Saturday, January 24, 2009

Help from a somewhat unexpected quarter

Hard on the heels of a big Sure, Go Ahead! from the Minnesota Public Utilities Commission, the Big Stone II power plant project got some really bad news from, surprise, surprise, the federal Environmental Protection Agency. Two days into the new Obama administration, the EPA notified the South Dakota Department of Environment and Natural Resources that it objected to the permit issued earlier to the utility consortium that wants to build the plant.

This decision was issued by the Denver office of the EPA. It is pretty clear from a perusal of parts one and two of the decision, linked above, that the EPA staffers have been working on this for a while, but the timing of the release is interesting. Here’s what MPR said the EPA was objecting to:

The EPA objection is over an air quality permit issued last November by the South Dakota Board of Minerals and Environment. At the time Big Stone II officials called the approval "a major step forward" for the plant. Now the EPA's Denver office is questioning whether the South Dakota air permit is adequate.

"We identified three key issues of the state's title five permit that we determined were not consistent with the requirements of the Clean Air Act," says the EPA's Carl Daly.

The agency wants South Dakota officials to revise the permit, he says.

Among the EPA objections to the permit are the sulfur dioxide and nitrogen oxide output limits and whether the permit sets up adequate monitoring of the plant's overall emissions, Daly says. Both gases contribute to acid rain.

South Dakota has 90 days to change the air permit to satisfy the EPA's objections. Daly expects South Dakota will be able to meet that deadline.

Unsurprisingly, the utility consortium says this will raise the cost of constructing the power plant. In other words, it will have to pay for some more of the externalities of the project that it was hoping to just off load on the public and the environment.

What’s an externality, Spot?

An externality in this case is part of the true cost of operating the enterprise that the enterprise operator avoids:

In a competitive market, the existence of externalities would mean that either too much or too little of the good would be produced and consumed in terms of overall cost and benefit to society. If there exist external costs (negative externalities) such as pollution, the good will be overproduced by a competitive market, as the producer does not take into account the external costs when producing the good. If there are external benefits (positive externalities) such as in areas of education or public safety, too little of the good would be produced by private markets as producers and buyers do not take into account the external benefits to others. Here, overall cost and benefit to society is defined as the sum of the economic benefits and costs for all parties involved.

Pay attention to that definition, grasshopper, because we’ll be coming back to it very soon.

Got it, Spot.

A thump of the tail to Mercury Rising.

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