If legislation closely mirroring the Waxman-Markey cap-and-trade bill manages to become law, the Sunflower Electric Power Corporation would be forced to abandon its plans to build an additional coal-fired plant at the utility’s Holcomb, Kan., power generating site, said Sunflower’s president and CEO Earl Watkins.

Watkins said the Waxman-Markey bill creates emissions requirements that cannot be met with any existing technology used to build coal-fired plants. This would lead to power companies abandoning plans to build coal-fired plants and focusing on other ways to generate energy, even though these alternative sources would result in an increased cost to their customers.

“There is no technology available today that can achieve those reductions,” Watkins told Kansas Liberty. “So who is going to spend $2 billion on a plant today… that may get shut down.”

Watkins said that the legislation does not specifically ban the building of new coal-fired plants, but uses subtle language that would produce the same result. Despite the possibility for cap-and-trade legislation becoming law in the future, Watkins said that at this time Sunflower was continuing its efforts to build the expansion project at full force, as the expansion will result in the best outcomes for Sunflower’s rate payers.

Sunflower’s addition is a supercritical coal-fired plant that utilizes the latest technology to create 20 percent less carbon dioxide than any other existing coal-fired plants.

The Waxman-Markey bill narrowly passed the House in June with the support of only eight Republicans. Kansas’ Republican delegation voted against the measure while Third District Democratic Rep. Dennis Moore supported it.

...opponents say it is unnecessary and will wreak havoc on the United States economy through increased energy costs and a monumental loss of jobs.

Proponents of the measure say it's necessary to preserve the environment and stave off so-called “global warming,” now being called "climate change," while opponents say it is unnecessary and will wreak havoc on the United States economy through increased energy costs and a monumental loss of jobs.

The Senate is now working to craft its own version of the bill. One interpretation of the Waxman-Markey bill is the Senate’s Kerry-Boxer Clean Energy Jobs and American Power Act. The legislation was crafted by Sen. John Kerry, D-Mass. and Sen. Barbara Boxer, D-Calif. and passed the Committee on Environment and Public Works earlier this month without any Republican support.

Kerry spokesperson, Jodi Seth, said the legislation would also need to be considered and passed in six additional committees before it could be brought for a vote on the Senate floor.

There are two core differences between the two bills. While the Waxman-Markey bill mandates that emissions are reduced by 17 percent by 2020, the Kerry-Boxer bill mandates emissions are reduced by 20 percent. The House version would have placed some limitations on the Environmental Protection Agency’s ability to regulate emissions by using the Clean Air Act, while the Kerry-Boxer bill allows the EPA to continue on its current path of regulation of greenhouse gasses and its ability to issue permits for coal-fired plants.

These differences would lead to the Kerry-Boxer bill having even harsher effects for states like Kansas, said Matt Warner, Natural Resources Task Force director for the American Legislative Exchange Council.

After the passage of the Waxman-Markey bill, ALEC sent out an alert to Kansas legislators warning them that Kansas could likely end up paying an additional $206 million in 2012 to meet requirements within the legislation.

These estimates would be magnified if the Kerry-Boxer bill is passed, Warner said.

“It is a much more aggressive reduction scheme which would exacerbate costs of all kinds,” Warner told Kansas Liberty.

Warner also pointed out that even if no cap-and-trade bills become law, that the Obama administration would still have the ability to regulate emissions through the EPA.

Sen. Pat Apple, R-Louisburg, and chair of the state Senate Utilities Committee, agreed with Warner’s concerns about the bill, saying it would result in a financial disaster for Kansas.

“So much of our state’s economy is built upon energy usage, and I think the cap-and-trade legislation would be so damaging to our state’s economy and to our budgets for businesses and for families,” Apple told Kansas Liberty.

The ALEC alert also pointed out that though Kansas would be suffering, coastal areas such as “California, Washington, New York and New Jersey would actually gain under the allocation scheme adopted by the House.”

Midwestern states, such as Kansas, are expected to absorb a greater amount of financial hardships than coastal states such as California and New York, because of their reliance on coal-fired plants. Some have questioned whether Democrats such as Speaker of the House Rep. Nancy Pelosi, D-Calif., would be pushing as hard for the legislation if their states were the ones that would be experiencing the additional economic troubles.

The Heritage Foundation has estimated that by 2035, Waxman-Markey would have resulted in a loss of 2.5 million jobs, an increase in gasoline prices by 58 percent and an average increase in electricity bills of 90 percent. The nonpartisan Congressional Budget Office has also agreed that the legislation “would also reduce economic activity through a number of different channels.”

While the Waxman-Markey bill’s implications have been largely scrutinized by organizations, think tanks and political resources, the Kerry-Boxer bill is still being studied. The Kerry-Boxer bill is not the only piece of cap-and-trade legislation in the Senate, but is gaining the most attention because of its passage in the Public Works Committee. However, because the Kerry-Boxer bill is more radical in its approach to cap-and-trade, many believe it would have a great deal of difficult gaining traction in the Senate and will likely not succeed.

Watkins said he didn’t consider the legislation as a “credible” threat at this time, and said he thought of the bill as “more draconian” than the Waxman-Markey bill.

Chair of the Senate Finance Committee, Max Baucus, D-Mont., has even admitted he is quite skeptical of the legislation. The Senate Finance Committee discussed the possible impacts of any cap-and-trade legislation during hearings last week.

Senate Finance Committee member Pat Roberts, R-Kan., has been strongly opposed to these initiatives and stated his position loud and clear during a committee meeting last week pointing out how Kansas’ production of oil and gas would make it a greater target for absorbing economic impacts.

“Cap-and-tax proposals which try and ration domestic energy production would lead to higher unemployment rates and a net loss for Kansas,” Roberts said in committee meeting. “Kansas ranks ninth amongst oil and eighth amongst gas-producing states. Together, oil and gas contributes nearly $350 million in state revenues each and every year and employs 28,000 men and women.”

Many members of the Senate Finance Committee are representatives of Midwest states, the area of the U.S. that is expected to absorb most of the additional costs and hardships associated with cap-and-trade legislation.

Watkins said that if a cap-and-trade bill such as the Waxman-Markey bill did become law, Sunflower ratepayers could be expected to pay anywhere between 30 percent to 75 percent higher energy costs. The total rate increase would be dependent on the allowance cost assigned to each ton of carbon dioxide emissions. The cap-and-trade bills work by capping the total amount of emissions allowed and by also charging a tax on emissions.

The Waxman-Markey bill does not specifically state how much the government would be allowed to charge for the carbon dioxide allowances, but many have estimated the price would range anywhere between $15 per ton to $50 per ton.

Watkins pointed out that because Kansas produces roughly 80 million metric tons of carbon annually, the state could be forced to pay out $1.6 billion each year to the federal government in carbon dioxide allowance, if the allowances are $20 a ton.

“That would be so incredibly devastating to the economy,” Watkins said.

The enormous amount of funding the federal government would receive has left many in the energy sector questioning whether the motives behind the legislation are not actually targeted at the environment, but instead at creating another source of revenue.

Watkins pointed out that even if cap-and-trade legislation became the law of the land in the United States, other countries would continue producing such large quantities of carbon that the results created by U.S. regulations would not likely produce a great enough dent in the total amount of global emissions.

“A lot of people really recognize cap-and-trade as a federal government revenue source,” Watkins said. “And not many people are inclined to think the federal governments should have another revenue source.”

Resources:

Heritage Foundation Report

ALEC

Roberts statement on cap-and-trade

Sunflower Electric Power Corporation

The Week in Review