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North Dakota officials say the state’s coal plants will be able to pump their CO2 underground in the future, and, based on this and other reasons, should therefore be exempt from a Minnesota law that requires utilities to plan ahead for the cost of potential climate regulations.
The planning requirement is part of Minnesota’s Next Generation Energy Act of 2007, which established the state’s renewable energy standard and requires emissions offsets for new coal power, even if purchased from out-of-state sources. The bipartisan legislation, signed by Republican Gov. Tim Pawlenty, was implemented prior to climate change becoming a third-rail political issue.
Law is not a ‘new cost’
Last week, a widely published Associated Press story, “ND officials protest new Minn. cost on coal power,” implied Minnesota imposes “charges” and “extra costs” on utilities for using coal. But the law does no such thing.
The provision in question, 216H.06, only requires utilities to include an estimate of future federal and/or state CO2 regulations in their long-term resource plans (in fairness, the AP does accurately summarize the law elsewhere in the story).
In a letter [PDF] from the North Dakota Industrial Commission to the Minnesota Pollution Control Agency, Gov. Jack Dalrymple claims 216H.06 is “an improper, extraterritorial extension of state regulatory authority” in violation of the Commerce Clause. That’s also the primary argument in a pending lawsuit between the two states.
The letter also cites “great uncertainty” over what the future will hold for CO2 regulation: “…many economic, scientific, and legal uncertainties exist that make quantifying the future cost of carbon dioxide regulation impracticable at this time.”
But perhaps Dalrymple’s most novel argument is that North Dakota’s status as “a leader in the advancement of [CO2 sequestration] technology” means the regulatory burden will be different for coal plants in his state:
Since the Commission first established its cost estimate in 2007, carbon dioxide injection and storage technology has continued to develop and now provides an even stronger justification to confine the cost estimate to Minnesota facilities.
In other words, North Dakota generators needn’t worry so much about future CO2 regulations, because they can just pump their emissions underground.
Law’s impact overstated?
The Minnesota PUC’s current cost estimate range is $9 to $34 per ton. Dalrymple calls upon the MPCA to recommend the estimate for North Dakota facilities be changed to $0 per ton. But it’s unclear whether such a change would make new coal power any more desirable to Minnesota utilities.
The newly completed Spiritwood plant in North Dakota, which was specifically exempted from Minnesota requirements, remains idle in part due to lack of demand, and in part because the power the plant generates isn’t presently cost-effective.
Minnesota law doesn’t prohibit coal power from North Dakota or anywhere else, but it does require CO2 emissions from new power sources to be offset. Which means a power plant that did succeed in sequestering its CO2 emissions underground would be exempt from the law in the first place.
Also, the resource plans are a long-term outlook, and the regulatory cost projections are one of many factors utilities must consider. It’s an entirely separate process from establishing a need for new generation sources or updating retail utility rates.
The aforementioned AP article, citing a spokeswoman from Otter Tail Power, estimated the burden of CO2 regulations on new coal power would result in a rate increase of $8 to $24 per month for customers. But in an email to Midwest Energy News, the spokeswoman, Cris Kling, said her figures were based on a hypothetical scenario in which a fee was applied to Otter Tail’s existing generation fleet, and should not be interpreted more broadly than that.
However you calculate, the figures used by the PUC for planning purposes don’t actually have a direct impact on ratepayers. The intent of the letter seems to have less to do with what Minnesotans pay for electricity and more to do with whether North Dakota producers find a market for their coal.
“It has long-term implications about the growth of the industry from where it is today,” Dalrymple told the AP. “We feel that the time has come to clear up this issue once and for all.”
Editor’s note: An earlier version of this post incorrectly referred to Jack Dalrymple as the former governor of North Dakota. He is the current governor.