Tuesday, April 20, 2010

Gas Industry Pressure to Power Plants in Colorado

DENVER — Colorado is pushing its largest utility toward using more natural gas to cut power plant emissions in the Denver area under a new law backed by environmentalists and the gas industry.
Gov. Bill Ritter signed the bill into law Monday while surrounded by representatives of the unlikely alliance who now hope to persuade other states or even Congress to rely more on natural gas to reduce pollution and greenhouse gases. Minneapolis-based Xcel Energy Inc. also backed the new law, which lawmakers rushed to pass to head off expected stricter federal emissions rules and to boost natural gas drilling.
The coal industry, which spent nearly $2 million opposing Colorado's legislation, called the law a gas giveaway and said it would cost hundreds of jobs in mines, on the railroads that move the coal, and at coal-power plants, which are more labor intensive than gas-fired ones.
The bill had been quietly the works for months before the legislative session began in January, and Colorado Mining Association President Stuart Sanderson criticized those behind-the-scenes negotiations for excluding the coal industry.
Under the new law, Xcel must come up with a plan by Aug. 15 for how it will reduce pollutants like nitrogen oxide over the next seven years at power plants producing 900 megawatts — enough energy to power about 675,000 homes on an average day. Xcel must give primary consideration to using natural gas but it can also consider keeping some coal-fired units and adding emissions controls.
Three power plants in northern Colorado are being considered, but Xcel hasn't decided exactly which smokestacks would be affected.
Utility regulations have typically favored building plants powered by coal, which is cheaper than gas. But under the law, Xcel will be able to negotiate long-term contracts to lock in lower prices for natural gas and customers will be on the hook for paying that price even if gas prices drop below that.
Xcel estimates that it could cause average electric bills to rise between 4 and 6 percent, although prices can't start rising until 2012.
Pete Maysmith, executive director of Colorado Conservation Voters, said it was unprecedented for a state to develop a comprehensive plan for tackling pollutants from nitrogen oxides to mercury as well as carbon dioxide.
Three other states have passed laws to reduce carbon emissions — California, Washington and Massachusetts — that effectively prohibit any traditional power plants from being built, said Glen Andersen of the National Conference of State Legislatures. Meanwhile, he said utilities in other states such as Nevada and North Carolina have been moving on their own toward natural gas because of fears about how much it might cost to operate coal plants if Congress passes carbon restrictions.
It's an issue now because so many power plants, like Colorado's, are now 40 years and older and utilities have to think about whether it's worth building new coal plants to replace them.
Backers, including the Sierra Club, say the law could serve as an example to other states with homegrown natural gas supplies and older power plants.
Don McClure, vice president for government and stockholder relations at EnCana Oil & Gas, said Texas is one state the industry believes might be open to similar legislation.
Pam Kiely, a lobbyist for Environmental Colorado, said environmental groups like hers want to help pass similar bills with specific emissions reductions.
"We didn't build this relationship and this trust to have it end today," she said of the gas-environmental coalition.

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