August 2018, Vol. 245, No. 8

Government

Government

By Stephen Barlas, Contributing Editor, Washington

Trump Wants Orders Delaying Coal, Nuclear Plant Closings

Energy Secretary Rick Perry is taking a second bite of the apple as he prepares recommendations requested by President Trump aimed at delaying retirement of electric generation facilities which use coal and nuclear energy as inputs.

President Trump’s National Security Council (NSC) drafted a memorandum that suggests Perry could delay retirement of those non-natural gas-using power plants by citing the Defense Production Act of 1950 and the Federal Power Act. The DOE would ostensibly force system operators to purchase electricity from “subject generation facilities” for a period of 24 months. System operators would be regional transmission organizations, independent transmission organizations and defense department facilities.

According to the draft memo, the Energy Department would exercise its emergency authority to order grid operators to give preference to plants “that have a secure on-site fuel supply” and that “are essential to support the Nation’s defense facilities, critical energy infrastructure, and other critical infrastructure.” Only coal and nuclear plants regularly keep fuel on site.

A White House statement June 1 underlined the request saying, “Unfortunately, impending retirements of fuel-secure power facilities are leading to a rapid depletion of a critical part of our Nation’s energy mix and impacting the resilience of our power grid.”

In 2017, Perry asked the Federal Energy Regulatory Commission (FERC) to undertake a rulemaking to improve resiliency of the power grid. His intention was to convince the FERC to subsidize electric generators using coal and nuclear energy. The FERC declined to move forward with that and has opened a second inquiry on grid resilience.

The DOE press office did not reply to an inquiry asking if and when Perry might make his recommendations to President Trump.

The NSC memorandum buttresses its alarm about a potential, dangerous power grid interruption by noting the recent and in some instances accelerating retirement of coal- and nuclear-fueled power plants. But it also refers to the potential vulnerability of the U.S. gas pipeline network.

 The financial difficulties of coal and nuclear plants is reflected in one instance by FirstEnergy Corp. (FES) It owns a subsidiary called First Energy Solutions which filed for bankruptcy in April amidst an announcement of the closure of three of its nuclear facilities and continuing financial troubles for its two coal-fueled generators, all in the competitive non-regulated market.

The FES asked the DOE for an emergency order to provide cost recovery to coal and nuclear plants in the PJM Interconnection market. The PJM is the largest RTO in the U.S. The DOE has not responded to that request, according to Thomas Mulligan, a spokesman for the parent company.

As evidence of pipeline network vulnerability, the NSC memorandum cites various regions of the U.S. where large amounts of megawatt availability depend on a single (i.e. precarious) natural gas connection: in New England more than 13,000 MW; in the Mid-Atlantic, 12,000 MW; in the Southeast 46,000 MW.

“There is absolutely no justification for the extreme intervention in energy markets suggested in the draft National Security Council memo. Such a move would be bad public policy, costly to American consumers and the economy, and legally questionable,” said INGAA President and CEO Don Santa. He called much of the rationale outlined in the draft National Security Council report “fundamentally flawed, particularly as it relates to natural gas pipelines.”

The DHS memorandum refers in numerous instances to the North American Electric Reliability Corporation (NERC). NERC is the electric reliability organization (ERO) for North America, subject to oversight by the FERC and governmental authorities in Canada.

However, the NERC standards do not account for national security requirements, nor do they apply to natural gas pipelines, for whom there are no mandatory reliability or resilience standards. The memorandum states that natural gas pipelines are “increasingly vulnerable to cyber and physical attacks.” In 2017, the NERC produced a special reliability assessment entitled, “Potential Bulk Power Impacts Due to Severe Disruptions on the Natural Gas System.

Water Infrastructure Bill

Congressional passage of a water infrastructure bill heavily focused on Army Corps of Engineers’ projects appears imminent with the House passing its version almost unanimously. The vote on the House floor was 408-2 for the Water Resources Development Act of 2018 (H.R. 8). The Senate version also passed the Environment and Public Works Committee by a unanimous vote and is called the America’s Water Infrastructure Act of 2018 (S. 2800).

The Senate bill contains provisions in addition to those funding Army Corps projects, including one extending the authorization for the Water Infrastructure and Finance and Innovation Act (WIFIA), which the EPA is implementing as a means of supplementing federal funding for the sewer and drinking water state revolving funds (SRFs).

The EPA’s implementation of the WIFIA, established by Congress in 2014, has been painfully slow despite Congress appropriating funds for the program in the last two budget cycles. The agency made its first loan in April of this year and its second in late June.

The Senate bill expresses considerable dissatisfaction with the EPA’s plodding implementation of the. WIFIA funding provides a much bigger bang for the federal buck through its loan subsidy mechanism compared to the SRFs which require mammoth federal appropriations.

The Senate bill requires a federal study on the “obstacles” preventing the EPA from pushing out more WIFIA loans. The report would be due to Congress within a year.

Asked why the committee inserted that provision in the bill and the nature of its dissatisfaction with the EPA on WIFIA, Mike Danylak, spokesman for the Senate Energy and Public Works Committee, said, “I think you should reach out to the EPA on this question.”

An EPA spokeswoman did not respond to an inquiry asking about the obstacles the agency is facing.

The first WIFIA loan went to King County, Wash, to help finance its Georgetown Wet Weather Treatment Station.  The project is estimated to cost $275 million.

The Army Corps portions of both bills provide congressional approval for local and state projects which the Corps has vetted. The lion’s share of the federal spending in the House bill is devoted to a project to address erosion along the coast in Galveston, Texas, and restore ecosystems including wetlands and marshes to enhance protection from storm surge in the area that was damaged by Hurricane Harvey.

Spending on that project accounts for $2.2 billion of the estimated total $2.7 billion federal costs for the entire bill, which would be dribbled out over the 2019-2028 period. The Congressional Budget Office (CBO) estimates that construction spending for the other six projects and three modifications would total about $550 million over the next 10 years.

Flood Risk Management projects approved for funding include the Ala Wai Canal (Hawaii) and Mamaroneck-Sheldrake Rivers (New York). Hurricane and Storm Damage Risk Reduction projects include St. Johns County (Florida), St. Lucie County (Florida) and Sabine Pass to Galveston Bay (Texas).

H.R. 8 would reauthorize the national dam and levee safety programs operated by FEMA and the Corps. Those programs provide grants to local and state governments to assist with levee safety and rehabilitation, maintaining databases for the nation’s dams and levees, and implementing a public awareness and education program for managing dam and levee safety. P&GJ