EPA’s PROPOSED OZONE AND CLEAN POWER PLAN RULE: What should texas do?

1. EPA’s PROPOSED OZONE AND CLEAN POWER PLAN RULE: What should texas do? Cyrus Reed Lone Star Chapter of Sierra Club October 15, 2014

2. Outline • Current rules • What are the proposed rules • Timeline • Who does it impact • State response • Ozone – Can we get there • Clean Power Plan – How to Comply • Role of TERP in both • Simple steps legislature can take this session to comply with both

3. Current rules • Ozone standard • Clean Air Act – 1990 amendments • 1997 ozone level set at 0.08 PPM • 2008 Ozone level lowered to 0.075 PPM, though only recently implemented • Houston and Dallas don’t meet 2008 standard • Carbon Dioxide Regulation • GHG reporting requirements • GHG limits on cars • GHG permits required for new facilities emitting 100,000 tons or more per year (tailoring rule) • Texas adopts GHG permitting regime in 2013

4. Proposed rules • Ozone Standard • EPA has been in a three year process reassessing the 75 PPB standard • Just published their Final Policy Assessment and Final Risk and Exposure Assessments • In December, expected to publish draft rule with a 60 to 70 PPB standard. possible • Most environmental groups calling for 60 or 65 standard • Most industry groups opposed • Lawsuits expected • Clean Power Plan Rule • Proposed in June of 2014 to cut carbon dioxide from fossil fuels plants by an average of 30% from 2005 levels to 2030. Each state has different requirements. • Public Comment Period extended until December of 2014 • Final rule expected in June of 2015 • Implementation plans due in 2016, but actual compliance begins in 2020 • Lawsuits expected

5. Who does it impact? Ozone rule • Potentially everyone • Multiple Cities – from 3 to 7 cities • Power Plants • New businesses wanting to open in urban areas • Transportation • Oil and gas development, if connection to ozone contribution • Refineries • Smaller area sources • TCEQ and Legislature • TXDOT

6. Air Quality Challenges are Real

7. How Are We Doing With Current Ozone Standard? (Some Concerns –San Antonio, Austin, Waco, and Corpus Christi)

8. State response • TCEQ has consistently opposed a new ozone standard • Argues will be impossible to meet a lower standard because of background levels and undermine current voluntary efforts • Argues that science does not support lowering standard • TCEQ and local COGs will be subject to final rule and need to develop SIPs

9. EPA’s Clean Power Plan: who does it impact • Existing Fossil Fuel Power Generation • From 1250 to 791 Lbs/Mwh by 2030 from our electricity sector • Transmission Planning • Renewable Energy Development • Energy Efficiency Programs • Building Codes • Energy Storage • DSM – Demand Response and Onsite Solar • CHP – Combined Heat and Power • Maybe landfill generators, maybe two biomass facilities • ERCOT, PUC, RRC, SECO and TCEQ

10. There are two paths under EPA’s Proposed Rule Mass-Based Approach Based on total carbon dioxide emissions and required reductions for 2020-2029 and for 2030 While reductions can begin in 2020,– first real mid-point check is in 2025; Will require approximately a 40% reduction in CO2 tons emitted from fossil-fuel plants EPA -- Technical Document on Mass-Based Approach in December Need to track any electricity generation to make sure that as carbon is reduced from existing plants, what replaces it TCEQ would be main implementer of mass-based approach Clean Air Interstate Rule – implemented in 2005 and 2007.

11. Rate-Based Approach • Texas Rate: 2012 average rate from 1261 lbs per MWh –includes renewables 853 lbs per MWh Average between 2020-2029 791 lbs per MWh by 2030 GAS EMISSIONS + COAL EMISSIONS/ <NUKE + RENEWABLES +GAS + COAL MWHs – NEGAWATTS from EFFICIENCY > • Lower Carbon Rate by: • Making coal plants more efficient (or retiring) • Combined Heat and Power • Dispatching efficient existing NG plants • Renewables – growing to 20% by 2030 • Efficiency – growing to 1.0% of sales by 2020 and 1.5% by 2025 or 2030 • Demand Response, Distributed Generation, Energy Efficient Building Energy Codes, as well as programs like Energy Star and LEEDs Could HELP

12. Texas: We’re No 1 or “With Great Power, Comes Great Responsibility Texas Emission = Florida + Pennsylvania Emissions

13. Texas: Also No 1 in SO2 + Nox Emissions

14. CO2 Emissions from the Electric Power Sector in Texas (2013). 62% Coal versus 38% Gas The majority of Texas’ power plant carbon emissions come from coal plants.

15. Ten (10) old and most polluting plants emit 39.8 % of the state’s power plant carbon emissions.

16. CO2 Emissions steady in ERCOT– slight decline on lbs/MWh Basis because of wind – we must do better

17. TEXAS WILL REACH 20% RENEWABLES BY 2020 – FORGET 2030 62 TWhs by 2018

18. Complying with Clean Power Plan • Whichever path chosen, Sierra Club believes Texas can reach proposed rate without resource adequacy or major cost issues • efficiency, demand response, renewables, and energy storage can play key roles to get there cost-effectively, grow our economy and lower pollution • The rule does not require that any particular coal plant retire, only that carbon emissions overall decrease. We do believe that retirements will happen, which will make it easier to meet the goals for whichever path is chosen

19. State response • TCEQ, PUC and RRC have jointly expressed concern about impact on Texas • TCEQ has said it is uncertain it could comply with EPA building block approach • ERCOT has said it believes it can make system work • Legislature has held one hearing but not officially opined • Some individuals legislators are publicly saying refused to implement • Many utilities concerned about scale and timing

20. What we could do on ozone • Begin cleaning up emissions from oil and gas patch • Fund TERP -- $1 billion sitting in a coffer • Fund sufficient monitoring • Consider further requirements on larger coal units

21. Are oil and gas emissions contributing to high ozone days in Dallas or San Antonio? • UNT Study showed greater rate of increase of ozone formation in fracking area than non-fracking area in ozone formation post-2008 • David Allen study found – preliminarily – that TCEQ was underreporting VOCs from methane emissions, largely due to leakage from pneumotic devices in DFW areas • TCEQ’s own emissions data suggest compressor engines and drilling rigs are top sources of Nox, while condensate tanks and pnuematic pumps and devices are cause of VOCs • Studies by ACOG in San Antonio suggest that amount of emissions will likely rise through 2018, and suggest that these emissions are now contributing to higher ozone levels

22. Venting and Flaring up – 35 billion Cubic Feet of gas in 2013

23. Solutions On Clean Air In the Oil patch • Green Completions, • Leak Detection • Compressor Station Maintenance • No-bleed pneumatic controllers • TERP funding • Venting and Flaring standards • Specific TCEQ authority over drilling completion requirements • Better inspection • Regulatory vs. Incentives

24. Status of LIRAP and TERP: Lots Spent but Lots More Available

25. Complying with clean carbon rule • Don’t fight – begin developing plan that takes advantage of the work we are already doing on building codes, energy efficiency and renewables • Authorize SECO to begin tracking carbon dioxide reductions – TERP can fund studies and reports • Authorize PUC to adjust rules to increase energy efficiency • Continue REC program but consider converting to carbon dioxide reduction trading program through ERCOT • Authorize TCEQ to consider mass-based trading approach for fossil fuel plant carbon dioxide emissions • Continue to implement advanced energy codes in our building stock and get credit for it • Fighting the rule will only lead to a similar situation like the GHG permits – feds step in, Texas loses

26. EE/RE Programs in Texas Prevented Some 10 Million Tons of Carbon Dioxide in 2012 – We Could Get 3X This Amount

27. Conclusions • Texas will need to develop a state response to comply with EPA ozone and carbon dioxide standards • Fighting through lawsuits not likely to win given our history • Making sure we track and get credit for what we are doing very important on efficiency, TERP, renewable energy, energy storage and other solutions being developed in Texas • Legislature can take steps in 2015 to help get us there: • Authorize TCEQ to take action • Fund TERP for a variety of programs • Make sure we are tracking our efficiency and renewable programs • Don’t do anything to undermine the progress we have made • Take some regulatory and incentive action on the oil and gas patch