South Dakota utilities evaluate EPA’s proposed CO2 rule

Basin Electric Power Cooperative – August 8, 2014

On July 31, Basin Electric attended a public hearing, “EPA’s 111(d) Carbon Regulation: A South Dakota Forum,” in Sioux Falls, SD.

During the event, Steve Tomac, Basin Electric senior legislative representative, and Kevin Tschosik, Basin Electric manager of distributed generation, sat on one of multiple panels that addressed how the Environmental Protection Agency’s (EPA) recently proposed carbon rules affect South Dakota coal plants – most specifically, the cooperative’s Deer Creek Station near White, SD.

EPA’s proposed rules for Section 111(d) of the Clean Air Act address greenhouse gas standards for existing fossil fuel-based power plants and petroleum refineries.

Following June’s proposed rule, EPA is scheduled to publish a final rule in June 2015, with states required to provide a plan to meet the agency’s expectations by June 2016.

Tomac said EPA’s regulations pose challenges for South Dakota utilities.

“The formula that EPA devised to try and set the carbon intensity levels in each state tends to get flawed a little bit,” Tomac said. “It doesn’t address that fact that the base year, which is 2012, was mostly a construction year at Deer Creek Station. That skews the numbers in South Dakota.”

Representatives of Otter Tail Power Company, speaking for that utility’s Big Stone Plant, also sat on the panel with Basin Electric. Otter Tail Power shares ownership of its Milbank, SD, plant with Montana-Dakota Utilities and NorthWestern Energy.

“South Dakota is unique in that it only has two fossil fuel-fired power plants,” Tomac said.

He also highlighted differences between the Deer Creek and Big Stone facilities.

“In the future we’ll be part of SPP (Southwest Power Pool), which the Basin Electric board of directors recently elected to join, and Big Stone is part of MISO (Midcontinent Independent System Operator),” Tomac said. “They’re different ownerships that serve different people.”

Tomac and Tschosik also explained how a combined cycle plant works, as well as why Basin Electric built Deer Creek Station. It was made to meet baseload in Basin Electric’s territory, but was later realized to also be a successful balancing power source for wind.

“If you have your wind with approximately a 50-percent capacity this past year, to really achieve ideal generation, you’d have to have another source with the other 50 percent,” Tomac said. “The challenge, of course is EPA’s rule is designed so that natural gas combined cycle would displace coal at a 70-percent rate.”

Basin Electric also sees the need for a multi-state approach to the proposed Section 111(d) rule.

“Most of the utilities present at the forum operate in more than one state,” Tomac said.

EPA Region 8 official Callie Videtich was present to hear additional concerns, such as the fate of renewable energy credits (REC).

Tomac said it’s unclear whether RECs should follow an electric load, or stay in the state they originate from.

“It’s a huge question that’s unanswered,” Tomac said.

It’s also a question EPA initially left up to the states, which could be problematic.

“If that’s the case, what we’ve got brewing is a potential state fight,” Tomac said.

Tomac said more discussion is necessary for Section 111(d). The proposed rule’s comment period ends Oct. 16.