- Associated Press - Monday, June 2, 2014

INDIANAPOLIS (AP) - Indiana’s start on converting coal plants to natural gas and taking other aging facilities off line could help the overwhelmingly coal-dependent state meet a new federal goal of reducing its carbon emissions by 2030. But state officials are keeping a wary eye on how the new U.S. Environmental Protection Agency targets will affect manufacturing in the highly industrial state.

The EPA on Monday gave Indiana three years to come up with a plan to cut carbon emissions by 20 percent over the next 16 years as part of a sweeping national initiative to curb pollutants blamed for global warming.

Indiana’s target presents a challenge in a state, sitting atop a major vein of coal, where more than 80 percent of power is produced by coal. But the EPA gave Indiana credit for already taking steps to reduce carbon emissions, such as encouraging utilities to set renewable energy standards, and environmental activists say they believe the goal can be accomplished.

“I think that meeting EPA’s goals is doable for Indiana, and it’s a challenge we really have to take on,” said Jodi Perras, Indiana’s representative for the Sierra Club’s Beyond Coal campaign.

Doug Gotham of the State Utility Forecasting Group, a state-funded, Purdue University research group, said moves that utilities are already making, like replacing aging coal-fired plants with ones that burn cleaner natural gas, will help Indiana move in the right direction to meet the 2030 goals.

But Gov. Mike Pence and a state manufacturers’ group fear the tougher standards will chill the state’s business climate. Pence vowed to oppose the regulations, saying in a statement that they would cost the state jobs and business growth and result in higher electricity rates.

Perras, however, said the changes have the potential to generate “green” jobs like manufacturing energy-efficient insulation, producing and installing wind turbines and solar panels, and other industries.

Tim Rushenberg, vice president for governmental affairs and tax policy for the Indiana Manufacturers Association, agreed that utilities already are making the switch away from coal in places like Indianapolis, where Indianapolis Power & Light is converting two coal-fired plants to natural gas. But he said he feared the new requirements “will stunt the growth of our Indiana manufacturing center.”

When energy costs rise, businesses must cut costs elsewhere to make ends meet, he said.

Indiana’s heavy reliance on coal is largely due to geography and economics. Gotham noted the coal vein beneath the southern part of the state, and that coal historically has been a cheaper source of energy.

“We’ve got coal. That’s a big part of it,” Gotham said.

The EPA said its targets were tailored to fit the states, but some states that relied less on coal had higher requirements than more-reliant states like Indiana. Those states tend to be ones that already get a large share of their power from alternative sources such as wind and nuclear.

Environmentalists said Indiana and the Midwest have already been suffering the effects of climate change caused by greenhouse gases that fuel global warming, including droughts and flooding that have cost farmers millions of dollars in crops and triggered the need for millions in disaster assistance.

Indiana’s power prices are currently among the lowest in the nation, but the changes announced Monday could raise rates enough to put Indiana in the middle of the rankings, Gotham said. The state’s electric rates are expected to be 32 percent higher in 2023 than they were in 2013, but that projected rate hike did not include the new federal pollution rules, according to the State Utility Forecasting Group.

Converting mid-sized coal-fired power plants to natural gas in Kentucky and Virginia has been estimated to cost as much as $50 million, but Gotham said such costs are generally tied to how close the plant is built to a natural gas pipeline.

Duke Energy, the largest U.S. utility by number of customers and market value and the largest in Indiana, said it was reviewing the EPA requirements.

“It is too soon to tell what impact the proposal will have on our operations, but we will work closely with the state to evaluate it and will be participating in the rulemaking process,” Duke said in the statement.

The Indiana Department of Environmental Management said it would thoroughly review Monday’s announcement before commenting.


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