1. Energy Facility Siting Options for Idaho Arne Olson Energy & Environmental Economics, Inc. (E3) Presented to: Subcommittee on Energy Facility Siting Boise, Idaho August 21, 2006 353 Sacramento Street, Suite 1700 San Francisco, CA 94111 Telephone: (415) 391-5100 http://www.ethree.com

2. August 10, 2006 3 Goals for Today’s Session Understand the substantive issues that an energy facility siting process must address Understand the substantive issues that an energy facility siting process must address Understand the current process for siting large energy facilities in Idaho and the gaps in that process Understand the current process for siting large energy facilities in Idaho and the gaps in that process Get a good idea of how other states handle energy facility siting Get a good idea of how other states handle energy facility siting See where there is common ground on an appropriate siting process for Idaho See where there is common ground on an appropriate siting process for Idaho

3. August 10, 2006 4 Roadmap for Developing the Energy Plan Understand where we are today Decide where we want to go tomorrow Figure out the best ways to get there Implement the approved measures Negotiate through legislative process Repeat You are here

4. August 10, 2006 5 Task of Siting Subcommittee Role of siting subcommittee is to talk about process Role of siting subcommittee is to talk about process What type of process is appropriate for siting large energy facilities in Idaho? What type of process is appropriate for siting large energy facilities in Idaho? Generation facilities (gas, coal, nuclear, renewable) Generation facilities (gas, coal, nuclear, renewable) High-voltage transmission facilities High-voltage transmission facilities Pipelines (crude oil, petroleum products, natural gas) Pipelines (crude oil, petroleum products, natural gas) Role of subcommittee is not to get into specifics of substantive issues Role of subcommittee is not to get into specifics of substantive issues

5. Draft Policy Objectives

6. August 10, 2006 7 Policy Objectives 1.Reliability, Stability 2.Low-Cost, Affordability 3.Environment, Conservation 4.Jobs, Economy 5.Flexibility Action Item Policy Statement Action Item Proposed Structure of Plan Findings

7. August 10, 2006 8 Draft Policy Objectives 1. Ensure a secure, reliable and stable energy system for the citizens and businesses of Idaho 2. Maintain Idaho’s low-cost energy supply and ensure access to affordable energy for all Idahoans 3. Protect Idaho’s public health, safety and natural environment and conserve Idaho’s natural resources 4. Promote sustainable economic growth, job creation and rural economic development through investments in Idaho’s energy infrastructure 5. Provide the means for Idaho’s energy policy to adapt to changing circumstances

8. Energy Facility Siting Issues

9. August 10, 2006 10 Substantive Issues in Energy Facility Siting Air emissions permitting Air emissions permitting Water discharge permitting Water discharge permitting Water rights & use of potable water Water rights & use of potable water Health and safety issues Health and safety issues Consistency with zoning/land-use plans Consistency with zoning/land-use plans Site remediation/restoration Site remediation/restoration Need for reliable energy supply Need for reliable energy supply

10. August 10, 2006 11 What is Unique About Energy Facilities? Energy facilities have a large “footprint”; impacts go beyond single community Energy facilities have a large “footprint”; impacts go beyond single community Energy networks are regional in scope Energy networks are regional in scope Reliable energy supply is seen as indispensable to the functioning of a modern society Reliable energy supply is seen as indispensable to the functioning of a modern society Electricity and natural gas utilities typically have power of eminent domain after obtaining Certificate of Public Convenience and Necessity (CPCN) Electricity and natural gas utilities typically have power of eminent domain after obtaining Certificate of Public Convenience and Necessity (CPCN)

11. August 10, 2006 12 Why do Most States have State- Level Energy Facility Siting? Energy facilities have environmental impacts that go beyond local areas Energy facilities have environmental impacts that go beyond local areas Air emissions impacts Air emissions impacts Water discharge impacts Water discharge impacts Water Consumption Water Consumption Energy facilities have economic impacts that go beyond local areas Energy facilities have economic impacts that go beyond local areas Energy is a basic necessity Energy is a basic necessity Must come from somewhere Must come from somewhere Energy networks are regional in scope Energy networks are regional in scope

12. August 10, 2006 13 Why do Most States have State- Level Energy Facility Siting? (2) Single state-level siting process can offer “one-stop shopping” for permits Single state-level siting process can offer “one-stop shopping” for permits State-level process may be more consistent and predictable State-level process may be more consistent and predictable Linear facilities such as transmission lines and pipelines cross multiple jurisdictions Linear facilities such as transmission lines and pipelines cross multiple jurisdictions EPACT 2005 grants siting authority to FERC for “National Interest Electric Transmission Corridors” for states without state-level transmission siting authority EPACT 2005 grants siting authority to FERC for “National Interest Electric Transmission Corridors” for states without state-level transmission siting authority

13. August 10, 2006 14 Preliminary Map of “ National Interest Electric Transmission Corridors ”

14. August 10, 2006 15 How Does Energy Facility Siting Work in Idaho Today? No comprehensive state-wide process No comprehensive state-wide process Air emissions & water discharge permits issued by DEQ Air emissions & water discharge permits issued by DEQ Water rights acquired from DEQ -- no process for evaluating alternative economic uses of water Water rights acquired from DEQ -- no process for evaluating alternative economic uses of water IPUC issues Certificate of Public Convenience and Necessity (CPCN) for utility-owned generation & transmission IPUC issues Certificate of Public Convenience and Necessity (CPCN) for utility-owned generation & transmission Local jurisdictions hear issues related to consistency with land-use plans Local jurisdictions hear issues related to consistency with land-use plans

15. August 10, 2006 16 Gaps in Current Idaho Process Merchant generation facilities Merchant generation facilities No requirement to show need for power No requirement to show need for power Possible mismatch between constituency of decision-makers and people who bear the impacts (both positive and negative) Possible mismatch between constituency of decision-makers and people who bear the impacts (both positive and negative) Generation and transmission facilities developed by municipal utilities and rural cooperatives Generation and transmission facilities developed by municipal utilities and rural cooperatives High-voltage transmission facilities not owned by investor-owned utility High-voltage transmission facilities not owned by investor-owned utility

16. August 10, 2006 17 Independent or “Merchant” Power Producers Independent power producers (IPPs) first gained a foothold with passage of Public Utility Regulatory Policy Act (PURPA) in 1978 Independent power producers (IPPs) first gained a foothold with passage of Public Utility Regulatory Policy Act (PURPA) in 1978 Momentum accelerated with federal policy favoring wholesale deregulation during the ‘90s Momentum accelerated with federal policy favoring wholesale deregulation during the ‘90s Today, IPPs generate around 35% of U.S. power Today, IPPs generate around 35% of U.S. power IPP can locate in any state on the Western grid and sell power to any other state on the grid IPP can locate in any state on the Western grid and sell power to any other state on the grid

17. August 10, 2006 18 Utility vs. Merchant Facilities Utility Facilities Developed under state regulation in conjunction with obligation to serve Developed under state regulation in conjunction with obligation to serve PUC reviews prudency and sets returns PUC reviews prudency and sets returns Risks and returns shared among utility shareholders and ratepayers Risks and returns shared among utility shareholders and ratepayers PUC issues CPCN PUC issues CPCN Merchant Facilities No obligations other than those spelled out in contract Physical output is consumed locally, but economic benefits accrue to contractual owner Risks and returns borne by merchant shareholders No CPCN required

18. August 10, 2006 19 “Nightmare” Energy Facility Siting Scenarios Large, merchant coal facility in rural area Large, merchant coal facility in rural area New, large nuclear power plant New, large nuclear power plant High-voltage transmission facility from Montana coalbeds to Southwest through eastern Idaho High-voltage transmission facility from Montana coalbeds to Southwest through eastern Idaho New petroleum product pipeline proposed to bring gasoline, diesel & jet fuel from refineries in Rockies to markets in the Northwest New petroleum product pipeline proposed to bring gasoline, diesel & jet fuel from refineries in Rockies to markets in the Northwest Question is whether Idaho needs to act now to prepare for these possibilities Question is whether Idaho needs to act now to prepare for these possibilities

19. Survey of Siting Processes in Other States

20. August 10, 2006 21 Survey of State Energy Facility Siting Processes States surveyed: States surveyed: Washington Washington Oregon Oregon California California Arizona Arizona Montana Montana Arkansas Arkansas Maine Maine Questions asked: Composition of Siting Body Decision-making authority Facilities over which Siting Body has jurisdiction Decision-making role of local officials Whether the jurisdiction requires a need standard or economic test to protect ratepayers

21. August 10, 2006 22 Washington Body: Washington Energy Facility Site Evaluation Council (EFSEC) Composition: Chair appointed by governor, five state agency members, one member from each local jurisdiction Decision: Issues permits & site certificate, governor must sign Facilities: Thermal generation greater than 350 MW, smaller wind (voluntary), oil & gas pipelines, transmission Role of locals: Formal decision-making role on Council Need Standard?: Must demonstrate need

22. August 10, 2006 23 Oregon Body: Oregon Energy Facility Siting Council (EFSC) Composition: Seven citizen members appointed by the governor and confirmed by the Oregon senate Decision: Issues site certificate, directs agencies to issue permits Facilities: Thermal plants greater than 25 MW, non- thermal plants greater than 35 MW, 230+ kV lines more than 10 miles in length Role of locals: Must approve proposed land use Need Standard?: No need standard or economic test

23. August 10, 2006 24 California Body: California Energy Commission (CEC) Composition: Five citizen members appointed by governor, four must have specific knowledge (economics, environmental, engineering, legal) Decision: Issues permit to construct & operate Facilities: Thermal plants greater than 50 MW and related transmission lines, fuel supply lines, and related facilities Role of locals: No formal decision-making role Need Standard?: No need standard or economic test

24. August 10, 2006 25 Arizona Body: Arizona Corporation Commission (ACC), Arizona Power Plant and Transmission Line Siting Committee Composition: Five elected members to ACC, two local members of Siting Committee Decision: Recommendation to full Commission to issue Certificate of Environmental Compatibility Facilities: Power plants greater than 100 MW and transmission projects greater than 115 kV Role of locals: Formal membership on Siting Committee Need Standard?: Economic test to protect ratepayers

25. August 10, 2006 26 Montana Body: Department of Environmental Quality, Board of Environmental Review Composition: Seven members: three public, two government, two professional Decision: DEQ director issues permits, Board of Environmental Review hears appeals Facilities: Transmission > 69 kV or 10 miles, pipelines of certain diameters and lengths, hydro > 50 MW, nuclear and geothermal plans, gas/coal can “opt in” Role of locals: No formal decision-making role Need Standard?: No need standard or economic test

26. August 10, 2006 27 Arkansas Body: Arkansas Public Service Commission Composition: Three members appointed by Governor Decision: Commission issues CPCN Facilities: Utility-owned facilities only Role of locals: No formal decision-making role Need Standard?: Economic test to protect ratepayers

27. August 10, 2006 28 Maine Body: Board of Environmental Protection Composition: Eleven volunteer members appointed by Governor and confirmed by Legislature Decision: DEQ director issues permits, Board of Environmental Review hears appeals Facilities: Facilities emitting greater than 50 tons/yr. VOC, 10 tons/yr. of a single Hazardous Air Pollutant, 25 tons/yr. of all Hazardous Air Pollutants combined, 100 tons per year of any other regulated pollutant Role of locals: Does not preempt local role Need Standard?: No need standard or economic test

28. August 10, 2006 29 Senate Bill 1292 (2006 Session) Body: DEQ Site Review Panel Composition: Three DEQ, one governor-appointed, one member appointed by each city and county within 50 mile radius Decision: make recommendation to DEQ Director within 90 days whether project is consistent with Energy Facility Siting Management Plan, Director makes decision Facilities: Not specified in bill Role of locals: Formal role on Site Review Panel Need Standard?: Not specified in bill