereby ensuring that "nature" would reign supreme. When will this nonsense stop?


Michael Z. Lowenstein, Ph.D.
Chief Technology Officer
Harmonics Limited


It is alarming to see how fast local agencies are acting to curtail 'greenhouse gas' emissions, without considering the implications of their actions.


Power producers are naturally predisposed to build large, low fuel cost generating plants--which means COAL with present pricing. That is the business they are running (the devil they know?)


Regulators just saying NO because of carbon emissions, is not the correct answer, for it does not provide any steering force to the power supply versus consumption balancing act. We must provide steering force to encourage conservation and alternatives to fossil fuel power generation. Kansas has annual wind speed of 17 MPH. LOTS of wind power can be generated there. Kansas also has abundant sunshine, so why not encourage solar powered generation?


While I am personally not subscribing to mankind caused global warming, I AM in favor of significantly reduced use of hydrocarbons to generate electrical power. These high energy density fuels are much more valuable serving uses not amenable to 'renewable' sources.


It is time to embark on a national 'go solar' program with distributed generation, on an emergency priority basis. Solar generators on every rooftop, owned by the present power suppliers and distributors should be the objective. Building owners should be induced to allow the units on their roofs with preferred cost power during peak hours if they have 'solar' and premium priced power during those periods if they are not so equipped--a very workable carrot and stick approach.


Having the present suppliers own and operate the distributed generation is a key point. They already have maintenance and technical staff to service the installations. They will earn incremental revenue from maximizing ROI from solar rather than buying fuel, building new large fossil fuel or nuclear plants, more HV distribution lines. Having the 'big boys' in the game with skin will ensure rapid improvements in ALL aspects of the technology--from the photo-voltaic cells to the connections, controls and time of day billing. None of those functions can be effectively handled by homeowners.


Solar is shinning brighter every day.


Keith E Bowers


China's Paradox - November 5, 2007


The Rainforest Action Network wants the Chinese to forget about coal and focus their attention on renewables - especially solar and wind. If they and similar organizations don't understand that this is absurd, the Chinese government as well as the investment banks helping to finance Chinese industry should attempt to explain it to them. Nuclear is probably the most sensible option for most of the new the power plants that will be built in China in the near future, although in that country - as in the US - there is almost certainly a place for renewables in the energy picture. A subordinate place for the time being, I might add, unless the Chinese government intends to keep a few hundred million of its inhabitants in poverty.


Ferdinand E. Banks
Professor


Privately Seeking Utilities - November 7, 2007


Regarding private equity investments in, or outright purchases of, companies, I'm wondering how far this can go. What does "private" really mean? Anytime the answer to "who owns that company" is the name of another company, corporation, partnership, whatever, then the next question must be "yeah, but who owns that?" Ultimately, everything is owned by people. How many people can own a business and still call it "private"? What if they don't know each other, have never seen or even talked to each other? "Private" equity seems to simply be a way to avoid regulation and oversight. I'm all for the idea of taking the longer view in investing, but this private equity business is starting to get out of control. Will the NYSE slowly shrink as these private equity firms grow? Are the private equity firms really just stock exchanges with a different name and little oversight?


William Quaintance


This is in reference to paragraph 15 of your November 7 article on Privately Seeking Utilities.


Actually, when KKR acquired ITC Holdings from DTE Energy, there were many more employees and a much higher budget at DTE for its transmission business, most all of which eventually was transferred over to the KKR newly acquired transmission business. You did not include this information when you indicated there were only 28 employees and a budget of $10 million. The 28 employees and $10 million budget did not include DTE's costs to operate the transmission business. So your statistic is rather misleading.


Bob Zaegel