Social costs of fossil fuels stop at North Dakota border

By Tom Steward | Watchdog Minnesota Bureau

ST. PAUL, Minn. — Don’t even think about it.

That was North Dakota’s blunt message to Minnesota as the Public Utilities Commission reconsiders the socioeconomic and environmental costs associated with electricity generation in planning future power plants and energy sources.

In June, the PUC will begin the process of re-evaluating the social costs of emissions related to electricity generation. Of primary interest to the PUC will be fossil fuel emission, including carbon dioxide, nitrogen oxides, sulfur dioxide and particulates.

About half of Minnesota’s electricity comes from coal, and that includes coal power from North Dakota.

“We don’t care what they do in the state of Minnesota, as long as they don’t affect us and as long as they don’t restrict our ability to send some very inexpensive and affordable electricity that’s generated by our lignite (coal) over there,” said North Dakota Attorney General Wayne Stenehjem.

Minnesota requires that so-called “external” health and environmental impact be weighed when considering new applications for generation permits, along with conventional “internal” costs for electrical generation. The cost estimates regulators use for just one of the emissions, carbon, has doubled since 2007 — from $4-$30 per ton to $9-$34 per ton.

When added to the actual cost of electrical generation, this makes fossil fuels less competitive than with non-emitting sources of electricity. In effect, it puts a regulatory finger on the scale favoring one source of electricity over another, without regard to actual costs for ratepayers and other key factors like base-load capability and overall reliability.

Electricity generated in other states is exempted from the application of these additional social costs, but a related 2007 PUC ruling left the door open to extending “externality costs” to facilities outside Minnesota.

North Dakota Gov. Jack Dalrymple drew a line in Fargo, firing off warning letters to Minnesota regulators in November 2013 and again in May — just in case.

“Minnesota’s attempt to regulate resources located outside of its borders is an improper, extraterritorial extension of state regulatory authority into North Dakota. This extraterritorial regulation violates the Commerce Clause and Supremacy Clause in the United States Constitution,” Dalrymple wrote to the Minnesota Department of Commerce and Minnesota Pollution Control Agency. “… We therefore request that you recommend that the Commission update the cost estimate for North Dakota facilities to $0/ton.”

The MPCA’s “2014 Pollution Report to the Legislature” indicates emissions from all four pollutants under re-evaluation have leveled off or declined in the past few years. Nevertheless, last fall a coalition of environmental special interest groups began pressing the PUC to recalculate “the costs inflicted on society from the emission of pollution.” The basis of the request is that contemporary scientific capabilities theoretically provide more accurate data.

Minnesota utilities, the Minnesota Chamber of Commerce and Minnesota Large Industrial Group opposed the regulatory reset across the board. But the Center for Energy and Environment, Fresh Energy, Izaak Walton League of America, Minnesota Center for Environmental Advocacy, Sierra Club and Will Steger Foundation successfully lobbied the PUC to up the ante on emissions anyway.

“The Minnesota Public Utilities Commission, by law, must update the health and environmental cost values it first adopted nearly two decades ago and still uses in electricity resource decisions,” said Beth Goodpaster of the Minnesota Center for Environmental Advocacy in announcing the campaign. “Those values are badly out of date, and no longer scientifically defensible.”

In April a federal judge slapped down a section of Minnesota’s Next Generation Energy Act that effectively barred utilities from importing coal-generated electricity from North Dakota and other states.

North Dakota officials say the decision, under appeal by Minnesota, bolsters the case that attempts by Minnesota to control energy decisions in their state violates the Commerce and Supremacy Clauses of the U.S. Constitution.

At this point, however, the PUC says the Roughrider State has nothing to worry about.

“The Commission will not, as part of this investigation, reexamine its earlier decision not to apply the CO2 environmental cost values to facilities in North Dakota. The Commission concluded in 1997 that important factors — the cost/benefit balance of applying CO2 values to North Dakota facilities, and interstate comity — weighed against applying CO2 cost values to North Dakota facilities,” according to a PUC order issued by Burl Harr, executive secretary of the Minnesota Public Utilities Commission.

It boils down to a border battle between two states and their vision for the electrical future.

“Year after year, right in coal country, we get “A” grades from the American Lung Association for the quality of our air,” said Stenehjem, North Dakota’s attorney general. “That’s because we have invested millions in pollution controls. So we do care, but we don’t think we have to go hat in hand to the bureaucrats over in Minnesota to ask their permission to sell them a product in commerce.“

Contact Tom Steward at tsteward@watchdog.org