States fight to save coal plants as EPA cracks down

Dec 17, 2023

A new rule proposed last month by EPA could spell the end of coal-fired power plants as they currently exist.

But not if some states have their way.

As utilities transition from coal to cleaner-burning natural gas and renewable energy, legislatures in some legacy coal states have stepped into the fray. Utah and Kentucky passed laws this year to make it harder for state regulators to approve utility plans retiring coal plants. In West Virginia, a new law will require the state to sign off before a utility can retire a coal or gas plant. Wyoming has enacted mandates in recent years to push utilities to explore selling coal plants or installing carbon capture technology before shutting them.

Montana, meanwhile, passed a sweeping law that bars climate analyses for new power plants.

Legal experts question whether the states’ efforts will make much of a dent in EPA's work to clean up the power sector, which accounts for a quarter of the country's greenhouse gas emissions. But they could set the groundwork for some operators to push forward on novel carbon capture and storage (CCS) technology that may keep power plants open and in compliance with federal regulations. Or they could preview the intense political and legal fights to come.

"A lot of states are making clear that the carbon rule and the other environmental rules are going to wreak havoc," said Michelle Bloodworth, CEO of the pro-coal trade group America's Power. "States with a lot of generation are sounding huge alarms and warnings, and that's why they’re passing legislation and are going to get involved in litigation."

In Utah, Republican majorities in the state Legislature passed a law known as the Energy Security Amendments — H.B. 425 — this spring to dictate the state's responsibility to ensure citizens have affordable and reliable power generation. If any power-generating source is forced to retire early because of federal mandates, the law also authorizes the state attorney general to use taxpayer dollars to defend it in court.

The law applies to any energy source, not just coal. But sponsors have tied its goals to the Intermountain Power Project, the state's largest coal plant, which is set to retire in 2025. Utah state Rep. Ken Ivory (R), the law's sponsor, told E&E News the goal is to "keep the lights on, keep people safe and healthy and keep the economy moving" in a rapidly changing electricity sector.

EPA's proposed power plant rule seeks to slash emissions from new and existing coal- and gas-fired power plants, pushing owners to either close them or outfit them with carbon capture technology or clean hydrogen fuel. The requirements change depending on the plant's use and technology, but the largest plants would have to either close or capture emissions by 2040.

Under the proposal — which could change before it is finalized — states would have to craft compliance plans to be approved by EPA. That's designed to give states some flexibility to ensure reliability or meet their own regulations. But that doesn't mean states can rely on their pro-coal leanings to propose plans that wouldn't slash coal emissions as quickly as the EPA wants, said Stacy Tellinghuisen, deputy director of policy development for Western Resource Advocates.

"At a high level, states can set whatever policies they want, but at the end of the day, they have to comply with the Clean Air Act," Tellinghuisen said. "Ultimately, the future of a power plant is a conversation between state and federal regulators, utilities, utility commissions, environmentalists and consumer groups to figure out the most cost-effective and reliable solution."

But some states say it should be up to them to dictate energy resources in their borders. Utah's Ivory pointed to the Supreme Court's 2022 ruling in West Virginia v. EPA, which limited the federal government's power to impose power plant rules and reinforced states’ power to police utilities.

"We simply make the declarations that have been stated and recognized in law in the United States from our founding until this administration that it is our right and responsibility to keep the lights on in Utah even against unconstitutional federal mandates," Ivory said of the law, adding that it "seeks to maintain the status quo of our constitutional balance of powers with respect to energy production."

In Montana, four of the state's coal plants have closed since 2015, according to the state's Department of Environmental Quality, but the fuel still accounted for 29 percent of generating capacity as of last September. State lawmakers have repeatedly sought ways to fight environmental rules they say would put the power source at risk.

This year, for example, lawmakers passed legislation, H.B. 576, amending water quality standards for coal mining. Another law, S.B. 208, bars localities from limiting energy choices, targeted at efforts by some cities to decarbonize their energy portfolios and ban new natural gas hookups.

The most sweeping law, H.B. 971, will bar state regulators from considering greenhouse gas emissions or climate impacts when evaluating large projects, including power plants. That could make it harder for environmentalists to challenge large-emitting projects on climate grounds.

The law was proposed just weeks after a state judge revoked a state-issued permit for a planned gas plant in part because of a failure to fully evaluate greenhouse gas pollution. Last week, the Billings Gazette reported that state environmental regulators reopened their review of that gas plant, but will only consider light pollution to comply with the state law.

When asked whether H.B. 971 would create a conflict with the EPA rule — which will require cuts to carbon dioxide emissions — a spokesperson for Gov. Greg Gianforte (R) pointed to a statement given to the Montana Free Press. The law "re-established the longstanding, bipartisan policy that analysis conducted pursuant to the Montana Environmental Policy Act does not include analysis of greenhouse gas emissions," spokesperson Kaitlin Price said in that statement.

Price added that the law "would allow evaluation of GHGs if it is required under federal law or if Congress amends the Clean Air Act to include carbon dioxide as a regulated pollutant." The Inflation Reduction Act, signed in 2022, amended the Clean Air Act to include carbon dioxide as a pollutant.

Whitney Tawney, executive director of Montana Conservation Voters, said Montana's law "flies in the face of climate change, which is happening all around us." But, she added, the EPA proposal could effectively render the law moot, because the EPA rule — if finalized — would require all new and existing plants to analyze their greenhouse gas emissions.

"This is really just the governor throwing a fit over climate change," Tawney said.

Montana's most high-profile coal law was overturned by a state court last year, showing the challenge states may face in trying to keep coal plants online.

The law concerned the Colstrip power plant, the state's largest remaining coal plant. Four of its out-of-state owners are working to exit Colstrip to meet emissions reduction goals in Washington and Oregon. In response, Montana lawmakers in 2021 enacted a law that would punish owners that do not pay for ongoing repairs, essentially imposing financial penalties on the utilities that were trying to get out of Colstrip.

A federal judge overturned that law and a related one concerning legal challenges over Colstrip last year. The future of Colstrip is still an open question. Now, two Montana utilities are trying to keep it online, saying it is the best source for reliable, low-cost power.

It's a reminder, said Western Resource Advocates’ Tellinghuisen, that utilities aren't always going to be beholden to political efforts when making decisions about their resource mix.

"I think that as utilities are looking at the cost of resources and their ability to reliably meet their load, they’re going to look to clean electricity and renewable energy rather than extending fossil fuels," she said. "The utilities are always evaluating costs and their ability to replace fossil resources with lower-cost ones."

The states’ efforts come as the power grid faces questions of reliability and affordability during the transition to renewables. Bloodworth of America's Power said an "onslaught" of rules from the Biden administration — including limits on wastewater disposal, mercury emissions and coal ash — has imperiled the country's network of baseload power.

In announcing the proposed standards, EPA said "they provide owners and operators of power plants with ample lead time and substantial compliance flexibilities, allowing power companies and grid operators to make sound long-term planning and investment decisions, and supporting the power sector's ability to continue delivering reliable and affordable electricity."

The agency also cited a joint memorandum of understanding signed with the Department of Energy promising to work to ensure grid reliability.

Environmentalists have argued that the EPA rule follows the market and has built in flexibility to ensure the lights stay on. A key part of that is an allowance for power plants to stay open past 2040 with carbon capture and storage, an emerging technology that can snatch carbon dioxide before it's emitted into the atmosphere and store it underground.

That would seem to align the federal government with Wyoming, which in 2020 passed a law requiring utilities to get some power from coal plants equipped with CCS.

But there are significant questions about whether that technology will be available and cost-effective enough to keep large emitters going in that time frame. Bloodworth said that installing "unproven" technology on the EPA's timeline is "just not feasible" and that the whole proposed EPA rule is "simply unworkable."

Wyoming's law is producing mixed results in advancing CCS technology.

The Dry Fork Station opened in Gillette, Wyo., in 2011 with state-of-the-art pollution controls and hosts an integrated test center to study CCS technology. Utilities Black Hills Energy and Rocky Mountain Power, however, have both said that CCS could raise costs for ratepayers. Black Hills has said it is looking at CCS for its Wyoming power plants, but it has not announced any plans.

However, Rocky Mountain Power signaled this spring that it would shutter coal plants rather than use CCS. Draft integrated resource plans published by parent company PacifiCorp accelerated the closure or conversion dates for some Wyoming plants, and modeling showed that CCS would not be cost-effective in comparison to an expansion of renewable and nuclear energy.

Shannon Anderson, an attorney for Wyoming's Powder River Basin Resource Council, said the PacifiCorp integrated resource plan underscores the long-term trend that coal is no longer competitive — even with state policies boosting it. The combination of the state's work on CCS with the new EPA proposal, she said, could spur the industry, but may not be enough to overcome economic realities.

"The state rules recognize that if it's not economically or technically prudent, a company doesn't have to do it if it's not in the best interest of customers," Anderson said. "So the question is, at what point do utility commissioners say this is a reasonable alternative? It becomes hard when you get to the stage of actually charging customers for carbon capture."