 Okay. Good afternoon. My name is Sarah Ladislaw. I'm the Director of the Energy and National Security Program at CSIS. And thank you all very much for turning out today for the release of our new report. If you haven't gotten a copy, they're out there on the back table, and we've got them online as well, in addition to some compendiums of other studies and some data tables for those of you who don't find the detail in here to be enough and want to dig into it a little bit more. Today is the official rollout of our new report called Remaking American Power, which is our attempt at looking at the broader energy sector impacts of the Clean Power Plan. For those of you who joined us in June, we did a preliminary rollout of some of our initial findings. Today's session will build on some of what we presented in that session, and then also focus a little bit on having a conversation about what it means for different participants within the sort of CPP implementation and sort of actualization process. One of our real main goals in doing this report was to help folks, a broad set of stakeholders, folks who produce electricity, the folks who produce oil and natural gas and coal, the folks who are thinking about how to create this rule, finalize this rule, implement this rule, come up with their own strategies for the design options and elements, to think about not only the downstream impacts by that capacity additions or retirements, fuel mix, cost of electricity bills, things like that to consumers, ultimate emissions reduction potential, but also some of the broader energy sector impacts, the things that happen in terms of natural gas or coal production, revenue generated by that and ultimately receipts received for both that regional and national level. We thought it was an important perspective to put on the table at this time when people are considering all of the ways in which they can engage in the discussion over the rule and their own approach to figuring out their implementation choices. I wanted to just take a second to thank the co-authors and our partner on the report, the Rodeum Group. This was a really fun, seriously, fun endeavor working with Trevor and John and Whitney and Shashank, primarily me and my colleague Michelle Melton, in putting this report together. It really sort of married together the sort of policy market technology focus here that we've got at CSIS and the energy program and the similar sort of focus with the economic and analytical chops that the Rodeum Group brings to the table. So we're very, very pleased to have undertaken this effort and hope that you all find it to be useful. So what we're going to do today is talk a little bit about what the report says. I'm going to go just to the next slide really quickly. And then have a little bit of a discussion with some of our guests who are here to talk about what the implications of it are. One of the things we won't go into is some of the detail that we did present in the preliminary findings, and you will find in the report about some things that we think are actually pretty important. So for example, we talked a lot at the preliminary findings event about some of the ways in which we framed the study, which John will talk about in just a moment, both in terms of different sort of compliance options, right? How you count energy efficiency, whether it's credited or noncredited, and how you sort of implement that as part of the rule, what level of cooperation you undertake, all of this has real and significant impacts on the ultimate effect of the rule, both at a regional and a national level. There's a lot more detail about that in the study that we didn't talk about. And then just to sort of flag it at the outset, we know that there's also a great deal of focus about a number of other elements around sort of CPP implementation in the broader energy sector impacts. For example, we'll be holding, and this is the cheap plug, so be attention, we'll be holding an event here on December 8th looking at sort of the role of methane in sort of the natural gas value chain. It is not something we took into consideration in this report because it isn't part of what we were talking about. We understand that it is a very important part of the ongoing dialogue about the rule of natural gas in not only sort of the U.S. electric power sector, but also sort of internationally. We also didn't take into consideration some of the things that happen in a post 2030 timeframe, though we do sort of mark those issues as being important elements of the debate that is out there sort of surrounding this rule. So we will focus on a few of the things that we thought were particularly significant that we did want to highlight from the report today. And John and Trevor will go through sort of the impacts and the importance of the broader upstream energy market impacts and how they, in many cases, sort of outweigh some of the downstream impacts. And I think Trevor is going to talk a little bit about that. And then John is going to go through something that we lacked in the last time that we were going, we did sort of the preliminary outreach, which was sort of a focus on what this means for various regions sort of in comparison. We won't go through all of that information, but we'll do it in an illustrative way to sort of highlight some of the key findings that we wanted to bring out today. One last point for me, and then I'm going to turn it over to Trevor to go through the first part of the presentation, is that we've got with us two excellent folks working in this space as well to talk through some of the perspectives that they bring to the table. Kate Zyla, who's the Deputy Director of the Georgetown Climate Center, do lots and lots of work on the options that states have in terms of their implementation plan. And she'll comment on the study from that perspective. And then we're also very lucky to have Erica Bowman from America's Natural Gas Alliance here to talk about the perspective of the oil and gas industry and people who are thinking explicitly about sort of the production side and then downstream through the sort of distribution side of what this rule could mean and how they're viewing this. Rick Duke, the Deputy Director of the White House Office on Energy and Climate Change, will also be joining us. He will get here a little bit late though, however, and he'll give some administration perspective views as well on sort of the work that we've done and sort of the perspective they bring to the table. So a lot on the table for a short period of time. We're very grateful for all of you to have joined us and I'm going to turn it over to Trevor to get the ball rolling. We'll start walking through some of those also. It was a pleasure to, as Sarah said, to partner with CSIS on this project and to take advantage of CSIS's unrivaled energy policy and market expertise to try to provide more holistic look at the potential impact of the clean power plan. Most of the focus to date has been on the impact within the electric power sector specifically, but changes within the electric power sector have far reaching implications for energy markets more broadly, whether it's natural gas production and consumption, coal production and consumption, international energy trade flows. And so that's the kind of bit of the conversation that we're looking to fill in here so that as stakeholders think about how to engage in this process, they have the full picture in front of them of how their various equities are are impacted. So my colleague John who who led this effort from our side is going to start walking through the results. And I also want to acknowledge Whitney Ketchum who's here with us today and Shashank Mohan who's not who were the real brains behind the operation on on the rhodium side. Thanks Trevor. And I'll second that last point thing. Whitney and Shashank were integral to the to this analysis. And thanks very much. So very quickly, I'm just going to kick off with giving you all a very quick description of what we actually did. As far as the analytical approach we took, and then I'll turn it over to Trevor to start talking about the upstream energy and market impacts that we talked about. So there's a lot more in the report. So please refer to that for all the the nitty gritty details. But on on our analytical approach as both Trevor and Sarah said, you know, the big goal for us is looking not just at the electric power sector, but the broader energy system impacts of the clean power plan. Between our respective teams, we did a deep dive on the actual proposal, got to know it, characterized it in an energy system model called NEMS. It's the same model that EIA uses. We use our own rhodium version of it. NEMS is actually really useful for this type of energy market analysis, because it not only has a fairly detailed electric power system model, but it also has fairly robust descriptions of upstream oil and gas and coal reserves, renewable energy and downstream energy demand. So you can actually impose a clean power plan policy in the power sector and the interactive effects across the economy can be captured in a model like NEMS. So we use that as our main platform for analysis. And out of it, we get the national and regional results that are captured in the report you all have in your hand. To capture the clean power plan itself, it's I think everybody now that we're a few months out from the proposal, everybody can agree, it's pretty complicated. So there's a lot under the hood and the clean power plan proposal. And I think from the analysis that's done today, you can see there's a lot of different ways to capture the proposal in a modeling effort. We try to stay at a high level and understand just a couple of key design elements and their impact on broader energy markets. So we are, we were fairly narrow in our drive here. And just for background, we started with our reference case, which is key to the annual energy outlook 2014 with one small tweak where we include EPA's new source performance standards for fossil fuel fire power plants, which means almost nothing in the forecast, but it is important that it's in there. And then for policy scenarios, we try to stay as close to the original clean power plan emission rate goals as possible. We're trying not to presuppose what states might do, but instead say, okay, what's the least cost way to meet the emission rate goals that EPA has assigned. So that means we've captured the policy as a tradable performance standard, either at the national level or regional level. I'll tell you what that means a little bit more in a second. But in a tradable performance standard, if you've got, say, an emission rate goal of 1,000 pounds per megawatt hour, if I'm a more carbon intensive generator with a higher emission rate, I have a compliance obligation. I have to go out and buy credits so that I can continue to run. That adds to my cost of operation. If I'm a generator below the emission rate level, say a wind generator, I get to generate credits, which is a subsidy for me to run. And so those shifts and incentives change the overall emission rate of the regulated fleet. And that's how you eventually get to your emission rate goals set by EPA. There's a number of other ways states can choose to get there from an instrument perspective, such as a mass based trading program. They could do what we call in the report portfolio approach where you've got a mixture of energy policies that ultimately get your power sector to the emission rate goals. But we decided to keep things as, it's not quite simple, but it's as straightforward as possible with regard to the EPA proposal. And then we changed two variables in the analysis. We changed the level of cooperation and we changed whether or not states use energy efficiency as part of their and credit that towards compliance with the emission rate goals. So we chose these in large part because we had a sense that they would be important for energy market implications. So we have four policy scenarios up on this table. You've got with regards to energy efficiency crediting, you've got all states either crediting energy efficiency. And what we mean by that is it's deploying energy efficiency to the level that EPA contemplated in the clean power plan building blocks or no states use EE crediting as part of their state plans. And then the other variable, the cooperation, we either have a single national tradeable performance standard, which is kind of a gold standard for cooperation that would definitely be a big undertaking under the clean power plan, or you have a regional fragmentation approach where we use the electric market regions in NEMs and each individual region has to meet its own emission rate goal on its own. And then because we're interested in energy market impacts, we also tested our analysis against different sensitivity scenarios around different natural gas futures. So we used a low oil and gas resource and a high oil and gas resource case to get a sense of how the overall pricing and availability of natural gas might influence compliance pathways and also a high LNG exports case, which is effectively the same as a high gas demand case where you see the parameters up there of a nine BCF a day by 2020 and 18 BCF a day by 2030 export regime. And so we'll touch base on a little bit of those results, but if you want more detail on that, I definitely encourage you to look at the report. And speaking of the report, you see on the PowerPoint here, which will also be available afterwards. There's a link directly to the CSIS website where you can get it. Sarah mentioned July and our preliminary release. We got that out there to start the conversation on this and we're picking it up again here with the final report. And this chart just kind of gives you a sense of what we covered then and compared to what we're covering now. And the short answer is we're covering everything we covered then, only more so now in the full report. Presentation is a little more bridge, but we have our full set of policy scenarios. We now have our market sensitivities, which we did not cover last time. We have a more complete set of results on the energy and electric power system impacts. And as Sarah noted, we have much more rich detail on the regional level beyond just the national impacts. So then I'm going to turn it over to Trevor to talk a little bit about what we saw in the energy system. Sure, so as John said, our goal was not to forecast how states will actually comply with the Coin Power Plan, but to look at if states were to take a least cost pathway to compliance. What would that mean for energy markets with those two design variables, so level of cooperation and to extent to which energy efficiency is credited. And the kind of backdrop for the implementation of the Coin Power Plan is a power sector that has undergone some fairly significant changes over the past few years as a result of the shale revolution. So thanks to relatively low-cost natural gas, the share of power generation that comes from natural gas has grown from low 20 percent, so up to a high of 33 percent in 2012, and is back in the kind of high 20s, low 30s now in a commensurate decline in coal fire power generation. If you look at the outlook pre-Clean Power Plan, and this is the 2014 annual energy outlook from the EIA generation, U.S. power generation by source, the extent to which coal generation is projected to decline simply as a result of cheap natural gas we've largely seen. So at $4 per MMBTU, even $3.50 per MMBTU, it's unlikely that coal fire power generation goes below 35 percent, 38 percent of the U.S. total. Most of the projected growth in demand is expected to be met with natural gas, given the new source performance standards that John mentioned. It's unlikely that we're going to build a new coal fire power plant under current regulations, and most of that low gets met by natural gas and some nuclear and renewable. But because natural gas is relatively cheap, there is a lot of dispatch in the country that is kind of on a razor's edge, where the marginal economics between coal and natural gas are very small, which means that small changes in power market incentives can have a big impact on dispatch. So what we see in one of our scenarios, and this is the national cooperation without efficiency crediting that you see on the right, is that emissions standard that is proposed in the clean power plant shifts the incentives in favor of natural gas in a way that leads to a pretty large change in dispatch. And that natural gas is at a national level the least cost means of complying with the emission rate standards the EPA has put forward. So some increase in renewables, a little bit of an increase in nuclear, but the vast majority of the change in generation is a coal to gas switch. In part that's because gas is cheap, in part it's because we have a large number of natural gas combined cycle power plants that have available capacity and because building new natural gas combined cycle plants is relatively inexpensive compared with other generation options. We see that dynamic across all of our policy scenarios. The magnitude just changes. So in scenarios where this is the change in generation on average between 2020 and 2030 relative to a baseline. And the magnitude varies depending on how much efficiency is credited. So if state's credit efficiency is a compliance mechanism that means you have to do less fuel switching. So the downside for coal generation is smaller and the upside for natural gas generation is smaller, but in all of those scenarios gas remains the least cost compliance pathway. And then we tested that against a number of gas market sensitivities. So what if the shale resource turns out to be lower than currently expected? What if we export large quantities of LNG? Would that change the economics of gas in the power sector and lead to another generation solution? And we find that by and large gas remains even in scenarios where we're exporting up to 18 BCF a day of natural gas by 2030. The shale gas resource base in the U.S. is currently estimated is large enough to both meet that export demand and deliver large-scale fuel switching in the electric power sector. To put that in context, we expect somewhere between three and 11 BCF a day of additional natural gas demand as a result of clean power plan implementation that depending on the extent to which efficiency is credited up to 14 percent increase in total natural gas demand in the U.S. The vast majority of that met by an increase in domestic production, so an almost as large increase in domestic output. On the flip side, that means a fairly large decline in U.S. coal consumption and coal production up to a 40 percent decline in U.S. coal production as generator switch from coal to natural gas. Again, in scenarios where efficiency is credited, the downside for coal is lower just as the upside for natural gas is smaller. When you put dollars to those quantity changes, the impact is fairly large up to a $32 billion a year increase in natural gas production revenue nationwide, and I can't see the numbers from here. Oh, this is prices that I'm looking at here. Sorry, need a new prescription for these glasses. Sorry, the price impact is relatively modest because of that flat shale curve, so I think up to an 8-9 percent increase in wellhead prices, a much lower increase in delivered prices, 2-3 percent increase in delivered natural gas prices across scenarios and a decline in coal prices, so you add the change in quantity to the change in price and up to a $32 billion a year increase in natural gas production revenue and almost as large decrease in coal production revenue. When you stack those changes in upstream supply alongside the changes in downstream energy expenditures, it's clear that if you're thinking about your equities as a state or as a company in the clean power plant, you really need to look beyond the electric power sector that the upstream changes are likely to be the most significant dynamic from an economic standpoint, that shift from coal to natural gas and renewables, potentially larger than the increase in energy expenditures as a result of the policy. John's going to walk through what that means for specific states and regions of the country and how different stakeholders think about their interests in this implementation discussion. Thanks, Trevor. So we saw, Trevor just went over kind of some of the national impacts and how they're quite substantial upstream and not just looking at the downstream impact, so now I'm going to break it down with a few select deeper dives and a few regions that wanted to give you some high-level thoughts on this first. So first of all, these are the regions we use in the report, these are US census regions. Pick your favorite color and keep track of it as we go through this. We'll be carrying through this color scheme through the next few charts. So first of all, this is not our output, this is EPA's output. What I wanted to start with is when you look at what the EPA projects for emission reductions under its state implementation scenario and its modeling of the clean power plan, you can kind of get a sense of relative effort expected for across these different regions. And so that's what this is here. This is the per capita emission reductions on an annual basis on average between 2020 and 2030 by census regions. So you notice that they are not all the same number and that's a product of the building blocks and how EPA designed the emission rate goals based on opportunities for reductions as opposed to everybody does x percent reductions of some amount. And you can see the West House central region, the purple up there, for example, is a little over three tons per person, which is quite substantial compared to say the Pacific, which is just 0.1 tons. And I think EPA would be the first say this is not exactly the way they expect everything to play out. The clean power plan is a very complicated beast and we don't know where it's going to lead yet, but this gives you a sense of relative effort under the current proposal. And if you take that another and extrapolate a little further, you say, okay, well, relative effort equals relative cost. Which is probably not a perfect one-to-one, but it gives you a sense of where you might expect the biggest impacts to take place. But we found that when you look beyond the electric power sector impacts, first of all, electric power sector impacts don't always line up with what you just saw in that previous chart. But then when you go beyond that and look upstream at the energy market impacts for coal and gas, this story completely changes. So this is just our one scenario, the National Without E scenario. I'm putting this up more to kind of prove the concept, and then we'll dive in a little deeper on a few regions. But on the left-hand side is, thanks, is the production revenue. So dark shaded is natural gas production revenue, light shaded is coal production revenue. And then on the right, the other side is energy expenditures with dark being electricity and light being all other energy, so gasoline, natural gas, any other energy besides electricity. And in this scenario, you see within all regions, electricity expenditures, electric bills go up. So without EE, in this particular scenario, everybody sees slightly higher electric bills. But there are relatively modest changes in when you think about $400 billion in electric bills nationally, for example. And then when you look upstream, the scale completely changes. So West-House Central, for example, sees that a $17 billion upside for natural gas, which is almost 17 times as much as the power sector impacts for that same region. So this illustrates that different regions and states within regions are going to have very different equities as they approach clean power plant implementation when they consider all of these different aspects, both electric power side and upstream for energy production. And it's important to think about these things when engaging in, after the rule is final, and trying to figure out what you're actually going to do. So speaking of what you want to do, if I, we've been in the report, we pose two questions that we think states should be contemplating here, which is, if I'm a state, I want to answer what do we want to do in our state and what do we want everybody else to do? Because some of these impacts, and particularly the upstream ones, are contingent on everybody else's actions, not necessarily your state's actions. So all of these answers are really going to come from a lot of different factors and they're all going to be different across states, such as generation and natural resource mix, your existing energy and climate policies, how your power market is structured, whether or not across the state boundaries, what EPA ultimately assigns for an emission rate goal for your state and what your stakeholders want. And not all of those things are going to line up perfectly for any state. And so what we thought we'd do is take a few of our regional results and do a closer look at a few regions. So we've called out West South Central because it really does have this gigantic upside for natural gas and you can see, you can see in the top corner there, those are the states, Texas, Oklahoma, Arkansas, Louisiana. And basically on the upside is by far the largest any region in the country. These are big natural gas producing states anyway and they happen to be a big deep area of additional supply if you need it. And that upside gets maximized so long as no other states do energy efficiency, which is kind of an interesting outcome. And if you're Texas or in Oklahoma, you might be thinking about what you might ask your neighbors to do or not do in their Clean Power Plan design. Cooperation with other states really brings down the cost for this region. Part of that is a function of how the Clean Power Plans fringes changes through cooperation. So working together in a broader market provides more compliance opportunities and really lowers the cost. And if you had to do one thing, cooperate or do EEE, cooperation gets you a lot more cost savings in this region anyway than EEE certainly helps. It helps everywhere from an energy cost perspective but cooperation has the bigger magnitude impact for this region. On to the mountain states. Again, you can see this is a much larger region geographically, which also has a non-trivial upside for natural gas. Quite substantial. Around $5 billion a year in our no EEE scenarios, but an even larger downside for coal. This is home to the Powder River Basin where half of the coal production in the United States comes from. And you can see the overall impacts between those two are going to be obviously pretty tangible for folks, in particular because the coal downside can be mitigated to some degree if other states do around the country do EEE crediting. Cooperation in this region is important for a lot of other reasons not just cost reductions. This region is home to a huge amount of renewables in particular wind and solar and not a lot of demand. So some of these states export at least 50% of their generation towards the coast, towards the west coast. And so getting cross recognition and of those renewable resources and everybody else's plans is going to be very important. And if you cooperate in a single plan, that's the single easiest most efficient way to do that. At least as the current plan is proposed. It also gives some of these states much greater compliance flexibility. Some of these states have a handful of regulated units and that's it. I think Idaho has won. And so if I'm a state and I'm trying to figure out how to do this most cheaply, it's better to get more opportunities. And the only way to do that is to cooperate. Moving on to the last one here, which is an outlier in a different direction. New England has no upstream energy production period. So with the exact, I mean, they have some in in state electric renewables and whatnot, but from oil and gas oil, gas and coal, they don't have any. So their equities are a lot different when they come to the clean power plan. They're looking solely at the downstream impacts and how to manage those. And this region happens to be one that's had a long history of carbon policy and clean energy policy and energy efficiency policy to build on. And going forward, their least cost pathway based on our analysis really just ramp up what they're already doing. You know, expanding their cooperation both in carbon markets, but also ramping up other clean energy policies is going to keep their costs fairly manageable under this under this regime. So with that, we're going to switch gears a bit and hand it back to Sarah to talk more about the infrastructure side of this because, you know, a lot of gas out of the ground means you got to do something with it. Got to put it somewhere. So thanks. Thanks very much, John. I think one of the things that we wanted to focus on in particular in this study and just as a sort of a caveat out front is one of the other big reports that we're doing is on sort of midstream oil infrastructure and it's called delivering the goods. And, you know, the big challenge in the energy industry is getting the resources you have to the place where you needed in a timely and efficient manner. And there's a lot of sort of cost and distributional issues associated with the ability to do that. And so a lot of the work that we did was sort of predicated on the fact that we've gone through and I see Howard sitting in the front seat. So thanks to EIA for this wonderful, wonderful graphic that we used is over the past, you know, several years we've seen a significant increase in the amount of, you know, natural gas infrastructure that's been put in place to accommodate the search. Just the ability to sort of move the increasing amounts of shale gas that we've been producing in various parts of the United States to the places where they need to be, not taking into consideration some of the sort of, you know, the more downstream oriented aspects of that investment cycle, but really just to get it from, you know, from the place that it's produced to the place where it can be utilized most efficiently has been a fairly sizeable undertaking, one that has, you know, slowed in recent years in terms of overall capacity, but certainly something that sort of, you know, several years back on the natural gas side alone congestion in terms of sort of moving infrastructure or getting infrastructure cited in time to be able to economically produce some of these resources was a big topic that we were dealing with. And then there's been additional studies done that look at, and this one is one that was recently done in combination with ICF and NINGA on just the projected amount of pipeline capacity needed over the next several decades in terms of what will additionally be needed to move some of these shale gas resources to places where where that resource shall be required. These kinds of estimates, however, don't take into consideration what we focused on in this study which was where could the significant increase in demand and production be as a result of these clean power plan projects or excuse clean power plan implementation efforts. And so we didn't, we were not able to calculate the actual number needed in terms of capacity additions to match the demand but when you look at sort of the range and particularly we've sort of circled the places on the map here where in in sorts of this is a map you all know sort of with the shale gas where the resource basins are. The previous two charts have shown sort of where the capacity additions have been placed in terms of needing to move to move resources from sort of the supply surge. The question going now forward is how much capacity may be added over what time period in terms of the response to clean power plan implementation to additional capacity a generation capacity on the natural gas side to new sort of new generation capacity added on the natural gas side will be required and what will be required in terms of of the pipeline infrastructure to get it there both both from an interstate and an interstate perspective. We think that there's a lot more work that needs to be done here. The reason why we flagged it was as much as we and you know be careful Whitney doesn't look at me nasty but like as much as we love models they assume stuff gets built and as our friends on the hills will be actively debating you know most of the afternoon infrastructure doesn't always get built right and it's not saying that natural gas infrastructure is nearly as politicized from that perspective but the the question is both from sort of a transmission capacity and a pipeline capacity perspective is what could what could the additional constraints and or issues in thinking about the infrastructure that this might require for your region how does that factor into as Trevor and John have both very eloquently said before that's sort of the perspective you bring to it in terms of your options right. So for example the northeast in terms of the ability to use a lot more natural gas demand is all predicated on their ability to get it there and that is not a small a small story at this point right. So so if you if you want to sort of you know reap the benefits or understand the benefits of additional natural gas within your supply system or even we we didn't do haven't mentioned really sort of transmission infrastructure but that's also sort of an additional issue. There is sort of an infrastructure component here that does need to be considered when you're making those decisions and so we think that there's probably a good deal more work to be done in this area to understand it both that sort of the state and that national level. So that's in a nutshell sort of the really high level version of what we did. There's a lot more detail as we said in each of the regional aspects but sort of also at the national level and certainly happy to talk about that. I wonder if it might be worth sort of taking one second just to do any clarifying questions the please technical clarifying questions if not what I'd like to do is move over to sort of our panel and sort of start the discussion about maybe with starting with Kate we sort of laid out a whole bunch of issues that we think are worth folks at sort of the state and regional level to be considering but Kate's actually working with a lot of folks at the state and regional level to talk about what they can or should be considering and sort of to offer maybe her perspective on what some of those issues are and how you view some of the sort of cost benefits of some of these decisions so if there are no sort of technical clarifying issues there's two all right they're real technical clarifying issues all right Fernando's right there and then I'll come to you next okay all right there no one else great thank you sir my question is pretty straightforward in the model for the power plants that currently exist and those that might be projected in the future is there some distribution of the reality of the size and efficiency of existing power plants to your gross model or have you created some sort of a normalizing factor how real is your analysis of existing power plant efficiencies and sizes that has a significant impact on the cost of the infrastructure obviously whether it's an 18 inch pipe or a 30 inch pipe depending on the consumption factor and efficiency factor can you give me a little bit of insight into that you specifically talking about the gas plants yeah I mean we it's the existing plants are all representative of the current fleet so they do represent different sizes efficiencies those types of things for new it's largely kind of an off the shelf typical plant like I think it's 500 megawatt capacity they could run up to 85 percent capacity factor and have a heat rate somewhere in the 6,000 for the existing fleet yes did you include the cost of the gas infrastructure and your costs meaning in in like electric rates and things like that when you had all your bar charts to talk about new gas or whatever are the costs of the infrastructure to move the gas included in the delivered gas prices yes yeah so production prices they don't they don't pay that you know you're getting out of the ground but yeah no delivered prices do reflect that sorry hi sorry if this is a little high level but I'm a little befuddled why there is a circumstance with no energy efficiency in it I I just can't see any state not including energy efficiency it's the one thing everyone likes I can give you one quick example all the registries they they do a carbon right now the regional ground at greenhouse gas initiative does not explicitly credit energy efficiency it's a mass-based program that everybody has to hold allowances they have efficiency policies that run alongside the carbon policy but that's different than explicitly crediting energy efficiency as compliance for the carbon policy is that make it see what I'm saying it's a nuance that shouldn't matter all that much but the clean power plan makes it matter just the way it's designed but you know I think where states I mean and there's also several states that don't have the energy efficiency policies in place now so you know whether or not they want to ramp them up something brand new on top of something brand new is another question but that I think just to be in sort of recognition of the sort of spirit of your point is one of the reasons why we put up sort of the no E scenario here was it was one of the bounds that helps make some of the points we were trying to highlight right so we have a range of scenarios that also include energy efficiency and some of the data was included in that and some of the charts you know take a little bit more time to look through actually do do that but I think it was the cleanest neatest way to get around the highly complex issues about how you count energy efficiency and how much energy efficiency counts and is real we had very I'm much smarter on that than I ever was before after talking to these guys it is an active area of debate and I think that one of the interesting things is we were going out and talking about and sort of socializing this issue and I think we probably end up talking a little bit more about this is you are correct there is a lot of you know incentive to use energy efficiency from a lot of other constituencies out there as well what we were trying to do here was just put some bounds around it and this was the useful way of sort of showing some of the points that we were trying to highlight but the report does go into sort of the other range of that as well so I hope they'll take a look at it I think probably would be good to sort of turn to Kate first and then we'll turn to Erica after but tell us a little bit about sort of you know how you take on what we've what we've put forward today sure my pleasure thank you so my name is Kate Zyla I'm the deputy director of the Georgetown Climate Center I am not a state but we we work with quite a lot of states on this particular policy and set of issues we are based at Georgetown's law school here in DC and we do a lot of work on the clean power plan including providing a bunch of resources and tools and data all kinds of stuff that you can find on our website which is not what I'm mostly here to talk about today we also convene a number of states to meet with each other and to meet with stakeholders to talk about some of the issues that come up for states and thinking about the clean power plan and how states might comply with it and so we hold a bunch of meetings where we bring states and power companies together to talk about their options and what ways they might comply with the plan we also convene a group of smaller group of states that works together to discuss issues and submit comments that we facilitate to EPA in December last year this group got together and wrote a letter that was submitted to EPA we're working together now on another set of comments that will come from a similar set of states currently being finalized I thought maybe they'd be out today to tell you about but they're not quite ready yet but coming very soon and so we work with these states to figure out sort of what their questions are and what some of the issues are and to help them express their thoughts to EPA and so that's some of the perspectives that I'm bringing here things that we hear and talking to states through these variety of different fora and I'll also say a few things about other things we're hearing from states either through comments they submit to EPA or other things they say publicly because of course the states don't all agree on any of these things there are lots of different perspectives in the group that we're talking to might have a very different opinion than another group that someone else might talk to so I'll try to bring a few of those perspectives together the first issue I'll note that some of the states we work with are focused on actually sort of gets to this last question about why might you not include energy efficiency and one of those reasons you might not include energy efficiency is that EPA takes comment on whether the fora building blocks they create are should all continue to remain fora building blocks and one of the ones they take comment on is should energy end use energy efficiency be one of the fora building blocks and so I think information like what you gain by including this building block is actually probably helpful contribution to that that piece of their question and the states that we work with a lot generally are very supportive of the general approach that includes the fora building blocks the first one being sort of plant level heat rate type and efficiency improvements the second one being the shifts to natural gas discussed a lot here the third one being more renewables and nuclear and the fourth one being energy efficiency and in general that set of options I think well reflects the sorts of strategies that states have used to reduce greenhouse gas emissions in the past and continue to use and so general support for that that system-wide approach as opposed to a much more narrower plant level sort of approach something else that's been really important to the states we work with is flexibility the proposal lays out these fora building blocks that EPA uses to set states goals but then the states meet those goals in any way that's not any way but in a variety of ways that they choose and they put into their plans and that's something that really allows the states to lean on their existing programs and work they've already put into things like renewable portfolio standards energy efficiency policies mass-based programs like reggie and to really try to figure out how the system they have in their state the resources they have in their state the policies they already put in place and the ones they expect to put in place later can be packaged together into a plan that makes sense and achieves their goal and so that flexibility has been really important to states too there have been a lot of questions so far about the goal numbers the stringency of them and how they relate to each other I think you've seen a lot of helpful context for that in the report here as well you know just questions about how did you come up with these numbers and is mine as equally hard as yours and how do we figure all that out is everyone being treated fairly first of all but also what does that mean for your incentive to work with your neighbor if your goal feels much more or much less stringent than theirs does so a lot of these kinds of questions EPA has recently come out with a notice of data availability that thing starts to answer some of these questions and there's a lot of time just spent sorting all of these details out likewise another sort of data thing you know we've talked about how you might have these intensity based rate system targets you might convert that to a mass based target part of the flexibility EPA provides that states can do that but there's been a lot of question about how do I know what my mass target is how do I calculate that is what I'm doing now good enough hard to tell and EPA has again come out with some technical documents recently that helped states think through that process but a lot of what they've been doing is just sorting out all of this data all the data that was used to create the goals in the first place these new technical support documents these new guidance it's been a lot of trying to figure out boy what is my goal and how did they get it and do I agree with how they got it and what does it mean for me and so I think the conversation while has been really meaty and technical has been sort of early and I think a lot of the things that we're seeing here are sort of part of the evolution of the conversation over time one of the things that has already come up quite a bit today is the potential for a multi-state collaboration as the report shows there are a lot of reasons to work with your fellow states reducing costs for consumers reducing administrative and compliance costs you know the bigger the region you have to work with you can take advantage of more cost effective reductions can align better with the electricity system and can provide flexibility if they're sort of market disruptions when you have a bigger group working together you can sort of fill in these gaps better and states are really interested in figuring out what it means to collaborate you know I think there's a model you can think about the regi system in the northeast where nine jurisdictions do more or less the same thing in a compatible way but you can also imagine collaborations that are not quite so whole hog right you can imagine states that have you know compatible renewables tracking systems or efficiency programs you can imagine just platform consistency where they may have different rules but they all say well gee we're all tracking the same kind of compliance unit whatever that may be let's let's use the same system and just have the option of more interchangeability even if their policies are really independent and so a lot of question about what it means to have a multi-state program versus a single state program and how those might overlap if if they're not you know entirely overlapped a lot of questions about sort of enforceability who's who's who makes sure this stuff happens right if you put state policies into a federal plan does that mean that EPA then enforces your state's RPS just how does this all work and a lot of interest in states and what EPA's proposal calls the state commitment approach where the states themselves sort of sign up and say we'll put ourselves on the hook to make sure these reductions happen we don't need you to be the enforcer of our particular policy and another in the weed set of issues that goes back to the platform issue I mentioned you know how does all this get counted and and verified and what are the systems in place for tracking and trading whatever these units are and making sure that they're not double counted that they we understand how they move or don't move across state lines and that everything is measured and verified and and sort of rigorously counted so a lot of technical details you see a lot of other states commenting already in the record the Regi states in the northeast had a letter they submitted November 5th arguing that there are some real opportunities to strengthen the rule and suggesting that greater cost-effective reductions are achievable than were asked for in the rule you'll see a lot of states submitting much more specific state related questions and issues you know Alaska comments on on you know whether it's appropriately included in the system since it's not connected to the other states Arizona questions are the way that interim goals are handled Georgia questions the way that under construction nuclear power is handled not surprising you know Louisiana comments that its goals were incorrectly calculated and also suggests that the whole system of calculation is just not appropriate so you see a range of comments and submissions from states I think also a range of ways of engaging with some states really trying to see how they can make the rule as effective as they can in other states saying we really don't like this and we don't want it to happen there are a couple of lawsuits happening already one by Murray Energy that was joined by nine states although 14 states filed a brief in support of EPA in that same lawsuit another group of states very similar to the first filed a separate lawsuit these are going to be heard together in the DC circuit court in the spring and then you see some state legislatures getting involved with their own sort of perspective on the issue and in a couple of states passing laws that limit the way that the state could comply with the rule in Kentucky there's a law pass that limits the state plan to measures that can be undertaken at the EGU themselves rather than the broad basket of system-wide policies that EPAs would allow the states to do and in Pennsylvania you have a law recently passed requiring legislative review of the state plan by both houses of the state legislature and so you see legislators trying to figure out how they will start to play and what the state decides to do so a really wide range of perspectives and approaches taken by the states I think one of the interesting things is sort of what happens now and I think you'll see a theme in some of those comments that were really about what is in this proposal and what does it mean for us and I think you see those conversations now shifting to okay what do we do about it and how do we figure out which of these choices works for us and I think one of the primary ways they'll start to figure that out is with data and analysis and the states have really limited resources to conduct this sort of analysis on their own they're expensive and hard and take a lot of time and effort and staff and there's just a huge appreciation we hear from states for work like you all are presenting today and data to help them sort through what their choices are as several of these folks have mentioned you know what the states the way they approach the plan affects significantly the results to the economy the costs and benefits they'll see and try to understand what their options are it's really helpful to have this kind of data available and also again it matters what your neighbors do right so as you're trying to figure out all right I'm a state what do I do it matters what your neighbors do and it matters what your region does and so again this is all really valuable input to their conversations I think as they go through sort of what their choices are they're thinking about a lot of different kinds of costs and benefits including obvious ones like electricity prices and electricity flows and pollution reduction and public health and other economic benefits I haven't heard as much so far about some of the upstream impacts that you all have have really highlighted today not because they aren't important but I think largely because we haven't had this sort of information and so I think this will be a really helpful contribution to their conversation and I really appreciate you're inviting me here to talk about it there was a great array of some of the issues one of the things I wanted to ask you about though is I didn't I didn't hear you say much about sort of timing right and so to the extent that you know a lot of what we were sort of talking about and looking at was about sort of optimization right and optimization is great but like you know doesn't always happen for everybody to the extent that that the pace of of you know what sort of you know has been put on the table does do you have a sense that it sort of drives people more towards as their sort of shift to okay what are our options more towards how does how could we do this in a way that complies with our existing system which is the point you started with right you know is how can we not not shift things too much because that that that may may make it harder to meet sort of what is already being sort of deemed a an aggressive time scale sure yeah they're certainly thinking about the timing and that's part of sort of how how hard or easy this is right one of the comments that that a lot of people have had that is a little farther than the weeds and I was I was starting to go but there's a lot of question about the the pace that use of the different building blocks implies and this is part of what came out in the notice of data data availability you put EPA put out recently which is that there seems to be this requirement that if you're using a lot that that the natural gas shift building block needs to happen faster than the other building blocks in order to get to the sort of average rate by by the interim time period and so a lot of question about the interim goals is related to the timing and how depending on the approach you'll use the natural gas piece was expected to ramp up too quickly and it might lessen the flexibility states have to meet the target in a number of different ways and so that's one of the pieces that EPA responded to with the the NOTA and that I think has been helpful for states to reflect on because there's this interplay between all of the flexibility and the ways that you get to the goals but also that the different expectations about how quickly that can happen and ways that might inadvertently shift you from one choice to another um well hopefully we'll have we'll have a little bit more of a discussion about some of that in addition to sort of what the the additional pieces of information the NOTA sort of put on the on the table for people to consider Erica Bowman is the Vice President for Research and Policy at the American Natural Gas Association and she actually kind of like the perfect person to have on the panel because she's at once both sort of an electric power expert but then also very much understands sort of the upstream perspective and has been working on it with a from from her position at ANGA I thought maybe if you could share some of your thoughts about sort of the perspectives you're hearing from those who sort of produce and and distribute natural gas on that perspective on the rule and the potential upstream side of that and then also to the extent that you are dealing with policymakers at a state and local level how much this message is or isn't resonating in terms of your perspective on how they rank those list of things that Kate was just talking about sure great and thank you so much for for having me today just a quick talking point on what ANGA is so ANGA is America's natural gas alliance and we represent several larger independent natural gas production companies in the United States so if you combine our membership production we represent about a third of natural gas production overall it's interesting I mean we we actually in our industry have are similar in the States and that we have varying views on the rule itself ANGA as an organization we're not taking a position on the rule we're not opposing or supporting it but we do want to actively engage in it and speak about you know the benefits that natural gas has to offer certainly the abundance and the affordability of that and and try to address any concerns that that may come up as these discussions go go forward but you definitely have have a range of views in the industry I think kind of more there's there's some that that look at this rule and think of it as another piece of regulation and concern around well what's next you know if we're going to be regulating the power sector this way does this impact the natural gas upstream does it pack impact oil upstream and then you have other companies that are looking at it from an opportunity perspective certainly looking at all the the resource results that CSIS has produced and there is some opportunity there for natural gas production to to reap some benefits depending on how the rule kind of comes out in proposed form and certainly how States choose to comply with the rule but one of the the I think from our perspective one of the biggest concerns that we have is is more more broad it it does apply to electricity and that electricity rates can drive manufacturing and there's certainly been a lot of talk about the industrial renaissance coming back to the United States a lot of more a lot of unshoring happening because of low natural gas prices and one of the the things that we've been thinking about and trying to understand a bit more in detail in our own analysis of the rule is if you were to move if States were to choose a mass-based system because there is flexibility as the rule stands now that they could do so will that type of choice from a policy perspective impact your economic growth as opposed to a rate-based perspective because if you do a total cap on your emissions you really at that point in time you're saying this is a priority this is a priority that we hit these emission targets and you could have credit prices or allowance prices go very high depending on how stringent that particular cap is if you do a rate-based system it's a little bit different because it's shaped more like a subsidy to those who generate credits and a cost to those who have to buy the credits but you have a rate that you're able to as long as you're meeting that rate it doesn't necessarily matter the amount of electricity that you're consuming it's the fact that the amount of carbon that you're producing while consuming that electricity is at a certain level so if you think about it from a broader climate perspective and we're on-shoring manufacturing processes from China, India depending on whichever country it is that and we have a lower carbon rate and we're producing more goods in the U.S. we may actually increase U.S. emissions but overall in the net benefit to the climate we actually may be reducing so that's something that we've been trying to figure out so in our own analyses we've kind of determined that a rate-based approach is more effective in terms of not limiting your growth opportunity from that economic perspective especially as it's associated with our abundant natural gas supply the other piece that is certainly been cropping up is the question around infrastructure today's infrastructure associated with natural gas and its deliverability to electric generating units the clean power plan is interesting because its standards are based on an annualized rate level so over the course of a year you need to hit that rate where a lot of the concerns and discussions that are occurring come from reliability people who are thinking about reliability as they should be certainly reliability organizations those utilities that need to serve electric customers etc they're thinking well if I have a peak day like a peak winter day and I need natural gas to serve both my residential and commercial customers that use natural gas for heating but I also need natural gas to generate electricity is my pipeline that I currently have in the ground big enough to do both especially when you have such a large heating demand during that time frame but again the EPA in there and in the as the rules propose it is an annualized number and so you could theoretically say well you don't need to use natural gas during those peak heating times you can send that gas to residential commercial customers and you can use a different type of generation whether it be coal oil nuclear some other dispatchable form or maybe you have more renewables that are are producing that day whatever it is so that's something that I think needs people need to remember when they think about the rule itself and from an infrastructure standpoint because when you when you look at the peak design of different pipes to serve the large heating demand during the winter season and you compare those winter months and you can then you look at the non-winter months and then the level of natural gas flowing through those pipes you're looking about a 60 percent flow rate through the pipe capacity throughput compared to their peak design so for seven months out of the year you have about 40 percent on average head room to serve additional electricity generation so that's something that I think you know it's a discussion around the reliability and there should be that discussion but there's also a real discussion around you know maybe we just have to operate our grid differently maybe we use existing assets they have to be paid the appropriate money to to stay around so that they have the revenue to make them whole but maybe you operate your good differently maybe you operate coal for a few months out of the year and the rest of the year you're really ramping up natural gas to comply with your clean power plan so those are some of the things that we've been looking at from an industry perspective certainly really appreciate CSIS and all the work they do and look for and to look at what George Town has also been looking into as well so thank you thanks Erica that was really helpful one of the things I was sort of wondering in is sort of you ended your comments is there's a discussion of how to really smart ways to incentivize greater reliability and thinking about the way that you operate the grid and so one of the things that we were talking about in over the course of the study was a very simple question is who are the relevant decision makers and sort of deciding you know ways in which to optimize your compliance with this with the rule and how to get over some of the reliability or infrastructure or other sort of needs and considerations have you guys thought about and I know you said you weren't taking a position nor you know sort of providing comments or things like that but on the best way to sort of bring about a discussion about some of those issues from a from an industry perspective like because you sure you certainly in all fairness sort of talked about of a broader perspective than than just the upstream perspective right I mean sort of natural gas end users thinking about sort of you know the having memories of some of the volatility that you know high gas demand or high gas surplus could bring if not managed appropriately how are you guys sort of thinking about talking about ways of engaging positively on that right we are we are writing some of the comments on the proposal itself just for clarity in terms of you know the different organizations that we work with to address some of those those issues that certainly the regional transmission authorities so New England ISO PGM ISO my so all the ISOs you know they're looking at this and they're trying to figure out well how how can I deliver reliability because that is their number one goal and then that also feeds up into FERC into the Federal Energy Regulatory Commission so we're engaging at on that level but it's also at the state public utility commissioner level to just education around really you know peak days peak demand days versus you know annualized numbers but also the cost to to the cost that's incurred to build that new pipeline so let's say that a region determines that yes we do need more pipeline and we want to move forward with that for instance New England New England has had very large basis differentials for many years meaning that they've had high prices during the winter and they have low pretty reasonable prices during the non-winter months it's been a challenge for them to build the additional pipeline that they need to support electric generation because the generators that use the natural gas are not able to recover that firm transport costs in the marketplace so that that really becomes a discussion around well you know is there a way that you could change your market rules your market tariffs to address that problem so those are kind of the dialogue the discussions that that we're engaging in and there may be different solutions it may not be that solution but there's there's a lot of different ways to to go about it maybe just to pick up on the point about sort of transmission infrastructure which we haven't really you know talked too much about but the John I don't know if you want to talk about it within the context of how how we discussed it in the report but we focused a lot on you know the potential for additional natural gas supply infrastructure but given different scenarios in different pathways for the ways in which you could meet you know this sort of increased demand one question is about sort of what kind of requirements would be out there in terms of transmission infrastructure especially in in certain regions which you know obviously has not necessarily been easier to build than in the other infrastructure so I guess two questions along those lines that's something else that you guys have been looking at sort of along along the same you know sort of reliability sort of lines but then also maybe Kate from from your perspective I mean does that the need to build infrastructure or the desire to avoid building infrastructure considerations that that you're hearing from states as well yeah so so we do engage a little bit I don't think we've been as actively engaged on the the transmission side of things but it is something that should be thought about because I mean you really could some people talk about they call it gas by wires where you know you do have a very I mean there's a very large production going on now in the Northeast and when I say Northeast I mean Marcellus which is Pennsylvania Ohio West Virginia and it's it's sitting you know very close to obviously the east coast which is a huge huge load population density and you have something very unique that we haven't had before and that is a large a large production basin sitting right right near demand so you know in theory you could build electric wires instead of the pipes to serve those electric generators but again it gets down to cost what's the the least cost solution to doing that and certainly it gets down to what customers and those who are impacted by such projects you know how they feel about it too yeah I would say that's it's certainly a concern and and states know for you know themselves what their own constraints are and where they're where they're limited and where they're not and it's it's very top of mind I think the trick is translating what they know about their own situation to the policy options at their fingertips now okay well I know I know I'm gonna have a hard time getting that built or or that's that's been a problem so far but what does that mean for whether I should do a rate-based system or a mass-based system and whether I should work with other states it's there's just so many variables to sort through that I think it's it's definitely one of things they're factoring in but it's just this big puzzle of trying to figure out given what I know and what I don't know what's next yeah well I guess that it was one of the following questions I had for your comments as well was you know the flip side of flexibility is complexity right and so to the extent that people are looking for a little less flexibility or a little bit more certainty on on certain things rather than the others I mean do you think that that that ultimately the the sort of patchwork of responses that you get from folks the state and local level on sort of what what they would like to see more clarity on versus where people would like to retain their flexibility is there kind of like a coalescing point there is that yeah I think I think part of that we saw in the the documents that EPA is just released in the last couple of weeks I think you know they heard pretty early on requests from states and others for it here's stuff we'd like to before even give you comments formally here's the stuff we'd really like more clarity on and I think that's what you saw come out in the notice of data availability and then the the rate to mass translation technical support document you state you're saying I don't I don't know if I want to do a mass based firm because I don't know what my mass based goal would be and if it seems harder or easier you know can you help us figure out so what our starting point would be I think a lot of a lot of those clarification questions were what came out of these recent documents and so I think now that those are out states can you know dig in and say okay well all right now I know what my choices are a little bit more clearly and now can I figure out again how do I make that choice and I think that really is where the analysis comes in is that there are there are so many options on the table and it's not a resisting of the options it's just looking for guidance and resources and data information on how to evaluate which will be in our interests which ones will will you know help us reduce costs which ones will make the system more reliable and and more seamless and I think this sort of is the next phase of the discussion now is all right now we know what we've got how do we figure out how we actually comply and uh hi rick welcome we've told everyone you're coming so but maybe an effort to give you a second to catch your breath and sorry trevor to put you on the spot for a second one of the things I thought was interesting about some of erica's initial comments and the perspective that we've heard reflected from a lot of folks who think about you know oh gosh price signals for producing their gas but also selling their gas and something we tried to take into consideration and the report is folks sort of you know from from an oil and gas upstream perspective trying to figure out whether or not you can have your cake and eat it too right and and are there competing sources of gas use that drive up prices that then sort of erode you know the ability to use gas say for you know the petrochemical or the this sort of manufacturing side of the equation which you know quite frankly for refining and everybody who's very energy intensive has been sort of a big deal and you did a different study earlier on sort of like the potential benefits of that and sort of the the natural gas price responsiveness of some of that investment from from a competitive perspective I mean is there anything you wanted to add on that point about whether or not sort of you know increased gas demand and the context of of sort of power generation under the CPP would be sort of a competitive dynamic for the gas sector I think a lot of what we looked at in sort of trying to imagine the highest gas with the lowest availability high highest gas demand or lowest availability suggested that the resource base is pretty responsive but I didn't know if you want to add any color to that you know I think that's right I mean we've in in our kind of most extreme scenario which was combining 11 bcf a day of additional gas demand in the power sector with 18 bcf a day of lng exports and you know the price impact was still relatively modest now it could turn out that the shale resource in the U.S. is not as robust as as in the kind of current annual energy outlook although the kind of experience to date has been a kind of improved outlook on gas availability as times progress not a decreased outlook on gas availability I think I'm probably less concerned about than Erica about the impact of the CPP on a nascent manufacturing revolution in the U.S. in part because we have yet to see actually any tangible evidence of said manufacturing revolution there has been an increase in manufacturing output in the U.S. but it's mostly been in non-energy related sectors or in sectors attached to energy production so steel pipe manufacturing truck manufacturing the kind of energy intensive manufacturing that you would expect to see benefited by lower cost energy in the U.S. our trade position in those goods has actually deteriorated which is not surprising because our trade position and energy is improving and so we're suffering from a very modest form of Dutch disease in the U.S. I mean industrial rates are six, seven cents per kilowatt hour on average in the U.S. now I think in our most aggressive scenario for CPP implementation they go up to you know eight, eight and a half cents industrial electricity rates in China are 12 and a half cents on average right now they're you know 15 cents on average in Japan 14 cents in Europe so it's hard to imagine a kind of policy environment in the U.S. that closes any of that gap for electricity and the share the parts of the U.S. manufacturing complex that are most directly benefited by the shale revolution it's because of the direct gas and NGL feedstock it's not because of electricity prices per se so the exposure would be more on the increase in gas demand well Rick in the interest to sort of bringing you into the conversation here you know you've seen the report but probably not read every word of it I can imagine but one of the things that we you know is you know sort of the crux of what we're trying to do is have a conversation about bringing in a broader set of constituencies on the more full aspects of sort of the downstream and upstream impacts of what CPP implementation could mean and you know you as being someone who's been in the administration you know since the beginning of it realized sort of all the different perspectives we've had on sort of the energy revolution that we've undergone here in the United States plus all of the sort of environmentally oriented sort of regulatory items that we've put on the table I just wanted to sort of get your thoughts on how you're thinking about it at this stage of the game and some of the things that we put forward in the report great thanks Sarah and I'll just make very brief comments and then happy to participate in the Q&A I think that this report is a welcome reminder of a lot of things but a couple that I would flag one is that we really have seen the natural gas boom in this country as a central part of both economic prosperity and climate action and the clean power plan is certainly a central nexus of those opportunities and I think this report is a welcome reminder that all the natural gas supply that we now benefit from helps to make it possible to both cut emissions and grow the economy simultaneously in the report does a very good job of laying that out and explaining the nuances of that and I guess I would just relate it to that point underscore the importance of the synergies between solutions like renewables and natural gas and we see tremendous complementarity between those intermittent renewable sources and natural gas backup power for the medium and long term not just for the near term and then I think the second thing that the report notes that I would underscore is just how central the role the States is in implementing the clean power plan that EPA is putting forward the Clean Air Act is deeply federalist in its in its bones and the clean power plan within the Clean Air Act is no exception to that so States will really be very much in the lead in choosing how they proceed and they'll have tremendous opportunities to design policies that work for their context and that maximize economic efficiency and really work for their stakeholders and their circumstances that's great thanks Rick John and Trevor did you want to add anything before I move to questions from the floor no okay all right great okay well we've got a couple ground rules here please just state your name and your affiliation to the extent that you've got a question put it in the form of a question at least somewhere along the line and Howard's laughing but weird and we'll take some questions have a bit of a discussion let's start with Howard up here I'm gonna add a third roll wait for the mic sorry yeah so my question relates so there's a lot there was emphasis placed in the presentation on the benefits of cooperation but it looks like the way the modeling was done is that for the national case so simply applied a national standard so effectively the benefits of for a particular region would reflect both the what I guess regular people would call the benefits of cooperation for a given set of separate state standards and the benefits for certain states associated with looking at a national average standard versus the standard they actually have under the program so can you provide some insight into how the what is presented as the benefits of cooperation actually divide up between the benefits of you know having a national standard which for some people is going to be below the standard they have for other people will be above the standard they have and the actual benefits of cooperation for the standards people actually have sure I can take a stab at that and I think Howard's getting at one interesting aspect of the clean power plan at least as the June's proposal says I think the the recent notice might change things a bit but or could change things a bit but when when you cooperate you average your emission rate goals across that cooperative region so if you are say a state with a very high goal and you wanted to cooperate you have very little incentive to because most everybody else is going to have a more stringent goal than you so why on earth would you cooperate right because you effectively as you average out that goal your overall compliance obligation gets more stringent and the reverse happens if your mission rate goes below in our analysis our national case we just took the we followed EPA's guidance in one of its initial technical support documents in the clean power plan proposal and averaged out the mission rate goal to a national goal and basically lead frogged over the question of why would a state cooperate if that mission that effective emission national emission rate goal would be more stringent than what they were currently facing so we did that because the national goal is is a bounding case for the overall national benefits of of cooperation which is different than how that you were showing benefits for specific regions yeah yeah so so one thing I would say is we didn't show them all here they're all in the report you can actually see some regions don't benefit from cooperation you do see that in the report where they're where their overall energy expenditures or electricity expenditures anyway go up in the national case because the emission rate goes more stringent than the they were facing so we do discuss that we do discuss this phenomenon of why on earth what I cooperate if that was the case and highlight that in certain circumstances states are going to have to talk about some sort of compensatory mechanism or other inducements to help everybody feel nice about playing together that difference in incentive changes a bit if you switch to mass rate mass based goals so that's another thing we point out the report and another thing that I think the recent notice helps with because then it then it kind of locks in a certain amount of tons per state and that doesn't change regardless of cooperation so you do have a different game so to speak if you're all in a mass space if everybody chooses that mass based path and then decides to try and cooperate then if everybody chooses a rate based path then everybody tries to cooperate at one I mean I think that this will be if I was a political science professor I would spend the next like three years assigning this to my students is like game theory real world example of game theory and so I mean the bottom line is like if you did side payments and you cooperated nationally you could structure in a way that absolutely everybody would be better off than a world in which they weren't the question is what would the mechanism for said side payments be and there are mechanisms that are available within power market regions but that'll be the kind of fun part to watch is as states with disparate interests and cooperation talk to each other can they broker side payment solutions to come up with a collaborative scheme that is better on net for everybody in involved one quick thing I would add based on the notice of data availability that I found quite interesting EPA openly contemplates setting doing the building box on a regional basis maybe different regions for different building box but they look at that and if you if you were to take that approach you should have less variability in emission rate goals across states which would immediately bring states closer together in this type of decision-making process it all depends on how how EPA lands on it but there they are certainly asking for comment on on those types of approaches which could kind of narrow that that gap Rick did you want to add anything nothing that was well covered agreed thank you for this excellent panel and congratulations for the new report I work out of resources for the future and we also doing a lot of research on clean power plant and one of our through the ridges research we had is about the building block 2 and building block 3 this sort of have already been covered by some of the panelists but I want to also like throw this out for your free discussion is is the beauty adding building block 3 probably going to dilute some of the cover technologies of the covered fleets because building block 2 is about dispatching into the natural and GCC but building block 3 is adding up the renewable energy which is going to the denominator which is probably going to dilute the dispatch effects of the building block number 2 is there going to be a concern or has that been modeled in any of your researches or that's totally not a concern at all this is my first question second question about probably I can put Richard into this discussion because you came in late but about the legal risk of all four building blocks they're probably going to be since from what building block 1 to building block 4 even though there are some flexibility they're going to be facing more strange and go so states probably going to be less incentive to like you know cover or get through all four building blocks if not all are covered or in their final state implementation plan what are the alternatives for them to achieve or for the whole nation to achieve that ambitious 26 to 26 goal that Obama President Obama have already proposed in his conversation with China so that's it yeah that second question is definitely for Rick so on on the building blocks I think one thing to remember is that there's the building blocks and then once you have that output then you then that's that's the goal right and that's independent of how you got there as far as any policy that state might use to get to the overall goals and I think in our analysis you see that regardless of how the those building blocks are set you know it's largely a coal to gas switching exercise either with or without efficiency efficiency kind of reduces that magnitude but it still is building block two in the real world does a lot more than building block two in the BSER at least in our analysis so I guess I'd just stop there I mean I don't as far as concerns for diluting emission reductions again I think the BSER is a calculation it's a it's just a mathematical formula that you know I think gets the incentives right as far as how it treats different technologies so what I think what matters more is once you've got that goal states setting up the right incentives to get get and meet their own goals whether they are lease cost pathways to meeting that goal or maybe they have other priorities in mind but you know I think that's the more important thing once the goals are set and Rick so let me start with a brief comment on the legal risk question just broadly I think it's important to remember that the environmental protection agency has a long track record of success with these kinds of efforts so when you look at the history of socks and knocks in PM regulation over a period of decades the agency has been repeatedly sued and has repeatedly prevailed and has driven down those pollutants by some 80 percent from their prior levels and so it is true that there will be litigation I think that's almost a certainty I think it's equally true that the EPA has an obligation under the Clean Air Act and recent court rulings to move ahead with carbon pollution standards and the power sector is clearly the greatest opportunity for that in the near term so it is something that they need to do and I think are very much moving forward deliberately and with strong legal foundation for with respect to the question of the role of the Clean Power Plan and overall 2025 target and overall 2025 target just announced with with the same time that President Xi Jinping of China announced their target I would just say that the Climate Action Plan is a comprehensive plan and when you look at the set of things that are underway it's important to remember that so we're not even talking about just energy CO2 we're talking of course about non-CO2 gases so in the case of methane there's a broad interagency approach that spans from landfill methane to voluntary measures in the ag sector to oil and gas related methane emissions and activity across all agencies in order to help deliver the reductions in that particular gas when it comes to industrial gases like hydrofluorocarbons we have a wide range of activity both domestically and diplomatically so the Environmental Protection Agency has something called the significant new alternatives policy program or the SNAP program I forget the exact acronym but the SNAP program which involves changing the status of certain hydrofluorocarbons so that they can no longer be used in certain applications and greenlighting certain alternatives and that is underway with important reductions coming from EPA's efforts there there's also a big private sector push that we just announced in September at the White House with some 700 megatons worth of cumulative emissions reduction through 2025 from private sector leadership on HFCs and then on a global scale president has made extraordinary progress in the context of the Montreal Protocol with addressing hydrofluorocarbons and this week they're meeting to see if it's possible to move ahead to the next steps in addressing HFCs in that context we're very committed to that and very excited about that prospect including what it would mean for market-based approaches to reducing HFCs domestically and then of course in terms of the energy CO2 question the clean power plan is central but we also have a wide range of other measures in motion which will contribute to emissions reductions and lay a strong foundation for reaching the 2025 goal so that includes existing light-duty vehicle standards or fuel economy which of course are going to double fuel economy by 2025 and as the vehicle fleet turns over that leads to greater and greater reductions in oil consumption improving energy security and reducing carbon pollution we're going to do another round of in this case heavy-duty vehicle fuel economy standards and so that'll help as well Department of Energy continues to crank out appliance efficiency standards that are saving consumers billions and cutting carbon pollution further and there's a wide range of other programs in motion addressing energy CO2 not to mention extraordinary market trends in our favor with the cost of things like solar affordable tanks plummeting and lots of movement on electric vehicles in fact just today we're announcing a new set of private sector commitments at the White House to help propel electric vehicle markets and so the states are going to continue to help deliver localities in the private sector and we're going to have a comprehensive approach consistent with the climate action plan to get the job done so anyway extended answer to a simple question no it's great it's very helpful and Kate I just did you want to add anything on sort of the the state perspective on the legality question or whether or not the sort of the the risk to illegality or the finding of illegality or the just the time it takes to go through that process is a significant factor and in that decision process yeah I would say that as as with everything else that the state opinions on that will vary with some of them actively suing and saying the rule is is is not legal and some of them saying that it really is the best system of emission reduction which is what EPA is required to identify because it does use the variety of approaches and policies that states are already using to drive down emissions and so I think you see opinions across across the range and I guess we'll see how that shakes out great and we've got a question back there Hi good afternoon I'm Patrick Wilson from the Babcock and Wilcox company which is an American technology company and Rick we're very excited to have been a part of the Clean Air Act era so my question is really about I'm really for Trevor about how you characterize the market we're a technology company and so we're concerned that the administration's big climate goals globally that have been so in focus this week really count on the adoption of clean coal technology internationally and the problem is there's no market as you've already said the market for new power in the United States is flat and to the extent that any new power generation of any kind is going to be added is going to be natural gas there's not much innovation in creating power from natural gas so the question is the administration has doubled down on we've got to have this great new technology we're going to implement around the world to reduce carbon emissions from coal which is going to be the fastest growing baseline baseload coal baseload power in the world so where's that innovation going to come from because clearly if there's no market in the United States there's not going to be any coal innovation here so I mean there certainly wouldn't preclude the option for deploying CCS on existing coal-fired power plants in the U.S. I imagine I may know the technology profile that is is different than for new coal-fired power plants there was in the in the U.S. China joint announcement a mention of a joint CCS demonstration project there there's excitement around CCS for enhanced oil recovery in Canada as well as the U.S. and other places I mean I think in general one of the estates think about about what they the plans they put forward under the under the clean power plan I mean one of the challenges is as Sarah alluded to before I mean this is a plan that spans the 2020 to 2030 time horizon and the technologies that you would deploy just to meet that 2020 to 2030 time horizon are not necessarily the same that you'd want to deploy to reach deeper levels of decarbonization over the long term and now the the clean power plan requirements are a floor not a ceiling and so states are of course free to think about what does a long term low carbon pathway look like for our state or region and how does CCS factor into that do we want to position ourselves for deeper emission reductions post 2030 and what role should CCS deployment play in that in that period and I would imagine the nuclear guys have a kind of similar set of cost concerns too natural gas is inflicting pain on lots of people not just Rick can probably speak to kind of administration CCS deployment programs more than more than I can obviously I mean I think that you know certainly from our analysis that kind of in that 2020 to 2030 time horizon it's hard to make the economics of either nuclear or CCS pencil out I'll just briefly add that I think the problems that you outline are very recognizable and I think that part of the answer lies in ongoing support on the research and development front which we of course are doing through the Department of Energy there's some mechanisms through the Loan Program Office that we're hopeful will yield some results we think that some of the bilateral cooperation of the sort that Trevor just mentioned with China may have some value we're excited about that aspect of joint announcement with China and of course there are some green shoots here and various projects within the U.S. context and we're absolutely committed to the success of those efforts I think across the board the key for all the low carbon solutions for nuclear for CCS and of course for sustained scale up of renewables and for that matter natural gas and then natural gas with CCS down the line you know the key is decarbonization over time and we think the Clean Power Plan is a critical step in that direction I'll just add one more thing on this you know we've talked about the role of states and the Clean Power Plan states have already played a pretty significant role in some of those initial nuclear and CCS projects we're seeing in the United States primarily PUCs and I don't think that role is going to diminish as the Clean Power Plan gets implemented in some of those same states or similar states we mentioned we modeled one pathway where states meet the least cost way to path to meet the emission rate goals but states certainly have other policy goals beyond just getting to the the Clean Power Plan goal and some of that can be technology deployment of a number of different flavors including CCS and nuclear so I think considering engagement with some of those leading states now and seeing how they might be contemplating your preferred technologies in their planning purposes would be a smart move if you want if you want to find a market in the U.S. under the current proposal I mean I think it just sorry one more thing I mean I think it's important to be like clear about this is this is a consequence of not having cap and trade or carbon tax like long-term price signal you know the technologies that lose in the move from a long-term market price pricing are nuclear and CCS and the more expensive longer lead time technologies that under a shorter focus regulatory approach they had they just have less room to less room to play and just to you know add a finger to the scale there I mean I think we spend a lot of time talking about various things including sort of renewables distributed generation models other things as Kate sort of mentioned that states might have an interest in pursuing that are beyond sort of you know what the what sort of the overarching federal level interests are but that that takes some work right and we've done some studies here in the past that looked at sort of how to the costs related to actually promoting things above and beyond the kind of savings you get from you know efficiency or gas or some of those other things and it's it's a cost right but it's also seen as an investment and so I think that to the extent that you want to think about a longer term time horizon along the lines that we were thinking about those kinds of things we were talking about those longer term time horizons that's another discussion that you know can and should be had it's just within the context of this you know of this particular conversation not necessarily it takes a lot of work to advantage those things in that circumstance can I add one little thing there which is that states also in many cases themselves have established their own greenhouse gas reduction goals that have happened you know maybe economy-wide and may have happened long before the clean power plan and not that they're inconsistent but many of them do look longer term and look out as far as 2050 and they do feel driven to achieve those goals and will be looking longer term where they've set those goals Hi there Christy Tezak from Clearview Energy Partners for Mr. Duke one of the things that you mentioned was the cross agency effort on methane there was a memorandum in 2010 talking about of taking a broader approach to greenhouse gas emissions evaluation under NEPA is that something that might be part of accelerating our progress towards the more aggressive 2025 Beijing goal is that another opportunity to you know look at you know especially like with this integration of infrastructure and and large programs is that another opportunity to to find another increment of progress Thanks for the question I think that when you look at the climate action plan what you see is an effort to look comprehensively across all sectors of the economy and all greenhouse gases and to apply the existing authorities that the administration has to achieve emissions reductions in those sectors and across those different greenhouse gases I think that it's important to recall that when it comes to NEPA questions those in and of themselves are process related requirements so I think that those are important process related requirements but really the focus of the climate action plan and where we see the ongoing opportunities to reduce emissions is through existing legislative authorities that allow us to to make that happen through energy efficiency standards through actions like this EPA SNAP program that I just mentioned through diplomacy through the EPA's clean power plan and the like Thanks Francisco de la Chine from the Electric Power Research Institute so two questions first on the modeling energy efficiency is a key component to this and in the scenarios where you have it included how did you deal with the costs for implementation of energy efficiency and the other question both modeling and regulatory renewables in particular Canadian Hydro did you did you see anything coming in on the modeling and then on the regulatory side would Canadian Hydro be potentially advantaged given that EPA hasn't necessarily clarified how to treat interstate renewables in the proposal I can start with the modeling questions so with EE we actually beyond just costs we adopted EPA's assumptions generally across the board for energy efficiency there's a few small revisions to that there's a lot more detail on the report on how we handle it but so the costs of EE are the same as what EPA assumed we incorporate the utility the cost that utilities incur for implementing EE into the rate so those expenditure numbers you see for electricity include that cost the participant costs that consumers incur from EE is not included in that expenditure number it averages about 20 billion dollars a year through 2020 to 2030 assuming that the cost structure and that deployment so so we we are clear those numbers are all included in the report we're clear about it but that that covers that on on Canadian Hydro we saw very small but non-trivial increases in imports from Canada generally I don't think we could differentiate what those were but you kind of know what it probably is and but that's because you have different incentives for generators across the board in the United States and you have those transmission lengths and that that happens but I think it's I don't I did not look like a lot of new capacity was getting built in Canada it's just more energy flows let's put it that way but I don't think our model could tell us much more than that on that front great thank you my name is Frank Barron and I'm a private investor first I'd like to thank CSIS for once again an amazing job of getting on top of these complexities presenting it to at least the investment community at the level we can talk about it I'd like to direct a question to Richard you heard a lot about the strategic planning that's going on here and you're an important part of it like CSIS is you heard the gentleman from Babcock and Wildless and you're going to hear it from me you know we live in the tactical world you know we confront the markets day by day moment by moment and I think as as Erica pointed out here is a large body of us that are in between those two points the tactical instance and between the longer-term strategic things like we were just talking about before you know last night I was informed by some of my co-investors in Hong Kong that China is making positive move now to begin dumping coal on the world market huge amounts of coal not small amounts but huge amounts of coal we also have significant rumors going on that Saudi Arabia may be getting ready to do the same thing on oil we have two million barrels a day right now of surplus on oil so we're engaged in a coal war and we're engaged in an oil war we are engaged in an energy war that's a very large thing to do my question directly Richard to you would be those bridge gaps between the long-term strategic issues that we have to deal with at the Babcock-Wilcox level which could be many years and the tacticals that we deal with moment to moment historically have had some assistance being bridged by taxation policy is the Obama administration involved in any bipartisan discussions at all that might lead to some tax administration changes to enable that bridge to be a little stronger than it currently is well I appreciate the question and it is a very complex moment in geopolitics of energy right now and so I'm not going to comment on the specific examples you mentioned but it's certainly a dynamic time I think let me just briefly say with respect to the clean power plan since that's the main focus of the discussion today back to the point about states being in the lead on this states and groups of states have extraordinary latitude to design durable clear systems that provide a foundation for scale up of all the low carbon solutions and so we will encourage EPA to work closely with states to help them make that happen but we also encourage stakeholders to keep up the dialogue with EPA about what you think will work for your interests and to allow that foundation to be as stable and clear and long term and successful as possible on the specific question we don't have any announcements to make at this point on the question of taxation thanks thanks rick okay I think we got him for one last question the gentleman in the fourth row back the blue shirt right here hi just wanted to get back to EPA's Noda for a minute I know you guys might not have might not have had time to do this earlier by the way my name is Doug Obi from inside EPA that's the EPA question EPA discussed treating natural gas a little bit differently in the Noda or maybe counting I guess more new gas generation counting it differently and they were thinking of doing it and I was wondering how that might tweak some of the conclusions in your report that you're releasing today and if you don't have you know specific numbers or anything can you give a qualitative sense of where that might affect some of the conclusions thanks they put out a few different ideas and that notice not not a few just around natural gas and then a few beyond that so it's important to keep that context because even EPA admitted in the notice that any combination of those suggested changes could yield very different emission rate goals for the states and I think without kind of contemplating a particular combination of components there one thing that considering new gas or they also asked for say co-firing and existing coal plant coal plants contemplating either of those as a component of the BSER calculation would of additional stringency in states that don't have a lot of current existing combined cycle units but do have a lot of current existing coal units so there is a handful of states that building block two the coal to gas switching does not really apply at the moment and considering new gas or co-firing would allow that building block to apply to those states meaning it would require some additional reductions from their current proposed emission rate goals that would shift potentially the overall stringency that we consider in the report and also would potentially affect the distribution of impacts in our regional cooperation scenarios but I couldn't without giving a you know concrete example it's it's hard to hard to say exactly how things would play out but it is it is interesting to note that you know it would it would also go I mentioned earlier how they talk about doing RTO wide or power market wide building block analysis and that would also kind of including new gas would also bring in the bounds of the the distribution of the emission rate goals so you'd have less deviation less differentiation across states which could be interesting I would just say in terms of a degree with with John on on those points but also if even a VP were not to include the new natural gas combined cycles in the standard setting but states for them to use the new combined cycles and compliance mechanisms it does impact a little bit in terms of the amount of gas that you may use to comply and that you may be complying using a new facility because it has a lower heat rate and displacing maybe some of the existing gas facilities so you'd see some distribution dynamics there I think we'd only one more time for one more short question if there is one if not yeah you want to do one short you used fossil with ccs in your study does that include natural gas combined cycle with ccs very short answer is yes slightly longer answer it's almost all of the fossil ccs is on those charts was natural gas with ccs not cold with ccs okay well listen part of the reason we get people to come back is we let them leave on time so I just want to express my deep appreciation to Rick and Erica and Kate for making time to be here today my deep appreciation to Trevor and John for the opportunity to work with them and then Michelle and Whitney should stand up stand up sorry we're the glory hogs which you need some recognition both for their intellectual leadership and carrying a lot of weight on this we really appreciate it thanks to all of you again we very much view this is our way of being helpful to a dialogue we think is ongoing and we will be continuing this in ways that you can stay tuned for in the future so thanks very much for coming today