Moon Lake manager expresses concern about proposed cap-and-trade system

RANGELY — Expensive.
That’s the one word Grant Earl uses to describe a proposal by President Barack Obama to impose a cap-and-trade system on carbon dioxide emissions from coal-fired power plants.
Earl, the general manager and CEO of Moon Lake Electric Association, had breathed a sigh of relief in June when the U.S. Senate killed a bill that would have imposed a tax on emitters of six greenhouse gases blamed for global warming.
That relief was short lived.
In November, Democrats won both the presidency and added seats in Congress. Then during his Feb. 25 State of the Union address, Obama delivered the line that has Earl and other power company executives nervous about their ability to continue providing customers with electricity at reasonable rates.
“… I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America,” Obama said. “… None of this will come without cost, nor will it be easy.”
It’s the cost that has Earl worried.
“It sounds good, but the details are what’s going to drive this whole engine,” he said the day after Obama’s speech. “That is what’s going to make or break the energy industry and ultimately the economy.”
Earl said about 50 percent the country is powered by electricity generated in coal-fired plants. That amount rises to nearly 90 percent in states like Utah, Wyoming and Colorado, which Earl said would put those states at a disadvantage under the president’s plan.
“It’s going to have a tremendous impact on those (states) … because coal obviously has the highest carbon emissions,” Earl said. “Natural gas obviously has much less, but there is a lot of natural gas generation that will be impacted also.”
Under the failed 2008 bill, the federal government would have placed caps on emissions of carbon dioxide and five other gases beginning in 2012. Companies that emitted the targeted gases would have been required to buy federally created permits for each metric ton of emitted gas.
However, power plants like the one operated by Deseret Power in Bonanza would have only been allocated 40 percent of the allowances they needed. The remaining 60 percent would have had to be purchased on the open market at auctions. The percentage of allowances allocated would have continued to be reduced until 2050.
Kimball Rasmussen, president and CEO of Deseret Power, told the Uintah Basin Standard at the time that the Senate bill was the equivalent of a “musical chairs situation.”
“In essence what they’re doing is trying to get party A to stop emitting and sell their right to emit to party B that wants to continue to emit,” he said.
Rasmussen said Deseret’s models showed that the company, which provides power for Moon Lake Electric and five other cooperatives in Utah and Wyoming, would have experienced a $95 million increase in operating costs had the bill passed. That cost would have escalated to $160 million over the next 20 years.
Moon Lake officials estimated that the average customer would have seen a $2,500 to $4,000 increase in their annual electric bill.
Rasmussen has since authored a 44-page paper entitled “A Rational Look at Climate Change Concerns and the Implications for U.S. Power Consumers.” In the paper, he argues that any proposed climate change legislation must be evaluated for not only the intended consequences, but the unintended ones as well.
“One possible outcome of U.S. climate legislation is the out-migration of U.S. business to China and other developing nations where less stringent environmental regulations could result in a net increase in global emissions,” Rasmussen writes. “This could actually leave the planet’s atmosphere in a worse condition.”
Rasmussen also noted that carbon capture and sequestration technology is “not ready for prime time.” And, any full-scale capture facility, he said, would likely cost more to operate than the coal-fired plants whose emissions it was designed to contain.
Earl said with the current technology it takes up to one-third of a plant’s generation to capture carbon emissions. That means in order to maintain power output additional plants would have to be built and brought online.
“Then you’re just spewing more carbon into the air,” Earl said. “At some point it’s just a numbers game that you can’t catch up with. It’s a dog chasing it’s tail.”
Earl said Utah’s congressional delegation is supportive of the position taken by Moon Lake Electric and the state’s other electric cooperatives regarding any effort to implement a cap-and-trade program. He said the cooperatives’ representatives will travel to Washington, D.C., in May to seek further support for their position.
“It’s an uphill climb right now with a Democratic Congress and a Democratic president,” Earl said. “We are not going to shape this legislation.”
He said the membership of the National Rural Electric Cooperative Association, which includes Moon Lake, has taken the stance that “we either have a seat at the table or we’re on the menu.” The trade group has been talking about submitting a proposal for a $12 per metric ton carbon tax to replace a cap-and-trade system.
Even that option is expensive though.
“A $12 per metric ton carbon tax on emissions would create a 165-percent increase in wholesale power costs to Moon Lake,” Earl said, adding that Utah’s electric cooperatives are urging NRECA to negotiate from zero carbon tax rather than setting an arbitrary starting point of $12.
Moon Lake Electric and Deseret Power have posted additional information about the anticipated costs of climate change legislation at www.de-seretpower.com/moonlake/.

Editor’s note: Patsy Lollar of Rangely serves on the board of directors of Moon Lake Electric, a rural electric cooperative that serves northwestern Utah and western Colorado. Moon Lake is headquartered in Roosevelt, Utah, and has its Colorado district office in Rangely.

The story is reprinted with permission.