1. Clean Power Plan Update July 2016 Dale Niezwaag

2. Basin Electric Power Cooperative
Consumer owned by 138 Member Cooperatives
11 Districts in 9 states
Service Territories Comprise 540,000 square miles
Serves 2.9 million electric consumers
6,555 MW of capacity within its generation portfolio (by end of 2016)
2,200+ employees
8 subsidiaries
Updated as of 6-13

3. Basin Generation portfolio
2000
Today

4. Generation by Fuel Fuel 2015 Avg. Total: 100% Coal 74% Wind 15%
Natural Gas 6%
Nuclear 2%
Hydro 1%
Recycled Energy
Other
<1%
Total:
100%

5. EPA’s Clean Power Plan (CPP)
Limits the amount of CO2 emitted from power plants.
EPA is requiring:
Coal plants to either shut down or severely limit operation
Replacement of Coal Generation with Natural Gas Combined Cycle Units
The addition of massive amounts of NEW (post 2012) renewable generation
Anticipated that a state, regional, or national credit trading program will be developed.

6. Regulating CO2 Emissions Under 111(d)
EPA is supposed to establish “Guidelines” on lowering emissions
States are to develop implementation plans (SIP’s) on how the state will achieve the goals and guidelines and submits it to EPA
EPA then either approves the SIP, approves the SIP with changes, or denies the SIP
If a state fails to provide a SIP or provides an inadequate SIP EPA can enforce a Federal Implementation Plan (FIP)

7. The CPP How Did We Get Here?

8. Regulating CO2 Emissions Under 111(d)
2007- In Massachusetts v. EPA, Supreme Court held that greenhouse gas emissions including CO2 constitute “air pollutants” under the Clean Air Act in 2005
Opened the door for various regulations of CO2 under CAA
New vehicle emission standards
Major source permitting requirements
Requirements for new and existing EGUs under Section 111

9. Best “System” of Emission Reduction
In light of limited opportunities to reduce CO2 emissions from individual units EPA relies on language in Section 111 allowing emission standards based on “Best System of Emission Reduction” (BSER)
Based on the word system, EPA asserts that they can reduce CO2 emissions through changes to the electricity generating “system” as whole
Shifting generation from higher CO2 emitting sources to low or zero emitting sources

10. CPP Basics

11. Original Clean Power Plan Timeline
October 23, Final Clean Power Plan published in Federal Register
Summer 2015
September 6, States make initial submittal with extension request or submit Final plan
1 Year
September 6, States with extensions submit Final plan
3 Years
January 1, Compliance period begins
7 Years
January 1, CO2 emissions goals met
15 Years
GOV (Dale Niezwaag)
New slide

12. CPP from Percentage Reduction of the 2012 Baseline

13. State Implementation Plan (SIP) Options
Emission-based Plan Options
Rate-based State Plan (Existing Sources have to meet the average rate for that State)
Mass-based State Plan (Existing Sources have to stay under the mass-based cap set for that State
“State Measures” State Plan
Has to meet the mass goal for the State, but can include things such as end-use efficiency and other options
Does not allow rate-based States to trade with mass-based States

14. CPP – What we know
Currently no commercially viable technology exists to remove CO2, it’s a byproduct of combustion
Final rule much more strict than proposed rule
Limits intended to begin in 2022
Final emission rate limits start in 2030
Will place upward pressure on rates
States have options as they develop State Implementation Plans (SIPs)

15. CPP – What we don’t know Exact rate impacts
How states will implement their plans (Rate-based/ Mass-based)
How will state plans treat generation and credits?
How will trading programs be developed?
How will this impact infrastructure & pricing for natural gas and electricity?

16. Our Response to the CPP

17. Dealing with the CPP Beat the Rule
Continue to support efforts to delay or overturn rule (Huge first step in winning the stay!)
Change the Rule
Work on Possible Legislative Items to Modify Rule If Legal Actions Fail
Meet the Rule
What will we need to consider if legal and political actions fail

18. Beat the Rule

19. Principal Legal Issues
Can’t regulate under Section 111 if subject to regulation under Section 112
Firm performance standard versus issuing a guideline document
The regulatory “outside-the-fence” issue

20. Other Legal Issues to Consider
The large change in numbers from proposed to final and their not providing enough notice/time to comment
It was arbitrary and capricious to select 2012 as the cut- off for wind generation to be built.

21. Change the Rule

22. Political Climate Federal Situation
House will support any pushback on EPA
Senate MAY support some pushback on EPA
President will veto any anti-EPA or CPP/111(d) legislation
House and Senate currently lack votes to override veto
Based on changes in Final Rule there MAY be enough votes to override a Presidential veto

23. Presidential Election Impacts
If Trump is elected…
Could force the EPA to make changes to the CPP
A full roll back or elimination of the plan is not likely.
The Supreme Court ruled that CO2 is a pollutant and that EPA has the authority to regulate it, so some sort of regulation of CO2 is likely.
International treaties and commitments make national policy changes difficult.
Public opinion favors doing something to address “climate change.”
If Clinton is elected…
Could build on and expand the CPP
Could support some reasonable fixes to the CPP

24. Potential Legislative Fixes to Make the CPP More Achievable
Any renewable energy built since 2005 should qualify toward compliance of the rule.
The interim goals should be eliminated.
The 2022 goal is 65%-75% of the final 2030 goal for Basin States

25. Meet the Rule

26. Basin Generation portfolio
CPL (Becky Kern)

27. Initial Assessment Potential 40% wholesale rate impact
What a compliance plan for 2022 might look like:
1,350 MWs of new wind capacity in addition to wind already contracted for development
1,740 MWs of new natural gas fired capacity
TRANS (Matt Stoltz)
Added “Market trials…” to last bullet (Matt Greek)
Updated slide

28. Initial Assessment Effort would be unprecedented in Basin’s history.
Over 500,000 acres of land likely required (vast majority for wind farms).
Assuming 100% success; 15 almost simultaneous permitting processes and major projects.
Over 1,000 major pieces of equipment; 900 wind turbines alone.
Over $5.0 billion in project costs.
TRANS (Matt Stoltz)
Added “Market trials…” to last bullet (Matt Greek)
Updated slide

29. Current Status

30. Current Legal Situation
Motion to stay the rule - this is a request for the courts to stop implementation of the rule until there is a final court decision on the merits (legality) of the rule. 
Motion was denied by DC Circuit Court on January 21, 2016 but was granted by the Supreme Court on February 9, 2016.
Merits Briefing begins the challenge to the legality of the rule and is filed in the D.C. Circuit Court of Appeals.
Oral arguments before a 3-judge panel were to begin in June.
Oral arguments before the full D.C. Circuit will begin Sept. 27th.

31. Questions?

32. Detailed Legal Points

33. Senate v. House Section 111/Section 112
Discrepancy between the conflicting Senate and House versions of the 1990 Amendments to the Clean Air Act.
House version: source specific (version reflected in U.S. Code)
Senate version: pollutant specific (broader authority)

34. Performance Standards v. Guideline Document
Does EPA have substantive authority under Section 111(d) to establish firm performance standards as opposed to issuing a “guideline document ...” providing information for the states to develop their state plans as Section 111(d) is structured based upon a procedure where the state is the party to establish the initial compliance plan?

35. Performance Standards v. Guideline Document
In other words, how far can EPA go without usurping the states’ role in establishing “standards of performance”?

36. Performance Standards
The final major issue is the “beyond the fence” issue:
Can EPA set performance standards at the unit level, yet base achievability of meeting the standards on measures to be taken beyond the unit (e.g. the three building blocks).

37. The Other Key Issue: Achievability of Performance Standards
Even EPA admits that no coal and gas unit can achieve the final performance standards for existing sources
In fact, performance standards for new coal and gas facilities are less restrictive than for existing facilities

38. Achievability of CPP
Under Section 111(a)(1), a standard of performance must reflect “the degree of limitation achievable”
The Clean Power Plan is not in fact achievable for Basin Electric in the states of North Dakota and Wyoming in the required time frame

39. Initial Assessment Potential 40% wholesale rate impact
What a compliance plan for 2022 might look like:
1,350 MWs of new wind capacity in addition to wind already contracted for development
1,740 MWs of new natural gas fired capacity
TRANS (Matt Stoltz)
Added “Market trials…” to last bullet (Matt Greek)
Updated slide