By Tom Kleckner

NORTH LITTLE ROCK, Ark. — Arkansas environmental and utility regulators began a dialogue with stakeholders on how to comply with the Environmental Protection Agency’s Clean Power Plan in an all-day workshop Friday at the state’s Department of Environmental Quality headquarters.

ADEQ and the state Public Service Commission gathered with a diverse group that included representatives from MISO and SPP, environmentalists, and trade groups. The group discussed their reactions to the carbon emission rule and how to create an efficient stakeholder process.

“The process is undefined,” said PSC Chairman Ted Thomas, “but that’s why we’re here today.”

“Engagement is very important to us,” ADEQ Director Becky Keogh said. “We want to engage with as many stakeholders as we can.”

ADEQ and the PSC have been charged by Arkansas Gov. Asa Hutchinson with crafting a strategy that takes into account carbon dioxide reductions already underway, maintaining the “remaining useful life” of the state’s power plants and “limiting the EPA’s opportunities for overreach and encroachment upon the state’s rights.”

Thomas and Keogh have met in recent weeks with EPA Administrator Gina McCarthy and Janet McCabe, the agency’s assistant air administrator. They have also attended meetings in other states to gain additional perspectives.

The state envisions a steering committee leading the strategic effort, with a policy committee and three subcommittees focused on those areas with the most impact: the economy, the environment and the electric grid.

EPA released its final rule in August, giving states until September 2016 to decide whether to submit a final plan or an initial strategy requesting a two-year time extension. States that fail to submit a plan by September 2018 could find themselves under a federally implemented plan.

Arkansas is among the states suing to block the rule, although it saw its CO₂ reduction requirements eased from 44% in the draft rule to 36% in the final. The targets, which must be reached by 2030, are based on a 2005 baseline.

“We moved from a very difficult position to the middle of the pack,” Keogh said.

SPP’s Lanny Nickell, vice president of engineering, was among those urging the state to consider a request for a two-year delay.

“We respect a state’s right to litigate, but we also believe we have to develop something on a parallel path in case the litigation is not effective,” said Nickell, who’s been leading SPP’s CPP compliance effort. “I ask that Arkansas work with us early and often in the process. We have to prepare the grid for whatever happens. The earlier we get some sense of what’s being planned, the better off we’ll be.”

Representing the other RTO in the room, MISO’s David Boyd said, “We will try and assist the state in implementing plans, but timing is still a problem. We do see a lot of transmission infrastructure and gas infrastructure [needs] and issues with design and permitting.”

Both Nickell and Boyd recommended a regional, trading-ready approach.

“We think carbon trading is a good thing,” Nickell said. “Our studies have shown that compliance on a regional basis is more effective than state-by-state. If you have to do something, it’s a good way to go, and trading ready helps.”

“Think millions of dollars being on the table,” Boyd said. “If you want to be part of a liquid market, you need a partner to trade with.”

The group also discussed the CPP’s mass-based and rate-based alternatives. Rate-based goals represent CO₂ emissions per unit of generation, while mass-based represents the total metric tons of CO₂ emitted by affected sources for each state.

Nickell said SPP is still evaluating the two alternatives, but, he said, “It appears a mass-based approach seems less complex.”

“We want to keep our options open and let the markets tell us what energy prices will be moving forward,” Thomas said.

Business and industrial interests repeated their criticism of EPA and the rule. Andrew Parker, director of governmental affairs for the state’s Chamber of Commerce, said the rule exceeds EPA’s legal authority and warned of significant cost increases to consumers, “especially the elderly, poor and others on fixed incomes.”

Jordan Tinsley, counsel for the nonprofit Arkansas Electric Energy Consumers, complained that the rule would result in stranded assets.

“They are requiring us to demolish our trusty pickups that we’ve taken good care of all these years. They won’t let us trade them in, but we have to go out and buy a shiny Lamborghini,” he said. “We think it will be very bad policy to get rid of our functional, efficient [generators], without regard for lower-cost alternatives.”

Brent Stevenson, executive director of the trade group Arkansas Forest Paper Council, took a more bombastic approach.

“Three words,” he said, pausing before thundering, “Ouch. Stop. Enough!

“There’s a cost to the EPA’s rules. Energy is one of the top three costs in our industry, along with labor and materials. Guess where we make up those costs? [The CPP] costs me money, it costs North Little Rock money, it costs the people of Arkansas money. We believe this rule should be struck down by the courts, but we’re not confident that will happen.”

Sierra Club of Arkansas Director Glen Hooks took an opposing viewpoint.

“We view the CPP as an opportunity,” he said. “If we do it properly, we can seize the opportunity in a way that benefits Arkansas and its environment and citizens.”

Or, as Keogh said, paraphrasing the late Yogi Berra, “When we reach the fork in the road, we’ll take it.”