According to the Casper Star Tribune, Black Hills is making the $237 million move in anticipation of U.S. Environmental Protection Agency (EPA) rules regulating mercury and carbon dioxide (CO2) emissions from coal-fired power plants. About 90 percent of the electricity generated in Wyoming comes from coal, which is abundant and cheap in the Powder River Basin.

But an official for Cheyenne Light, Fuel & Power, which is partnering with Black Hills on the new gas plant, expressed concern about getting federal permits for a new coal-fired power plant. Natural gas burns about 50 percent cleaner than coal, according to the EPA, and CO2 is the main component of greenhouse gases widely believed by most scientists to be causing global warming.

Black Hills Power Vice President for Operations Chuck Loomis told the Star Tribune that, if approved by state regulators, the company will begin construction on the new 132-megawatt gas-powered plant in 2012 and hopefully have it up and running in 2014.

“It was our determination that joining with Cheyenne Light, Fuel, and Power for constructing a combined cycle unit in Cheyenne was our best option,” Loomis told the paper.

Black Hills Energy supplies electricity to about 94,000 customers in southeastern Colorado. It’s the only other publicly traded utility in the state besides the dominant Minnesota-based Xcel Energy, which is shutting down numerous coal-fired power plants along the Front Range and converting some to natural gas and renewable sources.

But with the shift away from coal mandated by Colorado’s Clean Air, Clean Jobs Act, environmental groups are increasingly concerned about the impacts to air and water quality from a surging natural gas industry in the state.

Many citizens’ groups and conservation advocates in Colorado are looking to Gov. John Hickenlooper to strengthen oil and gas drilling regulations in the state.

Environmentalists are concerned that a common method of natural gas drilling can release dangerous chemicals into groundwater. (Bryan Smith/ZUMApress.com)

Less than two hours after President Obama suggested in a post-midterm press conference that Republicans and Democrats could find common ground on proposals to develop the country’s natural gas resources, Sierra Club Executive Director Michael Brune underscored environmentalists’ love-hate relationship with the fossil fuel.

“To be clear, natural gas is not clean, but it’s cleaner than some dirty energy,” he told reporters at a separate Nov. 3 press conference on the prospects for energy and climate legislation in the new Congress.

[Environment1] Natural gas is shaping up to be one of a small handful of energy issues that could get significant attention in the next Congress. As a result, environmentalists are being forced to grapple with the complexities surrounding the expanded use of natural gas. On the one hand, burning natural gas produces about 40 percent less greenhouse gas emissions than coal; on the other hand, natural gas drilling presents its own set of concerns that make environmentalists cringe.

“We want to make sure natural gas is not viewed as some kind of magic bullet,” said Franz Matzner, climate legislative director at the Natural Resources Defense Council. “But we need to look at ways in which we can reduce our carbon footprint now and it’s appealing that it has a smaller footprint. It’s not a replacement for getting renewables online.”

Meanwhile, hoping to ride the momentum from Obama’s high-profile remarks last week, the natural gas industry is preparing to push next year for a number of provisions that favor natural gas. One natural gas industry official, who spoke on the condition of anonymity, said natural gas will be a key issue in any bipartisan energy bill next year. “There is some potential to gather bipartisan support for an energy proposal that involves promotion of natural gas,” the official said. “There can be some kind of adjustment policy that allows for the benefits that natural gas provides: stable pricing, domestic production and plentiful resources.”

The natural gas industry plans to lobby for the inclusion of natural gas as an option for meeting a renewable energy standard, which would require that a certain percentage of the country’s electricity come from renewable sources like wind and solar.

In a Nov. 5 letter to President Obama obtained by The Washington Independent, the heads of the country’s four major natural gas industry groups laid out their policy priorities. “Should Congress move forward on a renewable or clean electricity standard, natural gas generation should be included as a compliance option,” the letter said.

Environmentalists and clean energy advocates say they will oppose such an effort. “Natural gas is not a renewable energy source,” said Dan Weiss, senior fellow and the director of climate strategy at the Center for American Progress. “Therefore it does not belong in an RES.”

David Hamilton, director of global warming and energy programs at the Sierra Club, echoed Weiss’ sentiments. “We really would need to look at the details,” Hamilton said. “But we’ve traditionally been protective of what gets called clean.”

A third clean energy advocate with close ties to Congress dismissed the prospect that environmentalists would be willing to compromise on including natural gas in an RES. “We would rather have nothing than that,” the clean energy advocate said.

But Weiss suggested there is room for negotiation on the issue. He said a proposal to pass a separate low-carbon electricity standard requiring that a certain percentage of the country’s electricity come from natural gas, coal with carbon capture technology and nuclear power “is something that we’d look at seriously.”

Any proposal that would allow natural gas to compete on the same footing as wind and solar, however, would face major opposition, Weiss said. “A low-carbon standard would incent low-carbon kinds of energy, but it would not compete directly with renewables,” he explained. For example, Congress may choose to pass a 15 percent RES and then an additional low-carbon standard of 10 percent, Weiss said.

The first natural gas-related piece of legislation is slated to come up for a procedural vote next week in the lame-duck session. Senate Majority Leader Harry Reid (D-Nev.) has scheduled a cloture vote for Nov. 17 on the Promoting Natural Gas and Electric Vehicles Act of 2010, which would provide incentives for electric and natural gas vehicles. The proposal has bipartisan support and is likely to be the only energy-related bill to see floor action in the lame duck.

While environmentalists support the vehicles proposal, they also say that any effort to encourage natural gas production should be coupled with natural gas drilling reforms. Hydraulic fracturing, or “fracking,” involves injecting chemicals, sand and huge quantities of water into the earth to loosen large underground deposits of natural gas. It is currently the cheapest and most widespread method for extracting natural gas from the ground. But environmentalists say the chemicals used during fracking can contaminate groundwater and cause significant damage to the land.

Hamilton, of the Sierra Club, suggested that environmentalists and liberal Democrats would be more likely to support efforts to expand natural gas development if Congress also considers drilling reforms. “We are very much of the mind that the regulatory structure for fracking should be in place before there’s more drilling,” Hamilton said. “The quicker that regulatory structure gets in place, the less resistance they’re going to get.”

Matzner, of the NRDC, called on lawmakers to pass natural gas drilling reforms that, among other things, require companies to disclose the amount and types of chemicals that are used in fracking and tighten regulation of the practice.

“There’s space here to put policies in place to make sure that natural gas is done in a more responsible way,” Matzner said.

There are proposals on the table in the House and the Senate that would address many of these issues. The Fracturing Responsibility and Awareness of Chemicals (FRAC) Act would give the Environmental Protection Agency regulatory authority over fracking. But the EPA is currently conducting a study on fracking that won’t be completed until 2012. Some have suggested it’s best to wait to address the issue in Congress until the study is finished.

Amy Mall, senior policy analyst at NRDC, has been working on fracking issues for years. Based in Colorado, she has seen the environmental impacts of the practice firsthand. Yet she recognizes that natural gas is a necessary part of the country’s energy mix, underscoring the complicated relationships environmentalists have with the fossil fuel. She, like many environmentalists see natural gas as a “bridge fuel,” or an interim step on the way to broader reliance on renewables.

“Our country needs a lot of energy,” she said. “Our first priority should be efficiency, then conservation. In the short term, we can’t meet all of our energy needs. We support natural gas as a bridge fuel, but we don’t think it’s a silver bullet solution.”

Stern said yesterday’s meeting was “productive,” but added that “no one is expecting or anticipating in any way a legal treaty to be done” at the November U.N. meeting in Cancun, according to the Associated Press.

The United Nations climate process has been marked by anticipation and disappointment. Last year’s much-ballyhooed negotiations in Copenhagen failed to produce a binding climate treaty. And the clock is ticking. The landmark Kyoto Protocol, which the United States did not sign, expires in 2012. The current negotiations are meant to lay the groundwork for a successor to the protocol, but right now it seems unclear exactly when such an agreement can be signed.

Why is all of this so important? In short, scientists say it’s essential for all major industrial nations to commit to reducing their greenhouse gas emissions. In other words, it doesn’t do anybody any good if some countries reduce their emissions and others continue to pump large amounts of carbon dioxide into the air. Emissions don’t stop at a country’s borders.

There’s quite a bit of tension on this issue between various industrialized and non-industrialized nations. The key to coming to an agreement is developing rules that non-industrialized countries and major emitters can agree to. That has proven tricky so far.

The reason? It costs a ton of money to significantly reduce emissions; you’ve got to retrofit fossil fuel power plants, build new infrastructure and develop clean energy technology. The poorer countries argue that richer nation’s should take the lead on all that because they can afford it. The richer countries note however, that every country needs to commit to some level of emissions cut.

Senate Majority Leader Harry Reid (D-Nev.) in the Capitol on Tuesday (Pete Marovich/ZUMApress.com)

Environmental groups are working feverishly behind the scenes to ensure that the climate and energy bill being cobbled together by Senate Majority Leader Harry Reid (D-Nev.) includes a carbon cap on the power sector, but sources closely following the debate on and off Capitol Hill say there is simply not enough support for such a proposal to pass the Senate this year.

[Environment1] A bill without any cap on carbon emissions would be a major disappointment for liberal Democrats and environmental advocates, who have long called for a price on carbon across all sectors of the economy. A so-called utility-only cap, which would limit pollution from just the electricity sector, was itself considered a significant compromise, but even that now appears to be a longshot.

Reid gave environmentalists some hope during a discussion with reporters at the Capitol on Tuesday, when he said he had a “rough draft” of climate and energy legislation that includes four titles. The first will center on an oil spill response and will likely raise oil companies’ financial liability in the event of another spill. The second will address “clean energy job creation and consumer savings,” and the third will focus on “reducing oil consumption and increasing energy independence,” according to Reid spokesperson Regan LaChapelle.

It’s the fourth title that’s receiving the most attention. Reid told reporters Tuesday that the title will focus on reducing pollution in the utility sector, but he declined to elaborate. While many environmentalists are touting Reid’s comments as an indication of his willingness to push a utility-only bill, LaChapelle, asked if the fourth title will include such a provision, said, “Decisions are still being made.”

But a list of provisions expected to be included in the final energy and climate bill, provided to TWI by a senior Senate source closely involved in the debate, does not include any cap on carbon emissions. And a Senate Democratic aide also closely tied to discussions on the bill echoes that point, saying the votes don’t exist to pass even a scaled-down utility-only bill.

Still, Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.), the architects of a climate and energy bill with a broad cap on carbon emissions, are preparing to distribute a so-called “utility-first” bill that would impose a cap in the near term only on utilities, possibly adding in other sectors later. Kerry and Lieberman met with a wide range of environmentalists — including representatives from the Environmental Defense Fund, the League of Conservation Voters and the Sierra Club — on Tuesday to discuss the proposal.

Environmental groups have spent the last several weeks working directly with various electric industry executives in an attempt to negotiate a middle ground on a utility-only bill, according to industry and environmental sources. One source representing a major environmental group, who requested anonymity to discuss the ongoing negotiations, says he is confident that an agreement with utilities can be worked out because many believe “that congressional action that creates a cap-and-trade law would be better for them” than regulation by the Environmental Protection Agency, which could go into effect if Congress does not act.

The environmentalist says there are a “lot of conversations going on around town” with utility executives in an attempt to hammer out a utility-only package. Environmental advocates are working to persuade a “critical mass” of members of the Edison Electric Institute (EEI), a key utility trade group, to support a utility-only proposal. It remains unclear if they’ve been able to find such support. Calls to an EEI spokesperson were not returned as of press time.

But a cap on utility emissions faces strong resistance from trade groups representing energy-intensive manufacturers. According to the environmentalist source, environmental groups do not expect manufacturers to “applaud” a utility-only bill, but they are trying to come to a compromise to avoid “all-out war” on such a proposal.

One lobbyist who represents the manufacturing industry threw cold water on the idea of a utility-only bill.

“With energy-intensive industries, you don’t have to think about utility-only for very long before you see that it has consequences,” the lobbyist said, adding that most utility-only proposals would result in a significant increase in electricity and production costs that could ultimately drive businesses, and jobs, overseas.

As the debate over energy legislation progresses, environmentalists acknowledge that time is not on their side. Reid said he hopes to introduce a final climate and energy bill the week of July 27, giving lawmakers little time to lobby for the inclusion of their proposals in the final package.

But Dan Weiss, senior fellow at the Center for American Progress, said he is confident that utility-only language will make its way into the package Reid brings to the floor, suggesting that the provisions could be culled from the work being done by Kerry and Lieberman, a months-old utility-only bill written by Sen. Jeff Bingaman’s (D-N.M.) staff or compromises hashed out with utilities.

Weiss could not say for certain whether a bill without any carbon cap would retain the support of liberal Democrats. But he noted that if the Senate passes a bill without a cap, environmentalists could look to a conference session with the House, which approved an economy-wide cap-and-trade bill last year, to strengthen the bill.

Franz Matzner, climate legislative director for the Natural Resources Defense Council, echoed Weiss’s comments. “In Washington, there’s this perpetual drumbeat that any piece of legislation is dead until all of a sudden it’s not,” he said. “The public doesn’t want band-aid measures. A lot of work is being done to include a cap.”

If a climate and energy bill moves forward without a cap on carbon emissions, environmentalists are left to focus on a renewable energy standard, which mandates that a certain percentage of the country’s electricity come from renewable sources like wind and solar, as well as provisions to wean the country off of its dependence on oil. But the RES included in the energy bill passed by the Senate Energy and Natural Resources Committee last June has just a 15 percent renewable energy requirement, a paltry figure for environmental advocates, many of whom have called for a 25 percent RES. Bingaman has said he will work to strengthen an RES on the floor, but sources, including some environmentalists, raise doubts about that possibility, given the tense political atmosphere in the Senate.

Across the board, stakeholders in the energy and climate debate say they are waiting for the White House to weigh in on the issue. While President Obama has called for a comprehensive climate and energy bill, he has said very little in recent months about a cap on carbon, nor has he laid out specific provisions he would like to see in a bill. Democratic leaders went to the White House today to discuss policy priorities for the rest of the session with the president. Sen. Byron Dorgan (D-N.D.), chairman of the Democratic Policy Committee, told reporters at the Capitol on Tuesday that the potential for passing an energy and climate bill this year came up at the meeting, but no decisions were made.

Asked whether a utility-only bill can pass this year, Dorgan, who has raised opposition to trying to pass a cap-and-trade bill in the past, was skeptical.

“Almost all of us understand we have to deal with energy issues to the extent that we can, but you know, we have difficulty even extending unemployment compensation, and that ought to be something that you would easily and quickly do during an economic downturn,” he said. “The question is, what’s achievable on energy? What can we get done?”

Sen. Olympia Snowe (R-Maine), long sought after as a potential Republican supporter of climate legislation, also downplayed the likelihood of passage of a utility-only bill. Speaking to reporters in the Capitol on Tuesday, Snowe said, “That’s still an open question as to whether or not you can even accomplish [a utility-only bill] and achieve the kind of consensus necessary.” A better near-term option, Snowe said, is to pass a bill that focuses on “an energy plan with efficiency and conservation and renewables and perhaps from that you can reach the point of addressing utility-only as a possibility.”

For her part, Snowe said she has been “raising the idea” of a utility-only bill for months and acknowledged “talking” with Kerry and Lieberman about crafting a utility-first bill. Her staff also worked with Bingaman’s staff on his utility-only bill, which has not yet been introduced, nor is it likely to be.

Later on Tuesday, Reid met with Interior Secretary Ken Salazar, Energy Secretary Steven Chu and White House climate and energy policy coordinator Carol Browner to discuss energy and climate change. A Senate source familiar with the discussion said “no big decisions” were made, but climate legislation was discussed.

- Oil spill response

- Clean energy job creation

- A title to “reduce oil consumption”

- A “broader” title, which he’s working on with the Finance Committee, and which will address the utilities sector. No details on whether it’ll include a cap on emissions, but he said it would deal with “pollution.”

More to come…

The bill, which was sent to TWI by a well-connected industry lobbyist, would require that the power sector reduce its emissions 3 percent below 2005 levels by 2012, 17 percent by 2020 and 42 percent by 2030, according to a PowerPoint presentation laying out an analysis of the bill. The full text of the draft bill is below.

The source that provided the discussion draft stresses that the bill is no longer in play and adds that other versions of the bill may exist. Many in the electric industry were critical of the draft’s allocation scheme when it was circulated among stakeholders, the source says. The draft would allocate 50 percent of allowances to the electric sector in 2012, a percentage that would decline by 5 percent each year, moving to zero allocations in 2022.

Bill Wicker, a spokesperson for Bingaman, confirms that the draft is authentic, noting that a trade publication, EnergyGuardian, posted it late last night. Wicker says the draft has likely changed since it was first distributed.

Bingaman has said for weeks that he is working on utility-only legislation, but would not introduce a bill until it had the requisite 60 votes required for passage. But prospects for a utility-only bill remain dim and sources on and off the Hill say Bingaman will likely focus on his energy bill, rather than wading into the debate over a carbon price.

Here’s the discussion draft:

And here’s an outline of the draft:

Update: After this post was published, Bingaman’s office confirmed to me that Snowe’s staff collaborated on the draft bill. The post has been updated to include this information.

The move ups the pressure on lawmakers who prefer congressional action to EPA regulation but have been wary of carbon-pricing legislation. With the threat of EPA restrictions growing ever stronger, it’s getting increasingly difficult for these lawmakers to ignore the issue.

Equally important is the utilities sector, some of whose leaders have backed the notion of comprehensive climate legislation. But utility CEOs have been more skeptical of a bill that would impose emissions limits only on power plants.

A Senate aide familiar with the energy and climate negotiations tells me that the utilities are unlikely to sign on to any legislation that does not feature some guarantee that other sectors will be capped down the line, even if only utilities are subject to the cap at first.

But the utilities’ bargaining power is likely to diminish with each new EPA assertion of authority. Faced with a choice between EPA regulation and a bill that will put a price on their carbon emissions — but one that they can help shape — they’re likely to choose the latter.

For an energy and climate bill that’s still facing tough odds, the timing of the EPA’s announcement couldn’t have been better.

Well, that question’s already starting to be answered. Greenpeace delivers a resounding “yes”:

Offering the first evidence of the complex Senate debate that lies ahead on an energy reform bill, the environmental group Greenpeace said Friday it intends to oppose the legislation that a bipartisan group of Senators intend to introduce next week.

“Although we appreciate the Senate’s efforts to reduce global warming pollution, it’s clear that polluter lobbyists have succeeded in hijacking this climate policy initiative and undermined the ambitious action necessary,” Phil Radford, the group’s executive director, said in a statement.

We’ll have more answers after the bill drops on Monday.

LaHood emphasized that the new guidelines will benefit not only the planet, but also American drivers, who will see their fuel costs drop as vehicles become more efficient.

“Putting more fuel-efficient cars on the road isn’t just the right thing to do for the environment,” he said. “It’s also a great way for Americans to save more at the pump.”

Jackson, who called the guidelines “historic” and a “win-win program for our economy and the environment,” added that they will also benefit American innovators, who will work to develop more efficient car parts and new batteries, and will mean “$2.3 billion that can stay at home in our economy rather than buying oil overseas.”

In response to a question from FOX News about whether this move has implications for further regulation of greenhouse gases, Jackson said the program will show people that emissions can be easily regulated, without harmful consequences to the economy. “It puts to rest these doomsday scenarios” about greenhouse gas regulations, she said. This is only the first step in regulating emissions, she emphasized; “the president’s big plan for dealing with energy and climate is new legislation.”

The guidelines drew immediate praise from the Alliance of Automobile Manufacturers, which has long advocated national emissions and efficiency regulations rather than patchwork state-by-state rules.

“America needs a roadmap to reduced dependence on foreign oil and greenhouse gases, and only the federal government can play this role,” Dave McCurdy, president and CEO of the Alliance, said in a press release. “Today, the federal government has laid out a course of action through 2016, and now we need to work on 2017 and beyond.”

Update: Elana Schor has some more details on the new guidelines, which would raise average vehicle efficiency to 35.5 miles per gallon by 2016. The rules are more lax for luxury car manufacturers like Mercedes and BMW; they will have extra time to comply.

“As the largest energy consumer in the United States, we have a responsibility to American citizens to reduce our energy use and become more efficient,” Obama said. “Our goal is to lower costs, reduce pollution, and shift Federal energy expenses away from oil and towards local, clean energy.”

That ought to shut bin Laden up.