Texas, gas states biggest winners under EPA carbon rules: report

WASHINGTON Thu Jul 24, 2014 3:39pm EDT

WASHINGTON (Reuters) - Gas-rich states such as Texas should have the easiest time complying with planned Environmental Protection Agency regulations on carbon pollution from power plants, despite opposition from their lawmakers, a new study says.

The study, released on Thursday by the Rhodium Group and the Center for Security and International Studies, shows the boom in shale gas production will give producing states an advantage in meeting carbon reduction targets proposed by the EPA on June 2.

The Clean Power Plan would put the U.S. power sector on course to slash carbon dioxide emissions by 30 percent from 2005 levels by 2030. Each state has been assigned its own target for lowering emissions.

The agency laid out four “building blocks” that states can use to meet their targets: making coal plants more efficient, switching from coal to natural gas, increasing renewable and nuclear energy, and boosting energy efficiency.

John Larsen, a senior analyst at the Rhodium Group, said switching coal-fired plants to natural gas is one of the cheapest and fastest ways to comply with the proposed standards.

“The primary pathway to compliance is a coal-to-gas switch,” said Larsen. “Big gas producing states and regions win, and can do really, really well under this policy.”

Larsen said researchers plan to expand their study and test scenarios for regions in which natural gas is not as plentiful, and for when natural gas prices increase.

Ironically, lawmakers from states which stand to benefit most from the EPA rules, including U.S. senators David Vitter of Louisiana and James Inhofe of Oklahoma and Texas Governor Rick Perry, are among the agency’s most vocal opponents.

That region, which also includes Arkansas, is likely to see a nearly $18 billion increase in annual natural gas production revenue between 2020 and 2030, according to the report.

Oklahoma has already joined a lawsuit with eight other states challenging the EPA's not-yet finalized rule on the grounds the agency does not have the authority to regulate carbon from existing power plants.

Inhofe on said on Wednesday at a senate hearing with EPA Administrator Gina McCarthy that the plan's energy efficiency recommendations were "impossible." He added that they did not address what would happen to coal plants that have already made investments to meet other recent pollution control requirements.

Texas Governor Rick Perry has repeatedly questioned the science behind climate change.

The report also said that, in the U.S. Mountain West region, which includes major coal-producing states such as Wyoming, coal production will decline by over $7 billion annually in the same decade, while natural gas production grows by $5 billion.

While energy costs in some regions might rise, the revenue windfall from higher natural gas production will help compensate for that, the report added.

(Reporting by Valerie Volcovici. Editing by Ros Krasny and Andre Grenon)