Dec 20 - McClatchy-Tribune Regional News - Christopher Bjorke The Bismarck Tribune, N.D.


North Dakota energy interests felt pressured by pending federal climate laws. Now a recent move by the Environmental Protection Agency toward the regulation of carbon emissions has put them in a vise.

"It's an all-out frontal assault," said John W. Dwyer, president of the Lignite Energy Council, of a recent ruling by the EPA that carbon emissions are a health threat, a step toward the agency assuming the power to regulate greenhouse gases. In addition to federal climate bills -- currently stuck in the Senate -- the EPA ruling is seen as a way to prod lawmakers to pass a bill to regulate carbon gases or face the threat of a federal agency doing it instead.

"Certainly, the EPA is a preemptive strike," Dwyer said.

Coal accounts for 95 percent of electrical generation in North Dakota, and oil production is one of its most lucrative economic activities. Politicians and energy representatives are afraid of what increased control of emissions would mean for the utilities and consumers.

"This hits coal harder than any other source, and it hits North Dakota harder than anywhere else," said state Public Service Commissioner Brian P. Kalk. Because the state is so dependent on coal for electricity, regulation could put it in the position of bearing the cost for emissions reductions, he and other officials said. "We have benefited immensely from cheap power."

North Dakota's coal legacy is based in the fuel's abundance here and federal utilities law that required utilities to favor the cheapest available energy source. Public Service Commissioner Tony Clark said that carbon regulation is popular in regions where coal is a smaller part of the energy mix and where utility users would pay a lower cost.

"It becomes a transfer of wealth from the heartland of the country, which is primarily coal-based," Clark said.

The ruling has implications for the oil industry as well, according to Ron Ness, president of the North Dakota Petroleum Council. While individual wells do not generate much emissions, if the EPA aggregates producers' wells, it could put them over emissions thresholds for agency regulation. It also would have an impact on refineries, which would have to account for its carbon production.

"We're looking at a tax that's going to go directly to consumers," Ness said.

Ron Day, the environmental, health and safety manager for the Tesoro refinery in Mandan, said 2010 would be the first year that they would have to monitor and report emissions, but he was not certain what EPA regulation could cost Tesoro. The breadth of the ruling would mean that agency would have jurisdiction over not just major emitters like coal-fired power plants, but also smaller commercial plants.

"The EPA would have literally hundreds of thousands of things they would have to monitor," Day said.

The EPA ruling could slow down the review process for new facilities or major modifications of older plants that produce above a certain amount of carbon gas and require utilities to adopt emissions controls using the best technology available, according to Claire Olson, senior vice president and general council for Basin Electric Cooperative.

The problem is that the existing technology has not been proven, said Dwyer. Requiring companies to make investments when the benefits are uncertain creates a risk that could discourage businesses from making new investments.

"You're trying to make a billion-dollar decision based on uncertainty," he said. "None of the vendors will guarantee the technology."

Investments made by utilities to capture and reduce emissions, as well as what it would cost to exceed emissions caps, would likely be passed on to ratepayers. Industry estimates put the rate increases created by climate regulation between 25 percent and 40 percent.

Supporters of emissions regulation say that it is needed to reduce greenhouse gases, which are widely believed to contribute to global warming.

"I think people can see farther than their own utility bill," said Marie Hoff, chairwoman of the Dakota Resources Council. Aside from the issue of climate change, reducing air pollution should encourage people to reduce fossil fuel use, she said. "The usual argument is that we can't afford it. But can we afford all the bad that comes with it?"

According to Dwyer, the coal industry in the state supports reducing carbon emissions and has spent $7 million on carbon capture and sequestration technology. The problem with regulation as it is being proposed now is that it forces the industry to reduce emissions without providing enough time to develop the means to do so.

"The challenge is having the time to develop the technology," Dwyer said. "They can't do it overnight."

Public Service Commissioner Kevin Cramer sees the EPA ruling as a tactic to get Congress to pass an unpalatable climate change bill by presenting a less attractive alternative. The chances of a bill passing before the 2010 election is doubtful, according to observers of Washington.

"Which is all the more reason to be concerned about the EPA," Cramer said.

(Reach reporter Christopher Bjorke at 250-8261 or chris.bjorke@bismarcktribune.com.)

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