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Essential Energy Insights - October 2021


Environmentalists join gas groups to call for more time on DOE grid proposal

Opposition to the U.S. Department of Energy's request that the Federal Energy Regulatory Commission write a new rule compensating baseload power generators, primarily coal and nuclear plants, for their "reliability and resilience" now includes some strange bedfellows: Environmental groups joined oil and natural gas interests in comments to regulators.

The Sierra Club, Earthjustice, the Environmental Defense Fund and the Natural Resources Defense Council joined the American Petroleum Institute, the Independent Petroleum Association of America, and 25 state oil and gas associations to ask FERC to extend its accelerated rulemaking schedule to allow more discussion before writing any rules remaking power markets and undercutting the price advantage of cheap natural gas from shales.

"The public interest organizations support the motion of the energy industry associations and request the commission adopt a modified schedule providing at minimum a 90-day initial comment period and at least a 45-day reply comment period," the filing by the four big environmental groups said.

Energy Secretary Rick Perry told FERC that the stability of the power grid is threatened by the "premature" retirement of coal and nuclear plants, which most observers have attributed largely to cheaper gas-fired power. "This diverse mix of resources must include traditional baseload generation with on-site fuel storage that can withstand major fuel supply disruptions caused by natural and man-made disasters," Perry said.

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There is no need for a quick rulemaking to fix "an emergency that doesn't exist," American Petroleum Institute Chief Strategy Officer Marty Durbin said after the energy groups filed their comments in opposition.

"We could see these exact same services with new technology," Earthjustice lawyer Kim Smaczniak explained Oct. 6. "It's obvious that this administration is picking favorites with a thumb on the scale for nuclear and coal at the expense of natural gas and clean energy technology."

"The premise that the problem of resilience is one of fuel security is flawed," she said. Going forward, she thinks it will be comments that sway the commission. "It's not clear what direction FERC will take, but the weight of comments" will be their guide, she said.

The outlook of Michael Krancer, a longtime natural gas booster and a former Pennsylvania secretary of environmental protection, was gloomier. He said the commission will be taking its signals from big coal and nuclear firms in what he sees as a political fight, not a regulatory or process issue, and natural gas has lots to lose if coal plant retirements slow or stall.

He predicted that if a rule is enacted compensating coal and nuclear plants for staying online without regard to price, fewer gas-fired power plants would get built, with cascading effects down to exploration and production companies being forced to write down the value of leases and reserves after gas demand plateaus.

"The Exelons of the world have already written what they want FERC to say," said Krancer, who co-founded the energy regulatory consulting firm Silent Majority Strategies. Exelon Corp. is a major nuclear generation owner.

Individual companies need to make their own comments to FERC, he said, because alliances, particularly one as shaky as the one between oil trade groups and environmental groups, will dissolve quickly in the face of a single-minded focus by baseload power. "An unprecedented coalition, at least for now," Krancer said.

But nuclear operators could "sell coal down the river later in this process, and then all those enviros who are only in the opposition because coal is in the subsidy-welfare rule may see it differently," Krancer said. "Then some will join in support, just like they supported the [New York zero-emissions credit] program."

Exelon said Oct. 6 that it will continue its efforts to push the clean power and resilience characteristics of its nuclear power fleet. "Now more than ever the need for a resilient and clean energy mix is clear. Exelon will always advocate appropriately and transparently on matters impacting our employees, customers and the communities we serve."

FERC opened the public comment period for the proposed rulemaking Oct. 2, which outlines a tight window for work. Initial comments are due Oct. 23, and reply comments need to be submitted by Nov. 7.