International Brotherhood of Boilermakers July 2017 Legislative, Regulatory & Political Overview Cecile Conroy, Director of Government Affairs
Energy Legislation o FUTURE Act – Introduced July 12, 2017 n n Furthering carbon capture, Utilization, Technology, Underground storage, and Reduced Emissions Act. Sponsored by Senators Heidi Heitkamp (D-ND), Sheldon Whitehouse (D-RI), Shelley Moore Capito (R-WV) and John Barrasso (R-WY), Lyndsey Graham (R-SC), Tim Kaine (D-VA). At the time of introduction, the bill has 25 bipartisan cosponsors and is supported by over 40 stakeholder groups, including IBB. Similar legislation expected to be introduced in the House by Mike Conaway (R-TX-11).
Energy Legislation o FUTURE Act – Cont’d n n Will reform, enhance, and expand upon the current 45 Q tax credit provision. Established in 2008, 45 Q provides a credit for CO 2 storage and is available to taxpayers that capture qualified CO 2 at a qualified facility and dispose of the CO 2 in secure geological storage. Under the current credit framework Carbon Capture Utilization and Storage (CCUS) projects have not been deployed successfully and the credit does not include industrial sources and utilization technologies beyond EOR. The financial uncertainty created by a cap – whether or not there will be any credits remaining when the facility captures CO 2 – does not provide access to commercial capital necessary to finance CCUS projects.
Energy Legislation o FUTURE Act – Cont’d n n The FUTURE Act would more fully incorporate utilization – beyond just EOR – and direct air capture as critical components of developing carbon capture projects and technologies that will contribute to greatly reducing CO 2 and CO emissions and creating products of usable value – both in the U. S. and globally. The Act will provide greater certainty for project developers and potential financers, create more flexibility in credit qualified entities, encourage innovation and development of new projects, and incorporate the Department of Energy’s planned large-scale pilot demonstration projects.
Energy Legislation o FUTURE Act – Highlights n n n Puts in place language for new facilities or equipment to qualify for the credit if they have “commenced construction” within 7 years from the date of enactment; Allows those who qualify to claim the credit for 12 -years; Increases the current credit values so that the EOR credit rises to $35 per metric ton and the credit for other geologic storage rises to $50 per metric ton; Opens up the $35 per metric ton credit to current and future utilization and direct air capture projects beyond EOR; Creates three separate capture threshold tiers for electric generation unites (EGUs), non-EGUs, and pilot or early development projects;
Energy Legislation o FUTURE Act – Highlights n n n Maintains the 75 million metric ton cap – and $20/$10 per metric ton credit amounts – for projects that are already using the credit or qualify and utilize the credit prior to enactment of this Act; Authorizes transferability of the credit to the entity sequestering the CO 2 or using it in EOR (the credit initially goes to the entity that owns the capture equipment and captures the CO 2 from the facility). CCUS is a vital component to addressing global climate change through increased carbon reduction – as stated by the EIA, IEA, IPCC, and world leaders from North America to Asia. It is imperative that we invest and continue to enhance existing – and develop new – technologies while also encouraging innovation and utilization if we are to provide a viable path forward for CCUS on a national and global scale.
Status of the Clean Power Plan o CO 2/GHG Proposed Rule for Existing Plants – n n 28 states and over 150 petitioners opposed the rule, including IBB, IBEW and UMWA. On Feb. 9, 2016, the Supreme Court stayed the rule, agreeing that petitioners were likely to prevail on the merits of the court challenge due to serious legal flaws in the rule. DC Circuit Order on April 28, 2017 put the CPP case in abeyance for 60 days with status reports thereafter (similar order issued March 30 for NSPS case, North Dakota, et al. v EPA). Awaiting DC Circuit decision on abeyance or remand.
Possible Alternative to Clean Power Plan o A narrow rule that relies on state-based programs emphasizing NSR reforms and emission trading – n n n EPA initiates NSR reforms to maximize the ability of utilities to make investments in efficiency-related projects; EPA develops state guidelines under 111 d advising states of what (non-binding) levels (or ranges) of CO 2 emissions from various source (and coal) types may represent the Best System of Emission Reduction, with or without NSR reforms; States would be directed to "kick the tires" of each unit in the existing fleet - to conduct unit-by-unit reviews - to assess what levels of reductions may be achievable consistent with the EPA guidelines, with or without NSR reforms (if NSR reforms are adopted, the level of improvement may be larger than under the regulatory status quo);
Possible Alternative to Clean Power Plan n States are given “X” years to submit State Implementation Plans reflecting the unit-by-unit assessments, which may be expressed in emission rate terms (lbs CO 2/MWh) and affected sources are given “Y” years to comply; and States have the option to develop emission trading programs on an in-state or multi-state basis to facilitate compliance, including the ability to use "outside the fence" measures. Coupling a narrow state-based rule with reformed New Source Review (NSR) regulations could go far to preserve existing coal fleet.
What is New Source Review (NSR)? o Reforming NSR by EPA or through legislation is key to major efficiency improvements. n n n The NSR process requires industry to undergo an Environmental Protection Agency pre-construction review for environmental controls if they propose either building new facilities or any modifications to existing facilities that would create a "significant increase" of a regulated pollutant. The Clean Air Act legislation allowed "routine scheduled maintenance" to not be covered in the NSR process. Since the terms "significant increase" and "routine scheduled maintenance" were never precisely defined in legislation, they have become a source of contention in many lawsuits filed by the EPA, public interest groups, and utilities.
What is New Source Review (NSR)? n n n The NSR program has stymied investment in the existing coal fleet due to concerns about triggering Best Available Control Technology (BACT) and other onerous NSR permitting requirements. To enhance the effectiveness of a replacement CPP rule, EPA must streamline NSR regulations to incentivize major investments in areas such as boiler and turbine upgrades. Substantial efficiency improvements would result in the existing coal fleet, along with reduced CO 2 emission rates.
Options for Fixing NSR o Revisions to existing NSR regulations: n n o Scope of Fix n n o Clarify that reliability, efficiency, and safety improvement projects performed routinely within the electric power sector (and not only those projects performed routinely at the specific power plant) qualify for the NSR exemption for routine maintenance, repair, and replacement. Replace the current annual emission increase test with the current NSPS emission increase test based on maximum hourly emissions. Could apply to all projects undertaken by any industry, or Could be limited to those projects undertaken by power generation sector. Legislation on revising NSR has been introduced by Morgan Griffith (R-VA-9). No similar bills yet in the Senate.
CO 2/GHG Proposed Rule for New Plants - update n n n April 17, 2017 – Oral arguments originally scheduled were cancelled by the U. S. Court of Appeals for the D. C. Circuit in March, 2017 based on EPA’s motion to hold the case in abeyance in light of President Trump’s Executive Order ordering EPA to review the Section 111(b) rule and the Clean Power Plan. The court’s action does not mean that it will grant EPA’s request to hold the case in abeyance, only that it does not wish to proceed with oral argument at this time while it considers the future of the case. Another “wait and see” period.
Other Legislative Items o House Appropriations for FY 18 Energy and Water spending bill: n n n Bill provides $634. 6 million for the Fossil Energy Research and Development Program at DOE, an increase of $299. 42 million from the administration’s FY 18 budget request; House is directing that funding for the program be used for coalrelated R&D; The Trump budget proposal slashed the Fossil Energy Office's budget by nearly 56 percent from the fiscal 2017 level. Very good news that the Appropriations Committee did not adopt the substantial budget cuts proposed by the Trump Administration in its FY 18 budget request. Senate may mark up their FY 2018 Energy & Water bill in the next couple of weeks.
Other Legislative Items o Healthcare: n n Revised Senate bill score may be key to support; Opposition ranges from not “mean” enough and keeps too many ACA regulations to serious concerns about Medicaid cuts, harm to rural hospitals, etc. And of course, it retains the “Cadillac” or “Excise” Tax that labor and major companies have been fighting for years. If passes Senate, House may take up the Senate bill directly and not go to conference on its own version.
Other Legislative Items o Tax Reform: n n o Infrastructure: n n o No one has seen any real tax reform legislation yet; May not happen unless or until Healthcare reform passes as they need the tax cuts provided in a new Healthcare bill. As with tax reform, no one has seen any real legislation; Will emphasis be on privatization or robust federal dollars to states, etc? NAFTA Renegotiations: n Administration will release on Monday 7/17 its NAFTA renegotiation plan as required by law before talks begin.
2017 -2018 Elections o 2017: n o 2018: n n n o New Jersey and Virginia have statewide elections, including Governor, on November 7 th. All US House seats up for re-election. One-Third of Senate up for re-election. 36 races for Governor. Early yet – lots of Primaries still tee’ing up.
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