As Congress prepares to tackle global warming, Americans are nervously fingering their pocketbooks.
Projected cost increases associated with a proposed cap-and-trade program have ranged from $175 a household in 2020, calculated by the Congressional Budget Office, to an annual average of $2,979 in Heritage Foundation estimates.
Cap and trade is a provision of the American Clean Energy and Security Act, which aims to limit greenhouse gases by setting caps on industry emissions of carbon dioxide. The act passed the U.S. House 219-212 on June 26.
The impact of cap and trade on area residents could be huge or not.
Frank Prager, vice president of environmental policy at Xcel Energy, Denver, said the company is estimating only a 1 to 2 percent increase in electrical costs in its Northern Plains region.
"We have done a couple of things over the last few years to get ready for this. We think this is inevitable," Prager said. "We have gone out and invested a lot of money in wind and renewable energy. The second thing is we have actually retired and repowered up coal plants."
Xcel Energy, which serves Minot, now operates two coal-fired plants after having replaced two older coal-fired plants in the Twin Cities area with natural gas plants. Natural gas produces less carbon dioxide. Xcel Energy's current energy mix in Minnesota and the Dakotas is 48 percent coal, 28 percent nuclear, 10 percent wind and renewables, 8 percent hydroelectric and 5 percent natural gas.
As the bill has been debated in Washington, Xcel Energy has worked to ensure that the regulations credit the company for the work already done by the company in reducing its greenhouse gases. Customers are paying for those reduction measures and shouldn't be penalized by having to pay a second time, Prager said.
Basin Electric Power Cooperative is projecting a 30 to 50 percent increase in the wholesale price of electricity under the cap-and-trade bill, said Floyd Robb, vice president of communications, Bismarck. What that means to the consumer will depend on how heavily their local cooperatives rely on coal-fired generating plants.
Verendrye Electric reports that 80 percent of its electricity is generated by coal-fired power plants with the remainder coming from hydroelectric and wind.
The state Association of Rural Electric Cooperatives predicted an average rate increase of 26 percent for the 250,000 members of electric cooperatives in the state when the cap-and-trade bill was introduced. Changes in the House will reduce that cost. The association hasn't yet calculated the amount of reduction.
"We certainly would like to see something that has less cost impact on our consumers than the current legislation calls for," Robb said. "The problem is that the caps come on, in our opinion, far too quickly. They really don't allow for the development of technology to solve the problems."
The U.S. Department of Energy has indicated that development of technology to capture carbon is about 10 years away if research is adequately funded. The Electrical Power Research Institute says technology could be commercially implemented by 2030.
The bill passed by the House would begin setting emission caps in 2012. Initially, emission reductions would be small, but there would be required reductions of 17 percent below 2005 levels by 2020 and 80 percent below by 2050.
Basin Electric recently entered a $100-million cooperative agreement with the U.S. Department of Energy to conduct a large-scale carbon capture demonstration at the Antelope Valley Station near Beulah. The company's Great Plains Synfuels plant near Beulah also has demonstrated success of commercial carbon capture.
Although wind energy makes up less than 2 percent of its current electrical energy supply, Basin Electric is building another wind farm south of Minot. It hopes to have 10 percent of its generating capacity from renewable sources by 2010.
Montana Dakota Utilities had forecast a 40 percent increase in electrical rates before the House modified the bill. The changes should reduce the amount of increase, but Mark Hanson, spokesman for MDU in Bismarck, said the company still is calculating the impact. Natural gas users, including those in Minot, won't be as greatly affected because of the fuel's smaller carbon footprint.
The current legislation could result in a reduction in the amount of coal that's mined and the amount of power obtained from coal-fired plants, said Steve Van Dyke, communications director for the Lignite Energy Council, Bismarck.
"What are you going to do with your 600 power plants that already are producing 50 percent of the nation's electricity?" he said. "If these goals get too aggressive, what we are going to end up with is billions and billions of dollars in stranded investments. You will have power plants that are just sitting there. Realistically, I don't think people are going to have much appetite for that."
There's also limited alternatives to coal, he said.
"People expect to have electricity 24 hours a day and if you are looking at renewables such as solar and wind, they are not available 24 hours a day and also they are still more expensive than what coal-based electricity is. So from a reliability and affordability standpoint, there's still going to be a need for coal," he said.
North Dakota's oil industry could see similar impacts, but no one is making any predictions. Ron Ness, president of the North Dakota Petroleum Council in Bismarck, said other legislation in Congress that proposes to ban a drilling technique called fracturing or increase taxes on the industry pose a more immediate concern.
However, for consumers, the issue is the price of gasoline.
Gas costs could increase 73 percent, Ness said. He said the cap-and-trade provision amounts to a tax on fossil fuels that is particularly harsh on petroleum despite the job that refineries have done to clean up their emissions.
"The cost is going to be shifted ultimately to the pump. It's extremely detrimental to those of us in the Midwest." he said.
Increased transportation costs would affect the price of many consumer goods on the market. The trucking industry delivers 80 percent of consumer goods, said Tom Balzer, managing director of the North Dakota Motor Carriers Association, Bismarck.
Balzer said the projected increase, even if not as large as expected, would be devastating at this time because of the recession, he said.
In the current economy, demand for freight has dropped significantly. The competition among firms for the limited business makes raising rates difficult and could drive demand for trucking services down even more, he said. The number of failed trucking firms has increased, and that number could double under the cap-and-trade plan, he said.
"I find it hard to believe that this is the right piece of legislation at this time," Balzer said. "The problem is we have no technology out there that can solve this."
Current technology for improving fuel economy focuses on smaller engines and lighter weight vehicles, which aren't the answer for carrying up to 80,000 pounds, he said.
Emission controls also would affect North Dakota's ethanol and sugar beet plants. They may eventually affect large boiler systems, such as at the larger university systems or hospitals.
Minot State University is looking to replace an idled boiler system. Roger Kluck, plant services director at MSU, said the university would like to find grants to install a geothermal system, which would not produce any greenhouse emissions.
The other option is to use $2.5 million from the Legislature to renovate the existing boiler. Even under the more stringent environmental rules that the boiler renovation would have to comply with, the boiler eventually could fall under a future emission cap, Kluck said.
"We are close enough that it raises concerns," he said. "That's why we have been looking away from coal as a fuel source."
A less obvious cost of cap and trade is the cost of enforcing any new law.
Terry O'Clair, director of the air quality division at the North Dakota Health Department, said the EPA would have enforcement authority but it could delegate duties to the states. If the state must get involved in overseeing compliance, that would involve an intensive amount of work and added expense, he said.
