Gas utilities in Washington file suit over new state air law

Avista Corp. (NYSE: AVA), Cascade Natural Gas Corp., NW Natural and Puget Sound Energy jointly filed an action in the U.S. District Court for the Eastern District of Washington challenging the Washington Department of Ecology’s recently-promulgated Clean Air Rule (CAR).

The four companies said Sept. 27 that they will also file litigation in Thurston County Superior Court.

Washington’s natural gas utilities said they believe that reducing greenhouse gas emissions is a matter that needs addressing, but CAR is not the solution. Each utility provided feedback and public comment on the rule, but their ideas were not incorporated.

A better approach, said the utilities, is a comprehensive nationwide solution to reduce greenhouse gases. Policy changes, combined with ongoing and effective conservation programs, customer education, and technology advancements are the key to reducing carbon emissions, they added.

The CAR rulemaking process will have the unintended consequence of increasing carbon emissions while penalizing customers for using natural gas. The gas utilities said CAR suffers several critical flaws with respect to electric and natural gas utilities that will result in adverse environmental impacts:

  • CAR will increase net carbon emissions regionally from the electric power sector by discouraging the use of existing natural gas-fired facilities in Washington state in favor of out-of-state coal plants and less efficient out-of-state natural gas plants.
  • To meet CAR emissions requirements, the utilities’ only option is to purchase ERUs because they have a duty to serve customers and meet the natural gas demand of customers.
  • The need for Emission Reduction Units (ERUs) will force a significantly increased reliance on electricity generated out of state, elsewhere on the Western Interconnection grid, which is not regulated by CAR.
  • This could result in a net increase of carbon emissions and other pollutants in the region as electricity generated by coal-fired plants will likely replace that previously provided by clean efficient natural gas.
  • Washington state currently has one of the strictest emission performance standards in the country for natural gas plants. This rule will restrict operation of these highly regulated plants and increase reliance on less efficient out-of-state plants.

They also said CAR will discourage people from adopting clean natural gas for home heating and push them toward more polluting fuels, resulting in increased emissions.

The gas utilities said CAR could require the development of new energy projects in Washington at a pace and scale that may not be cost effective or achievable.

  • It is likely that there will not be enough offsets in a market for covered parties to comply with CAR. This will cause utilities to fall out of compliance with the rule.
  • The lack of available offsets will cause covered parties to scramble to create projects that generate emission reduction units. Such projects, not needed for energy purposes, will artificially drive energy costs higher.

CAR attempts to reduce greenhouse gas emissions from “covered entities” in the state of Washington. The rule applies to stationary sources located in the state, such as large manufacturers, as well as to petroleum producers and natural gas utilities. CAR sets a cap on emissions associated with covered entities, which decreases over time. Entities have to reduce their carbon emissions, develop projects that would cut others’ emissions, or purchase emission reductions from others.

The Washington Department of Ecology announced on Sept. 15 that after months of stakeholder meetings, and public review and input, Ecology that adopted this first-of-its-kind clean air rule that caps and reduces carbon pollution.

“Today marks a watershed moment in our country’s history,” said Ecology Director Maia Bellon. “We are taking leadership under our clean air act, adopting a strong and practical plan to reduce greenhouse gases, and doing our fair share to tackle climate change.”

Recognizing the need to take action, in 2015 Gov. Jay Inslee directed Ecology to cap and reduce carbon pollution under Washington’s Clean Air Act. Under the new rule, businesses that are responsible for 100,000 metric tons of carbon pollution annually will be required to cap and then gradually reduce their emissions. If a business cannot limit its own emissions, it has other options. It could develop a project that reduces carbon pollution in Washington, such as an energy efficiency program. Businesses could also comply by buying carbon credits from others or from other approved carbon markets.

The plan relies on businesses to trade independently among themselves and with other markets. All emissions reductions, projects and trading would be validated by independent auditors with oversight from Ecology.

Natural gas distributors, petroleum fuel producers and importers, power plants, metal manufacturers, waste facilities, and state and federal facilities would be included in the plan and need to show their emissions are declining by an average of 1.7% a year starting in 2017.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.