Interim Joint Committee on Natural Resources and Environment


Minutes of the<MeetNo1> 2nd Meeting

of the 2013 Interim


<MeetMDY1> July 9, 2013


Call to Order and Roll Call

The<MeetNo2> 2nd meeting of the Interim Joint Committee on Natural Resources and Environment was held on<Day> Tuesday,<MeetMDY2> July 9, 2013, at<MeetTime> 1:00 PM, in<Room> Room 149 of the Capitol Annex. Representative Jim Gooch Jr., Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Jared Carpenter, Co-Chair; Representative Jim Gooch Jr., Co-Chair; Senators Joe Bowen, Chris Girdler, Ray S. Jones II, Bob Leeper, John Schickel, Brandon Smith, Johnny Ray Turner, Robin L. Webb, and Whitney Westerfield; Representatives Hubert Collins, Tim Couch, Keith Hall, Stan Lee, Reginald Meeks, Tim Moore, Marie Rader, John Short, Kevin Sinnette, John Will Stacy, Fitz Steele, Jim Stewart III, and Jill York.


Legislative Guest:††† Representative Rocky Adkins.


Guests: Dr. Len Peters, Secretary, Energy and Environment Cabinet; Mr. George Siemens, Vice President for External Affairs, LG&E and KU.


LRC Staff: Tanya Monsanto, Stefan Kasacavage, and Kelly Blevins.


Impending US EPA regulation of greenhouse gas emissions from new and existing power plants

Secretary Len Peters, Energy & Environment Cabinet, discussed the Obama administrationís climate change agenda. Prominent cornerstones of the climate change agenda include the following: targeted emissions from new and existing electric power plants; an $8 billion loan guarantee for advanced fossil energy and efficiency projects; efficiency initiatives for buildings and appliances standards; and efforts to end support for public financing of new coal-fired power plants abroad. In discussing significant dates for the new source performance standards, Secretary Peters stated that they would apply to both new and existing sources. Final rules are expected by June 1, 2015, and states will need to submit new state implementation plans under Section 111(d) of the Clean Air Act. The main concern is the time that states will have to comply with those rules.


Kentucky faces more severe implications from the new rules than other states. Kentucky is coal dependent and has a carbon footprint that is 50 percent higher than the national average. The manufacturing sector is vulnerable because it is predicated on Kentuckyís historic competitive advantage in providing low cost power to this sector. Higher energy prices can induce higher unemployment because the energy-intensive manufacturing sector employs more than 20,000 Kentuckians.

††††††††††† Kentuckyís share of coal relative to other fuel stocks will decrease, and coal shipments to other states will decline as more states retire coal-fired power plants. These changes are creating uncertainty in the electric power industry. The new source performance standard guarantee that there will be no new coal fired electric power plants in Kentucky. Governor Beshear and governors from several other states have asked the United States Environmental Protection Agency to reconsider the rule because of its dramatic impact on the statesí economies.


Kentuckyís options are limited. Kentucky will continue to petition the United States Environmental Protection Agency for greater flexibility in meeting the new ruleís targeted reductions. Kentucky needs more reasonable implementation timelines. Kentucky will also identify ways to affordably comply with the standards by expanding research and development on advanced coal technologies and carbon capture and storage. The cabinet will be examining the recommendations of the Kentucky Climate Action Plan Council and determining whether the state can promote use of biomass as an alternative fuel stock. There is a boiler efficiency study being performed by the cabinet which should be finalized in October. The cabinet hopes that the study will reveal new ways to obtain higher efficiencies in burning coal and identify technologies that can be utilized going forward. There is no single method or single fuel source going forward. All resources are needed.


††††††††††† In response to a question about the future of coal exports to foreign countries and how the closure of the uranium enrichment facility in Paducah, Kentucky will affect energy demand, Secretary Peters stated that regardless of the administrationís desire to end support for financing foreign coal-fired power plants, there will continue to be international demand for coal. However, the consumption of energy, expressed as kilowatt-hour as a percentage of gross domestic product (GDP), may not change with the closure of the uranium enrichment plant.


In response to a question about how much coal demand will decrease as a result of the administrationís efforts to stop overseas financing of coal-fired power plants, Secretary Peters said that financiers of international power plants are multinational corporations and those corporations may not be controlled.


In response to a question about the destruction of different types of greenhouse gasses, including methane, that contribute to global warming, Secretary Peters stated that the contributions of various gasses are not as significant as carbon dioxide. Methane is more potent, but compared to carbon dioxide methane is not as concentrated. Other contributors of greenhouse gas include transportation. Up to 40 percent of greenhouse gasses come from that sector.


In response to a question about whether mining per se contributes to the methane footprint, Secretary Peters said that coal is composed mostly of carbon. Burning coal releases more carbon than burning methane, which releases 1 carbon atom and 4 hydrogen atoms. There is less carbon dioxide from burning methane than burning coal.


One legislator doubted the sincerity of the Obama administrationís efforts to switch fuels when no resources have been put into increasing the share of hydro power and when nuclear power is predicated on the storage of wastes in Yucca Mountain, and asked about the value of chemical looping as a new coal fired technology. Secretary Peters responded that chemical looping is a new technology developed at Ohio State University with promise. It is hoped that some of the funding from the $8 million loan guarantee will be used to commercialize it. Hydroelectric power is a good source of renewable power in the West; however, in the manufacturing states of the Midwest, the sources of power are only coal, natural gas, and nuclear. The United States is reluctant to build nuclear power plants. The fear is that the nation and the economy will be predicated on a single fuel for electricity, and a single fuel would be unwise.


In response to a question about the eligible uses of the $8 billion dollar loan guarantee funds and about future natural gas usage in Kentucky, Secretary Peters stated that the cabinet does not know what the money can be spent on, but it is hoped that research and development of supercritical and oxycombustion boilers will be included. The cabinet will continue to evaluate project eligibility. Regarding natural gas use, Secretary Peters said that natural gas will become an important fuel in Kentucky. The concern is the variety of economic sectors, including home heating, vehicles, chemicals, and baseload generation, is too concentrated on a single fuel. Natural gas is best for value-added chemicals.


In response to a question on how the United States Environmental Protection Agency will set the amount of carbon dioxide that must be reduced by states, Secretary Peters stated that the guidelines for carbon dioxide reduction will likely be something set in conjunction with the National Resources Defense Council.


In response to a question about whether natural gas and other fuels are as reliable a baseload fuel source as coal, Secretary Peters said that the scale of energy use is of concern. Examining other fuels is not an option in Kentucky. Wind for baseload generation in Kentucky would require a wind turbine every square mile. In terms of coal sequestration, researchers have not solved the storage problem.


In response to a question about whether the cabinet is putting together a list of projects to submit to the United States Environmental Protection Agency for funding from the $8 billion dollar loan guarantee, Secretary Peters said that the cabinet is evaluating the loan guarantee. There is no project list at this time.


In response to several questions including whether the President has the authority to authorize a loan guarantee absent congressional approval, the opportunity for waste coal uses, and methane from volcanic gases, Secretary Peters said that volcanic gases do not have a substantial impact on global warming. Volcanic gases are a mixture of sulfur acids, ash and methane. There are many scientists studying global warming trends. Those scientists look at temperature, sea level, and glacial fields. There are indications that global warming is occurring. Legislators responded that it is too harsh to place all the blame for global warming on coal, and climate has always been changing.


George Siemens, Vice President for External Affairs, Louisville Gas & Electric and Kentucky Utilities, discussed the utilitiesí response to the White House announcement on proposed changes to the Clean Air rules. The utilities do not have a plan per se. There is much uncertainty with how the new rules will unfold, and the utilities will ask for more flexibility and time. Every regulation increases cost to customers, the exact cost is unknown. The technology to remove and control carbon does not exist.


In response to a question about what the penalties will be to the utilities if they unable to meet the federal emissions reduction guidelines, Mr. Siemens said that utilities will have to address reductions through efficiency. If efficiencies cannot be achieved, then the utility will compel reductions through retirement of utility plants. Secretary Peters stated that the boiler efficiency study will hopefully reveal some new technologies and opportunities to comply with the required reductions. However, the cabinet does not know what is best for the manufacturing sector in this state. Electricity costs will increase.


One legislator commented that a balanced energy portfolio is difficult under the new rules, and there is still a concern about fracking with natural gas. This is a concern if natural gas becomes a primary fuel for electric generation in Kentucky. In response to a question about whether there are any rules that prevent fracking wastes from coming into Kentucky, Bruce Scott, Commissioner for Environmental Protection, Energy and Environment Cabinet said that there is no prohibition against the disposal of fracking wastes in the state. Kentucky does not use fracking drilling fluids, so it has not been a problem. A request was made that the topic of fracking and controlling disposal of fracking wastes be examined more fully by the committee.


In response to a question about whether any other university has studied chemical looping, Secretary Peters stated yes. A legislator then commented that the United States is short sighted in terms of understanding the impact of restricting coal use for baseload generation in the United States. In response, Secretary Peters stated that the United States needs all fuels. Also, the state should reevaluate the use of nuclear energy. A legislative strategy must include all options. The fleet of power plants planned for today will be what is available in 30 years.


One legislator commented that Kentucky has been responsive and reduced emissions from power plants, but there was greater flexibility in responding to the problem. Utilities acted when technologies became available. In response, Mr. Siemens stated that Louisville Gas & Electric pioneered scrubbers. The utility can always add equipment, but nothing is comparable in the past to the technological needs required to control carbon dioxide emissions.


Several legislators commented that the White House administration does not care about the impact of these changes on the Kentucky economy. The impact is on jobs, severance money, and the economy. One legislator asked for a report on how severance tax is imposed and how it is used.


After a motion and a second, the committee adjourned at 2:20 PM (EST).