Interested Party Testimony Submitted to the Ohio House Energy and Natural Resources Committee on House Bill 349Dec 08, 2015
By Joe Nichols
Thank you Chairman Landis, Vice-Chair Hagan, Ranking Member O’Brien, and members of the Energy and Natural Resources Committee for the opportunity to testify today regarding House Bill 349. My name is Joe Nichols and I am the William & Helen Diehl Energy and Transparency Fellow at The Buckeye Institute. The Buckeye Institute is a non-partisan, non-profit, research and educational institution—a think tank—that advances free-market public policy solutions.
Ohio faces perhaps the most significant energy policy decision of this decade: how to satisfy the state’s obligations to regulate carbon dioxide emissions from power plants under President Obama’s so-called “Clean Power Plan.” This Clean Air Act section 111(d) carbon dioxide regulation has grave implications for Ohio’s economy and political sovereignty.
Unfortunately, compliance with the new section 111(d) regulation will have a significant, negative economic impact on Ohio. National Economic Research Associates estimates that the new regulatory requirements will increase Ohio’s retail electricity prices 15% per year, on average, from 2022 to 2033. Likewise, Energy Ventures Analysis forecasts that Ohio’s wholesale electricity prices will be 31% higher in 2030 than they otherwise would be without the Clean Power Plan. Higher electricity prices will harm the state’s economy and workforce.
Higher energy prices will make Ohio less attractive to new companies, and existing Ohio businesses will find it harder to grow and harder to survive. Higher costs and slower corporate growth ultimately put Ohio jobs at risk. The Heritage Foundation estimated that Ohio will lose nearly 32,000 manufacturing jobs by 2023 due to the Clean Power Plan—and that estimate was made working from the less stringent proposed rule. Losses under the final rule may prove even more devastating.
Beyond jeopardizing Ohio jobs, the section 111(d) regulations will siphon more political power from the states to the federal government. State compliance plans will be federally enforceable. Thus, section 111(d) shifts the traditional balance of power that has allowed—since at least the Federal Powers Act of 1935—the states latitude and flexibility in setting their own energy policies. As Commissioner Tony Clark of the Federal Energy Regulatory Commission stated, under the new regulations “[States] will have entered a comprehensive ‘mother may I’ relationship with the EPA that has never before existed.”
House Bill 349 strengthens the partnership between the General Assembly and Ohio EPA in preparing for the Clean Power Plan. The bill rightly requires the Ohio EPA to obtain the General Assembly’s approval before submitting a state plan to the U.S. EPA, which will enhance transparency and accountability in the state’s section 111(d) compliance process. The Ohio EPA would typically file such a plan without any legislative input or approval. However, the unprecedented nature and detrimental effects of the Clean Power Plan’s mandates have forced Ohio and many of her sister states to make an exception. At least eight other states across the country, including Arizona, Arkansas, Kansas, Missouri, Nebraska, North Dakota, Tennessee, and West Virginia, have enacted legislative oversight requirements similar to House Bill 349.
In addition to requiring General Assembly approval for a final state plan, House Bill 349 contains three other improvements to Ohio’s section 111(d) compliance process: requiring a cost and reliability impact report for any state plan; requiring General Assembly approval for future amendments to a state plan; and a request for an extension to the September 2016 deadline for submitting a state plan.
House Bill 349 would require the Ohio EPA to draft four distinct plans and provide the General Assembly with a thorough assessment of each plan’s potential impact on electricity prices and reliability. Although it would be prudent to contemplate each of the four plan options, drafting and analyzing four separate plans may prove too burdensome under the circumstances. A more feasible solution would be to require a cost and reliability report for one draft state plan of Ohio EPA’s choice. This provision is simply good governance. You wouldn’t let a mechanic repair your car without first inspecting it and then giving you an estimate of what needs to be repaired and what those repairs will cost. Likewise, agency officials should not commit the state’s electric power resources to costly changes without first providing Ohioans and their elected representatives with a compliance plan and a cost estimate.
House Bill 349 also requires the state legislature to approve any future amendments or revisions to a final state plan. Governor Kasich and Ohio EPA Director Butler have shown exceptional leadership on this issue thus far, explaining to Congress and President Obama just how harmful the new regulations will be for Ohio. Their efforts are reassuring, but with the Clean Power Plan’s compliance period extending until 2030, the federal regulations will long outlast Mr. Kasich’s administration. Requiring General Assembly approval for future plan amendments will help ensure that those amendments provide the same protections, transparency, and accountability as the original state plan.
Finally, because section 111(d) is unusually burdensome for the state EPA, and because House Bill 349 would require the state plan to pass the General Assembly, the bill rightly seeks a two-year extension from the U.S. EPA. Between the proposed rule and the final rule, the U.S. EPA increased Ohio’s emissions target by approximately 11%. This unexpected increase compounds the need for a two-year extension. As Director Butler recently testified, “…states can’t rely on analyses used to review the proposed [Clean Power Plan] but rather need to re-launch a new effort to assess the final version.” That “new effort” will require an appropriate amount of time and consideration. Thus, meeting the initial September 2016 deadline for submitting a cost-effective, compliant state plan composed in a thorough, transparent process would be impossible. A two-year extension, however—allowed under the EPA’s final rule—would give the Ohio EPA, the PUCO, and the General Assembly a more reasonable timeframe to seek input from stakeholders and determine the best compliance option.
House Bill 349 takes important steps to protect Ohio from the dire consequences of the Clean Power Plan. The bill creates a partnership between the General Assembly and Ohio EPA in the carbon rule planning process, and allows for a more transparent and accountable process going forward. The requirements and procedures outlined in House Bill 349 offer responsible, state-based solutions to an unfortunate, Washington-based problem.
Thank you for your time and the opportunity to testify today. I am happy to answer any questions that you may have.
1. Robert Alt, “Public Comments Docket EPA–HQ6OAR6201360602,” The Buckeye Institute, December 1, 2014, http://www.buckeyeinstitute.org/uploads/files/12-‐1-‐14%20US%20EPA%20Clean%20Power%20Plan%20Comments%20(Final).pdf
2. National Economic Research Associates, “Energy and Consumer Impacts of the Clean Power Plan,” November 7, 2015, http://www.nera.com/content/dam/nera/publications/2015/NERA_ACCCE_CPP_Results_Nov72015.pdf
3. Energy Ventures Analysis, “EPA’s Clean Power Plan: An Economic Analysis,” http://www.nma.org/attachments/article/2372/11.13.15%20NMA_EPAs%20Clean%20Power%20Plan%20 %20An%20Economic%20Impact%20Analysis.pdf
4. Kevin Dayaratna, PhD, Nicolas Loris, and David Kreutzer, PhD, “The Obama Administration’s Climate Agenda Will Hit Manufacturing Hard: A State-by‐State Analysis,” Heritage Foundation, February 17, 2015, http://www.heritage.org/research/reports/2015/02/the-‐obama-‐administrations-‐climate-‐agenda-‐will-‐hit-‐ manufacturing-‐hard-‐a-‐state-‐by-‐state-‐analysis
5. FERC Perspective: Questions Concerning EPA's Proposed Clean Power Plan and Other Grid Reliability Challenges,” Before the United States House of Representatives Committee on Energy and Commerce, Subcommittee on Energy and Power, 114th Congress (July 29, 2014) (statement of Commissioner Tony Clark, Federal Energy Regulatory Commission).
6. National Conference of State Legislatures, “States’ Reactions to EPA Greenhouse Gas Emissions Standards,” updated October 23, 2015, accessed November 30, 2015, http://www.ncsl.org/research/energy/states-‐reactions-‐to-‐proposed-‐epa-‐greenhouse-‐gas-‐emissions-‐ standards635333237.aspx
7. State Perspectives: How EPA’s Power Plan Will Shut Down Power Plants, Before the U.S. House of Representatives Committee on Science, Space, and Technology, Subcommittee on Environment, 114th Congress (September 11, 2015) (statement of Craig Butler, Director of Ohio EPA).