Despite political uproar, Kentucky could meet EPA emissions goal

WASHINGTON, June 4 Wed Jun 4, 2014 6:18pm EDT

WASHINGTON, June 4 (Reuters) - Kentucky may be well positioned to meet a carbon emission target for power plants set by federal regulators, even as U.S. Senate candidates there blast the plan, saying it will cripple the state's coal industry.

The Environmental Protection Agency seems to have listened to feedback from state officials before the rollout on Monday, said John Lyons, Kentucky's assistant secretary for climate policy.

The result: the Bluegrass State may be able to meet EPA targets between now and 2030.

"I appreciate EPA's stakeholder process. Undoubtedly they did listen to our concerns," Lyons told Reuters.

Shedding the carbon intensity of its fleet by 400 pounds of CO2/MWh will rely on retiring coal plants and shifting to natural gas, measures already planned to meet separate EPA rules on slashing mercury emissions.

"How far down the road that gets us? I'm not sure yet," he said, adding that market conditions could change drastically by 2030, making natural gas more expensive.

Kentucky gets over 92 percent of its electricity from coal plants, the second-highest proportion of any state, and is a major coal producer.

Its coal industry is the rallying point in the state's Senate race, in which Republican incumbent Mitch McConnell, the Senate Minority Leader, is being challenged by Democrat Alison Lundergan Grimes.

Lyons and Len Peters, the state's Energy and Environment Secretary, talked to the EPA for months. They urged a flexible approach that would allow Kentucky to use a range of measures to allow an achievable target.

The EPA assigned Kentucky one of the lowest targets in its proposal, which is based on a complex formula that factors in actions states have already taken to cut carbon and the potential they have to make further cuts.

By 2030 Kentucky must cut another 18.3 percent in emissions from its utility fleet from 2012 levels, the sixth-lowest target of the 50 states.

Washington state, in comparison, has a reduction target of 71.8 percent. Most of that is expected to come from the closure of a single coal plant.

Kentucky could also be hamstrung, Lyons said, by a state law that stops officials from using certain measures to comply with EPA rules.

The law, backed by the state's coal industry, says state regulators can only comply with EPA rules by making improvements at the site of a power plant.

And while the EPA has said that states should be able to reduce coal plant heat rates by 6 percent on average, Lyons said Kentucky's aging fleet may be unable to exceed a 1 percent cut.

Regardless of the anti-EPA noise in the dueling Senate campaigns, Lyons plans to keep working with the EPA during the next public stakeholder process, a 120-day comment period.

"Our job is to assess the rule and see what it is going to require and what impacts it is going to have," he said. "The elections don't play any part of what we have to do here." (Editing by Ros Krasny and Eric Walsh)