OG&E 2013 Annual Report Download - page 36

30 OGE Energy Corp.
The Acid Rain Program also focuses on one set of sources that emit
NOX, coal-fired electric utility boilers. As with the SO2 emission reduc-
tion requirements, the NOX program was implemented in two phases,
beginning in 1996 and 2000. The NOX program embodies many of the
same principles of the SO2 trading program. However, it does not cap
NOX emissions as the SO2 program does, nor does it utilize an
allowance trading system.
Emission limitations for NOX focus on the emission rate to be
achieved (expressed in pounds of NOX per MMBtu of heat input). In
general, two options for compliance with the emission limitations are
provided: compliance with an individual emission rate for a boiler; or
averaging of emission rates over two or more units to meet an overall
emission rate limitation.
Since becoming subject to the Acid Rain Program, OG&E has met
all obligations and limitations requirements.
Climate Change and Greenhouse Gas Emissions
There is continuing discussion and evaluation of possible global climate
change in certain regulatory and legislative arenas. The focus is generally
on emissions of greenhouse gases, including carbon dioxide, sulfur
hexafluoride and methane, and whether these emissions are contributing
to the warming of the Earth’s atmosphere. There are various international
agreements that restrict greenhouse gas emissions, but none of them
have a binding effect on sources located in the United States. The U.S.
Congress has not passed legislation to reduce emissions of greenhouse
gases and the future prospects for any such legislation are uncertain,
but the EPA believes it has existing authority under the Clean Air Act to
regulate greenhouse gas emissions from stationary sources. Several
states have passed laws, adopted regulations or undertaken regulatory
initiatives to reduce the emission of greenhouse gases, primarily through
the planned development of greenhouse gas emission inventories and/or
regional greenhouse gas cap and trade programs. Oklahoma and Arkansas
are not among them. If legislation or regulations are passed at the Federal
or state levels in the future requiring mandatory reductions of carbon
dioxide and other greenhouse gases on the Company’s facilities, this
could result in significant additional compliance costs that would affect
the Company’s future financial position, results of operations and cash
flows if such costs are not recovered through regulated rates.
In 2009, the EPA adopted a comprehensive national system for
reporting emissions of carbon dioxide and other greenhouse gases pro-
duced by major sources in the United States. The reporting requirements
apply to large direct emitters of greenhouse gases with emissions equal
to or greater than a threshold of 25,000 metric tons per year, which
includes certain OG&E facilities. OG&E also reports quarterly its carbon
dioxide emissions from generating units subject to the Federal Acid Rain
Program. OG&E has submitted the reports required by the applicable
reporting rules.
Following from the Supreme Court’s interpretation of the Clean Air
Act’s applicability to greenhouse gases in Massachusetts v. EPA, the
EPA has proposed regulations for new power plants. In 2010, the EPA
also issued a final rule that makes certain existing sources subject to
permitting requirements for greenhouse gas emissions. This rule requires
sources that emit greater than 100,000 tons per year of greenhouse
gases to obtain a permit for those emissions, even if they are not other-
wise required to obtain a new or modified permit. Such sources that
undergo construction or modification may have to install best available
control technology to control greenhouse gas emissions. Although these
rules currently do not have a material impact on the Company’s existing
facilities, they ultimately could result in significant changes to the
Company’s operations, significant capital expenditures by the Company
and a significant increase in the Company’s cost of conducting busi-
ness. In October 2013, the U.S. Supreme Court granted certiorari to
review EPA’s greenhouse gas regulations, including the Tailoring Rule
which limits the sources subject to greenhouse gas permitting require-
ments to the largest fossil-fueled power plants. It is conceivable that
the Court could invalidate EPA’s prevention of significant deterioration
and Title V Tailoring Rule, but still leave power plants subject to antici-
pated new and existing source performance standards for greenhouse
gas emissions described below.
In January 2014, the EPA issued new proposed New Source
Performance Standards that specify permissible levels of greenhouse gas
emissions from newly-constructed fossil fuel-fired electric generating
units. The proposed New Source Performance Standards sets separate
standards for natural gas combined cycle units and coal-fired generating
units. As directed by President Obama’s June 25, 2013, Climate Action
Plan, the EPA also announced plans to establish, pursuant to Section
111(d) of the Clean Air Act, carbon dioxide emissions standards for
existing fossil fuel fired electric generating units. EPA plans to publish
the proposed standards for existing units by June 1, 2014, and finalize
those guidelines by June 1, 2015. States must then submit their individ-
ual plans for reducing power plants’ greenhouse gas emissions to EPA
by June 30, 2016.
The Company is continuing to review and evaluate available
options for reducing, avoiding, offsetting or sequestering its greenhouse
gas emissions.
The Company also seeks to utilize renewable energy sources that
do not emit greenhouse gases. OG&E’s service territory is in central
Oklahoma and borders one of the nation’s best wind resource areas.
The Company has leveraged its advantageous geographic position to
develop renewable energy resources and transmission to deliver the
renewable energy. The SPP has begun to authorize the construction of
transmission lines capable of bringing renewable energy out of the wind
resource area in western Oklahoma, the Texas Panhandle and western
Kansas to load centers by planning for more transmission to be built in
the area. In addition to significantly increasing overall system reliability,
these new transmission resources should provide greater access to
additional wind resources that are currently constrained due to existing
transmission delivery limitations.