TCS Daily

California Must Streamline Regulation to Provide Power and Protect the Air

By Lynn Scarlett - February 12, 2001 12:00 AM

As Californians battle to keep their lights on, the state's environmental lobbyists worry about air quality. They fear that lawmakers in the midst of the crisis will weaken environmental regulations so that older generating plants can come back on line and new ones can be built more quickly. In Washington, the White House last week announced it would examine options for regulatory relief. Some California lawmakers are also pressing for regulatory relief so older plants can rev up their engines and new plants can come on line more quickly.

Changes in environmental regulations are in order. But these changes need not spell environmental backsliding. If California emulates what some other states are doing, regulatory changes would improve, not undermine, environmental quality.

The state needs more power supplies. Demand ramped up by 14 percent between 1996 and 1999, but electricity generating capacity nudged up a mere 2 percent. Under current regulatory procedures, getting a new plant on line takes at least four to five years. Yet other states are managing to improve environmental quality and expedite permitting of major industrial plants.

Seven years ago, New Jersey, then ranked second only to California for its regulatory red tape, began overhauling its environmental permitting. It first experimented with facility-wide permits. Instead of requiring firms to obtain permits for each and every possible source of pollution at a manufacturing plant, the agency developed a single, facility-wide permit. Companies worked with regulators to come up with an overall environmental performance plan. As long as they kept within the emission limits spelled out in the plan, they could increase production or change technologies without getting new permits.

As sensible as this sounds, the old permitting process did not function in this way. Under the old system, changes in technology required new permits, and changes in production levels could also trigger new permits. Cumbersome and sluggish, the old system actually deterred companies from investing in newer, cleaner, more energy-efficient technologies.

New Jersey has since replaced this facility-wide program with an even more far-reaching Gold and Silver Track program. Under this program, companies with environmental management systems in place that ensure high environmental performance -- including energy-efficiency goals -- get fast-track, long-term permits.

Like New Jersey, Oklahoma also examined its environmental regulations in the early 1990s. The regulations, the state's secretary of environment opined at the time, "frustrated people" and "hindered industrial development." So, Oklahoma created a "customer-serving" environmental agency focused on streamlining the permitting process. They moved toward a "one-stop" procedure. They also created a "general permit" through which facilities with similar processes could receive authorization under a single rule rather than undergo permitting on a case-by-case, equipment-by-equipment basis.

Experience in some companies with the federal Project XL, a program designed to streamline permitting while maintaining high environmental performance, also offers potential guidance to the state's lawmakers as they address the state's power problems. Under one XL project in Minnesota, a manufacturer was able to install new, more efficient equipment without getting prior regulatory approval. Similar projects in California could help non-utility manufacturers improve their energy efficiency by upgrading equipment, thereby reducing their demands for electricity.

Project XL offers the feds a useful vehicle with which to help California. Some of the Project XL experiments unleashed time-consuming negotiations -- often the result of disputes between the U.S. Environmental Protection Agency and its regional offices. Efforts by the Bush administration to facilitate rather than torpedo XL-type permitting agreements could expedite construction of electricity plants without compromising environmental quality.

Environmental lobbyists have been leery of these streamlining initiatives. They propose, instead, greater emphasis on conservation and boutique renewable energy sources like solar and wind.

Conservation can play a role -- but only if two conditions are met. First, the state will have to let retail prices rise. And, secondly, the state will have to introduce some regulatory flexibility so big users of electricity can move more quickly to energy-conserving technologies. Conservation on any meaningful scale requires the very kinds of regulatory flexibility environmental lobbyists have opposed.

Boutique renewable energy also can play a role -- but it will be modest, at best. The state's renewable energy portfolio is currently just over 10 percent of total energy supplies. Solar power remains relatively expensive. Wind power does not provide a steady stream of power. And both, at any large scale, have environmental impacts, particularly on landscapes.

Regulatory innovation of the sort pioneered in other states offers California the best way to bring on more power supplies -- and maintain, or even improve, environmental quality. These innovations should not be confused with regulatory relief that would jeopardize the air-quality gains California has made over the past two decades.

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