Power struggle

Mar 19 - Central Penn Business Journal (PA)

Sides wrestle with what the Supreme Court's decision means for Clean Power Plan's future

It's not the end of the war, nor even the end of a battle.

Last week's U.S. Supreme Court decision temporarily halting federal regulations to reduce greenhouse gas emissions from power plants merely signals a pause, albeit a very pregnant one, in the clash between the White House on one side and a coalition of states and industries on the other.

Partisans on both sides jumped on the court's 5-4 order, alternately reading it as an unprecedented move hinting at the justices' deeper skepticism of the so-called Clean Power Plan; or conversely, as a simple technical setback while challenges are pending before a lower federal court in Washington, D.C.

Meanwhile, the utilities and railroads that make a living from coal - key among the affected fossil fuels - are taking a measured approach and choosing their words carefully when asked about the plan and what the court's action portends.

Utilities in limbo

"From Talen Energy's perspective, the U.S. Supreme Court's decision is a significant development, but it is just one step in a complex and lengthy legal process," Todd L. Martin , a spokesman for Allentown -based utility Talen Energy , calling the decision "one of many regulatory and economic challenges impacting our business."

Part of that process will play out in Washington , where a judicial review of challenges to the plan is expected to be taken up by D.C. Circuit Court in June.

But the battle also is being fought state-by-state, including in Pennsylvania , where the Department of Environmental Protection has been working on a proposal that ultimately would lead to a 33 percent reduction in carbon emissions from the state's power industry.

That proposal is due to the U.S. Environmental Protection Agency in September, and DEP Secretary John Quigley told the Pittsburgh Post-Gazette following the court's ruling that work on the proposal will continue, as the EPA 's regulations have been stayed, but not struck down.

" Pennsylvania will continue planning and engagement with stakeholders on the Clean Power Plan, pending final decision of this issue by the Supreme Court," DEP spokesman Neil Shader told CPBJ. "We will continue to closely monitor the ongoing legal process."

That leaves business leaders in an uncomfortable limbo.

"We can't speculate," Martin told CPBJ when asked how the Clean Power Plan and state regulations could affect Talen's operations if they ultimately are adopted.

What is clear is that state and federal impacts could be significant for companies like Talen, whose large portfolio of power generation holdings includes the coal-fired Brunner Island and the gas-fired York Power plants in York County .

"With regard to the CPP, Talen Energy has consistently stated that we do not oppose reasonable regulations with achievable targets based on proven and commercially available technologies," Martin said, adding that Talen "will continue to be an active and productive participant in this and all other regulatory rulemakings impacting our industry."

"We will continue to monitor statespecific responses where we operate generation plants and engage as needed to remain constructive," he added.

Ryan Hill , a spokesman for Allentown -based PPL Corp. , from which Talen was spun off in 2015, highlighted how little companies know for sure.

The Supreme Court's decision "hopefully will result in greater clarity and really less uncertainty in the end as utilities look to comply with any final requirements," Hill said.

"We're uncertain at this point exactly how states may choose to address their planning process as a result of that (Supreme Court) decision, but we remain prepared to work with the states to address the EPA 's rules in the best interests of our company and our customers," Hill said.

Railroads face challenges

Where utilities make money by burning coal, railroads rely heavily on transporting it to generate their income, with Pennsylvania remaining a key state both for production and consumption of the fuel.

For Norfolk Southern Corp. , which is a significant presence in Pennsylvania and the midstate, coal represents 56 percent of its traffic out of the state and 23 percent coming in - the single greatest commodity in both directions.

Asked about how environmental legislation would affect its business, a spokesman for the Virginia -based railroad suggested a reporter contact the Association of American Railroads for an industry-wide perspective.

"Coal is the most important single commodity carried by U.S. freight railroads, accounting for more than 18 percent of rail traffic in 2015," AAR spokesman Ed Greenberg said. "The nation's freight railroads play a key role in responding to the shipping needs of American manufacturers, including the very ones which would be impacted by the proposed plan.

"So, the freight rail industry applauds the Supreme Court's decision to hit the pause button on this plan," Greenberg added.

Greenberg said he could not speculate on how railroads would be affected by clean power legislation, but did point out that AAR was among the groups that supported a 2014 study on potential impacts of the EPA 's plans.

Among the findings of that report, undertaken by Boston -based NERA Economic Consulting , are predictions of double-digit spikes in electricity prices in 43 states, including Pennsylvania (up 14 to 17 percent by 2031 ).

Louder voices

Not everyone was as guarded in their reaction to the week's news, or their views on potential impacts of the Clean Power Plan.

The Clean Power PA Coalition , which represents environmental and conservation groups, expressed disagreement with the Supreme Court ruling, but had praise for DER

"Secretary Quigley's affirmation that Pennsylvania will develop and be ready to submit a state plan to the U.S. Environmental Protection Agency this September shows that the Wolf administration is committed to the public health of Pennsylvanians and to building a clean energy economy in our commonwealth - and is taking steps Pennsylvanians strongly support," a coalition statement read.

State-level compliance is to be phased in beginning in 2022. While state proposals for meeting the goals are due to EPA this September - the goal Quigley has said Pennsylvania intends to meet - EPA has offered extensions of up to two years for states that request them.

Pennsylvania previously said it will not apply for an extension, and that does not sit well with critics of the plan.

"This (Supreme Court) decision reinforces the importance of Pennsylvania taking its time in voluntary early compliance with overreaching regulations on industries such as energy where state primacy has presided," said John Pippy , CEO of the Harrisburg -based Pennsylvania Coal Alliance .

"The legal standard to achieve a stay is extremely high and in doing so, the Supreme Court has recognized that the Clean Power Plan could cause irreparable harm to this country's citizens, economy and energy sector," Pippy said.

Kevin Sunday , government affairs manager for the Pennsylvania Chamber of Business and Industry, citing the NERA analysis predicting power price increases under the EPA 's plan, added that the state is a net exporter of electricity to the 13-state PJM grid, which serves 61 million people, as well as tens of thousands of businesses.

"Our economy both produces and uses a lot of energy, so we can ill afford a massive increase in electricity prices," Sunday said, calling the court's move a win for the state's economy.

"This rare move by the Supreme Court shows the justices are extremely concerned EPA is overstepping its bounds," Sunday said. "Developing nations like China and India are continuing to increase their emissions; the United States has, through free markets, been the biggest reducer of C02 emissions over the past decade without heavy-handed regulations."

BY ROGER DUPUIS | rogerd@cpbj.com

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