Sun, May 25, 2014 - Page 9 News List

Obama divides power players with rules some accept

Making power from coal produces twice as much carbon dioxide as that from natural gas, so rules helping gas firms may hurt coal firms

by Mark Drajem and Mark Chediak  /  Bloomberg

Illustration: Kevin Sheu

The upcoming greenhouse gas rules from the administration of US President Barack Obama are gaining acceptance from an unlikely quarter — power companies — and splitting the US energy industry’s normally unified opposition to new limits.

The proposed US regulations set for release on Monday next week would mandate deep cuts in greenhouse-gas pollution, while allowing smokestack emissions to be offset with enhancements elsewhere in the system, according to people familiar with the plan.

US power company executives, while cautioning that they are not privy to the plan’s details, greet the US Environmental Protection Agency’s (EPA) promise of a flexible approach with sentiments ranging from eager endorsement to grudging acceptance.

“Our goal is to work with EPA to make sure the rule works,” Exelon Corp senior vice president Joe Dominguez said. “There needs to be a pathway toward meaningful reductions.”

For some power companies, the rules would help save nuclear reactors or boost investments in wind farms. Nuclear reactors emit few greenhouse gases, and companies with a fleet of reactors, such as Entergy Corp and Exelon, may benefit from a rule to cut carbon.

“We see a potential upside,” said Chuck Barlow, vice president of environmental strategy and policy for Entergy, which owns coal, natural gas and nuclear power plants, including the Indian Point facility north of New York City. “It would be an opportunity for our nuclear facilities.”

That view is not shared by US lobbyists for coal producers, such as Peabody Energy Corp, who call the EPA plan the latest salvo in a “war on coal” that would result in lost jobs and less reliable energy.

The willingness of power companies to embrace the agency’s effort could cleave the US business lobby and give Obama a chance to rally support. Eventually, US states will need to implement whatever the EPA proposes, and utilities could help head off coal producers and get state leaders to engage in the effort, supporters say.

Exelon chief executive Chris Crane said the rules will give his company a chance to go to state regulators and talk about how its nuclear fleet, which is suffering because of low electricity prices, could thrive.

“It will be in the states where these kinds of decisions are made,” he told reporters in Washington this month.

Xcel Energy Co has about half of its capacity in coal, followed closely by natural gas. Still, if the EPA gives credit for early action and sets reasonable targets, “we are confident we will do fine under the rule,” Xcel vice president for policy and strategy Frank Prager said in an interview.

“There is a very practical conversation happening, but that’s not to say everybody is going to end up in the same place,” former top US White House official for energy and environment Heather Zichal said.

The EPA’s approach would mandate 25 percent cuts, while giving states broad leeway in how to reduce emissions and endorsing a path that goes “beyond the fence line” of specific plants, according to people familiar with the plan.

The agency is contemplating a long phase-in for the steepest cuts, and the proposal is to include as many questions as answers for utilities and state officials, the people said.

What year the administration will choose as the baseline is not clear and could be a significant matter of dispute.

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