March
22, 2001
Honorable George W. Bush
President of the United States of America
1600 Pennsylvania Avenue, NW
Washington, DC 20500
RE: BRIDGING DIFFERENCES WITH ENVIRONMENTALISTS
OVER GREENHOUSE GAS EMISSIONS
Dear President Bush:
You made a command decision in what many
environmentalists view as a reversal of an earlier campaign promise to mandate
a reduction in carbon dioxide emissions from power plants. This has resulted in
a firestorm of protest and unsavory accusations from environmental groups who
only days earlier had given you "guarded praise" for statements made
by EPA Administrator Christie Whitman in support of such reductions. You did
this because you are convinced that mandatory reductions will unduly increase
the price of electricity and adversely affect the economy, which appears to be
on the verge of a recession.
My view of this is that wise men
occasionally change their minds; fools never do. Circumstances have changed
since the campaign, during which by the way my entire family and I supported
you wholeheartedly. But this does not have to be an all or nothing issue.
Simply because you are not going to mandate a reduction in carbon dioxide
emissions from power plants does not mean you cannot throw the weight of the government
in support of power projects that do reduce the emission of greenhouse gases. A
high profile program supporting these types of projects and heralding the
hundreds of tons of carbon dioxide kept out of the atmosphere by such projects
would go a long way toward bridging differences with moderate environmental
groups.
My company, Tennessee Power Company, is a
developer of environmentally sensitive power projects that reduce the emission
of greenhouse gases. I can tell you from experience that utilities generally
make it very difficult for independent small power plants to be viable, and are
typically totally oblivious to any environmental benefits of such projects.
During the previous administration we had such projects killed by utilities,
government-owned and investor-owned utilities, and this despite formal
complaints filed with the Federal Energy Regulatory Commission and appeals made
directly to the administration. The previous administration may have talked the
talk when it came to the environment, but from our vantage point they certainly
did not walk the walk.
The manner in which utilities typically kill
a small power project is subtle but effective. They begin by simply ignoring
you. If you ask them for their avoided cost they laugh at you and say that
there is no way you could possibly finance any power project at their avoided
cost, which is obviously well below the market or what they would sell power
for even if you added a legitimate markup. Then they confront you with a
quagmire of administrative hurdles squirreled away in obscure regulatory
filings, which you only discover after filing a complaint for their lack of
responsiveness. They follow that with a barrage of expensive studies and
deposits. If they haven't succeeded in running you off by this time, they
finally present you with an exorbitant estimate of what it would cost to
interconnect to their system, a gold-plated interconnection, reserving the
right to charge more if costs happen to run higher. Some utilities are more
notorious than others, and of course they all have their environmental window
dressing they like to show off.
It is ironic that the very environmental
groups that are so critical of you right now will not themselves support any
specific project that will actually reduce the emission of greenhouse gases.
Instead, like many governmental agencies, they will support concepts and theory
but when it comes to throwing support behind an actual, specific project of an
independent small power producer, they simply will not do it. They tell us they
have been "burnt" before in supporting specific projects and as a
matter of policy they no longer do that. It seems a tad hypocritical that they
now expect you to take specific action on actual, specific power plants to
reduce greenhouse gas emissions when they themselves will not throw their
support behind actual, specific power projects that would similarly reduce
greenhouse gas emissions.
Nevertheless, they will undoubtedly take the
position that you represent the power of the government and that they represent
the conscious of the people in trying to shame the government into taking the
proper action. I think the government can move toward the concern of moderate
environmentalists about global warming by taking a more proactive stance in
support of independent small power producers with projects that obviously
reduce greenhouse gas emissions. This can be done via executive orders and
administrative action without new legislation.
Certain laws and regulations relating to
PURPA and antitrust could be vigorously enforced by the government at the
Federal level on utilities who do not voluntarily work with such projects to
overcome the market barriers described above that have been erected to kill
such projects. A task force could be formed within DOE that would aggressively
take action by engaging the Department of Justice and FERC against any utility
perceived as not encouraging and promoting such projects on its system. While
this may be a little worrisome to utilities, it is certainly nothing compared
to mandatory carbon dioxide reductions at power plants. It will not impact the
price of electricity, and will help the economy by increasing the supply of
electricity from 3 to 30 megawatts for each of several, maybe hundreds, of
small plants such a program would bring on line within the next few years.
More importantly, from an environmental
standpoint, you would be forcing utilities to work with small independent power
producers in averting the annual release into the atmosphere of an equivalent
of hundreds of tons of carbon dioxide in greenhouse gases, such as methane.
Utilities will oppose such a program, but that is what you want so you can tell
them it is either this or you will reconsider mandatory reductions in carbon
dioxide emissions from their power plants. After all, wise men do occasionally
change their minds; fools never do. Environmentalists could no longer accuse
you of caving in to the industry, and moderate environmentalists will support
your effort to curb greenhouse gas emissions.
Sincerely,
Michael
R. Knauff
cc: List Attached
Honorable Dick Cheney
Vice President
United States of America
1600 Pennsylvania Avenue, NW
Washington, DC 20500
Christie Whitman
Administrator
Environmental Protection Agency
401 M Street
Washington
Spencer Abraham
Secretary
US Department of Energy
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