1. Analysis of the EPA 111(d) Clean Power Plan Rule Presented by: David W. Schnare, Esq. Ph.D. Director Center for Energy and the Environment Thomas Jefferson Institute for Public Policy General Counsel Energy & Environment Legal Institute December 17, 2014

2. Analysis of the EPA 111(d) Clean Power Plan The regulation will harm over 700,000 poor Virginians. It will cause more premature death than it will avoid. 25 Governors, 22 Attorneys General, 7 State Legislatures, 13 Public Utility Commissions, and 12 Environmental Departments argue the rule is illegal. A Virginia Energy Federalism Act would protect citizens, utilities and businesses through “wait and see” legislation without risk from EPA.

3. 185,000 Families 537,000 Families

5. The 111(d) Rule will cost lives EPA claims the rule will prevent up to 6,600 premature deaths. EPA failed to disclose the “health-wealth” impacts. The loss of $560 billion in disposable income citizens will pay to cut electricity use under the rule (only one of 4 pillars of the rule) will cause 47,700 premature deaths as calculated using EPA’s own economic analysis methods.

6. The EPA Plan is “All Pain and No Gain” EPA’s plan would reduce global temperatures by 0.02 deg. C. by 2100. EPA has admitted this fact. Expenditures on the plan will take tax revenue out of the state’s budget and will force traditional environmental spending to compete with new work required under the federal “Plan.” Restated, traditional environmental protection will lose funding and attention under the plan. Knappenberger, P.C. & Michaels, P.J. 0.02 o C Temperature Rise Averted: The Vital Number Missing from the EPA’s “By the Numbers” Fact Sheet, Cato Institute, June 111, 2014, http://www.cato.org/blog/002degc-temperature-rise-averted-vital-number-missing-epas-numbers-fact-sheet.http://www.cato.org/blog/002degc-temperature-rise-averted-vital-number-missing-epas-numbers-fact-sheet Testimony before the Senate Committee on Environment and Public Works, http://www.epw.senate.gov/public/index.cfm?FuseAction=Hearings.Choose&Hearing_id=8655edd9-03ac-bb36-cab8-7913ec6c2b94. http://www.epw.senate.gov/public/index.cfm?FuseAction=Hearings.Choose&Hearing_id=8655edd9-03ac-bb36-cab8-7913ec6c2b94

7. Why is the 111(d) Rule Illegal? EPA attempts to regulate “outside the fence”, an authority the Clean Air Act does not offer. Under the rule, Virginia loses its authority to decide what energy utilities may generate and/or use, and would force Virginia to establish a renewable energy standard. EPA requires Virginia to “redispatch” (shift) generation from coal-fired plants to natural gas-fired plants. Dispatch of generation is not within either Federal or State control. It is done by private balancing authorities under FERC guidance. Under 111(d) States are allowed freedom to craft any form of implementation plan it wishes as long as it achieves the pollution standard. EPA replaces this with a binding, inflexible approach. EPA may not use 111(d) if it has already regulated sources under Section 112, which it has done.

8. Who thinks the 111(d) rule is illegal? Public Utility Commissions

9. Who thinks the 111(d) rule is illegal? Governors

10. Who thinks the 111(d) rule is illegal? State Legislatures

11. Who thinks the 111(d) rule is illegal? Attorneys General

12. Who thinks the 111(d) rule is illegal? State Environmental Departments

13. U.S. Congress House Energy and Commerce Committee Report on EPA’s 111(d) Proposed Rule December 16, 2014 There are fundamental legal questions about the EPA’s authority to regulate in this area and, assuming such authority, the scope of that authority; EPA’s plan would transform federal and state decision-making concerning the transmission and delivery of electric power in the United States; Many of the key assumptions in the EPA’s proposed “building blocks” are unrealistic; The proposal would not be workable for many states; and The accelerated timeline for completing the rulemaking appears inadequate to respond fully to all substantive comments.

14. What must Virginia do? Cut power sector CO 2 emissions by 43 percent from 2012 levels by 2030. Require existing fossil fuel units to achieve a carbon emission rate that is as much as 26% lower than the carbon emission rate that the EPA recently determined can be achieved by new units. Turn SCC powers over to DEQ or EPA Initiate a renewable energy mandate on state utilities Create new authority to replace the Federal FERC/NERC authorities. Control electricity use in private homes, businesses and industry (demand side management). Craft a plan and obtain all legislative changes within one year.

15. Both EPA and Virginia lack the authority to implement the CPP as proposed

16. Ancillary Problems

17. What has Virginia already done? From 2005 to 2012, CO2 emissions from Virginia power generation facilities declined by 40% due to increased use of nuclear power, heat rate improvements, coal unit retirements, new gas generation, and energy efficiency. Regardless of the EPA rule, Dominion has planned additional investments and retirements which are projected to decrease CO2 emissions by another 28%. SCC staff regard those recent and planned “infrastructure improvements” as “reasonable and prudent.” The rule does not allow Virginia to take credit for most of these emissions reductions.

18. States are free to “wait and see”. The legality of the rule is already before the Court. The question of legality will take 18 months to 2 years to resolve. The proposed rule has “anticipatory” effects that cannot be reversed and which involve significant costs. Future Majority Leader McConnell “will do everything in his power to protect the states from EPA” which is expected to take the form of a bar on EPA preparing “Federal Implementation Plans” if a state does not submit a plan States can decide to simply wait until the courts have settled the legal question before expending any resources to prepare a plan. They have already examined the rule and need do no more. Legislatures can pass “wait and see” legislation.

19. A State Energy Federalism Act Providing Reliable, Affordable, Safe Power (RASP) These have been called RASP Acts. Halt the expenditure of state funding of Plan development and implementation until the Courts have determined whether the rule is legal. Require the state legislature to approve any implementation plan. Require a report on the affordability and reliability of electricity under the plan before the legislature votes. Prevent any attempts to close a coal-fired plant if the plant is still needed to ensure reliability. Require the State Corporation Commission to make decisions based on “least-cost” methodology. Cap electricity rate increases for higher greenhouse gas regulations at 1.5%.

20. David W. Schnare, Esq. Ph.D. Director Center for Energy and the Environment Thomas Jefferson Institute for Public Policy General Counsel Energy & Environment Legal Institute Schnare@EELegal.org