Energy Facility Energy Facility Siting Options for Siting Options for

IdahoIdahoArne Olson

Energy & Environmental Economics, Inc. (E3)

Presented to:Presented to:

Subcommittee on Energy Facility Siting Subcommittee on Energy Facility Siting Boise, IdahoBoise, Idaho

August 21, 2006August 21, 2006353 Sacramento Street, Suite 1700

San Francisco, CA 94111Telephone: (415) 391-5100

http://www.ethree.com

August 10, 2006 2

Goals for Today’s SessionGoals for Today’s Session Understand the substantive issues that Understand the substantive issues that

an energy facility siting process must an energy facility siting process must addressaddress

Understand the current process for Understand the current process for siting large energy facilities in Idaho and siting large energy facilities in Idaho and the gaps in that processthe gaps in that process

Get a good idea of how other states Get a good idea of how other states handle energy facility sitinghandle energy facility siting

See where there is common ground on See where there is common ground on an appropriate siting process for Idahoan appropriate siting process for Idaho

August 10, 2006 3

Roadmap for Developing Roadmap for Developing the Energy Planthe Energy Plan

UnderstaUnderstand where nd where

we are we are todaytoday

Decide Decide where we where we want to want to

go go tomorrotomorro

ww

Figure Figure out the out the

best best ways to ways to

get thereget there

Implement Implement the the

approved approved measuresmeasures

NegotiatNegotiate e

through through legislativlegislative processe process

RepeaRepeatt

You are

here

August 10, 2006 4

Task of Siting Task of Siting SubcommitteeSubcommittee

Role of siting subcommittee is to talk about Role of siting subcommittee is to talk about processprocess

What type of process is appropriate for What type of process is appropriate for siting large energy facilities in Idaho?siting large energy facilities in Idaho? Generation facilities (gas, coal, nuclear, Generation facilities (gas, coal, nuclear,

renewable)renewable) High-voltage transmission facilitiesHigh-voltage transmission facilities Pipelines (crude oil, petroleum products, natural Pipelines (crude oil, petroleum products, natural

gas)gas)

Role of subcommittee is Role of subcommittee is not not to get into to get into specifics of substantive issuesspecifics of substantive issues

Draft Policy Draft Policy ObjectivesObjectives

August 10, 2006 6

Policy ObjectivesPolicy Objectives1.1. Reliability, StabilityReliability, Stability

2.2. Low-Cost, AffordabilityLow-Cost, Affordability

3.3. Environment, ConservationEnvironment, Conservation

4.4. Jobs, EconomyJobs, Economy

5.5. FlexibilityFlexibility

Action Action ItemItem

Policy Policy StatemeStateme

ntnt

Policy Policy StatementStatement

Policy Policy StatemeStateme

ntnt

Policy Policy StatemeStateme

ntnt

Action Action ItemItem

Action Action ItemItem

Action Action ItemItem

Proposed Structure of Plan Proposed Structure of Plan FindingsFindings

August 10, 2006 7

Draft Policy ObjectivesDraft Policy Objectives1.1. Ensure a secure, reliable and stable energy system Ensure a secure, reliable and stable energy system

for the citizens and businesses of Idahofor the citizens and businesses of Idaho

2.2. Maintain Idaho’s low-cost energy supply and Maintain Idaho’s low-cost energy supply and ensure access to affordable energy for all Idahoansensure access to affordable energy for all Idahoans

3.3. Protect Idaho’s public health, safety and natural Protect Idaho’s public health, safety and natural environment and conserve Idaho’s natural environment and conserve Idaho’s natural resourcesresources

4.4. Promote sustainable economic growth, job Promote sustainable economic growth, job creation and rural economic development through creation and rural economic development through investments in Idaho’s energy infrastructureinvestments in Idaho’s energy infrastructure

5.5. Provide the means for Idaho’s energy policy to Provide the means for Idaho’s energy policy to adapt to changing circumstancesadapt to changing circumstances

Energy Facility Energy Facility Siting Issues Siting Issues

August 10, 2006 9

Substantive Issues in Substantive Issues in Energy Facility SitingEnergy Facility Siting

Air emissions permittingAir emissions permitting Water discharge permittingWater discharge permitting Water rights & use of potable waterWater rights & use of potable water Health and safety issuesHealth and safety issues Consistency with zoning/land-use Consistency with zoning/land-use

plansplans Site remediation/restorationSite remediation/restoration Need for reliable energy supplyNeed for reliable energy supply

August 10, 2006 10

What is Unique About What is Unique About Energy Facilities?Energy Facilities?

Energy facilities have a large “footprint”; Energy facilities have a large “footprint”; impacts go beyond single communityimpacts go beyond single community

Energy networks are regional in scopeEnergy networks are regional in scope Reliable energy supply is seen as Reliable energy supply is seen as

indispensable to the functioning of a indispensable to the functioning of a modern societymodern society

Electricity and natural gas utilities Electricity and natural gas utilities typically have power of eminent domain typically have power of eminent domain after obtaining Certificate of Public after obtaining Certificate of Public Convenience and Necessity (CPCN)Convenience and Necessity (CPCN)

August 10, 2006 11

Why do Most States have Why do Most States have State-Level Energy State-Level Energy

Facility Siting?Facility Siting? Energy facilities have environmental Energy facilities have environmental

impacts that go beyond local areasimpacts that go beyond local areas Air emissions impactsAir emissions impacts Water discharge impactsWater discharge impacts Water ConsumptionWater Consumption

Energy facilities have economic impacts Energy facilities have economic impacts that go beyond local areas that go beyond local areas Energy is a basic necessityEnergy is a basic necessity Must come from somewhereMust come from somewhere Energy networks are regional in scopeEnergy networks are regional in scope

August 10, 2006 12

Why do Most States have Why do Most States have State-Level Energy State-Level Energy Facility Siting? (2)Facility Siting? (2)

Single state-level siting process can offer Single state-level siting process can offer “one-stop shopping” for permits“one-stop shopping” for permits

State-level process may be more consistent State-level process may be more consistent and predictableand predictable

Linear facilities such as transmission lines Linear facilities such as transmission lines and pipelines cross multiple jurisdictions and pipelines cross multiple jurisdictions

EPACT 2005 grants siting authority to FERC EPACT 2005 grants siting authority to FERC for “National Interest Electric Transmission for “National Interest Electric Transmission Corridors” for states without state-level Corridors” for states without state-level transmission siting authoritytransmission siting authority

August 10, 2006 13

Preliminary Map of Preliminary Map of ““National Interest Electric National Interest Electric Transmission CorridorsTransmission Corridors””

August 10, 2006 14

How Does Energy Facility How Does Energy Facility Siting Work in Idaho Siting Work in Idaho

Today?Today? No comprehensive state-wide processNo comprehensive state-wide process Air emissions & water discharge permits Air emissions & water discharge permits

issued by DEQissued by DEQ Water rights acquired from DEQ -- no process Water rights acquired from DEQ -- no process

for evaluating alternative economic uses of for evaluating alternative economic uses of waterwater

IPUC issues Certificate of Public Convenience IPUC issues Certificate of Public Convenience and Necessity (CPCN) for utility-owned and Necessity (CPCN) for utility-owned generation & transmissiongeneration & transmission

Local jurisdictions hear issues related to Local jurisdictions hear issues related to consistency with land-use plansconsistency with land-use plans

August 10, 2006 15

Gaps in Current Idaho Gaps in Current Idaho ProcessProcess

Merchant generation facilitiesMerchant generation facilities No requirement to show need for powerNo requirement to show need for power Possible mismatch between constituency of Possible mismatch between constituency of

decision-makers and people who bear the decision-makers and people who bear the impacts (both positive and negative)impacts (both positive and negative)

Generation and transmission facilities Generation and transmission facilities developed by municipal utilities and developed by municipal utilities and rural cooperativesrural cooperatives

High-voltage transmission facilities not High-voltage transmission facilities not owned by investor-owned utility owned by investor-owned utility

August 10, 2006 16

Independent or Independent or “Merchant” Power “Merchant” Power

ProducersProducers Independent power producers (IPPs) first Independent power producers (IPPs) first

gained a foothold with passage of Public gained a foothold with passage of Public Utility Regulatory Policy Act (PURPA) in 1978Utility Regulatory Policy Act (PURPA) in 1978

Momentum accelerated with federal policy Momentum accelerated with federal policy favoring wholesale deregulation during the favoring wholesale deregulation during the ‘90s‘90s

Today, IPPs generate around 35% of U.S. Today, IPPs generate around 35% of U.S. powerpower

IPP can locate in any state on the Western IPP can locate in any state on the Western grid and sell power to any other state on the grid and sell power to any other state on the gridgrid

August 10, 2006 17

Utility vs. Merchant Utility vs. Merchant FacilitiesFacilities

Utility FacilitiesUtility Facilities Developed under Developed under

state regulation in state regulation in conjunction with conjunction with obligation to serve obligation to serve

PUC reviews PUC reviews prudency and sets prudency and sets returnsreturns

Risks and returns Risks and returns shared among utility shared among utility shareholders and shareholders and ratepayersratepayers

PUC issues CPCNPUC issues CPCN

Merchant FacilitiesMerchant Facilities No obligations other No obligations other

than those spelled out than those spelled out in contractin contract

Physical output is Physical output is consumed locally, but consumed locally, but economic benefits economic benefits accrue to contractual accrue to contractual ownerowner

Risks and returns Risks and returns borne by merchant borne by merchant shareholdersshareholders

No CPCN required No CPCN required

August 10, 2006 18

““Nightmare” Energy Nightmare” Energy Facility Siting ScenariosFacility Siting Scenarios

Large, merchant coal facility in rural areaLarge, merchant coal facility in rural area New, large nuclear power plant New, large nuclear power plant High-voltage transmission facility from High-voltage transmission facility from

Montana coalbeds to Southwest through Montana coalbeds to Southwest through eastern Idaho eastern Idaho

New petroleum product pipeline proposed to New petroleum product pipeline proposed to bring gasoline, diesel & jet fuel from bring gasoline, diesel & jet fuel from refineries in Rockies to markets in the refineries in Rockies to markets in the NorthwestNorthwest

Question is whether Idaho needs to act now Question is whether Idaho needs to act now to prepare for these possibilitiesto prepare for these possibilities

Survey of Siting Survey of Siting Processes in Other Processes in Other

StatesStates

August 10, 2006 20

Survey of State Energy Survey of State Energy Facility Siting Facility Siting

ProcessesProcesses States surveyed:States surveyed:

WashingtonWashington OregonOregon California California ArizonaArizona MontanaMontana ArkansasArkansas MaineMaine

Questions asked:Questions asked: Composition of Siting BodyComposition of Siting Body Decision-making authorityDecision-making authority Facilities over which Siting Facilities over which Siting

Body has jurisdictionBody has jurisdiction Decision-making role of Decision-making role of

local officialslocal officials Whether the jurisdiction Whether the jurisdiction

requires a need standard requires a need standard or economic test to protect or economic test to protect ratepayersratepayers

August 10, 2006 21

WashingtonWashingtonBody:Body: Washington Energy Facility Site Evaluation Washington Energy Facility Site Evaluation

Council (EFSEC)Council (EFSEC)

Composition:Composition: Chair appointed by governor, five Chair appointed by governor, five state agency members, one member from each state agency members, one member from each local jurisdictionlocal jurisdiction

Decision:Decision: Issues permits & site certificate, Issues permits & site certificate, governor must signgovernor must sign

Facilities:Facilities: Thermal generation greater than 350 Thermal generation greater than 350 MW, smaller wind (voluntary), oil & gas pipelines, MW, smaller wind (voluntary), oil & gas pipelines, transmissiontransmission

Role of locals:Role of locals: Formal decision-making role on Formal decision-making role on CouncilCouncil

Need Standard?:Need Standard?: Must demonstrate need Must demonstrate need

August 10, 2006 22

OregonOregonBody:Body: Oregon Energy Facility Siting Council (EFSC) Oregon Energy Facility Siting Council (EFSC)

Composition:Composition: Seven citizen members appointed by Seven citizen members appointed by the governor and confirmed by the Oregon senatethe governor and confirmed by the Oregon senate

Decision:Decision: Issues site certificate, directs agencies to Issues site certificate, directs agencies to issue permitsissue permits

Facilities:Facilities: Thermal plants greater than 25 MW, non- Thermal plants greater than 25 MW, non-thermal plants greater than 35 MW, 230+ kV lines thermal plants greater than 35 MW, 230+ kV lines more than 10 miles in lengthmore than 10 miles in length

Role of locals:Role of locals: Must approve proposed land use Must approve proposed land use

Need Standard?:Need Standard?: No need standard or economic No need standard or economic testtest

August 10, 2006 23

CaliforniaCaliforniaBody:Body: California Energy Commission (CEC) California Energy Commission (CEC)

Composition:Composition: Five citizen members appointed Five citizen members appointed by governor, four must have specific knowledge by governor, four must have specific knowledge (economics, environmental, engineering, legal)(economics, environmental, engineering, legal)

Decision:Decision: Issues permit to construct & operate Issues permit to construct & operate

Facilities:Facilities: Thermal plants greater than 50 MW Thermal plants greater than 50 MW and related transmission lines, fuel supply and related transmission lines, fuel supply lines, and related facilitieslines, and related facilities

Role of locals:Role of locals: No formal decision-making role No formal decision-making role

Need Standard?:Need Standard?: No need standard or No need standard or economic testeconomic test

August 10, 2006 24

ArizonaArizonaBody:Body: Arizona Corporation Commission (ACC), Arizona Corporation Commission (ACC),

Arizona Power Plant and Transmission Line Siting Arizona Power Plant and Transmission Line Siting Committee Committee

Composition:Composition: Five elected members to ACC, two Five elected members to ACC, two local members of Siting Committeelocal members of Siting Committee

Decision:Decision: Recommendation to full Commission to Recommendation to full Commission to issue Certificate of Environmental Compatibilityissue Certificate of Environmental Compatibility

Facilities:Facilities: Power plants greater than 100 MW and Power plants greater than 100 MW and transmission projects greater than 115 kVtransmission projects greater than 115 kV

Role of locals:Role of locals: Formal membership on Siting Formal membership on Siting CommitteeCommittee

Need Standard?:Need Standard?: Economic test to protect ratepayers Economic test to protect ratepayers

August 10, 2006 25

MontanaMontanaBody:Body: Department of Environmental Quality, Board Department of Environmental Quality, Board

of Environmental Reviewof Environmental Review

Composition:Composition: Seven members: three public, two Seven members: three public, two government, two professionalgovernment, two professional

Decision:Decision: DEQ director issues permits, Board of DEQ director issues permits, Board of Environmental Review hears appealsEnvironmental Review hears appeals

Facilities:Facilities: Transmission > 69 kV or 10 miles, Transmission > 69 kV or 10 miles, pipelines of certain diameters and lengths, hydro > pipelines of certain diameters and lengths, hydro > 50 MW, nuclear and geothermal plans, gas/coal 50 MW, nuclear and geothermal plans, gas/coal can “opt in”can “opt in”

Role of locals:Role of locals: No formal decision-making role No formal decision-making role

Need Standard?:Need Standard?: No need standard or economic No need standard or economic testtest

August 10, 2006 26

ArkansasArkansasBody:Body: Arkansas Public Service Arkansas Public Service

CommissionCommission

Composition:Composition: Three members appointed Three members appointed by Governorby Governor

Decision:Decision: Commission issues CPCN Commission issues CPCN

Facilities:Facilities: Utility-owned facilities only Utility-owned facilities only

Role of locals:Role of locals: No formal decision-making No formal decision-making rolerole

Need Standard?:Need Standard?: Economic test to Economic test to protect ratepayersprotect ratepayers

August 10, 2006 27

MaineMaineBody:Body: Board of Environmental Protection Board of Environmental Protection

Composition:Composition: Eleven volunteer members appointed Eleven volunteer members appointed by Governor and confirmed by Legislature by Governor and confirmed by Legislature

Decision:Decision: DEQ director issues permits, Board of DEQ director issues permits, Board of Environmental Review hears appealsEnvironmental Review hears appeals

Facilities:Facilities: Facilities emitting greater than 50 tons/yr. Facilities emitting greater than 50 tons/yr. VOC, 10 tons/yr. of a single Hazardous Air Pollutant, VOC, 10 tons/yr. of a single Hazardous Air Pollutant, 25 tons/yr. of all Hazardous Air Pollutants combined, 25 tons/yr. of all Hazardous Air Pollutants combined, 100 tons per year of any other regulated pollutant100 tons per year of any other regulated pollutant

Role of locals:Role of locals: Does not preempt local role Does not preempt local role

Need Standard?:Need Standard?: No need standard or economic test No need standard or economic test

August 10, 2006 28

Senate Bill 1292 (2006 Senate Bill 1292 (2006 Session)Session)

Body:Body: DEQ Site Review Panel DEQ Site Review Panel

Composition:Composition: Three DEQ, one governor- Three DEQ, one governor-appointed, one member appointed by each city appointed, one member appointed by each city and county within 50 mile radiusand county within 50 mile radius

Decision:Decision: make recommendation to DEQ make recommendation to DEQ Director within 90 days whether project is Director within 90 days whether project is consistent with Energy Facility Siting consistent with Energy Facility Siting Management Plan, Director makes decisionManagement Plan, Director makes decision

Facilities:Facilities: Not specified in bill Not specified in bill

Role of locals:Role of locals: Formal role on Site Review Panel Formal role on Site Review Panel

Need Standard?:Need Standard?: Not specified in bill Not specified in bill