ORDES
OHIO BASIN INTERSTATE ENERGY OPTIONS
CONSTRAINTS OF FEDERALISM
PHASE
OHIO RIVER DASIK ENERGY STUDY
-------
September 1980
OHIO BASIN INTERSTATE ENERGY OPTIONS:
CONSTRAINTS OF FEDERALISM
by
Boyd R. Keenan
Department of Political Science
University of Illinois at Chicago Circle
Chicago, Illinois 60680
Prepared for
Ohio River Basin Energy Study (ORBES)
Grant No. EPA R805588
OFFICE OF RESEARCH AND DEVELOPMENT
U.S. ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
-------
PREFACE
In the summer of 1975, a committee of the United States Senate directed
the U. S. Environmental Protection Agency (EPA) to assess the impacts of the
proposed concentration of power plants in a major portion of the Ohio River
Basin. (Other "energy sources" also were to be assessed, but the emphasis
was to be placed upon generating facilities.) EPA, in turn, selected a
group of Ohio Valley and midwestern university faculty members to carry out
the assessment known as the Ohio River Basin Energy Study (ORBES). The
effort has been in progress since the fall of 1976. The researchers are now
in the final stages of summarizing their most significant findings. Neces-
sarily, these findings must be presented in abbreviated form in a final main
report upon which general consensus has been reached by a 13-member ORBES
"core team."
Individual core team members have attempted to be responsive to requests
from a number of constituents for analyses within their respective areas of
competence. Chief among these have been their colleagues on the core team,
who jointly determined which materials should be included in the main report.
Other constituents have varied in number and character for core team members,
dependent in part upon the academic discipline of the researcher. Those deal-
ing with issues of governmental concern have been particularly sensitive to
questions and counsel from public officials serving on an ORBES Advisory Com-
mittee and from other policymakers, including members of Congress.
Among certain environmental groups and regional bodies a feeling persists
that an interstate approach might ameliorate negative impacts from power plants
in localized portions of the ORBES region or even in the entire region. Even
before the Senate committee mandated the ORBES study, consideration of pro-
posals in the U. S. Congress encouraged the view that regional mechanisms
might be helpful. By the time the ORBES study was launched in the fall of 1976,
discussions of such mechanisms had begun among leaders of regional organi-
zations, other policy makers, and residents in areas where plants were being
concentrated. These mechanisms can generally be categorized as relating to
either plant "operations" or plant siting.
At the beginning of Phase II of ORBES, the core team decided that the
main report would be built chiefly around a "scenario" methodology whereby
plausible but hypothetical conditions would be assumed for each scenario.
Then, impacts from the various scenarios would be assessed. A limited
number of regional operational options were incorporated into various
scenarios. However, to be faithful to this "impact assessment" approach,
the core team felt that it would be impossible to objectively translate
interstate and/or regional siting policies into scenarios.
i i i
-------
Because of this feeling that the scenarios could not meaningfully re-
flect controversies centered around interstate siting, the core team was
faced with a dilemma. How should the topic (interstate siting) -- which
has generated considerable interest in the region -- be discussed outside
the framework of the central methodology being utilized in the study? In
varying degrees, most members of the core team felt that, despite the
scenario emphasis in the main ORBES report, some attention should be given
to possible interstate mechanisms being discussed in various settings. In
narrative form such treatment will be given in the final report. But it
was recognized that space in the main report would not permit broad back-
ground coverage of the subject there. Thus initially, the core team com-
missioned Professor James A. Mclaughlin of the West Virginia University Col-
lege of Law to prepare a legally-oriented support report emphasizing legal
issues associated with the topic. Entitled Legal and Institutional Pro-
blems of the Interstate Coordination of Electric Power Plant Siting and
Development, that study has now been completed.Professor Vincent Cardi,
also in the College of Law, was the core team member responsible for coor-
dinating Professor Mclaughlin's research with the team's activities.
As the work of the core team and support researchers drew to a close,
it became evident that space in neither the main ORBES report nor Professor
Mclaughlin's legal study would permit broad treatment of major aspects of
proposals for interstate mechanisms for plant operations and siting. Among
such aspects is the matter of structural and "political" constraints inhe-
rent within our federal system of government. Though these matters are
both controversial and difficult to address objectively, it was decided
that this report should be included in the ORBES publication series. (As
a background paper however, it does not necessarily represent the views of
the core team as a whole.)
In the final months of the ORBES project, regional impacts from proposed
coal-based synthetic fuel installations in portions of the ORBES region have
become a source of concern. This-condition has led many of those advocating
interstate siting of power plants to the view that a broader facility
siting arrangement should be considered in the Ohio Basin area. The ORBES
study does not focus upon impacts from synthetic fuel facilities. But
these developments have stimulated such an interest in broad energy faci-
lity siting that discussions of interstate power plant siting alone do not
reflect current political and institutional dynamics. Thus, although the
emphasis is on interstate power plant siting in this report, its title and
the final chapters reflect broader energy facility siting concerns.
Another dilemma faced by ORBES researchers from the beginning of the
project is relevant here. Those members of Congress expressing interest in
the study offered contradictory counsel on the question of whether recommen-
dations should be included in the main ORBES report or in accompanying docu-
ments. Two views were heard: (1) that the most responsible position of
the ORBES researchers would be to present institutional options for addres-
sing problems in the region and then offer recommendations as to the most
appropriate of these options; and (2) that options should be identified but
that no recommendations should be made. This document, like the main re-
iv
-------
port, reflects the opinion of the author and of the full core team that the
Senate committee originally mandating the study sought a range of options
but not recommendations.
The author is indebted to virtually all members of the core team and
several support study authors. Probably his greatest debts are to Profes-
sor McLaughlin, Professor Cardi, and Professor James J. Stukel. The latter
was particularly helpful in attempting to alert the author to the technical
intricacies of interstate air quality issues. Mention should also be made
of the ORBES Phase I report by Professors Nicholas L. White and John F.
Fitzgerald (both then at Indiana University), entitled Legal Analysis of
Institutional Accountability for the Ohio River Basin. Finally, tne valuable
assistance of Ms. Rita Harmata, ORBES research associate, is gratefully ac-
knowledged.
However, the author takes full responsibility for the contents of this
volume. Although it utilizes several ORBES publications in addition to the
author's research, the author alone made judgements in regard to interpreta-
tions included here.
Chicago, Illinois
Summer, 1980
-------
CONTENTS
PREFACE i i i
1. INTRODUCTION 1
1.1 Regional and National Background 1
1.2 Report in Context of ORBES 3
2. FEDERALISM AND POWER PLANT IMPACTS 6
2.1 Energy Balkanization of Federal System 6
2.2 ORBES Region Balkanization Example 7
2.3 Spillover Impacts 9
3. INTERSTATE AIR QUALITY CONFLICTS AND AVAILABLE REMEDIES 13
3.1 Interstate Pollution Transport 13
3.2 Local Transboundary Pollution 15
3.3 Long-Range Transboundary Pollution 18
3.4 Types of Remedies 19
4. AIR QUALITY CONTROL POSSIBILITIES 22
4.1 Siting and Operational Controls 22
4.2 Voluntary Options 25
4.3 The Interstate Compact 28
4.4 TVA Linkage to ORBES Region 30
4.5 Other Regional Organizations 31
4.6 National Government Initiatives 32
5. BASIN WATERWAYS IN THE FEDERAL CONTEXT 35
5.1 History of ORSANCO 36
5.2 National Defense Considerations 37
5.3 Ohio River Boundary Disputes 38
6. NUCLEAR POWER PLANTS 44
6.1 History of Early Plants 44
6.2 Uniqueness of Marble Hill 47
7. INTERSTATE STRUCTURE OF POWER INDUSTRY 53
7.1 The Bulk Power Supply Sector 54
7.2 Holding Companies 55
7.3 The Power Pool 60
7.4 Joint Ownership 63
7.5 Reliability Councils 65
7.6 Other Power Consortia 65
vn
-------
CONTENTS (continued)
8. NON-INDUSTRY RESPONSES: INTERSTATE POWER OPTIONS 68
8.1 Public Confusion 68
8.2 Kentucky Interstate Siting Proposal 71
8.3 Interest from ORSANCO 74
9. TRANSCENDING OPTIONS 79
9.1 Unexpected Developments 80
9.2 Focus Still Lacking 81
10. CONCLUSION 82
10.1 Power Consumption Reduced 82
10.2 Common Dilemma for Industry and Government 83
10.3 Need for Education 86
-------
Chapter 1
INTRODUCTION
As defined by hydrologists, the Ohio River Basin sprawls across por-
tions of fourteen states. Only six of these states -- Illinois, Indiana,
Kentucky, Ohio, Pennsylvania, and West Virginia — actually border the
river itself. (The remaining states are Tennessee, New York, North Caro-
lina, Virginia, Maryland, Mississippi, Alabama, and Georgia.) For reasons
discussed below, this report mainly treats only the six "river" states al-
though an effort is made to place them in the context of the broader basin
and of the nation.
Actually, the discussion does not focus upon these six states as sepa-
rate entities but rather upon their interactions with one another, with
groups of other states, and with the national government.' The use of ths
word "energy" in the title may be misleading in that not all forms of
energy are examined; however, no other term seemed to fit. It should be
noted at the outset that the Ohio River Basin Energy Study (ORBES), for
which this paper was prepared, does not address all the types of facilities
covered briefly at the end of this report. However, the subject matter
being explored in this particular paper would be of limited value without
the cursory treatment of overall interstate configurations, including non-
generating installations. For example, discussions of possible interstate
approaches to mitigating negative power plant impacts recently have been
broadened in the public sector to include consideration of such facilities
as coal-based synthetic fuel plants.
1.1 REGIONAL AND NATIONAL BACKGROUND
Residents in various areas of the Ohio River Basin became concerned as
early as 1974 that the concentration of electric power plants in various
parts of the basin might lead to adverse conditions at both local and re-
gional levels. For example, in that year a group of residents living along
the Ohio River in Indiana and Kentucky between Louisville (Ky.) and Cincin-
nati (Ohio) expressed alarm at the planning for new electric generating
stations.
In response to this particular concern, a subcommittee of the U.S.
Senate Appropriations Committee requested the U.S. Environmental Protection
Agency (EPA) to conduct a study of possible impacts from such a concentra-
tion of power plants. The EPA awarded a series of grants over a period of
more than four years (1976-1980) to faculty members at a group of Midwestern
and Ohio Valley universities to carry out the study. The project became
known as the Ohio River Basin Energy Study (ORBES), and the main report of
that study will be completed late in 1980. This paper is among the special
1
-------
reports prepared during the course of the ORBES project.
Concern over power plant siting in the Ohio River Basin followed that
felt in several other parts of the country by five or six years. In parti-
cular, questions were being raised in the Northeast. Initially, most atten-
tion was focused on nuclear generating stations, but it soon became evident
that siting and operation of fossil fuel power plants likewise represented
a problem of major dimensions. It was also recognized that interstate as-
pects of the problem required attention and that the federal character of
our political system presented difficulties in addressing relevant issues
on an interstate or regional basis.
By 1970, a small group of U.S. senators and representatives were intro-
ducing legislation to provide for "wall-to-wall" intergovernmental power
plant siting across the nation. Among the most prominent of such proposals
was a measure known as "The Intergovernmental Coordination of Power Develop-
ment and Environmental Protection Act" (1). It was introduced early in 1970
by then-Sen. Edmund Muskie of Maine, chairman of the Subcommittee on Inter-
governmental Relations of the Senate's Committee on Government Operations.
The bill declared that "lack of coordination and consultation and effec-
tive procedures among the Governors of the States and Federal, regional, and
State agencies discourages joint planning for the supply of electric energy
and impedes efforts to promote the welfare and safety of the people of the
United States" (2). The proposal also asserted that:
...electric utilities are public utilities, and the
interstate character of the electric utility industry,
the effects on interstate commerce of such industry's
facilities, the vital nature of the service it provides,
and the impact of such industry on national environ-
mental assets demand Federal leadership and financial
assistance through intergovernmental cooperation with
appropriate regional, State and local agencies to
protect the public interest bulk power supply" (3).
One purpose of the proposed Act was described in the draft as follows:
...(to) preserve and enhance the environment by insuring
that the siting and construction of bulk power facilities
is consistent with local, State, regional, and national
programs for the control of air and water pollution,
multipurpose use of land, and conservation of other
natural resources (4).
In lengthy hearings on this bill in 1970, provisions of the measure were
debated. Under the proposed legislation, regional districts and boards would
have been established around the country. A national agency to be designated
by the President would have supervised these regional bodies. A similar bill
was introduced by Sen.Edward Kennedy of Massachusetts.
In arguing for passage of his bill, Sen. Muskie asserted that "the threat
2
-------
to our environment and to the reliability and adequacy of our supply of
electric energy is too great to leave these decisions to the electric uti-
lities" (5). Sen. Muskie was not successful in obtaining passage of his
proposal. Many observers at the time felt that the inclusion of the pro-
vision for interstate-regional bodies which would have participated in the
siting of power plants was a factor in the proposal's failure. Members of
Congress understandably wish to protect the rights of their individual
states, and they were suspicious of a proposal to establish new regional
bodies. Under Sen. Muskie's proposal, of course, these regional bodies
would ultimately have been under the jurisdiction of a federal agency. This
pattern was particularly offensive to a number of congressmen and governors,
particularly those from Southern states.
At about the same time, however, a group of Southern governors were re-
cognizing some of the same interstate dilemmas associated with the siting
and operation of power plants and related environmental issues. Through the
Southern Governors' Association, an interstate compact was drafted to address
these problems. Understandably the governors wished to preserve a greater
role for the states, as opposed to the national government, in regional elec-
tric power activities. Approval of the compact was obtained by the U.S.
Senate without a negative vote, but a New York congressman who chaired a
critical committee in the House of Representatives was successful in keeping
the proposal from reaching a vote in the House.2 Thus, during the same year
(1970), efforts by both a group of governors and powerful figures in the
congress to devise interstate mechanisms for power plant siting were foiled
by the realities of American federalism.
It is worth emphasizing again that both Sen. Muskie and Sen. Kennedy
fought for national leadership in meeting the challenges associated with
power plant siting and other electric power problems while the Southern
governors sought a state-oriented approach to achieve many of the same ob-
jectives. The failure of the advocates of national supremacy, on the one
hand, and supporters of states' rights, on the other, to obtain the required
support for their positions illustrates the character of the federal system,
which has prevailed since the U.S. Constitution was ratified in 1789. There
has always been a constant tension between spokesmen for these two positions
on most critical issues. But only in the past 12 or 15 years have politi-
cal leaders been much interested in the siting and operation of power plants.
And the significant role of electric power in society now requires both
leaders and responsible citizens to examine the developing interaction be-
tween our federal system and electric power generation.
1.2 REPORT IN CONTEXT OF ORBES
The main ORBES report is yet to be published, and neither this paper
nor other individual documents can claim to speak for the core team, the re-
search group responsible for the main report. This report and other sup-
port papers are efforts of university faculty members (and a limited number
of researchers at other organizations) to present analyses in a large num-
ber of related fields.
-------
The emphasis in this report on negative impacts should not be construed
as implying that no positive impacts accrue from electric power generation
in the ORBES region. Health and economic advantages from electric power, as
well as other benefits, are often overlooked. Three of the last four win-
ters through which the region's residents have passed have been severe, and
electric power has reduced much human misery during these periods. Also,
unprecedented heat episodes, accompanied by record numbers of heat-related
deaths, might have been even more devastating if electric power reliability
had not been so well maintained during the summer of 1980. Of course some
environmentalists in the region claim that active air conditioning units
have caused the power plants to produce more pollution, neutralizing some
of the benefits. Such divergent points of view point up the challenges to
be faced in the years ahead in attempting to measure and assess the "trade-
offs" between the positive and negative benefits of electric power and other
forms of energy.
This paper is in part a response to specific requests from citizens and
policymakers who desired a discussion of negative impacts at the interstate
level and of current institutional proposals being considered to mitigate
such impacts. The discussion is admittedly subjective in that it at times
represents the author's personal judgement of current and possible inter-
state conditions. Though the presentation occasionally draws upon data and
analyses of other ORBES researchers, it is not based upon any specific ORBES
scenario to be discussed in the main report. Thus neither the ORBES core
team nor other researchers associated with the study are responsible for the
contents of this paper. It should be emphasized again that attempts here to
discuss power plants in the broader context of all interstate energy facili-
ty problems and options for addressing them represent only the views of the
author.
-------
1. Disputes have long raged over the appropriate use of the terms national
and federal. Even many of the most careful scholars use the two words
interchangeably. When possible, the attempt is made here to use "na-
tional" in reference to the government centered in Washington. "Federal"
is used with respect to the system which is formed by the constitutional
delegation of powers to the national government and the reserving of all
other powers to the various state governments.
2. The congressman was the late Emmanuel Celler of New York, chairman at
the time of the House Judiciary Committee. Professor Eugene Mooney con-
tends that Rep. Celler "still smarted" from a controversy with the New
York Port Authority in 1950 and therefore "apparently hated all inter-
state compacts." See Eugene F. Mooney, "Another Look at the Interstate
Compact: "A Supple Device," In Boyd R. Keenan (Ed.), Energy and Environ-
ment: An Intergovernmental Perspective (Proceedings of the Ohio River
Valley Assembly), Institute of Government and Public Affairs, University
of Illinois, January, 1978, p.138.
References
1. S. 2752, 91st Cong., First Sess.
2. S. 2752, 91st Cong., First Sess., Sec. 2 (a) (1).
3. S. 2752, 91st Cong., First Sess., Sec. 2 (a) (1).
4. S. 2752, 91st Cong., First Sess., Sec. 2 (b) (2).
5. "Intergovernmental Coordination of Power Development and Environmental
Protection Act," Hearings before the Subcommittee on Intergovernmental
Relations of the Committee on Government Operations, Washington, D.C.,
February 3 and April 29, 1970; and Annapolis, Md., February 4, and March
3, 1970, p. 31.
-------
Chapter 2
FEDERALISM AND POWER PLANT IMPACTS
An understanding of interstate dynamics within the ORBES region is de-
pendent upon knowledge of the American federal system. Most definitions of
federalism involve the idea of division of powers. It is this concept which
separates a federal from a unitary (or centralized) form of government. To
quote Richard Leach: "Each level of government in a federal system insists
upon its rights to act directly upon the people. Each is protected constitu-
tionally from undue encroachment or destruction by the other" (1).
The federal system has been tested severely since the Arab oil embargo in
the fall of 1973. In particular, every sector of the broad United States
energy system has been affected dramatically. Recognition of our dependence
upon foreign oil supplies forced reassessment of, our total fuel situation.
This dependence itself and the escalation of oil prices brought domestic coal
into prominence. National policies increasingly called for this coal to re-
place foreign oil in every way possible.
National legislation offered incentives to those electric utilities that
could make the switch and penalized those which could not. As this is being
written, Congress is debating a measure, known as the "backout" bill, which
would provide public funds to help electric utilities convert their oil
boilers to coal-burning units.
Of course in earlier times coal was heavily relied upon by electric util-
ities and other industries. But that was before the environmental movement
had brought so many constraints, and its use presented far fewer problems. The
post-embargo emphasis upon coal brought new strains upon the U.S. federal sys-
tem. Cleavages between and among states produced conflicts that had not been
experienced before. These included competition between older coal operators
in the East and Midwest, where much of the coal is high in sulfur content,
and Western coal interests, who offered low-sulfur coal.
Friction even developed among states East of the Mississippi, where there
were also differentials in the sulfur content of the coal. Among the ORBES
states, West Virginia, Pennsylvania, and the Eastern part of Kentucky con-
tained much low-sulfur coal. Coal in Western Kentucky, Illinois, Indiana,
and Ohio was mostly high in sulfur content.
Competition for coal sales has increasingly been matched, as discussed
at length below, by conflicts among the ORBES states and neighboring states
over air pollution moving from one state to another.
2.1 ENERGY BALKANIZATION OF FEDERAL SYSTEM
Energy-related conflicts which have developed since the 1973-74 oil em-
bargo among states and between various regions of the country have popularly
-------
become known as a part of the "balkanization" of the federal system. The
term has not been precisely defined, but generally to balkanize is to break
up an area into smaller and often hostile camps.'
Within the definition of federalism, as given above, the balkanization
process appears to have at least one meaning in the context of this paper.
Leaders in various state governments as well as in the national government
have developed parallel interests in power plant siting, construction, and
operations over the past dozen years, Naturally leadership in the indivi-
dual ORBES states had little -- if any -- interest in power plants in neigh-
boring states until it became obvious that impacts from those facilities
were being felt close to their own homes.
Environmental concerns are not the only sources of balkanization. Hos-
tility has also come from those more interested in industrial and/or econo-
mic development. And environmental and development concerns are often linked.
No one can say with any confidence just how great the influence of air qua-
lity legislation has been in producing unfavorable economic conditions --
including unemployment — in certain ORBES states. Many feel the importance
of such legislation has been exaggerated. But there are perceptions within
these states that federal air quality legislation and enforcement of both
federal and state regulations around the ORBES region are producing unem-
ployment. It is often argued that the federal Clean Air Act of 1977 is the
most complex legislation ever enacted by the U.S. Congress. It could also
be contended that the interstate political issues surrounding air quality
controversies in the ORBES states are among the most complicated domestic
problems to ever challenge our federal system.
2.2 ORBES REGION BALKANIZATION EXAMPLE
The following chapter presents several ORBES region examples of inter-
state conflicts centered specifically on air quality. They all demonstrate
how air pollution contributes to the phenomenon called balkanization and the
potential of such conflicts for affecting the federal system. But one case
of multi-state interaction involves economic considerations, as well as air
quality, in a way that graphically illustrates how power plant issues can
virtually pervade every aspect of life. (In this instance some of the
plants in question are just outside the study region portion of an ORBES
state, but coal interests in two other states are squarely within the re-
gion.)
2.2,1 The "Metzenbaum Amendment"
Shortly before Congress gave final approval to the Clean Air Act Amend-
ments in 1977, an addition to the proposed legislation gave the President
the power to order utilities to burn "locally or regionally available coal"
under certain conditions "to prevent economic disruption or unemployment"
(Section 125) in the enforcement of the law. Sponsor of the addition to the
Act was U.S. Senator Howard Metzenbaum of Ohio,and the new section is now
widely known as the "Metzenbaum amendment." (Congressmen from Kentucky and
West Virginia have since declared that they supported this Amendment with
-------
the expectation that it would protect mining interests in their states from
unreasonable competition from low-sulfur coal available to power plants from
western states,)
The broad 1977 act had barely been signed by President Carter when new
coalitions began to form in anticipation of a new and complex decision-making
dilemma involving ORBES states as a result of the Metzenbaum amendment.
Most specialists agreed that the new national air quality legislation would
force Ohio power plants to greatly reduce the amount of sulfur dioxide they
emit and affect interstate coal marketing in the ORBES region.
As already noted, most Ohio coal is heavily laden with sulfur, while
most nearby West Virginia coal and that mined in neighboring Eastern Ken-
tucky contains reduced amounts of sulfur. Thus, one way for Ohio utilities
to reduce their emissions of sulfur dioxide and meet new national air quali-
ty standards would be to burn coal imported from Kentucky and West Virginia.
Another way to meet the new standards was for utilities in Ohio to continue
burning high-sulfur Ohio coal but to build expensive filtering devices called
scrubbers to remove most of the sulfur dioxide. For obvious reasons, Kentucky
and West Virginia coal companies, and Ohio utility companies, orefer reducing
emissions by importing low-sulfur coal.
2.2.2 Unusual Coalitions
When the utilities announced their preference and intention to buy coal
from West Virginia and Kentucky an unusual coalition led by Ohio Governor
James Rhodes, United Mine Workers (UMW) leaders in Ohio, and Ohio coal opera-
tors sought to persuade President Carter to invoke the Metzenbaum amendment
of the 1977 Clean Air Act cited above.
An equally-unusual alliance fought invocation of the amendment. It in-
cluded representatives of Ohio utilities, congressmen from Appalachian states,
and coal interests in Kentucky and West Virginia. They argued that Section
125 was in conflict with the interstate commerce clause of the U.S. Consti-
tution. For several months in late 1978 and through much of 1979 President
Carter and his aides were placed in a dilemma on the issue. A series of sub-
sequent complex decisions involving executive, legislative, and judicial
branches of government followed.
2.2.3 Compromise Within Federal System
Finally, On June 6, 1979, President Carter announced that he would re-
fuse to invoke Section 125. Invoking that section, of course, would have
barred the sale of Kentucky and West Virginia coal in Ohio. The President's
reasoning offers an insight into decision-making in the crucible of the
federal political process. Of equal significance is the plan proposed by
the President to reduce the bickering among coal interests in the three ORBES
states and to avoid the constitutional question noted above.
According to President Carter, he could not agree with the argument
that there would be "economic disruption" in Ohio. But some of his critics
8
-------
argued that he was only able to issue such a refusal as a result of what
White House officials insisted was a "coincidental" new ruling by the U.S.
Environmental Protection Agency, EPA earlier had ordered that two coal-
fired power plants to the north of the ORBES study region -- Cleveland
Electric Illuminating Co. (CEI) facilities — reduce their sulfur dioxide
emissions down to a rate of 1.2 pounds per million BTU's of heat. (To do
that, of course, CEI would have been forced either to build scrubbers or
switch to low-sulfur out-of-state coal.)
However, apparently on the very day of the presidential announcement,
EPA officials said that new studies had shown that the 1.2-pound standard was
unreasonably low. It was reported by EPA that the old standard failed to
consider that the two plants were located on Lake Erie, where wind and
weather patterns allegedly disperse pollution.
Thus, the EPA argument apparently ran, the Cleveland plants could emit
more than six pounds of sulfur dioxide per million BTU's and still not vio-
late standards for air quality near the plant. Further, under the relaxed
standard, both Cleveland plants would be able to continue burning Ohio high-
sulfur coal — reportedly about five million tons of it per year. And, of
course, these plants — which might have switched to Kentucky or West Vir-
ginia coal ~ would not do so under the new EPA rule.
EPA's proposal for the two Cleveland plants awaited public comment over
a period of 60 days before it became final. The agency accepted comments
through August 13, 1979. During the interim, White House officials ex-
pressed the belief that, if the Cleveland proposal were finalized, there
would not be enough switching to Appalachian coal by Ohio public utilities
to warrant a finding of "economic disruption." The President's refusal to
invoke the 1977 "local coal" clause was felt by most knowledgeable observers
to mean that Ohio plants other than the two in Cleveland would be free to
switch to Appalachian coal.
Ongoing debate has surrounded the Cleveland plants, particularly with
reference to the possible negative impacts of long-range air pollution trans-
port into Pennsylvania and New York. And new decisions with respect to the
plants may have been made by the time this report is issued.
Though Cleveland itself is outside the ORBES study region, the decision
to permit the burning of high-sulfur coal -- even if it should prove to be
only temporary — illustrates well the complexities facing the region's elec-
tric utilities and the federal system itself.
2.3 SPILLOVER IMPACTS
Not all interstate impacts from power plants range across so many en-
vironmental and economic interests as those associated with the Metzenbaum
Amendment. Some negative impacts simply spill over from one state to another.
From the earliest planning for ORBES there appeared to be agreement among
interested members of Congress and EPA officials that the ORBES study should
-------
somehow present institutional2 options which might mitigate such impacts,3
Members of Congress sought both technical and institutional and/or organi-
zational options from the study which might enable them and policymakers
at the state level to address such interstate "spillover" impacts. The
actual wording in the ORBES directive issued to the EPA in the suttmer of
1975 by a subcommittee of the U.S. Senate Appropriations Committee follows:
The Committee is aware of plans in various stages
of development which could lead to a concentration of
power plants along the Ohio River in Ohio, Kentucky, In-
diana, and Illinois. Although the environmental impact of
such a concentration could be critical, the decision-making
authority regarding construction of these facilities is
dispersed throughout the Federal government and several
state governments.
The Committee directs the Environmental Protection Agency
to conduct from funds appropriated in this account an
assessment of the potential environmental, social, and
economic impacts of the proposed concentration of power
plants in the lower Ohio River Basin. This study should
be comprehensive in scope, investigating the impacts from
air, water, and solid residues on the natural environment
and residents of the region. The study should also take
into account the availability of coal and other energy
sources in this region (2).
With one exception, these two paragraphs served as the blueprint for
arrangements which EPA made with the university researchers to undertake
the ORBES study. The single exception was a joint decision later by EPA
and the subcommittee to direct the researchers to add virtually all of the
State of West Virginia and the southwestern portion of Pennsylvania to the
area to be examined during the final three years of the study.
Much of the remainder of this report is devoted to various types of
interstate spillover impacts. Of course spillover impacts from power plants
can influence various areas of life, including human health, economics,
employment opportunities, crop productivity, land use, air quality, and a
wide range of water-related impacts. But this paper will address only those
impacts which have already resulted, or can be expected to result, in pro-
posals for new institutional mechanisms within the context of our federal
system.
After more than three years of investigation, there is virtual consen-
sus within the ORBES core team that spillover air pollution impacts from
power plants represent the most critical interstate challenges to policy-
makers in the ORBES study region. These have developed in part, of course,
because air problem areas have no physical boundaries as do water and land.
Thus, chapter 3, "Interstate Air Conflicts and Available Remedies," is
devoted to interstate air problems.
10
-------
Land-oriented impacts from power generation stations at times have in-
volved two or more states. Most often, however, they are local (or intra-
state) in nature. The same is true of various social impacts such as those
related to labor. (For example, no dramatic movement of workers across
state lines seems to be identified in any of the ORBES scenarios,}
Although relatively few nuclear power plants are located in the ORBES
region their very presence and planning for nuclear power will likely in-
fluence the future shape of interstate institutions within American federa-
lism. Chapter 6 is devoted to interstate spillover conflicts which could
arise as a result of nuclear power plants.
The interstate character of the electric power industry is critical
to an understanding of negative interstate spillover impacts and to the
consideration of strategies to mitigate such impacts. Thus, Chapter 7 is
entitled "Interstate Structure of Power Industry."
11
-------
Chapter 2
Notes
1, The concept and the word "balkanlzatton" itself apparently derive from a
group of countries that cover a peninsula in the southeast corner of
Europe. The countries are named after the Balkan Mountains in Bulgaria and
Yugoslavia. The Balkan Peninsula has often been called "the powder keg
of Europe" because so many wars have begun there.
2. A great deal of controversy exists among social scientists over the defi-
nition of the word "institution," and voluminous, if not helpful, litera-
ture has developed on the difference between an institution and an "or-
ganization." The terms will be utilized interchangeably in this paper
with the hope that the context, and the adjectives used with the words,
will reduce confusion.
3. This comment is based upon inquiries directed to the ORBES University
Management Team from members of Congress and EPA officials. Of course
members of Congress and EPA officials not making such inquiries could
hold different expectations for the study. An effort was made to keep
members of Congress from the ORBES states and appropriate EPA personnel
apprised of the study's progress, but no systematic survey of their ex-
pectations was undertaken.
References
1. Richard H. Leach, American Federalism (New York: W.W. Norton, 1970), p.l.
2. U.S. Congress, Senate Appropriations Committee, 94th Congress, 1st Sess.,
Senate. Department of Housing and Urban Development - Independent Agen-
cies, Senate Report 940326, 1975.
12
-------
Chapter 3
INTERSTATE AIR DUALITY CONFLICTS AND AVAILABLE REMEDIES
The major energy-environmental futures (or "scenarios") pursued by the
ORBES researchers are based on the central assumption that, through the year
2000, coal will continue to be the dominant fuel for the generation of elec-
tricity in the ORBES region. Of course it was noted earlier that this
general report on interstate relations is not based on a specific scenario.
But it is relevant that analysis of all coal-dominated futures reveals that,
among all impacts identified, those related to air quality offer the most
potential for serious negative effects.
Tied to these air quality impacts are possible economic effects and im-
pacts on human health. Such health impacts are a function of air pollutant
concentrations, while the economic impacts are centered on such matters as
the cost of air pollution control, cost of medical care for pollution-
related diseases, and dollar losses associated with decreases in agricultural
yields due to air pollution. It is also possible that states will engage in
costly competitive activities in attracting industry and that these efforts
will center around air quality questions.
For these reasons, as well as others, interstate conflict resulting from
the spillover of air pollution from a source in one state to one or more
states have been prominently publicized in recent months. However, it is
not often understood by the general public that remedies are available for
some conflicts but not for others. For that reason, this chapter emphasizes
those conflicts for which such remedies are probably already available. The
following chapter, "Air Quality Control Possibilities," emphasizes those in-
terstate conflicts for which no remedies presently appear to be available
and the possibilities being considered. Since these problems are both com-
plex and controversial, it is difficult to make a sharp distinction between
these two types of conflicts. Thus it is impossible to avoid some overlap
in these two chapters.
3.1 INTERSTATE POLLUTION TRANSPORT
Air pollution conflict between two or more states centers on what is now
called "pollution transport," meaning, of course, movement across state lines.
There is an unfortunate tendency to lump together all air pollution movement
across state lines. Such a generalization fails to highlight the most
serious challenges in attempting to address interstate air quality problems
in the context of American federalism.
The phenomenon of air pollution transport from one state to another is
described under several names. Most ORBES researchers prefer the term
"transboundary air pollution transport." To the lay person, it is often
helpful to separate transboundary air pollution transport into basic types.
13
-------
These are: Cl) local transboundary air pollution transport, where the
movement of air masses is at relatively short distances across states lines;
and (2) long-range transboundary air pollution transport, where air masses
travel longer distances, often involving several states,
Precise definitions for local and long-range transboundary air pollu-
tion transport are difficult, if not impossible, to provide. Lawyers,
meteorologists, and other specialists involved in studying this problem
understandably prefer definitions acceptable to their "guild" but which
may be meaningless to the lay person.
The growing literature in this field suggests that air pollution trans-
ported across state lines is generally termed "local" if the movement is
50 kilometers (31 miles) or less. Utilizing this definition, all pollution
transported across state lines for distances greater than 50 kilometers is
"long-range" transport. Meteorologists point out, however, that attachment
of any exact meter or mile distance to these terms is misleading, and per-
haps even destructive, in efforts to understand legal and institutional re-
lationships among the states. They take issue with efforts at precision in
these definitions because, at power plants as elsewhere, the meteorology
changes from hour to hour. Wind, temperature, rain and topography all con-
tribute to the changes.
The key point in understanding interstate air pollution monitoring, ac-
cording to most meteorologists, is the ability or inability at any given
time to identify power plant sources. Meteorologists usually would define
local and long-range pollution transport not in terms of distance but on
the basis of whether the pollution can be clearly identified with a parti-
cular plant. If such source identification is possible in a particular
case it is, then, convenient to term the pollution movement "local." If
source identification is not possible at a given time and place, the air
masses transporting pollution must be termed "long-range."
To illustrate the complexity of monitoring interstate air pollution
transport within political and governmental settings, it is helpful to note
that it would be possible for transboundary air pollution transport in a
given area to be defined on one day as local and on the next day as long-
range. (The change from one type to another» as defined here, could occur from hour
hour.) In the former instance, but not in the latter, the meteorology would
permit identification of emissions as being from one particular plant.
It appears that most courts have generally found admissable as evidence
monitoring data which identifies plant emissions within the 50 kilometer
range. But again, meteorologists warn that on certain days this might not
be possible, while on other days, in the very same spot, it might be possi-
ble to identify plant sources even up to 200 kilometers.
This complex technical discussion assumes added significance when the
policymaker and the lay citizen try to understand various attempts by Con-
gress to address interstate air quality conflicts in the Clean Air Act
Amendments of 1977 (1). Although these provisions have been subject to a
14
-------
great deal of criticism, they do provide a legal framework in which states
may seek remedies to perceived interstate inequities resulting from local
transboundary pollution. (As noted below, they do not provide mechanisms
for addressing long-range pollution.) Opportunities for petitioning the
administrator of the U.S. EPA and for public hearings are provided for
those states whose officials believe that adequate relief from transboun-
dary pollution has not been forthcoming. Also, of course, states have the
final recourse of judicial review.
3.2 LOCAL TRANSBOUNDARY POLLUTION
Despite the framework for addressing local pollution transport ques-
tions provided by the Clean Air Act a few protracted disputes between ORBES
states over local transboundary pollution have occurred in the years since
the passage of that legislation. Of the six ORBES states, only Illinois,
perhaps because of boundary configurations, has avoided serious interstate
conflicts in the ORBES region. Certain interstate air quality disputes
have involved litigation, while others have been limited to administrative
and/or regulatory arenas. The disagreements have involved both existing
plants and proposed facilities.
3.2.1 Disputes Over Existing Plants
The basic Clean Air Act provision in such disputes is Sec. 126, "In-
terstate Pollution Abatement," which sets the procedures for states or a
"political subdivision" to seek action against operators of existing
sources in other states. This section specifically determines the process
through which a governor or other official may petition the EPA administra-
tor. At least three formal petitions have been filed with the administra-
tor by representatives of ORBES states against neighboring states, and
they are believed to represent the only formal efforts in the entire coun-
try to utilize this particular provision of Section 126.
3.2.1.1 Kentucky-Clifty Creek Conflict
As a result of a petition filed by the governor of Kentucky, EPA
hearings were held in July of 1979 in Louisville, Ky., to pursue the gover-
nor's claims that sulfur dioxide emissions from an Indiana plant were affec-
ting Kentucky's efforts to comply with air quality standards in the area
immediately across the Ohio River from Madison. The facility in question
is the Clifty Creek plant at Madison, Ind., operated by a consortium of in-
vestor-owned companies known as the Indiana-Kentucky Electric Corporation
(IKEC). EPA is now in final deliberations on the petition.
3.2.1.2 Kentucky-PSI Dispute
The second instance where the interstate petition procedure of Sec. 126
has been utilized also involves a claim by a Kentucky governmental unit
against a source in Indiana. In December of 1979, the Jefferson County Air
Pollution Control District in Louisville petitioned the EPA administrator
15
-------
with the argument that the Gallagher power plant, operated in Southern
Indiana by Public Service Indiana (PSI), was frustrating Kentucky efforts
to maintain air quality standards and assure industrial growth 1n that
state. At issue are sharply different clean air standards for Jefferson
County, Ky. and Floyd County, Ind. Although the two counties are separa-
ted only by the Ohio River, air standards for Jefferson County are consi-
derably stricter than those for Floyd County.
Hearings on the Gallagher plant situation were held by EPA in April of
1980, and EPA officials report that an announcement on their findings are
expected soon. The Gallagher and Clifty Creek plants are separated by only
about forty miles, so that any resolution of the two problems could be
conceptually linked by air quality measurements and modeling of the general
area.
3.2.1.3 West Virginia-Sammis Petition
The final known instance of a state seeking remedy under the interstate
petition provision of Section 126 is an action taken in 1978 by West Virgi-
nia against a plant in Ohio. The facility, the W.H. Sammis plant, operated
by Ohio Edison Co., is located at Stratton, Ohio, across the Ohio River from
New Manchester, W. Va., in the state's northern panhandle. It was believed
to be the first suit in the nation filed under Section 126. Like the other
two petitions noted above, no final resolution has been reported on the
Sammis plant.
3.2.2 A Construction Permit Dispute
In addition to allowing action against existing sources the Clean Air
Act also prohibits a state from approving construction of a facility whose
emissions would prevent another state from attaining or maintaining national
standards.
Despite the framework for addressing local transboundary pollution
transport questions provided by the Clean Air Act, protracted legal con-
flicts between ORBES states have taken place. One of the most illustrative
in revealing the complexity of local transboundary pollutant transport took
place in the late 1970's; it concerned the siting of an electrical genera-
ting facility on the Indiana side of the Ohio River. Lengthy legal pro-
ceedings among Indiana, Kentucky, and the U.S. Environmental Protection
Agency ensued.
The case began with the announcement by Indianapolis Power and Light
Company (IPL) of its intention to build three 605 megawatt units on an 884-
acre site in southeast Indiana. Located southwest of Cincinnati, about 50
miles downstream on the Ohio, the site is near the Indiana town of Patriot
in Switzerland County. Across the river is Boone County, Kentucky, where
the Cincinnati Gas and Electric Company and the Dayton Power and Light Com-
pany are jointly constructing their East Bend plant.
In May 1978, Kentucky officials informed EPA that their modeling re-
16
-------
suits indicated that the porposed IPL plant at Patriot, in conjunction with
the East Bend facility, would cause an allowable nationally-set pollutant
increment to be exceeded in Kentucky. At issue was a provision in the 1977
version of the Clean Air Act which limited "significant deterioration" in
certain areas of the country. The "Prevention of Significant Deterioration"
(PSD) increment for sulfur dioxide allegedly would be exceeded in Kentucky
by emissions from the Patriot plant.
Under Section 160 of the Clean Air Act, a PSD permit was required be-
fore IPL could begin construction at Patriot. In August 1978, taking the
Kentucky modeling results into consideration, EPA Region V, headquartered
in Chicago, disapproved the PSD permit application submitted by the utility.
In turn, the utility company petitioned the U.S. Court of Appeals, Seventh
Circuit, to review EPA's decision (2). IPL also asked the court for a tem-
porary injunction to prevent EPA from approving permits sought by other
electric utility companies in the area. Apparently, IPL feared that the
EPA Region IV offices in Atlanta would grant the owners of the East Bend
plant a permit to expand that facility. Such approval might have used up
portions or all of the sulfur dioxide increment sought by IPL. This effort
is believed to represent the first time in American history that an electric
utility in one state has fought in federal court to "stake its claim" for
clean air before a utility in a neighboring state could make its own claim.
In October of 1978, the Court of Appeals denied IPL the temporary injunc-
tion. EPA admitted error based upon misinterpretation of modeling data sub-
mitted by the State of Kentucky, and on May 21, 1979, the court -- at EPA's
suggestion — remanded the proceedings to the agency for administrative
ruling. Finally EPA reversed itself and awarded the permit. But the permit
was awarded only after extensive technical arguments involving the court,
EPA, both states, and the utility affected. The cost of the negotiations,
in terms of both time and money, was apparently considerable to both public
and private parties to the dispute. This case also shows how interstate
conflicts might arise over power plant siting as sites become more scarce.
Often it is cited in discussions of possible mechanisms that might both
avoid such disputes and preserve air quality in a "local" two or three-state
area.
3.2.2 Complexity of Tri-State Areas
The potential for interstate air quality conflict surrounding siting
and construction or power plants and other energy-related facilities is par-
ticularly complex in a number of tri-state areas in the ORBES region. These
include: (1) the immediate area surrounding West Virginia's northern "pan-
handle," which includes portions of that state, plus Ohio and Pennsylvania;
(2) the area around Huntington, West Virginia, and Ashland, Kentucky, which
includes portions of those two states, plus Ohio; and (3) the Cincinnati
area, which includes portions of Ohio, Kentucky, and Indiana. In these and
other interstate areas of the ORBES region, certain national structural pat-
terns, particularly EPA's organizational structure for regulatory functions,
may discourage communication among the states. The ORBES states fall into
three different EPA regions: Region III (offices in Philadelphia), with
17
-------
jurisdiction over Pennsylvania and West Virginia; Region IV (Atlanta),
with responsibility for Kentucky; and Region V (Chicago), with oversight
of Illinois, Indiana, and Ohio. EPA has responded to the difficulties as-
sociated with air quality management in the Ohio River Valley and the
broader ORBES region by creating a tri-regional task force. Comprised of
the three regional administrators, the body's primary objective is to
strengthen cooperation in meeting interstate and interregional air quality
issues.
3.3 LONG-RANGE TRANSBOUNDARY POLLUTION
As noted above, the distinguishing characteristic of long-range trans-
boundary air pollution is that emissions transported across state lines, al-
though capable of being measured, cannot be identified with a particular
plant. There is ambiguity within legal circles as to whether individual
plant sources must be distinguished before legal actions can be brought by
one state against another under the Clean Air Act. Some scholars feel that
it is possible to seek action if groups of plant sources are identifiable.
However, the matter has not been litigated definitively, and no consensus
exists within the legal community.
Emphasis here on impacts from ORBES region power plants and approaches
for addressing them should not obscure the reality that extraregional im-
pacts are also significant in understanding overall air quality problems in
the area and particularly those relating to long-range transport. The
ORBES region is part of a broader "natural" region that encompasses more than
one-third of the nation's land area, ranging eastward from the Misisisippi
River to the Atlantic coast. In addition to the ORBES region, other sec-
tions of this broader area are important elements in the generation of
electric power and in the overall air quality situation. For example, as
pointed out below, it is difficult to consider air quality strategies for
the ORBES region independent of the area served by the Tennessee Valley
Authority (TVA). The ORBES region actually overlaps the TVA service area
in portions of southern Kentucky. More important, perhaps, is the fact that
air masses from the two regions mix and often move toward the northeastern
United States and southwestern Canada. In a continuing dialogue, Canadian
officials have informed the United States that they probably will take
vigorous steps within the next five years to force this country to reduce
air pollution that moves across the border into Canada.
3.3.1 No Present Policy
Thus, the present situation apparently is that the U.S. Congress and
the courts have not yet provided the EPA with the legislative and legal foun-
dations for setting any policy on long-range transboundary pollution trans-
port as it has been defined in this paper. Another way of putting it is
that EPA has not devised a strategy to recommend to the Congress. But a
great deal of research is being carried out now in regard to this matter
within various units of EPA and by their extramural contractors. Some ten-
tative options for resolving interstate conflicts resulting form long-range
transboundary pollution transport are discussed in the following chapter,
"Air Quality Control Possibilities."
18
-------
3.3.2 Northeastern States Concerned
Recent focus has also been provided to the long-range transport issue
by attention given it by the northeastern states, which, because of pre-
vailing wind patterns, experience impacts from pollutant concentrations
transported from the ORBES region. Central to concerns in northeastern
states and in Canada over air pollution originating in the Ohio Valley is
acidic deposition, or acid rain. EPA officials have been forced to ac-
knowledge the sensitivity between ORBES states, with their heavy use of
coal, and northeastern states.
3.4 TYPES OF REMEDIES
To help in conceptualizing both "available" remedies to conflicts dis-
cussed in this chapter and "possible" remedies to conflicts treated in the
following one, they might be categorized in the same way. Three families
of remedies are suggested: (!) technical; (2) techno-organizational; and
(3) miscellaneous.
3.4.1 Technical Approaches
The first of these, technical approaches, are generally methods that
are applied at a single generating unit, with little or no attempt at inter-
utility or inter-state coordination. However, as discussed elsewhere, con-
ceivably some such approaches could be applied and coordinated on an inter-
utility and/or interstate basis. Of course, even those technical approaches
limited to a single plant without any possibility for interstate coordina-
tion are relevant to this discussion. Since the transport of pollutants
long distances across state lines is such an important factor in overall re-
gional air quality, even those controls limited to a single plant could re-
duce pollutant concentrations far beyond the source.
Among such technical approaches already in use or which have been con-
sidered for utilization in the ORBES region are these:
(1) flue gas desulfurization systems on coal-fired generating
facilities.
(2) A device known within the industry as "least emissions dis-
patch." This is a day-to-day load management technique
which puts fossil-fueled units into service in the order
of least emissions of a particular pollutant, rather than
least cost. Least cost dispatching is traditional utility
practice, and only one company that uses least emissions,
Southern California Edison, has been identified.
Individual utilities in the ORBES region apparently could
initiate least emissions dispatch at their respective plants
19
-------
if an incentive system could somehow be devised. The ef-
fects would be greatest if this option were implemented by
the large systems that operate in the region. So far as is
known, least emissions dispatch has not been practiced on
an interutility or interstate basis. However, as noted in
the following chapter, it might be possible for electric
reliability councils or other voluntary groups within the
industry to encourage an interutility or interstate approach.
Also, existing state public service commissions or other
governmental authorities might do likewise within their re-
spective states.
(3) Early retirement of plants. Since older coal-fired plants
are generally permitted to emit more pollutants than newer
plants, an earlier retirement of plants than has been prac-
ticed in the past would result in less pollution.
3.4.2 Techno-organizational Approaches
Techno-organizational approaches acknowledge the importance of techno-
logy but imply that in such strategies technology must be applied within
an organizational context usually broader than one utility company in a
single state. Most of the possibilities explored in the following chapter
would appear to fit this category.
3.4.3 Miscellaneous Approaches
Some possible remedies to interstate conflicts (those discussed in
these two chapters as well as others) do not fit conveniently into either
of these groups. And in some instances, these miscellaneous possibilities
appear to transcend both of the other types of approaches.
Most of the approaches discussed in these two chapters are regulatory
in nature. It is also possible to use nonregulatory alternatives in efforts
to improve air quality in the interstate-regional context. For example,
market incentives may be used alone or to augment direct regulation. Such
incentives include the use of marketable emission rights, the banking of
allowable increments, the offsetting of emissions, the application of the
"bubble" concept to utility systems, and emission fees. All are techniques
that EPA has begun to explore, and even in some cases to implement, and ap-
parently hopes to use increasingly.
Taxes at various levels of government can be assessed in ways which
provide incentives to pollution control capable of improving air quality,
both locally and regionally. Such incentives need not be limited to accel-
erated depreciation for "end of the pipe" control equipment, but can also
include favorable tax treatment for more efficient process changes, such as
coal cleaning and coal blending. Tax policies also can encourage moderni-
zation and technological innovation that address both air quality problems
and developmental challenges.
20
-------
Chanter 3
Refprences
1. Section 110 (Implementation Plan): 110 (a) (F) (i); 126 (Interstate
Pollution Abatement); and 160 (Purnosps, Prevention of Significant
Deterioration of Air Quality).
2. Indianapolis Power and Light Comnany v. U. S. Environment Protection
Agency. Docket No. 78-2062. filed October 2. 197B.
21
-------
Chapter 4
AIR QUALITY CONTROL POSSIBILITIES
The main question to be explored in this chapter is whether evidence
exists to suggest that any air quality control approaches, other than
those now in place, might be successful in mitigating negative impacts
from power plant emissions which move across state lines in air masses.
Before discussing these interstate possibilities for air quality con-
trol, it is desirable to distinguish the objectives of this chapter from
those of certain other chapters which also consider interstate options.
The key point is that interstate air quality problems have been identified
as the most serious challenge in the ORBES region and hence this chapter
is devoted exclusively to air quality control. But important as air quali-
ty control may be, it is only one problem area within the multi-faceted
interstate electric power system within the ORBES region.
Chapter 7, entitled "Interstate Structure of Power Industry," attempts
to describe the overall interstate elements -- in addition to air quality
control -- of the system as it has been structured by the industry itself.
Next, chapter 8, "Non-Industrv Responses: Interstate Power Options/ reviews re-
gional proposals and ideas which have been advanced -- mostly from non-
industry sources -- as possible ways of making the total ORBES region power
system more responsive to current interstate conditions. Finally, broader
interstate organizational options which take into account all energy facili-
ties (not just power plants) are examined in chapter 9, "Transcending Op-
tions."
As noted in the opening chapter, for more than a decade the exploration
of interstate siting and operation of power plants has been carried on.
For example, national legislation to create mechanisms to address these
functions on an interstate basis was being considered by Congress as early
as 1970. Most interstate proposals have included provisions for air quality
control. However, for both technical and political reasons these proposals
have not been accepted. Thus, aside from certain provisions in the Clean
Air Act, as discussed in this report, almost no arrangements are available
to address interstate air quality problems through siting or operational
devices.
4.1 SITING AND OPERATIONAL CONTROLS
Possibilities for interstate power plant air quality control approaches
seem to divide themselves into three basic categories: (1) siting possibi-
lities; (2) operational possibilities; and (3) combined siting-operations
possibilities. Recalling the definitions presented in the previous chapter
for "local" transboundary pollution and "long-range" transboundary pollution,
it appears necessary to explore each of these three approaches in the con-
22
-------
text of both local and long-range transbotmdary pollution.
4.1.1 Siting Possibilities
Interstate power plant siting alone, as an approach for mitigating air
quality impacts, is considered unrealistic by some for a number of reasons.
Among these is the reality that existing plants -- particularly those in
operation for many years -- are producing a high percentage of today's
transboundary pollution. Neither new siting arrangements nor strict en-
forcement of federal new source performance standards (NSPS) will affect
the amount of pollutants being emitted from the older plants.
The political and organizational difficulties likely to be encountered
in any effort to develop an interstate plant siting arrangement are also
noted frequently as serious impediments to the development of any success-
ful interstate siting plan. These difficulties seem likely to be substan-
tial whether electric utilities themselves might attempt to launch
a voluntary interstate siting effort or governmental efforts would be made
to develop an interstate siting mechanism. Unless transboundary air pollu-
tion becomes a much more visible political issue, it will remain extremely
difficult for either the utilities themselves or government units to develop
the necessary organizational arrangements to implement interstate siting in
the ORBES region. (Both possibilities are discussed in more detail below.)
4.1.1.1 Interstate Siting and "Local" Impacts
Putting aside the political and organizational difficulties associated
with possible interstate siting, what about the actual "technical" effec-
tiveness of a siting mechanism designed to mitigate impacts from local
transboundary impacts? The conclusion of ORBES research appears to be" that
local transboundary impacts (as defined earlier) could be reduced through
interstate siting efforts. A regional siting mechanism alone could reduce
pollution concentrations at local "hot spots" where these concentrations
are highest. This would especially be the case at a location where two or
more power plant plumes interact.
A possible trade-off, however, might be increased water consumption im-
pacts. Under a dispersed siting situation, some generating facilities would
likely be placed near headwaters of major rivers. In these locations, of
course, less water is available, and water consumption could deplete some
of the supply.
4.1.1.2 Interstate Siting and "Long-Range" Impacts
It appears, on the basis of ORBES research, however, that interstate
siting alone could not reduce total regional (interstate) pollutant
"loadings." Most air quality and meteorology specialists associated with
the ORBES project seem to believe that simply spreading new sites around
the region would not affect long-range transboundary impacts. (But, as
noted below, most of these same specialists cto suggest that siting arrange-
ments, if linked with critical operational techniques, could reduce total
regional pollutant loadings.)
23
-------
4.1.2 Operational Possibilities
Realization that a large percentage of transboundary air pollutants
will come from older plants through the end of the century has dampened
somewhat the enthusiasm for interstate siting possibilities felt earlier by
many in the ORBES region. Consequently, attention is turning increasingly
to plant operational strategies. Also adding to this attention is the
growing controversy over acidic deposition, or acid rain, brought into pro-
minence by officials in northeastern states and Canada. EPA officials have
been forced to acknowledge the sensitivity between ORBES states, with
their heavy use of coal, and northeastern states. Within the past few
months, the EPA administrator has addressed the matter directly. As dis-
cussed in detail later in this chapter, he has indicated his preference for
a "regional, multi-state approach" to begin the process of combating emis-
sions that he believes are associated with acid deposition. (1)
The EPA administrator has not elaborated on such an approach, but one
must presume that he envisages a national operational mechanism that would
be administered by EPA or a similar agency. Although the acid rain pheno-
menon is not understood fully, increasingly it is affecting consideration
of operational mechanisms designed to mitigate multi-state transboundary
air pollution problems in the broadest sense.
One example of a plant operations device which might be utilized across
state lines is known as "least emissions' dispatch." (2) It deals with the
criterion for bringing additional plants on line as demand rises on a parti-
cular day. A least emissions dispatch policy would use the criterion of
least pollution discharge rather than least cost is placing new generating
units in operation. Such a policy would pass on additional costs to rate
payers, but some specialists have argued that the costs are minimal if the
cost of pollution impacts are factored in.
Since no utilities in the ORBES region have felt a least emissions dis-
patch practice to be sound policy in its own system, it seems unlikely that,
without strong incentives from government at some level, two or more utili-
ties would voluntarily implement the practice across system and state lines.
Also, some utility leaders have maintained that the potential for this miti-
gation strategy has been exaggerated.
However, the least emissions dispatch approach does illustrate the
kind of positive effect that a regionwide change in utility operations might
have on air quality even under conditions of high electrical energy growth.
The notion is also suggestive of even more unusual possibilities that
might be developed. Among these is the concept of differential emissions re-
ductions, which is predicated on the idea that utility systems in concert
might use a variety of devices to reduce emissions at individual plants when
meterological conditions suggest that pollutant concentration hot spots are
developing.
24
-------
4.1.3 Combined Siting and Operational Controls
On the basis of ORBES research, a cautious assessment can be made that
a combined strategy to determine expected emissions, site plants, and im-
plement cooperative operational controls might improve air quality through
'much of the region.
It seems that the region as a whole might benefit if, somehow, a re-
gional entity could weigh the advantages of approaches such as those taken
in the various ORBES scenarios. For example, in the scenario which ex-
ports electric power outside the region, a regional body conceivably might
conclude that the exports should be produced by nuclear-fueled rather than
coal-fired units, thus avoiding the air quality impacts identified.
Further, as already noted above in the section on "siting possibili-
ties," certain operational changes, when coupled with regional siting, most
likely could reduce total regional loadings. To make such suggestions is
not to under-estimate the problems to be faced by the utility industry if
they should attempt to implement such unusual practices.
Finally, in review, given the interdependency of siting, emissions
reductions, and other operational functions, it appears that interstate co-
ordination in all these areas would be required to reduce regional pollu-
tant loadings and/or to reduce concentrations from long-range transboundary
pollution in the region and beyond. Because of the alarm being expressed
in northeastern states and Canada over long-range transboundary air quality
impacts from ORBES region plants, it seems likely that discussions of such
interstate coordination will increase in the coming years.
Sections of this chapter have briefly addressed possible ways that
power plant siting and operational control arrangements might reduce nega-
tive transboundary air quality impacts in the ORBES region. It has not, how-
ever, treated the question of specific organizational entities which could
encourage the implementation of such arrangements or coordinate and/or
manage the activities required. Thus, the remaining sections of the chapter
are devoted to organizational aspects of interstate qir quality control
possibilities.
4.2 VOLUNTARY OPTIONS
The least disruptive approaches -- in terms of existing organizational
arrangements -- for seeking mitigation of negative air quality impacts would
likely be those that could be arranged on a voluntary basis. Two distinct
types of voluntary cooperation suggest themselves. First, the electric
utilities themselves could voluntarily develop cooperative devices to
achieve specific objectives. Second, state agencies or officials responsi-
ble for regulating the power industry in the various ORBES states could
take the initiative in forming voluntary interstate mechanisms.
One rationale for such cooperation -- whether led by the utilities them-
selves or the states -- is that procedural difficulties and delays, as well
25
-------
as subsequent negative air quality impacts, might be avoided. If this
reasoning is sound, it would seem to be advantageous to the utilities,
state government, and the general public.
4.2.1 Utility Interstate Cooperation
Those favoring some form of cooperation in interstate power plant
siting and operations among the utilities themselves often point out that
the electric power industry does cooperate in many operational functions
already. As noted in detail in chapter 7, cooperation across state lines
takes such organizational forms as power pools, joint plant ownership,
holding companies, and reliability arrangements. The latter type of coop-
eration is accomplished through the National Electric Reliability Council
(NERC) and nine regional reliability councils. Through these councils, the
nation's major electric power systems collect and exchange information on
such matters as load projections, generating resources, and interconnected
network facilities. (3) The question of why the reliability councils could
not assume interstate or regional leadership in mitigating air quality im-
pacts is increasingly being raised.
Some observers contend that it would be possible for Congress to ex-
pand existing legislation to encourage utility coordination of power plant
siting across state lines and other kinds of cooperation. Such encourage-
ment, they argue, might be in a form similar to that used by the national
government to stimulate the creation of the reliability bodies following
the 1965 "blackouts" in the Northeast. Thus, despite the hurdles certain
to face any effort at interstate siting and other new cooperation, several
bills have been introduced in the Congress which, if approved, would have
urged the electric utility industry in general to create additional mecha-
nisms.
Others believe it is unlikely that "encouragement" alone will be
enough to stimulate action in the interstate siting and operational field
by the reliability councils or other segments of the power industry. They
point out that the councils are made up of representatives of the indivi-
dual utility companies and that, according to this view, the councils do
not want to appear to be seeking to become "operational" in any sense or
to usurp any authority from the individual utilities.
4.2.1.1 Lack of Realism?
Is it actually realistic to expect any segment of the electric power
industry to provide leadership in creating cooperative mechanisms aimed
at interstate air quality control? It may not be in a utility's self-
interest to push for cooperative air quality control arrangements. The
burdens associated with installing flue gas desulfurization devices and
other anti-pollution equipment and the accompanying governmental regulations
just to control local pollution have been heavy. It may be expecting too much
to believe that — even with government "encouragement" — utilities will
take on a complicated cooperative interstate air quality control responsibi-
lity voluntarily.
26
-------
4.2.1.2 Regulatory Difficulties
If utilities in some combination of states were to agree on an arrange-
ment for voluntary interstate siting of plants and other forms of cooperation,
a method would be required for administrative and/or regulatory review of
their decisions at both the federal and the state levels. At present it is
difficult to envisage an acceptable structural arrangement for such review.
It would seem that the Federal Energy Regulatory Commission (FERC) and either
state siting agencies or public service commissions would have to be involved
somehow. In the present legal and political climate, coordination in such
an interstate arrangement would be extremely difficult. However, one ORBES
support study considers such a plan at length.(4) It suggests the possi-
bility of interstate identification or even acquisition of sites on an in-
terstate regional basis. Noted is a practice initiated by the State of
Maryland, which buys and "banks" future sites.
4.2.2 State-Initiated Cooperation
Cooperative ventures initiated by the states themselves to mitigate
negative transboundary air quality impacts represent another possibility,
but there is no evidence that such will develop. As discussed in chapter 8,
only one major proposal in the ORBES region is known. In September 1976,
the then-governor of Kentucky proposed to the governors of four other states
bordering the Ohio River (all of the ORBES states except Pennsylvania) that
they cooperate in the siting of power plants. However, the idea was not
pursued. At present, there is apparently no governor among the ORBES states
who wishes to make a case for interstate air quality control.
Further, officials of such state agencies as public service commissions,
environmental protection departments, and energy units apparently communi-
cate very little across state lines in regard to possible cooperation in
power plant siting or matters relating to power plant operations, In fact,
it appears to be difficult for such officials to communicate on such issues
even within their own states, due in part to the complexities of such areas
as operations and permit and licensing procedures associated with plant
siting and construction.
Before interstate or multi-state cooperation in the mitigation of trans-
boundary air pollution impacts could occur, legislative leaders in the
various states would have to perceive these impacts as major problems.
4.2.2.1 A Beginning in Ohio?
In only one ORBES state, Ohio, has the legislature given its administra-
tive leaders a clear mandate to seek interstate cooperation in developing
mitigation strategies. Ohio also is the only ORBES state that, by legisla-
tion, has fashioned a "one-stop" siting procedure through which one agency
has the authority to resolve all issues involving the acceptability of an
electrical generating facility site (Ohio Rev. Code Ann., sec. 4906.01 et
seq.). The Ohio Power Siting Commission, the lead agency through which the
27
-------
process operates, is made up of chief executive officers of the relevant
state agencies and also includes public and legislative membership. A
section of Ohio's power siting statute specifically provides for .ioint pro-
ceedings with other states and the federal government and for entering into
interstate compacts or agreements. If the other ORBES states were to create
similar commissions, there would at least be a suitable family of agencies
in the ORBES region for interstate discussions on siting and operational
problems.
4.2.2.2 Possible Regional Regulatory Agency
Although this section is entitled "voluntary options," this appears to
be the most appropriate place -- while discussing state-oriented cooperation
-- to raise the possibility of some kind of regional regulatory body aimed
at reducing transboundary air quality impacts in the ORBES region. As em-
phasized in a report prepared under contract to the Federal Energy Adminis-
tration in 1976, "while the nature of bulk power supply operations is highly
regional, regulation of those operations now occurs basically at the state
level." (5) The idea of an interstate-regional regulatory body in the
ORBES region would undoubtedly be viewed with alarm by the utility industry
as well as most other sectors in the respective ORBES states. One cannot
imagine any such proposal being accepted now by the various state legisla-
tures. But communications and voluntary cooperation among the public ser-
vice commissions in the ORBES states would seem to be a reasonable step.
4.3 THE INTERSTATE COMPACT
Another potential vehicle for mitigating negative transboundary air
quality impacts is the interstate compact. The U.S. Constitution declares
that "no state shall, without the consent of Congress...enter into any
Agreement or Compact with another State" (art. I, sec. 10). The courts have
held, however, that such congressional consent is required only when states
create an organization "tending to the increase of political power in the
states, which may encroach upon or interfere with the just supremacy of the
United States" (Virginia v. Tennessee, 148 U.S. 503, 1893). Given the cur-
rent concern over energy developments, the courts might hold that congres-
sional approval would be required of any new interstate agreement designed
to mitigate transboundary air impacts.
4.3.1 ORSANCO As Air Control Mechanism
Although in recent years interest has increased in the use of the inter-
state compact as a possible mechanism to mitigate these impacts, no serious
attention has been given to such an approach in any ORBES state legislature.
Legislative action is required before Congress can consider consenting to
a compact. However, state commissioners of an organization established 32
years ago through interstate compact to improve water quality in the Ohio
River Valley have expressed considerable interest in transboundary air pro-
blems. This organization is the Ohio River Valley Water Sanitation Commis-
sion (ORSANCO), formed when governors of the six ORBES states, plus New
28
-------
York and Virginia, signed an interstate compact. Since early 1979, the pos-
sible role of ORSANCO in the development of a multistate siting entity has
been under discussion. (6). Aside from urqinq an exploratory study on
whether there is need for a new or existing organization to engage in siting
activities, the ORSANCO commission has taken no formal action on establish-
ing such a body.
4.3.1.1 Advance Consent Concept
Some members of ORSANCO panels believe that their compact could be
modified to permit supplementary agreements, between as few as two member
states, to resolve transboundary air pollution conflicts and other problems
relating to interstate facility siting. Under such an agreement, the con-
cept of "advance consent" might be exercised, thus avoiding the need to ob-
tain congressional approval of agreements between states. ORSANCO commis-
sioners who favor such an expansion of the organization's role have empha-
sized that such a plan need not interfere with siting-related steps, par-
ticularly the issuance of construction and of rating permits, that now
are performed by state or federal agencies. Rather, the goal would be to
identify both prime siting areas and those unacceptable on the basis of
multistate and regional criteria.
As a specific proposal from one former commissioner put it, an ORSANCO-
based arrangement could be "applicable to the entire river valley or por-
tions thereof adjacent to two or more states. At the very least, a permit
coordination, or perhaps a multistate certification process, could be de-
vised even if nothing more profound were done." (7)
4.3.1.2 Pros and Cons of ORSANCO Role
A number of advantages and disadvantages can be cited in regard to
ORSANCO's role in mitigating negative air quality impacts. A major advan-
tage is that ORSANCO is an entity already in place, and it would take years
to approve a separate interstate body. However, ORSANCO is a water-related
organization, while air quality probably will be the major controlling
factor in operational and siting problems. Moreover, although the agency
has qualified staff to carry out its present functions, the staff is limited
in their air-related capabilities. Eight key states are commission members,
but the commission includes neither Tennessee nor other less critical
states in the broader Ohio River basin. The long-time ORSANCO constituency
consists of the eight member states; industry, including the electric utili-
ties; and municipalities. However, "newer" publics such as environmental
groups that focus on coal-related air quality problems, perceive limited
access to the body. Finally, ORSANCO is experienced in political affairs
and interstate diplomacy and probably is capable of articulating the states'
polition in conflicts with the federal government.
ORSANCO is discussed in later chapters. For example, in chapter 5,
devoted to basin waterways, it is emphasized as an important water-related
organization in the region. In chapter 8, dealing with broader interstate
29
-------
power options, its possible role as a power plant siting organization is
given additional attention.
4.3.2 Model Outside the Region?
No interstate compact to mitigate transboundary air pollution is known
to operate anywhere in the country at this time. However, the Delaware
River Basin Compact has organizational elements that could be relevant in
the consideration of such mechanisms for the ORBES region. The organization
"has played an active role in electric energy facility siting and has been
instrumental in both assisting and obtaining overall approval of sites and
in discouraging the utility from mis-siting projects. " (8) An agency es-
tablished by the compact has the authority to manage the water resources of
the river basin without regard to political boundaries. Unlike the Ohio
Basin, where the river's main stream and major tributaries provide adequate
water for industrial facilities, generating facilities on the Delaware River
were threatening to seriously affect the water quantity and quality of basin
streams at low flow. Therefore, in 1971, the Delaware commission amended
its rules to require that utilities obtain approval of water use for projects
with a capacity of 100 megawatts electric or more. Although water issues
were the impetus for the creation of the Delaware Compact Commission, and
air quality problems are viewed as most critical in the ORBES region, the
tools utilized in interstate administration of the use of water resources
might suggest organizational techniques for regional management of air
quality problems.
4.4 TVA LINKAGE TO ORBES REGION
In considering strategies to mitigate negative air quality impacts in
the ORBES region, it is impossible to ignore the Tennessee Valley Authority,
a federal corporation created in 1933 and a major consumer of roal among
the nation's utilities. The TVA service area includes parts or all of seven
states: Virginia, North Carolina, Kentucky, Tennessee, Mississippi, Alabama,
and Georgia. Of these states, only Kentucky also is in the ORBES region.
However, in terms of overlapping problems of long-range transboundary air
pollution transport, the two regions are so interconnected as to make se-
parate treatment almost impossible. Vital connections also are evident in
at least four other areas: (1) relationships and comparisons between TVA
and ORBES region utilities in providing coal-fired electric power to uranium
enrichment facilities, (2) rate-making and other financial comparisons between
TVA and ORBES-region utilities, (3) competition among coal suppliers in ob-
taining contracts with ORBES region utilities and TVA, and (4) linkages
between the two regions in waterway management. Thus, it is necessary to ask
whether any strategy in the ORBES region, operational or siting-oriented,
could be effective without the inclusion of the six other states that, to-
gether with Kentucky, form the TVA service area.
Even casual consideration of operational and/or siting cooperation to
link the ORBES and TVA areas for purposes of mitigating air impacts probably
would result in emotional responses from utility leadership in both regions.
30
-------
Intense ideological differences separated the early supporters of the TVA
idea from the leadership of the investor-owned utilities. Although conflict
has diminished somewhat over the years and the two sectors work together in
such areas as electric power reliability, cooperation might be difficult
to implement. However, given the increasing importance of the two areas in
eastern United States air quality management, pressures might force either
some form of cooperation between them or regulatory activity by a federal
agency unacceptable to both.
4.5 OTHER REGIONAL ORGANIZATIONS
For different reasons, then, both ORSANCO and TVA will be important in
discussions of multistate air quality management in the ORBES region. Pro-
bably of less significance are a number of other regional organizations.
4.5.1 Ohio River Basin Commission
One of these groups apparently shares with ORSANCO an interest in pro-
viding counsel on the interstate siting of power plants. This is the Ohio
River Basin Commission (ORBC), a federal-state partnership composed of 11
Ohio River Basin states (including the 6 ORBES states), 9 federal agencies,
and ORSANCO. ORBC was created in 1971 under Title II of the Water Resources
Planning Act of 1965 (42 U.S.C. 1962). Commission spokespersons have noted
that the organization may be suitable for studying siting dilemmas and pos-
sibly becoming involved in giving counsel of decisions. In developing its
budget in recent years, the ORBC staff has acknowledged power plant siting
problems, including transboundary air transport, and has sought funds to
study associated interstate issues.
A negative factor in considering ORBC for a possible role in air quality
impact mitigation is its basic organizational mission, which is limited to
planning focused on water problems. Howver, the argument has been made that,
in the absence of other effective organizations, the basin commission is an
appropriate institution to participate in planning for future air quality
management. Most of the disadvantages noted above in connection with OR-
SANCO 's possible role in air quality affairs apply to ORBC, perhaps in a
more telling fashion. In addition, leadership in certain of the states
holding membership in the commission has been dissatisfied with the organi-
zation's activities. For example, the state of Ohio has withdrawn financial
support. In the context of the above discussions of TVA and ORSANCO, it
should be noted that, unlike ORSANCO, ORBC does include the state of Tennes-
see within its membership. However, TVA's status as a federal corporation,
one that traditionally has functioned with few constraints from the states,
probably means that Tennessee's ORBC membership is of limited importance
in this regard.
4.5.2 Appalachian Regional Commission
A 13-state economic development-oriented organization centered in Appa-
lachia is so tied to a continued emphasis on coal that it must be mentioned
31
-------
in the context of air quality concerns. This body is the Appalachian Re-
tional Commission (ARC). It was created by Congress in 1965 under the
Public Works and Economic Development Act of 1965 (42 U.S.C. 3121), with
the purpose of promoting Appalachian economic development. The ARC region
includes all of West Virginia; portions of three other ORBES states, Penn-
sylvania, Kentucky, and Ohio; and parts of all of nine other states. Be-
cause of the overlap between much of the ARC region and the TVA service
area, many of the comments above in regard to TVA and the ORBES region
air quality relationships apply equally to the interface between the ORBES
region and the ARC area. A proposal has been made that ARC's functions
be expanded so that it could address transboundary impacts in the Ohio River
valley and that it perhaps become an energy facility siting body. This also
would involve an expansion of the commission's region. However, this pro-
posal finds little support in Indiana, Illinois, and Ohio, where many dis-
agree with the ARC emphasis on economic growth.
4.5.3 Title V Commissions
The multistate economic development bodies known popularly as Title V
commissions also should be mentioned, although no such bodies operate in the
ORBES region. These commissions also are created under the Public Works
and Economic Development Act of 1965. With the consent of the states inclu-
ded, an area may be designated a multistate economic development region and
invited to establish a commission. In the last few years, the federal gov-
ernment has given three new entities initial commission designation; each
would encompass one or more of the ORBES states. However, the role of these
proposed commissions in the mitigation of transboundary air pollution im-
pacts in unclear.
4.6 NATIONAL GOVERNMENT INITIATIVES
Most federal initiatives probably will center on the Clean Air Act.
Since the 1977 amendments were signed, various interests with a variety of
perspectives have sought to modify the act radically. Often electric utili-
ty representatives describe it as unnecessarily complex and excessively time
consuming. On the other hand, environmentalists and some EPA officials cha-
racterize the Clean Air Act as ineffective in addressing troublesome pro-
blems, including multistate, long-range transboundary air pollution trans-
port.
In August 1981, current authorization measures to fund administration of
the Clean Air Act will expire. This means, in effect, that Congress soon will
be reviewing the 1977 amendments. The EPA administrator has stated that the
act "could be gutted if people don't pay attention to what is happening." (9)
He has emphasized the problem of acidic deposition, which involves "numerous
jurisdictions, existing sources, and energy issues," noting that "the Clean
Air Act's primary reliance on the States is sound, but on this issue we con-
front one of its principal shortcomings: how to deal effectively with re-
gional and area-wide problems involving transport over long distances, and
across state and national boundaries." (10) Moreover, he has questioned
32
-------
seriously "whether the State Implementation Plan process ~ requiring as it
does a State-by-State, plant-by-plant approach -- is the best way to solve
this problem in a timely fashion." He continues:
I would personally prefer a regional, multi-state
approach to the problem of total loadings -- one
which would, for example, allow an entire utility
system to find the most cost-effective approach to
getting a percentage reduction from among a mix of
all their loadings; such a system should even be
flexible enough to permit trade-offs with other
utility networks, This would require a change in
the law. (11)
Thus, it appears likely that any new national initiatives aimed at the
mitigation of transboundary air pollution impacts will focus mainly, per-
haps exclusively, on mechanisms to combat the acidic deposition phenomenon.
33
-------
Chapter 4
References
1. Douglas M. Costle, "A Law in Trouble?" remarks delivered at the annual
meeting of the Air Pollution Control Association (Montreal, June 23,
1980).
? This concept is discussed by M. R. Rent and John Lantount, "Paoer No. 71-C-
' 26-PWR-I-A," delivered at Power Industry Comouter Aoolications Conference, 1971
3. Most of the electric utility service in the ORBES region is coordinated
by two regional councils: the East Central Area Reliability Council
(ECAR) and the Mid-America Interpool Network (MAIN). See Jan L. Saper
and James P. Hartnett, eds., The Current Status of the Electric Indus-
try in the ORBES States. (ORBES Phase II), pp.13-18.
4. James Mclaughlin, Legal and Institutional Aspects, ch. V, Sec. 8C.
5. Structural Reform in the Electric Power Industry, Prepared under con-
tract to the Federal Energy Administration (Contract No. CO-05-50152-
00), Gordian Associates, Washington, D.C., June 1976, p.45.
6. Memorandum from Kentucky Commissioner Eugene F. Mooney, chairman, Task
Force on Major Facility Siting, to ORSANCO members (January 10, 1979),
and Eugene F. Mooney, "Proposal to ORSANCO on Major Facilities Siting
Process for Ohio River," distributed as Appendix G. at ORSANCO commis-
sion meeting (September 14, 1978).
7. Mooney, "Proposal to ORSANCO," p.3.
8. Herbert A. Hewlett, "The Role of River Basin Commissions in Energy
Facility Siting," paper delivered at a seminar of the Southern Governors'
Conference (March 25, 1977).
9. Douglas M. Costle, "A Law in Trouble?"
10. Douglas M. Costle, "A Law in Trouble?"
11. Douglas M. Costle, "A Law in Trouble?"
34
-------
Chapter 5
BASIN WATERWAYS IN TKE FEDERAL CONTEXT
Although it is felt by most ORBES researchers that transport of air pol-
lution across state lines will present the major institutional challenge in
the generation of electric power in future years, Ohio River basin waterways
remain critical in the broad federal context. The rivers are of obvious sig-
nificance in providing for transportation of coal and other fuels to power
plants and a wide variety of industrial installations. Less obvious, but of
growing importance, are subtle but critical linkages between air and water
management.
One type of such possible linkage relates to the number and frequency
of "hot spot" high concentrations of air pollutants already discussed.
These hot spots could be diminished by dispersed siting of new plants. Such
a dispersion strategy could be achieved by locating some generating facili-
ties near headwaters of the Ohio River's major tributaries. In these loca-
tions, of course, less water is available than on the Ohio "mainstem." Water
consumption at the plants would further deplete the supply, and more drama-
tic impacts would result. In selecting such a siting strategy, then, the
overall region would be trading off possible negative air quality impacts
for potential adverse water-related effects. Thus, the emphasis by ORBES
upon air impacts should not obscure the continued importance of water and
the always-present possibility of increased negative water impacts.
Of course, political dynamics and the status of technology permitted
state and federal officials to address interstate water problems across
state lines in the Ohio basin long before interstate air pollution became so
prevalent or so widely recognized.
As explained in other CRBES publication series, the region does not con-
fom to the hydrological definition of the Ohio basin. Technically, 209
thousand square miles in fourteen states are drained by the Ohio River and
its nineteen major tributaries. In addition to the six ORBES states, the
drainage basin also includes portions of Tennessee, New York, North Carolina,
Virginia, Maryland, Mississippi, Alabama, and Georgia. But in the minds of
most the basin is associated with what is more properly called the Ohio
River Valley, made up of those portions of the six ORBES states which border
the river.
By the 1930's, in the words of Paul V. McNutt, then Federal security
administrator, the water pollution problem in the Ohio River Valley "over-
shadowed that of any other drainage basin in the United States" (1). Just
as the diversified sources of pollution and the many governmental agencies
involved now make air quality problems difficult to approach, so were the
early steps in addressing interstate pollution extremely awkward.
35
-------
The region's steadily increasing industrialization and the accompany-
ing rise in'population made interstate action in controlling water pollu-
tion imperative in the thirties, Also, severe droughts in 1930 and 1934
reduced the amount of available water in the river and served to call pub-
lic attention to the menace which Ohio River pollution represented to pub-
lic health throughout the region.
5.1 HISTORY OF ORSANCO
Congress gave impetus to the growing demand for interstate action by
authorizing negotiations for an interstate water sanitation compact in 1936
(2). Shortly therefore, the Ohio River Valley Water Compact Commission was
formed to draft an appropriate compact document. With the help of the
Council of State Governments, agreement on the terms of a compact,was
reached in 1938. But it was not until 1948 that the necessary number of
states accepted its terms. Virginia became the last of eight states to ap-
prove the compact. Others who had approved the document were the six ORBES
states, plus New York. Ninety days later, on June 30, 1948, governors of
the eight states signed the compact, and it became effective. The compact
does not prescribe how pollution shall be controlled. For this purpose it
creates as the agent of the states the Ohio River Valley Water Sanitation
Commission (ORSANCO), composed of three representatives of each state and
three from the federal government.
ORSANCO has thus been in existence for thirty-two years. A scholarly,
objective work on interstate compacts, written in 1959, described ORSANCO
as follows:
The Ohio River Valley Water Sanitation Committion is
set apart from most compact agencies by the fact that
it is endowed by its Compact with the power to secure
compliance with the standards it sets. Article X of the
Compact makes it the duty of the municipality, corpora-
tion, or entity to whom the Commission issues an order
to comply with it, and the Commission is given power to
call on any court of general jurisdiction or on any U.S.
District Court in any of the Compact states to enforce
its order by mandamus, injunction, order of specific
performance, or some other equally appropriate form of
legal action. Ordinarily, the Commission does not deal
directly with any municipality or industry regarding
compliance with its orders. It has won adherence to
them through its education efforts and by relying on
the several pollution control agencies in the states (3).
Origins and operations of ORSANCO are particularly relevant now because
of its interest in interstate power plant siting and operations, as dis-
cussed in the preceding chapter. In view of such interest on the part of
ORSANCO, another quotation from the work cited above is pertinent:
36
-------
The success of the Ohio River Valley Water Sanitation
Commission can be attributed to a number of factors.
For one thing, it has not deviated from the work pre-
scribed by the Compact — pollution control, Although
pollution is but one of the many problems which exist
in the Ohio River Basin the Commission has steadfastly
refused to be enticed by the possibilities of such pro-
blems as flood control, navigation, soil conservation,
reforestation, and recreation. No doubt its way was
made easier by the fact that all the party states already
had an agency concerned wholly or in part with the pol-
lution control, with which the Commission could imme-
diately begin to work and whose efforts it could begin
to bring together into a massive attack. The Commission
has always been respectful of these agencies, and in
return the agencies have been willing to work with the
Commission. "The Commission's success on the industrial
side can be credited in part to the dollars and cents
value of stream sanitation which the Commission demon-
strated in a great many cases. Finally, the Commission's
success is due to its decision to rely mainly on education
and persuasion to win adherence to its standards rather
than on compulsion by law. Perhaps the most important
result of its work is the creation of public awareness
of and interest in attacking the pollution problem
throughout the valley (4).
Both advocates and critics of ORSANCO should remember that these com-
ments were written in 1959. Although the Ohio River Valley has long been
a center for the production of electric power, the possibility of ORSANCO
becoming involved in interstate siting of plants or other utility-related
functions certainly was not a point of contention in 1959. Of course a
great many changes have occurred at all levels of government since then.
Not least of these has been the establishment of the U.S. Environmental Pro-
tection Agency (in 1970). The national agency and ORSANCO obviously have
different constituents to which they must be responsive, and tensions have
developed between the two organizations. These tensions and other organi-
zational dynamics surrounding ORSANCO will be discussed in chapter 7, "Or-
ganizational Structures."
5.2 NATIONAL DEFENSE CONSIDERATIONS
The use of the nation's total inland waterway system to maintain the
nation's security has long been recognized, and recent efforts to reduce our
dependence upon foreign oil only emphasizes this fact. Use of the Ohio
River and its major tributaries to ship coal and other domestic fuels is a
case in point. Of course the production of electric power itself ~ direct-
ly related to national defense — is dependent upon adequate supplies of
water, and, as emphasized throughout ORBES documents, the region's waterways
have been a vital factor in attracting electric utilities to the region.
37
-------
The region also contains a vast array of other essential industrial
facilities, built in the area to utilize water supplies, which would be
pressed into defense production if an emergency should arise, Among these
are some of the world's largest concentrations of chemical installations.
As is noted in chapter 9 it now appears that the region's bountiful water
supplies and massive coal resources together will attract a new coal-based
synthetic fuel industry. All of these elements are tied together by the
region's waterways, and any institutional conflicts among the states --
or between the states and the national government — will affect the well-
being of the residents in this area as well as the country in general.
There may be a touch of chauvinism or romance attached to assertions
by ORBES region residents that the Ohio River itself has been a "lifeline"
for the nation in war and peace almost from the earliest days of the coun-
try. But history bears out these assertions to a degree, and there is lit-
tle to suggest that the Ohio River will be less significant for the nation
in the future.
5.3 OHIO RIVER BOUNDARY DISPUTES
At a time when it is fashionable to discuss future energy "balkaniza-
tion" of the states in the American federal system, one must assess with
caution the role of the Ohio River as a boundary line for five of the six
states and an ongoing boundary dispute among these states. (For its first
forty miles after it is formed by the confluence of the Allegheny and the
Monongahela rivers at Pittsburgh, the Ohio flows within Pennsylvania be-
fore it becomes the border between Ohio and West Virginia.) As discussed
below, the Supreme Court has spoken once again in this matter, but there is
some doubt whether the states will be successful in implementing the last
decision of the court.
Since colonial times the Ohio River has been the source of these border
disputes, and given the farcical character of some of these conflicts it is
questionable whether they should be dignified with serious attempts at re-
view or analysis. However, as the complexities of an advancing technologi-
cal period confront the ORBES states, with their respective unique aspira-
tions for producing energy, these disputes just might assume genuine sig-
nificance. The siting of power plants have already produced interstate con-
flicts centered on the boundary issue, and if a synthetic fuel industry in
the Ohio Valley becomes a reality these conflicts could intensify.
A dispute between Kentucky and Indiana over a nuclear power plant being
constructed near Madison, Ind., about 30 miles upstream from Louisville,
illustrates both the unique postures of the states in regard to power pro-
duction preferences and the current relevance of long-time boundary disputes.
In 1975, Public Service Indiana (PSI), an investor-owned utility com-
pany based in Plainfield, Ind., (a few miles southwest of Indianapolis),
announced plans to build the facility in question at a location known as
Marble Hill. A host of objections were voiced almost immediately by public
officials in Kentucky. These included the claim that dumping cooling water
from the nuclear plant could endanger Kentuckians living downstream at Louis-
38
-------
ville and beyond, Details of the controversy are discussed in more detail
in the following chapter, devoted to nuclear plants.
5.3,1 Kentucky Ownership Claim
The point here is that Kentucky officials have argued through the
years that the state historically owned the Ohio River to the current low
watermark on the Indiana side of the stream. According to Kentucky offi-
cials, this recognization has prevailed since 1792, the year in which Ken-
tucky was awarded statehood. Formal recognition of the boundary essential-
ly would make the river part of Kentucky. Hence such ownership,according
to this view, would give Kentucky jurisdiction over all river activities
except navigation (which is a federal power) and allow state officials to
deny PSI authority to remove water from the river for cooling of the nuc-
lear plant or to discharge effluent into the river. In 1978, the federal
Nuclear Regulatory Commission (NRC) ruled that Kentucky did not have the
authority to block construction of the Indiana nuclear facility. After an
appeal to the U.S. Court of Appeals failed to reverse the NRC ruling, the
Kentucky attorney general took the matter of river ownership directly to
the U.S. Supreme Court in a petition filed in the fall of 1978.
The Supreme Court already had a similar question pending in a 12-year
boundary suit brought against Kentucky by the State of Ohio. Kentucky's
661-mile Ohio River border is shared with the states of Ohio, Indiana, and
Illinois with similar historical precedents existing for each state. Thus,
it was generally expected that any decision rendered by the Supreme Court
in regard to the 170-mile common boundary between Ohio and Kentucky would
likewise apply to the 380-mile Kentucky-Indiana border. (Kentucky also
has a common river border of 111 miles with Illinois.)
All concerned with the case acknowledged that the water level of the
Ohio River has been raised by the construction of dams and that the river's
banks have moved northward into Ohio and Indiana. Thus, the basic issue
before the Supreme Court was whether the present boundary should be the
northerly low-water mark -- now a considerable distance further to the north
than in 1792 -- or whether the states should be forced to accept the 1792
border, which is now somewhere near the middle of the river.
A special master recommended late in 1979 that the Supreme Court for-
mally rule that the existing northern shoreline boundary between Ohio and
Kentucky is incorrect and that the dividing line is actually the low-water
mark of the Ohio River as it existed in 1792 (5).
In his recommendation, the master said the 1792 boundary could be de-
termined either by survey or by mutual agreement between the attorney gene-
ral of Ohio and Kentucky (6). In a comment on the master's recommendation,
Ohio Attorney General William J. Brown said he had "historic documents"
which would aid a surveyor in determining the 1792 low-water marks. He
admitted, however, that it could take considerable time to ascertain the
exact dividing line between the states (7).
39
-------
Much less prominence has been qiven to West Virginia's situation in
claiming ownership of the river, but it now finds itself in the same plight
as Kentucky, Under reasoning similar to that applied to Kentucky, 1t had
been held prior to recent action that West Virginia's border extended to
the northern low-water mark in its common Ohio River border with the state
of Ohio.
5.3.2 A New Interpretation
In what could become the single court decision with the most potential
for affecting future water-oriented interstate relations among the five
states, the Supreme Court ruled on January 21, 1980, that the Ohio-Kentucky
boundary should be fixed where it was nearly two centuries ago. This, of
course, was the low-water mark on the northern shore of the river as it
existed in 1792 when Kentucky was admitted to the union.
The decision in the case, Ohio v. Kentucky, dealt specifically only
with a border dispute between these two states. But, as already noted, the
decision was felt by all concerned to set a precedent for the similar river
border dispute between Kentucky and Indiana. (The Supreme Court has in-
deed ruled since the January decision that the Kentucky-boundary should re-
vert to the 1792 mark.)
In a split decision (6 to 3), the minority justices offered dissents in
the Ohio-Kentucky case which suggest that the boundary problems have not
been disposed of forever. In a dissent by Justice Powell, with whom Justice
White Rehnquist joined, it was declared:
This curious result frustrates the terms of the
Virginia Cession of 1784 that first established the
Ohio-Kentucky border, ignores Chief Justice Marshall's
construction of that grant (and)...is contrary to
common-law rules of riparian boundaries, and creates
a largely unidentifiable border.
The Ohio River must remain the border between the
States and within the domain of Kentucky. The only
way to ensure this result is to recognize the current
low-water mark on the northern shore as the boundary.
...The Court's holding that the boundary forever re-
mains where the low-water mark on the northern shore
of the river was in 1792, regardless of the river's
movements over time, may produce bizarre results.
...Sensible people could not have intended such
results, which not only would mock the congressional
resolution accepting Ohio into the Union as a State
"bounded...on the South by the Ohio river."
(2 Stat. 173 (1802).
40
-------
...Following today's decision, all boundary matters
between Ohio and Kentucky will turn on the location
almost 200 years ago of the northern low-water mark
of the Ohio River. This cumbersome and uncertain
outcome might be justified if it were dictated by
unambiguous language in the Virginia Cession. But
since the Court's decision is not only unworkable
but also does violence to that deed as it has been
construed by this Court, I cannot agree with the
Court's ruling today (8).
Thus, despite the concerns of three justices, the ruling was a victory
for Ohio, Indiana, and Public Service Indiana (PSI), the utility construc-
ting the nuclear plant at Marble Hill, Indiana.
If the view of the minority judges had prevailed, Indiana and Ohio
would have lost some of their land to Kentucky. Now, however, Kentucky —
whose leaders have always contended that their state owned the entire river
~ must prepare to share ownership with Ohio, Indiana, and Illinois. Of
course the same is true of West Virginia, the other state South of the river,
which — as noted above — shares it as a common border with Ohio.
Kentucky (and perhaps West Virginia) may seek a rehearing of the case.
But a motion for rehearing will not be successful unless Kentucky convinces
some of the justices who decided in favor of the Ohio (and Indiana) that
their votes were in error. At present there appears to be little chance of
this occurring.
Of course the Supreme Court's decision most certainly will nullify Ken-
tucky's attempt to block construction of the Marble Hill plant on the ground
that the plant's discharge will be into water owned by Kentucky. Now, of
course, under the new ruling of the Court, the Marble Hill discharge point
will be in Indiana.
Barring the Court's acceptance of a Kentucky plea for rehearing, then,
Kentucky, Ohio, Indiana, Illinois, and West Virginia will be required to
devise a method of determining the 1792 boundary. It could be argued, per-
haps, that this costly task might provide some incentive for new interstate
cooperation such as that required to stimulate joint discussions on the
siting of energy facilities.
The Supreme Court decision apparently means that there must be a "double
enforcement" by the five affected Ohio River states. Kentucky's argument
that its River ownership justified a claim for permit granting authority over
the new power plants across the river at least had the attraction of simpli-
fying the process. Now, with the possibility that a number of synthetic fuel
plants may join new power plants on both sides of the river, prospects of
double enforcement conjure up thoughts of complex -- even chaotic -- permit
and licensing procecures. If such does indeed occur, a plant siting "treaty"
arrangement might prove attractive.
41
-------
At the present, three different Corps of Engineers district offices,
three ERA. regional headquarters, the flye states bordering the River, and
the Ohto River Valley Water Sanitation Commission (ORSANCO) are in some ways
involved in the decision-making process. And, the Supreme Court decision
could well increase the tensions and complexities which surround the inter-
agency and inter-state dynamics.
Prior to the decision, Kentucky officials had been encouraged by ac-
tion of one federal agency. In a recent hearing on Indiana's Clark Mari-
time Center, a proposed riverport across from Jefferson County, Ky., the
U.S. Army Corps of Engineers consented to receive Kentucky's testimony on
the center's effect on the latter state. This was perceived in Kentucky as
federal recognition of its regulatory interests along the river boundary.
However, even before the Supreme Court decision, Indiana had not felt
that Kentucky deserved such recognition, Now, the question emerges whether
the tangled web of jurisdictions through which power plant and synthetic
fuel plant operators must move for approval of sites might become even more
cumbersome.
42
-------
Chanter 5
References
1. U.S. House Reoort 2653, 76th Cong., 43rd Session, 2.
2. 49 Stat. 1490 (1936).
3. Richard H. Leach and Redding S. Sugg, Jr., The Administration of Inter-
state Compacts (Baton Rouge, Louisiana: Louisiana State University
Press, 1959), no. 183-184.
4. Ibid., pp. 186-187.
5. Special master in the case was II. S. District Judge Robert Van Pelt,
Nebraska.
6. From a telenhone conversation between Judge Van Pelt and the author, January
2. 1980.
7. "Ohio Happy with River Suit's Course," Cincinnati Fnnuirer, Januarv 2, 1980.
8. These quotations are taken from the "Slio Opinion," issued hv the Supreme
Court of the United States. Ohio vs. Kentucky will he oublished later in
the formal Supreme Court reports.(Case argued Oecember 3, 1979; decided
Januarv 21, 1980.)
43
-------
Chapter 6
NUCLEAR POWER PLANTS
Previous chapters have concentrated mainly upon interstate problems
associated with siting and operation of coal-fired electric generating fa-
cilities. Of course such installations dominate the electric power industry
in the ORBES region. But the few nuclear power plants in the region pre-
sent significant interstate and intergovernmental issues far out of propor-
tion to their number when compared to coal installations. In terms of both
siting and operations, the nuclear plants offer interstate problems which
cannot be lumped with fossil-fuel facilities. A dispute between Kentucky
and Indiana over Ohio River water use for cooling a nuclear plant was noted
in the previous chapter. However, a broad array of other interstate pro-
blems exist in connection with the construction and operation of nuclear
plants in the ORBES region.
This chapter will review the history of siting, construction, and opera-
tion of nuclear power plants themselves in the region as related to inter-
state matters but will not examine those installations in the region which
are associated with other phases of the nuclear fuel cycle. Interstate as-
pects of the operation of uranium enrichment facilities and nuclear waste
disposal sites will be discussed in chaoter 9, "Transcending Ontions."
As this is being written in the summer of 1980, considerably more than
a year has passed since the accident occurred at Metropolitan Edison's
Three Mile Island (TMI) plant near Harrisburg, Pa., on March 28, 1979. The
TMI facility, located on the Susquanna River, is only two counties removed
from the Ohio River drainage basin and the ORBES study region. The Sus-
quanna empties into the Chesapeake Bay, not the Ohio River. But the TMI
plant's location in an ORBES state and its closeness to the edge of the Ohio
basin are relevant for this discussion.
The accident seems to have intensified opposition to nuclear power
plants in the two ORBES states — Kentucky and West Virginia -- which do not
contain nuclear generating facilities. Of course Kentucky and West Vir-
ginia are two of the nation's leading coal producing states. Whether oppo-
sition to nuclear power in these states is based mainly on genuine fears or
results from a concern that nuclear facilities might make coal less attrac-
tive (as many nuclear advocates argue) such opposition is real. However,
before focusing on interstate relations in regard to nuclear power, it
seems desirable to trace briefly the history of nuclear plants in the ORBES
region.
6.1 HISTORY OF EARLY PLANTS
The first experimental nuclear power station in the country was put
into operation at Shippingport, Pa. — in Western Pennsylvania on the Ohio
44
-------
River and within the ORBES region -- 1n 1957. The Duquesne Power Company
has continually operated this facility, first for the U,S, Atomic Energy
Commission, next for its successor agency (the Energy Research and Develop-
ment Administration), and now for the U.S. Department of Energy (DOE), The
plant is only a few miles from the heavily industrialized area of Eastern
Ohio, but apparently no interstate problems matching those associated with
nuclear plants in the lower Ohio Valley have developed over the 23-year
life span of the facility.
The same is true of the nation's first full-scale commercial unit put
on line at Dresden, 111., by Commonwealth Edison Company, in 1960. Located
near Morris, 111., Dresden is now the site of four units. It is located in
Grundy County, one of the northern-most Illinois counties included in the
ORBES region and more than 200 miles from the Ohio River. As noted earlier,
the ORBES study region boundaries were drawn to include Illinois coal-
producing counties.
Since providing the setting for the country's "pioneer" nuclear sta-
tions, utilities in both Pennsylvania and Illinois have developed a heavier
reliance on nuclear power than other ORBES states. In the ORBES portion
of Pennsylvania, in addition to operating the Shippingport experimental
reactor, Duquesne Power Company has also operated the commercial Beaver
Valley Station, also at Shippingport, since 1977. (A second unit of this
station is presently under construction.)
Commonwealth Edison, with its headquarters in Chicago and its service
area encompassing most of Northern Illinois, now relies upon nuclear gen-
erating plants for about 50 percent of its power, more than any other uti-
lity in the country. In addition to the Dresden facility, Commonwealth
Edison operates one other nuclear plant in the ORBES region. This is its
LaSalle County facility, a short distance west of Dresden and, like Dresden,
more than 200 miles from the Ohio River.
Another Illinois utility, Illinois Power, is presently constructing
a nuclear plant near Clinton, DeWitt County, about 50 miles south of Dres-
den, but still nearly 200 miles from the Ohio River.1 All three of these
Illinois plants -- Dresden, LaSalle County, and Clinton -- are located in
relatively rural areas, are 40 to 70 miles from the Indiana state line, and
have not stirred interstate conflicts as have Indiana and Ohio nuclear fa-
cilities located on the Ohio River as discussed below.
6.1.1 Diverse Responses to Nuclear Plants
Possible explanations of the difference in community and state respon-
ses to nuclear power plants within the ORBES region and elsewhere have re-
cently begun to interest social scientists. Apparently no convincing ex-
planations have been developed. In the context of this paper, it is perhaps
pertinent to ask why Kentucky and West Virginia leadership has generally
taken a negative attitude towards use of nuclear power by neighboring states
while attitudes of governmental and political leadership in other ORBES
45
-------
coal-producing states is less negative. Some observers have sugges-
ted that, at least in the case of Pennsylvania and Illinois, the longer
experience with nuclear reactors has reduced the concerns of their resi-
dents.
Probably neither the expertise of social scientists themselves nor
adequate knowledge of the ORBES region yet permits generalizations of this
kind. It is even "risky" to generalize in regard to Kentucky and West
Virginia always having political leaders who oppose nuclear plants. A
relatively recent governor of Kentucky urged the development of nuclear
energy. This was Louis Nunn, elected to a four-year term in 1967, who
promoted establishment of "nuplex" centers designed to exploit both the
atom and coal. Such energy centers would have exported electric power to
other states. Of relevance here in terms of ongoing ORBES interstate re-
lations is the fact that Nunn was once again the Republican nominee for
governor of Kentucky in 1979. In his recent campaign, Nunn still advocated
the construction of a large number of additional power plants for exporting
or "wheeling" of electric power outside the state, but he emphasized the
use of coal. (Nunn was defeated in the 1979 election by the Democratic
nominee, John Y. Brown, Jr., who had urged that a new coal-based synthetic
fuel industry be the centerpiece of Kentucky's future energy policy.)
No doubt the most that can be said in terms of anti-nuclear sentiments
among the states 1s that Kentucky leaders have clearly been the most vocal
in opposing nuclear plants. (It should not be ignored, of course, that
Kentucky's unfortunate experience with a nuclear waste facility, the Maxey
Flats site 1n Flemino County has probably influenced many residents
of the state in their overall views on nuclear matters. Further compli-
cating interstate dynamics surrounding total nuclear developments is the
presence of two massive uranium enrichment facilities in the ORBES region.
As discussed elsewhere, one is near Paducah, Ky., while the other is
located near Portsmouth, Uhio, on the Scioto River but only a few miles
upstream from the point where this stream empties into the Ohio across from
northeastern Kentucky.)
6.1.2 Kentucky Focus on Two Facilities
The present focus of anti-nuclear sentiment in Kentucky is on two
plantsi one under construction in Indiana and the other in Ohio. The
less controversial of the two is a nearly-completed facility on the Ohio
River, near Moscow, Ohio, about 20 miles upstream from Cincinnati. Known
as the Zimmer plant, the installation is operated by the Cincinnati Gas &
Electric Company (CG&E), but is jointly owned by this firm and Dayton Power
and Light Co., and Southern Columbus Electric Co, of Columbus, Ohio. (The
latter was recently acquired by American Electric Power Company, a holding
company formerly headquartered in New York City, but now in the process of
moving a major part of its corporate operations to Columbus.)
Many of the general Kentucky concerns over the Zimmer plant apply
46
-------
equally to the Indiana Marble Hill facility cited, in the previous chapter,
(Details of the Kentucky opposition to Marble Hill will be discussed below.)
But there are several distinct aspects to the Zimmer'-Kentucky controversy,
For example, Ziraner was virtually ready for operation when the TMI acci-
dent occurred in March of 1979, and Cincinnati Gas and Electric had already
announced its desire to open the facility in 1980. As in the case of
other nuclear plants under construction around the country, the Nuclear
Regulatory Commission (NRC) suspended initial hearings on Zimmer in the
wake of the TMI accident.
After the hearings on Zimmer were re-opened early in 1980, a newly-
elected Kentucky attorney general, Steven Beshear (just elected the pre-
vious November), filed a motion with the NRC in early March to intervene
as an "interested state" in the deliberations on CG&E's application for an
operating license. The attorney general said the Ziraner plant represented
an "inherent hazard" to Kentuckians (1). Beshear continued:
The Commonwealth of Kentucky is greatly concerned
about the inadequacy of emergency planning and moni-
toring capability for the plant...
I am opposed to licensing of the Zimmer nuclear power
plant so long as emergency plans remain inadequate to
cope with accidental releases of radiation (2).
Beshear said his state had developed a list of areas across the Ohio
River and within 10 miles of the plant — including Bracken, Campbell and
Pendleton counties -- where state officials believed emergency preparedness
plans must be improved before an operating license should be issued. Aside
from the specific areas identified for attention, Beshear said that addi-
tional plans will also be needed for Kentucky counties within a 50-mile
radius of the Zimmer plant. According to him, CG&E will be expected to pay
the cost of improved emergency preparedness plans in Kentucky. In the
event the utility does not agree to assume such costs, the attorney general
said, Kentucky will oppose the issuance of the operating license. Other
objections were raised by Beshear with respect to these matters: (1) pos-
sible shipment of radioactive material to or from the Zimmer plant and
particularly "inadequate" safety standards for movement of radioactive
waste material by rail; (2) lack of permanent disposal sites for spent
nuclear fuel; and (3) lack of an adequate plan of operation for decommis-
sioning the plant at the end of its useful life,
6.2 UNIQUENESS OF MARBLE HILL
Early in 1974, Public Service Indiana (PSI), a utility with headquar-
ters at Plainfield, Ind. (near Indianapolis), announced plans to build a
nuclear power plant on the Ohio River about 10 miles southwest of Madison,
Ind. (Madison is also the site of the Clifty Creek coal-fired plant dis-
cussed earlier. ) The proposed facility was given the name of Marble
Hill, taken from a small nearby community which once was the center of an
active quarry industry. Here, there was a unique situation where the
47
-------
state's largest utility (but with no nuclear experience) sought to build one
of the world's largest nuclear plants directly across a river -- whose owner-
ship was under dispute — from a portion of a state (Kentucky) already in-
tensely opposed to nuclear power. The interstate dynamics were further
compounded by the closeness, about thirty miles downstream, of Kentucky's
largest city, Louisville,
It is unlikely that any electric power facility in the country --
nuclear or otherwise — has provided a more graphic demonstration of the
almost unbelievable complexities faced by a democratic system of government in
attempting to manage 20th century energy affairs within a federal framework
fashioned in the 18th century. Controversy surrounding the plant over the
past six years of planning and partial construction encompass almost all
issues which face other nuclear installations around the country. All are
highly significant, but in this context only those will be discussed which
relate directly to this plight faced by our federal system in dealing with
increasingly critical interstate and intergovernmental problems. The pre-
vious chapter touched briefly upon the plant as an element in the Indiana-
Kentucky boundary dispute, but the possible interstate lessons to be
learned from Marble Hill extend far beyond that issue.
6.2.1 Interstate Ownership Questions
Conflict and confusion over ownership of the Marble Hill plant has re-
vealed interstate dynamics which raise new questions about old cooperative
arrangements between various sectors of the electric power industry within
the federal context. Prominent among these is the relationship between an
investor-owned utility and rural electric cooperatives, which are funded
through loans provided by an agency of the national government.
The total ownership of the Marble Hill plant to be operated by PSI be-
came a point of contention early in the planning process. A PSI brochure
appearing in 1976 indicated that "about one-fifth of the plant's output
will go to Hoosiers served by Northern Indiana Public Service Company (NIPS-
CO), which will have 20% ownership. Ownership of a still smaller portion of
the plant and its output is yet to be determined" (3). (NIPSCO, based in
Hammond, serves primarily the heavily industrial belt of Northern Indiana,
including Gary.)
However, late in October of 1976, a Kentucky newspaper carried an arti-
cle, which reported that NIPSCO was "thinking of pulling out" of the owner-
ship arrangement (4). The same story reported that letters of intent for
partial ownership had been signed by two rural electric cooperative entities
(5). The story identified the organizations as the East Kentucky Power Coop-
erative, with intentions of consumating an arrangement for 8 percent owner-
ship, and the Wabash Valley Power Association (located in Indiana), which
planned to seek 7 percent ownership of the plant.
By late January of 1977, NIPSCO confirmed that it definitely had de-
cided not to pay one-fifth of the cost for Marble Hill (6). (Over the next
48
-------
few weeks there were conflicting reports as to whether NIPSCO would buy
an earlier-announced 20 percent of Marble Hill power or a lesser amount.)
The January announcement also indicated that PSI's own share of the owner-
ship would be increased to 75 percent and that the Wabash Valley Power
Association had agreed to increase ownership percentage from 7 to 17 per-
cent. PSI sources indicated that the East Kentucky Power Cooperative, which
serves rural cooperatives in 18 Kentucky counties, was still planning to
hold 8 percent ownership. However, the same story quoted an East Kentucky
official who said its involvement was not certain.
Less than a week later, on January 26, 1977, three agencies of the Ken-
tucky state government obtained a temporary restraining order in one of its
own courts (Franklin Circuit Court in Frankfort, the state's capital),
blocking work on the proposed plant in Indiana (7). Kentucky units were
the Department of Natural Resources and Environmental Protection, the Office
of the Attorney General, and the Kentucky Public Service. (Governor Carroll
had given the agencies his "blessing" in seeking the court order.) Defen-
dents were PSI, NIPSCO, the Wabash Valley Power Association, and Kentucky's
own East Kentucky Power Cooperative. A long list of claims made by Kentucky
are discussed below in a later section. The Supreme Court had not, of course,
at this date ruled on the Ohio River ownership question, and most of the
claims were based on Kentucky's argument that it owned the entire stream Lo
Indiana's low-water mark.
A few days later (February 3), a Louisville-Jefferson County (Ky.) com-
mittee charged with challenging the Marble Hill plant recommended that three
new legal approaches be utilized in the interstate conflict: (1) a ruling
from the Kentucky attorney general to determine if the East Kentucky Coop-
erative had violated state law in joining the project without approval of
its own home state public service commission; (2) possible grand jury inves-
tigation of the cooperative's action; and (3) an anti-trust review of the
financing arrangements for the plant (8).
Within one week, officials of the Eastern Kentucky Cooperative announced
withdrawal of their proposal to purchase 8 percent of the installation with
the amount involved estimated at $120 million. Both Louisville newspapers
carried extensive quotations from officials of the organization which
raised questions related to both interstate relations and the particular is-
sue of joint ownership involving a cooperative and an investor-owned company.
According to a Courier-Journal account, the cooperative's decision to
withdraw had nothing to do with power or the need for power. The newspaper
quoted the president of East Kentucky as blaming its withdrawal on govern-
ment regulatory delays and "uncertainty about the Carter administration's
policies on nuclear power and Kentucky opposition to the project" (9). One
reason for the cooperative's decision, according to quotations attributed
to its president, was the refusal of the Rural Electrification Administration
to release funds for East Kentucky's share of the plant until all litigation
was "cleared up" (10).
49
-------
The Louisville Times quoted the president as maintaining that parti-
cipation in the project would have put East Kentucky power, for the first
time, "under the control" of the Federal Power Commission, the U.S. Nuclear
Regulatory Commission, and the Public Service Commission of Indiana (11).
He also noted that the organization would have continued under the super-
vision of both the Kentucky Public Service Commission and the national
Rural Electrification Administration.
6.2.2 Kentucky vs. Marble Hill
The vigor with which the Commonwealth of Kentucky has opposed PSI's
construction of the Marble Hill nuclear facility in Indiana probably
represents one of the most striking set of interstate rivalries since the
various Ohio River Valley states were brought into the union. Probably
no issue in the history of the two states has bonded public officials in
Kentucky so firmly against her neighbor across the Ohio River to the north.
Two governors, the state's Department of Natural Resources and Environmental
Protection, and the state's public service commission (now formally known
as the Energy Regulatory Commission) have all joined from time to time in
legal action to block continued construction of the Marble Hill facility.
As noted elsewhere, nuclear supporters in Indiana have often charged
that much of the Kentucky opposition stems from a desire to market Kentucky
coal for utilization in Indiana power plants, rather than a genuine fear of
nuclear power on the part of Kentuckians. But regardless of the motivation,
the Kentucky opposition to the facility is likely to continued indefinitely.
6.2.3 Responsiveness of Government Agencies
In terms of interstate relations and federal-state affairs, the Marble
Hill case is likely to long stand as an example of lack of effectiveness in
communications. Public hearings conducted by units of the U. S. Nuclear
Regulatory Commission (NRC) have been the center of controversy in portions
of Kentucky and Indiana surrounding the site over the past years. The
record of governmental activity left by various hearings of NRC units during
this period probably challenges those of any other nuclear facility in the
country in terms of complexity and efforts of citizens to obtain information.
That record is too long to review here, and it does not touch directly
upon the topic of this paper, interstate options for the future. But something
of the attitudes of certain groups in the region can be gained from a statement
by one residents who has followed the issue almost from the very beginning.
Dr. Harold Cassidy, professor emeritus of chemistry at Yale University
and a member of Save the Valley (STV), contended in March of 1977, after a
set of NRC hearings: "We are led to conclude that these laborious, expensive,
and time-consuming hearings are fundamentally a process of passing from a
pre-determined premise to a foregone conclusion."
It would be unfortunate if the voluminous record left from NRC hearings
associated with the Marble Hill facility are not examined by students of the
federal system in future years. Perhaps as vividly as any siting issue in the
50
-------
history of the country, they disclose the plight of earnest and well-informed
citizens to understand how the "fruits" of technology will affect them.
The overall importance of the hearings and what they reveal about the responsive-
ness of our federal system cannot be exaggerated. But it will take considerable
time for a genuine analysis to be made of them.
51
-------
Chapter 6
Notes
1. The Clinton plant has received national prominence in recent months as the
result of a television presentation produced on the facility by the week-
ly CBS program, "Sixty Minutes." In what has been widely publicized by
the media, Illinois Power produced its own video response to CBS. Se-
veral national media commentators have suggested that the company's ag-
gressive — and apparently successful — informational campaign in an-
swering Sixty Minutes may well represent a significant precedent in the
history of both public utilities and industry-media relations.
References
1. News story, Louisville Courier-Journal. March 5, 1980.
2. News story, Louisville Courier-Journal. March 5, 1980.
3. Undated brochure, "Marble Hill Nuclear Station," Public Service Indiana,
100 E. Main Street, Plainfield, Ind.
4. Louisville Courier-Journal, October 22, 1976.
5. Louisville Courier-Journal. October 22, 1976.
6. Louisville Courier-Journal, January 21, 1977.
7. Louisville Courier-Journal, January 26, 1977.
8. Louisville Times, February 3, 1977.
9. Louisville Courier-Journal, February 10, 1977.
10. Louisville Courier-Journal. February 10, 1977.
11. Louisville Times, February 10, 1977.
52
-------
Chapter 7
INTERSTATE STRUCTURE OF POWER INDUSTRY
We have examined the character of interstate impacts from electric
power stations upon the region's physical environment, particularly air and
water. Impacts have been examined in advance of organizational structures
because of the emphasis upon impacts coming originally from the ORBES con-
gressional mandate and retained by the ORBES core team. In such an approach
it has been necessary to discuss physical systems without having defined an
organizational framework. The process has been something like pouring a pie
filling into a little-understood pie crust that someone else has prepared.
Now it is necessary to seek an understanding of the piecrust or the broad
interstate organizational structure holding the elements of the power indus-
try together. Various academic fields would define the organizational struc-
ture in different ways. However, most political scientists would find ac-
ceptable the notion that the organizations in question are those which con-
trol the "authoritative allocation of values" (1).
On the basis of traditional definitions of American federalism (such as
those discussed in chapter 2), it may initially appear simple enough to map
the organizational terrain. Almost everyone knows that the U.S. Constitution
theoretically delegates specific powers to the national government and re-
serves all others to the states. The Constitution makes no mention of elec-
tric power generation, so during its formative years the state was the major
unit of government which "allocated" values with respect to power generation.
In the process, electric power production became defined as a "natural" mono-
poly and was judged by policymakers to be best handled by public regulation.
Since state legislators did not have the time to engage in the regulatory
process themselves, they established public service commissions to act in
their stead. The original idea was that these state commissions would regu-
late corporations granted charters to operate in the respective states. In
early textbooks, the situation appeared simple enough.
But advances in technology, organizational ingenuity, and politics
soon made obsolete such theories of electric power regulation and management.
In particular, it became possible to transmit electricity over long distances.
Also, interstate waterways, which became sources of hydro-electric power, be-
came the responsibility of the national government. Electricity transmitted
across state lines was judged by the courts to represent interstate commerce.
And, since the Constitution does mention interstate commerce, the national
government assumed partial regulatory control over certain aspects of the
electric power industry. Among these is nuclear power, exceptional because
of its national security characteristics.
The electric power industry differs from other regulated industries in
the significant extent of direct government participation in the industry as
owner and operator. Across the nation all levels of government can be found
acting in such roles. As discussed in more detail below, a national govern-
ment corporation, the Tennessee Valley Authority (TVA), overlaps a small por-
53
-------
tion of the ORBES region in Kentucky and includes portions of six other
states.
All these interstate organization developments, plus rapidly advancing
technology, shattered any orderliness which might have initially existed
relative to electric power generation within our federal system. Many of
these developments have been reviewed in depth in the nation's regulatory
literature, and several ORBES publications cover the basic aspects of elec-
tric power-oriented organizations in the study region. These include,
of course, such organizations as the individual utilities themselves, fuel
interests, and state and national regulatory bodies.
What has not been so well covered in the context of the ORBES region are
the implications of the growing numbers of interstate and regional organiza-
tional arrangements surrounding the broad electric power industry there.
Examination of these arrangements is the primary purpose of this report.
7.1 THE BULK POWER SUPPLY SECTOR
The electric power industry is normally categorized into three principal
areas -- generation, transmission, and distribution. But generation and
transmission together are often referred to as the bulk power supply sector. The
ORBES study mandate to explore the impacts of the "concentration" of power
plants in the study region appears to make this sector the most relevant in
this discussion of interstate elements of the electric power industry.
In the ORBES region, as elsewhere, continuing technological advances have
provided incentives for closely integrated operations over larger and larger
geographical areas -- including interstate areas -- in order to take advan-
tage of economies of scale in managing the bulk power supply system. At pre-
sent, it appears that differences of opinion exist among industry spokesmen,
government specialists, and academic scholars as to whether fundamental
limits to scale economies in generation have been reached. In fact, some
argue that the larger generating units installed in recent years generally
have exhibited higher forced outage rates than expected and that this sug-
gests that limits to scale economies may have even been exceeded.
However, countering this view is the notion that there is now an added
impetus by the opportunities offered through coordinated bulk power supply
planning to minimize the environmental costs associated with system develop-
ment.
One recent study of the industry emphasizes the advantages of larger
systems:
One concern is whether the industry is structured in such
a way that it can yield maximum economies in operation.
This concern centers around the degree of interconnection
and coordination in the bulk power supply sector of the
industry. Another concern is the effect of interconnection
on the structure of regulation.
54
-------
...The optimal degree of spatial integration in an efficient
bulk power supply system is determined by the costs and bene-
fits of interconnection. Increasing interconnection reduces
reserve requirements necessary to maintain a given level of
reliability, makes possible the use of larger and more effi-
cient equipment, increases system load diversity, and enables
a more global weighing of social and environmental costs.
Increased size can also be expected to provide more risk
diversification, purchasing and financing economies, as well
as a degree of managerial expertise not available in smaller
systems (2;.
Yet, the benefits cited here must be weighed against increasing trans-
mission costs, the possibility of exposing a larger area to a single system
disaster, and, beyond some point, increasing costs. And there is always the
matter of possible anti-competitive effects that may result from increasing
system integration. Complications of interstate problems only add to
the complexity. Most of these factors are very difficult to quantify. Pro-
bably the most that can be accomplished here is to alert the general reader
to the opposing arguments presented with respect to enlarging the size of
bulk power supply systems in the ORBES region, particularly when they cross
state lines. One member of the Senate committee mandating the ORBES study
expressed the hope that it would "allow everyone involved in the decision-
making process about power development to share the same information, to
speak the same language"(3). A considerable amount of education will be re-
quired beyond the ORBES study itself if this is to be accomplished with re-
gard to understanding the bulk power supply sector.
The study cited above recommended that legislation be developed and
enacted that would federally charter regional bulk power corporations to
operate on a multistate basis and market electricity at wholesale. It ar-
gued that this approach would offer many of the advantages of both consolida-
tion and coordination in achieving the benefits of larger systems with re-
latively few of the disadvantages. Further, it maintained that this
would permit the industry to operate effectively on a regional basis with a
minimum of interstate multi-jurisdictional conflicts, and would ensure effec-
tive regulation. Finally, it urged that legislation be enacted to achieve a
closer match between the boundaries of regulation and the boundaries of bulk
power supply systems. In later portions of this chapter and in the con-
cluding chapter, this proposal will be examined in more detail. First, how-
ever, it is desirable to describe the existing interstate bulk power supply
systems in the ORBES region.
7.2 HOLDING COMPANIES
Probably no other private organizational entity has more significance in
interstate power affairs in the ORBES region than the corporate body known
as the holding company. Portions of two other ORBES reports (one edited by
Saper and Hartnett and the other authored by Mclaughlin) particularly address
the holding company as an institution (4,'. Here, however, the emphasis is
55
-------
being placed upon the unique interstate aspects of the holding company
within our federal system.
The classic definition of a holding company is "any company, incorporated
or unincorporated, which is in a position to control, or materially to in-
fluence, the management of one or more other companies by virtue, in part
at least of its ownership of securities in the other company or companies."
(5). The holding company movement developed in this country in the early
20th century, when electric power industry leaders began to effect consoli-
dations that would make it possible to take advantage of load diversity be-
tween different areas, often in different states, and to introduce some de-
gree of standardization in equipment and methods.
As the holding companies increasingly developed in the nineteen-twenties,
they moved beyond the control of the various state public service commissions.
Further, the values of the holding company technique were felt by many during
that period to be offset by its abuses. Concern over inflated valuations,
watered stock and feverish speculation in securities of companies -- often
several steps removed from the actual operating level — led, in 1928, to the
initiation of a Federal Trade Commission investigation.
The probe disclosed that -- as a result of the holding companies -- the
electric power industry was largely interstate in nature, as current was
transmitted across state boundaries. Holding companies operated virtually
all over the country. Out of this situation and additional investigations
grew popular demands for federal regulation of holding companies and the
interstate operations of electric power firms.
A series of new national laws, including the Public Utility Holding
Company Act of 1935, were passed by Congress, creating a host of new agencies.
The 1935 legislation provided that, within three years the "super" holding
concerns were to be dissolved under the supervision of the new Securities
and Exchange Commission (SEC). Thereafter holding companies were forced to
limit their operations to "single integrated systems and the business direct-
ly connected with the supply of power service to consumers." Only one ex-
ception was allowed to this rule, called by its critics "the death sentence."
Under this rule, a holding company could exist if it was necessary to tie
together a group of operating power plants in a single region and to promote
efficient operations.
From 1935 until the 1977 creation of the U.S. Department of Energy (DOE),
the SEC was responsible for the electric power holding companies, while the
FPC was responsible for the operating companies. In 1977, the FPC was moved
into the cabinet department and renamed the Federal Energy Regulatory Commis-
sion (FERC). Certain oversight functions for holding companies were moved
from the SEC to DOE.
The history of pressures leading to the passage of the 1935 Holding Com-
pany Act should in no way be construed as impugning the integrity or legal
operation of the few existing electric power companies operating across state
lines in the country. The history is reviewed to show one reason why the
56
-------
interstate aspects of the industry are not more rationally structured. The
effect of the national merger policy has been to discourage large scale con-
solidations which might have been deemed desirable from many perspectives,
including, perhaps, air quality and other environmental concerns.
It has been estimated that the percentage of the nation's capacity con-
trolled by holding company systems has dropped from approximately 80 percent
of generation to about 19 percent since the holding company legislation of
1935 (6 ). As already noted above, holding companies were not outlawed by
the legislation, but the SEC has reorganized and attempted to simplify
existing holding companies, limiting their operations to single, integrated,
geographically contiguous systems. Three holding companies now control
utilities in the ORBES systems: American Electric Power System (AEP); Al-
legheny Power System (APS); and General Public Utilities (GPU).
7.2.1 AEP and Interstate Affairs
As a holding company, AEP controls operating electric utility companies
which have service areas and/or power generating facilities in four of the
six ORBES states. These are Indiana, Kentucky, Ohio, and West Virginia. (Of
the ORBES states, only two — Illinois and Pennsylvania -- do not contain an
AEP operating company.) AEP companies also operate in three neighboring
states — Tennessee, Virginia, and Michigan -- bringing to a total of sever
the number of states in which the holding company's firms function.
Eight operating companies are included in the AEP holding company family
with only two outside the ORBES study region. They are the Michigan Power
Company and the Kingsport (Tenn.) Power Company.
In addition to its powerful role as a holding company controlling opera-
ting companies in four of the ORBES states, the AEP has long been a leader
in stimulating various kinds of cooperation among the region's utilities.
Officials of AEP provided the leadership in establishing the Ohio Valley
Electric Cooperation (OVEC) discussed in other portions of this report. Sub-
sidiaries of AEP own about 40 percent of OVEC.
7.2.1.1 AEP Acquisition of Columbus and Southern
The acquisition this past year by AEP of Columbus and Southern Ohio
Electric Company (C&SOE) of Columbus, Ohio, probably represents the most sig-
nificant "interstate" event in the electric power industry in the ORBES re-
gion in recent years. And AEP is now in the process of moving a major por-
tion of its corporate headquarters from New York City to Columbus.
In 1968, AEP proposed the acquisition of C&SOE through an exchange of
1.3 shares of AEP common stock for each share of C&SOE. Both AEP and C&SOE
quickly filed motions urging the Security and Exchange Commission to expedite
its decision concerning the acquisition. However, the SEC delayed a ruling
until recently. C&SOE has often emphasized that the prolonged delay of the
proceedings has restricted its financing plans over the past years.
57
-------
The record of the review by the SEC and other government agencies of the
AEP request to acquire C&SOE is probably one of the most extensive of any
carried out since the 1935 Holding Company Act was enacted. As such, the
record contains detailed information on interstate utility dynamics in the
ORBES region. It reveals that in purely physical terms (generating capacity
and quantity of electric power sold), AEP is the largest investor-owned
utility in the nation. In financial terms (value of assets and amount of
revenues), three other utility systems are larger than AEP ( 7).
The SEC describes the AEP system as follows:
AEP's service area is largely rural and small-town.
The largest community served is Fort Wayne, Indiana,
with a population of some 180,000? Because AEP does
not serve any large city, it can do more with a dollar
of capital investment than a metropolitan system which
is subject to greater environmental requirements. Much
of AEP's business comes from bulk power sales to in-
dustrial customers and to distributors of electric
power whose own generating capacity is insufficient to
satisfy their demand. Over the years, AEP has grown
and flourished on this business. Because of the
economic geography of its system, its bulk power and
its acknowledged efficiency, AEP's rates, over the
years, have been the lowest of any other investor-
owned utility in Ohio (8).
7.2.1.2 Acquisition and Integration Standards --
Various provisions of the 1935 Holding Company Act were designed to pre-
vent a recurrence of the practices which gave rise to the Act. Among those
practices was the acquisition and control of large interstate and multi-
state areas of the country by holding companies even when the areas were
not naturally integrated.
In this regard, however, the SEC decided that "it is undisputed...that
adding C&SOE to the AEP system meets the criteria of Section 2(a)(29)(A)" (9).
It continued:
(1) The electric utility systems of C&SOE and AEP are
geographically contiguous, would be physically inter-
connected and are capable of being operated as a
single system.
(2) The combined system would operate within a single
area or region (10).
*Fort Wayne is located at the northernmost edge of the ORBES region.
58
-------
This positive review by the SEC does not mean there was no opposition
to the acquisition of C&SOE by AEP. In fact, SEC staff recommended to the
Commission that the request be denied. Also, a great deal of intra-state
opposition to the acquisition came from other utilities in the State of
Ohio. Much of the Ohio intra-state opposition is too complex and per-
haps not extremely relevant for this discussion. However, one aspect of
the claims by Ohio utilities does seem relevant in this treatment of inter-
state utility relations.
Through the years, C&SOE had developed a "pooling" relationship with
two other utilities operating in the same general area of Ohio. They are
Cincinnati Gas and Electric Company (CGE) and the Dayton Power and Light
Company (DPL), which are both combination gas and electric companies. At
the request of CGE and DPL the SEC was faced with making a judgement of
whether a strengthened intra-state electric utility pool (made up of CSSOE,
CGE and DPL) might provide adequate economies of scale offered by modern
technology. Those holding this view argued that C&SOE could thus obtain
all the advantages of joining with AEP while preserving its independence from
a large interstate holding company. Comments in an SEC approval document
appear relevant for the ORBES study:
The pooling issue is one aspect of the major debate,
referred to above, as to what should be the future struc-
ture of the electric utility industry. We will not under-
take to resolve these issues since they are beyond our
mandate in this case and becuase they are within the
province of the Congress and the Department of Energy.
It is enough for present purposes to conclude that the
concept of an integrated public-utility system mandated
by the Act has not been superseded by the development of
pooling.
In any event, as explained below, we do not believe that
the pool as presently constituted can provide CSSOE with
the potential economies and efficiencies anticipated by
its affiliation with AEP (11).
7.2.2 APS in the Interstate Context
The second holding company with operating utilities in the ORBES region
is the Allegheny Power System, Inc. Two of its three operating companies --
the West Penn Company and the Monongahela Powpr Comnanv -- are located 1n the
ORBES region (in Pennsylvania and West Virginia). The third, the Potomac
Edison, is located on the periphery of the region, in Eastern West Virginia.
Public attention was focused upon the Allegheny System and its interstate
and multi-state characteristics when a scaffold accident at a Monongahela
Power Company plant near Willow Island, W. Va., claimed the lives of 51
workers in April of 1978. Like AEP (at that time), the Allegheny System main-
tains its corporate headquarters in New York City. So-called "absentee"
59
-------
management in New York became a source of criticism in some quarters --
particularly around the West Virginia site — after the 1978 tragedy.
Headquarters for Monongahela Power are in Fairmont, West Virginia;
West Penn maintains its central offices in Greensburg, Pennsylvania; and
Potomac Edison ooerates from Hagerstown, Maryland.
7.2.3 GPU. TMI. and the ORBES Region
On March 28, 1979, the name of the third holding company with a pre-
sence in the ORBES study region became prominently known as a result of
one of the most dramatic events in the history of the American electric
power industry. On that date, the widely-publicized accident occurred at
the Three Miled Island (TMI) nuclear plant operated near Harrisburg, Pa.,
by Metropolitan Edison Company (Met Ed), a subsidiary of General Public
Utilities (GPU). Though Met Ed does not provide power to communities in
the ORBES region, its service area is only one county removed from the re-
gion. The "interstate" significance of the accident at Met Ed's facility
was so pervasive as to transcend "study" regions and indeed all elements of
the nation's electric power industry.
The other two GPU operating subsidiaries are Pennsylvania Electric Com-
pany, whose service area does reach into the ORBES region (with headquarters
in Johnstown, Pennsylvania), and the Jersey Central Power and Light Company
(headquarters in Morristown, New Jersey). All three GPU subsidiaries are
linked together in the ownership of the TMI facility.
7.3 THE POWER POOL
A less formal device than the holding company for sharing power both
within a state and across states in the operation of bulk power supply sys-
tems is the power "pool." By definition, "a power pool consists of two or
more utilities which are interconnected on a formal contractual basis to
plan and operate their combined power supply in the most reliable and econo-
mical manner for their combined load and maintenance requirements" (1?). The
earlier discussion of AEP and its acquisition includes a brief comparison of
the distinct characteristics of a holding company and a power pool.
Examination of interstate power pool arrangements in the ORBES region seems
to explain in part why some utility spokesmen have expressed reservations over
the method used by ORBES researchers in determining the boundaries of the study
region and in the frequent utilization of the concept of power "exports1.1 This
interstate contractual sharing of power by utilities both inside and outside
the ORBES region illustrates the difficulty of describing the region meaning-
fully in terms of power production and transmission.
7.3.1 Power Pool Arrangements in ORBES Region
Various lists of power pool arrangements in the ORBES region are incon-
sistent with one another since various definitions exist with respect to
"pools." For example, as noted above, the SEC described the cooperative
60
-------
relationships among C&SOE, CGE, and DPI as a pool. However, the inventory
of pools included in a basic ORBES document omits this Ohio arrangement
and includes only three such formal pool arrangements in the ORBES region.
They are: (1) Central Area Power Coordinating Group (CAPCO), which in-
cludes the Cleveland Electric Illumination Co., the Duquesne Light Co.,
(Pittsburgh), the Ohio Edison Co, (Akron), the Pennsylvania Power Company
(New Castle), and the Toledo Edison Co.; (2) PJM Interconnection (POM),
made up of General Public Utilities (GPU); Pennsylvania Power and Light Co.
(Allentown), Philadelphia Electric Co., and United Gas Improvement Corpora-
tion (Philadelphia); and (3) Illinois-Missouri Pool (IMP), comprised of
the Central Illinois Public Service Co. (Springfield); the Illinois Power
Co. (Decatur); and the Union Electric Co. (St. Louis, Mo.). (13).
However, one of these pools, the IMP, apparently does not share through
the actual "dispatching" of power from individual plants. Rather, it is
generally described by spokesmen for its member companies as a loosely-linked
arrangement which permits the two Illinois utilities and the Missouri company
to cooperate on general electric power reliability matters in their relation-
ships with the Mid-America Interpool Network (MAIN), one of n-'ne regional
councils discussed in more detail below.
As noted above, definitions vary as to what types of cooperative ar-
rangements among electric utilities should be termed a "pool." The key
words in the definition presented above seem to be "interconnected on a for-
mal contractual basis." The definition does not include joint ownership
of generating plants as a necessary requirement for a pool. Yet many com-
panies which have joined together to share power actually own generating
plants jointly also.
7.3.2 CAPCO: An Example
One example of a pool entity in which the members own plants as "ten-
ants in common" is the Central Area Power Coordinating Group (CAPCO), which,
as noted above, includes five companies. CAPCO also provides appropriate
examples of the interstate and regional complexity associated with pooling.
Finally, it also illustrates the difficulty of distinguishing and/or esti-
mating the power actually generated or consumed in the ORBES region.
Apparently, each generating unit planned and constructed by the five
"member" companies of CAPCO in recent years has been owned jointly by at
least two and usually all of the members as tenants in common. Their of-
ficers feel that economies of scale are possible because the group can in-
stall larger generating units than any one member could build and use on
its own. (Latest publications of CAPCO report that currently eight large
generating units are planned or being constructed under CAPCO ausnices.J
Service areas of two of the five CAPCO companies, the Duquesne Light
Co. and the Pennsylvania Power Company, are totally in the ORBES region.
However, the latter, is a totally-owned subsidiary of still another CAPCO
company, Ohio Edison, operating entirely in the neighboring state of Ohio.
61
-------
While a part of Ohio Edison's service area is located in the ORBES region,
a large portion is outside the study region's boundaries. The service
area of one of the two remaining Ohio companies within CAPCO, Cleveland
Electric Illuminating Co., is entirely outside the ORBES region. And only
a small portion of the service area of the remaining CAPCO member, Toledo
Edison Co., is within the ORBES region.
7.3.2.1 Artificial Boundary Line
The dividing line between the Ohio Edison service area in Eastern Ohio
and that of its subsidiary, Pennsylvania Power, in Western Pennsylvania, is
the straight line probably drawn nearly 175 years ago by a long-forgotten
surveyor. Obviously the line between the states has legal meaning for
some purposes. But it is an expensive and artificial line in virtually
every sector of bulk power supply, including environmental control.
The advantages of economy of scale afforded Ohio Edison and its subsi-
diary, Pennsylvania Power, would appear to be thwarted as they must face
scores of changing regulations at the national level and at the level of
Ohio and Pennsylvania. It would seem that customers of both utilities ul-
timately bear the burdens imposed by the artificial state line. For exam-
ple, important changes in state regulatory policy affecting the structure
of electric rates occured in both Pennsylvania and Ohio in 1978. Customers
and the general public must surely find it nearly impossible to understand
the complex organizational arrangements made necessary by the boundary line
drawn long before Thomas Edison first placed his first power plant into
operation.
7.3.2.2 Legal Entanglements Faced by CAPCO
Most of the literature on pooling arrangements -- even from sources
generally critical of the utility industry -- are sympathetic to the notion
of cooperation in the bulk power supply sector. Yet the legal entangle-
ments increasingly facing utilities joined in pooling efforts illustrate
something of the difficulties faced by those companies attempting to coop-
erate across state lines. A few examples taken just from CAPCO operations
over a two to three year period appear to make the point:
On August 2, 1978, the national government began legal
proceedings against Ohio Edison and Duquesne Light
Company (as co-owners of the Sammis Unit No. 7) in the
U.S. District Court for the Southern District of Ohio
(Eastern Division) under the Clean Air Act. The govern-
ment asked the Court to assess "appropriate," but
unspecified civil penalties for allegedly continuing
violations of particulate emission regulations which
were the subject of a notice of violation from the
U.S. Environmental Protection Agency (EPA).
In 1975, the City of Cleveland, filed a complaint in
the U.S. District Court against all CAPCO member companies
62
-------
(in both Ohio and Pennsylvania) alleging violations by
the defendants of Sections 1 and 2 of the Sherman Act to
restrain and monopolize trade with respect to dealing with
the City of Cleveland.
In July of 1977, the Borough of Shippingport (Pa.) filed
actions in the Beaver County (Pa.) court of Common Pleas
against all CAPCO companies, seeking to enjoin the opera-
tion of the Bruce Mansfield Plant and the Beaver Valley
Unit No. 1, and to obtain damages because of alleged opera-
tional malfunctions of the flue gas desulphurization system
at the Bruce Mansfield Plant.
A complaint dated October 3, 1977, was filed against
Pennsylvania Power in the U.S. District Court for the
Western District of Pennsylvania, by Boroughs of Ellwood
City and Grove City, Pa., alleging that Pennsylvania
Power individually and "in conspiracy" with other CAPCO
companies had violated Sections 4 and 14 of the Clayton
Act to restrain and monopolize trade and commerce in
alleged markets for electric power (14).
It should be noted that these examples come from reports supplied by
a CAPCO member, Ohio Edison Co. Also, it may be that the CAPCO companies,
individually and collectively, are guilty of one or more of all charges lis-
ted here. But certainly the scope of legal complexities of the set of
charges facing a power pool group in an area embracing only two states would
surely give pause to environmentalists and utility supporters alike. The
social and economic costs of exploring such real or perceived problems on
a piece-meal basis must be great.
7.4 JOINT OWNERSHIP
The matter of joint utility ownership of plants has been noticed as a
secondary point in earlier discussions centered on other concepts. But the
idea of power sharing across state lines through joint plant ownership,
aside from other organizational arrangements, deserves additional attention.
The expectation, in joint ownership of plants, is that the financial
burden for all owners will be eased in such a situation, whether the coopera-
ting utilities are located in the same state or in two or more states. The
device theoretically provides smaller utilities with an economical source of
new generating capacity. All jointly operated plants in the ORBES states are
identified in a separate document (15).
An example of the complexities of interstate ownership of individual
power plants surfaced just as this report was being completed. The latest
development in an interstate dispute occurred on August 29 (1980) when the
Kentucky Court of Appeals called into question ownership participation by
Kentucky Power Co., in a generating plan in Rockport, Ind. Ironically, the
plant being constructed at Rockfort, across the Ohio River from Owensboro,
63
-------
Ky., by Indiana and Michigan Electric Co., is a sister company of Kentucky
Power in the American Electric Power System.
The ruling thwarted an earlier Franklin Circuit Court (a Kentucky
court) that would have permitted Kentucky Power to acquire 15 percent of
the 2,600-megawatt coal-fired plant. The Court of Appeals returned the
matter to the Kentucky Energy Regulatory Commission, which had first
denied Kentucky Power's involvement in the project in late 1978. The
utility had appealed the decision to Franklin Circuit Court, and the energy
commission then appealed the circuit court's ruling to the Court of Appeals.
At this point it is difficult to know whether there are substantive
policy implications involved or whether the dispute is merely centered
around legal technicalities. But a review of the case illustrates the dif-
ficulties which citizens confront in their attempts to understate the inter-
state aspect of power generation in the ORBES region, particularly when
joint ownership is involved.
A Kentucky Power spokesman reported the company may appeal the decision
further. In a prepared statement, the utility called the ruling "a blow
to our customers" that, if not altered, would "result in substantially hioher
electric rates in the future" (16). In its original decision, the Kentucky
commission found that the utility could serve the power needs of its cus-
tomers by obtaining power from other utilities in the AEP system, without
buying a share of the Rockport Plant. The commission also indicated that
it took into consideration Kentucky Power's plans to build a large genera-
ting plant this decade in Lewis County, Ky., in the Eastern part of the
state.
The interstate dynamics are the most pertinent for this chapter. And
the growing overall complexity of the search for economies of scale is re-
vealed by these conditions which show a regulatory body and two levels
of the judicial system in dispute within one state (Kentucky) over a com-
pany's participation as joint owners of a plant being constructed in ano-
ther state (Indiana). From the current public record, there is no evidence
whether the public service commission in Indiana (or the courts there) have
been involved in the controversy. Of course the matter is further com-
pounded by the fact that the holding company to which both companies belong,
AEP, apparently believes that joint ownership would be advantageous to all
parties, including the utilities' customers.
In chapter 6, of course, a discussion was included on the efforts of
forces in Kentucky to prevent the East Kentucky Power Cooperative from be-
coming joint owner of the Marble Hill nuclear facility with PSI. Some ob-
servers view these various developments as further evidence of interstate
"balkanization" along the Ohio River. On the other hand, they may be total-
ly coincidental. In any case, the situations would seem to support long-
term consideration of interstate-regional regulatory communications among
the states. If such efforts would fail, it appears that the call for a
regional regulatory body of some sort, mentioned elsewhere, will gain addi-
tional support.
64
-------
7.5 RELIABILITY COUNCILS
Bodies known as reliability councils are among the most important in-
terstate bodies which have been formed by the electric utilities themselves.
The National Electric Reliability Council (NERC) was formed voluntarily
(but with encouragement from the national government) in 1968 following
blackouts in the Northeast in 1965 and 1967. It was incorporated in 1975.
NERC helps coordinate the efforts to augment the reliability and adequacy
of bulk supply of the electric utility systems in North America. NERC, in
turn, consists of nine regional councils whose memberships comprise essen-
tially all of the electric utility systems in the United States and several
Canadian systems.
The basic structural character of NERC and the regional councils is
described in the ORBES document on the structure of the electric utility
industry (17). As described there, the six states include sections of five
reliability council regions. The regional reliability council apparently is
an administrative body representing groups of utilities from a specific re-
gion.
Most important for the paper is the often-raised question of whether the
reliability councils in the ORBES region could somehow become an interstate
entity responsible for coordinating cooperation in such areas such as siting
and utility operations beyond reliability matters. Officers of utilities in
the ORBES region have explained "anonymously" that leadership in the relia-
bility councils are likely to be reluctant to assume such a task. Apparent-
ly the councils are truly viewed within the industry as merely expediters in
technical reliability matters, and there is reportedly a concern within thp
electric power industry that they might enter areas which appear to give them
responsibilities in functions such as siting and broad operational affairs.
7.6 OTHER POWER CONSORTIA
The above categories of interstate cooperation by electric utilities in
the production and transmission of electric power across state lines cannot
include all the various miscellaneous arrangements which have been devised
for joint activities. There are a number of other interstate "consortia"
and other joint ventures which have already been mentioned in parts of this
report and others which cannot be described in detail.
One of considerable importance which has been mentioned in passing on more
than one occasion is the Ohio Valley Electric Corporation (OVEC), created in
the mid-1950's under the leadership of AEP. Its purpose is to allow fifteen
investor-owned utilities in the Ohio Valley area to jointly produce electric
power for the U.S. Department of Energy (DOE) uranium enrichment plant near
Portsmouth, Ohio. OVEC and its subsidiary, the Indiana-Kentucky Electric
Corporation (IKEC) operate generating stations at Kyger Creek, Ohio, and
Clifty Creek, Ind., to supply electric power for the DOE's uranium enrichment
plant near Portsmouth, Ohio.
65
-------
Investor-owned utilities from all ORBES states except Illinois share
in the ownership of OVEC and its subsidiary. As mentioned earlier, AEP
companies reportedly own about 40 percent of OVEC.
A similar interstate arrangement permits another investor-owned con-
sortium to supply half of the necessary power to operate-DOE's enrichment
plant in Paducah, Kentucky. This company is known as Electric Energy, Inc.,
(EEI) and operates a plant at Joppa, 111. Four utilities, two from Illinois
and one each from Kentucky and Missouri, jointly own EEI. They are:
Illinois Power (20 percent); Central Illinois Public Service Co. (20 percent);
Kentucky Utilities (20 percent); and the Union Electric Company of Missouri
(40 percent).
The Tennessee Valley Authority (TVA) supplies the remaining power for
the Paducah enrichment plant.
66
-------
Chapter 7
References
1. David Easton, The Political System (New York: Knonf, 1953).
2. Gordian Associates, "Structural Reform in the Flectric Power Industry"
(Prepared under contract to the Federal Enernv Administration, Contract No.
CO-05-50152-00), 1976, np. 28-29.)
3. News release issued bv the Office of U. S. Senator Rirch Ravh, Julv 22,
1975.
4. Jan L. Saper and James P. Hartnett (eds.), The Current Status of the Electric
||ti1ity Industry in the Ohio River Basin Energy Study States, and James A.
Mclaughlin, I'egaT and Institutional_ Aspects of Interstate Power Plant
Development in the Ohio RiverRasTn Inergy Studv Reoion.
5. Martin T. Farris, Public Utilities (Houqhton Mifflin, Boston, 1973), n. 140.
6. Gordian Associates, "Structural Reform in the Flectric Power Industrv," p. 9.
7. Securities and Exchange Commission, "In the Matter of American Electric Power
Company, Inc.," (70-4596), Administrative Proceedinq File No. 3-1476,
Release No. 20633/Julv 21, 1978), n. 4. (Accordinq to this report, one of
the three utility systems larger in assets and amount of revenues is the
Southern Company, also registered with the SEC under the Holding Companv
Act. The other two, Pacific Gas A Electric Comnanv and Consolidated Edison
Company, are independent operating companies.)
8. Ibid.
9. Ibid., p. 9.
10. Ibid.
11. Ibid., p. 15.
12. Saper and Hartnett, p. 13.
13. Ihid.. p. 14.
14. Ohio Edison 1978 Annual Report, pp. 34 and 35.
15. Steven D. Jansen, Electrical Generating Unit Inventory, 1976-1986.
16. Pam Luecke, "Rulinq Leaves Utility's Action in Question," Louisville
Courier-Journal, August 30, 1980.
17. Saper and Hartnett, p. 13-18.
67
-------
Chapter 8
NON-INDUSTRY RESPONSES: INTERSTATE POWER OPTIONS
The previous chapter reveals that the interstate structure of the elec-
tric utilities in the ORBES area represents, in effect, a regionalization
of the power industry. It has been estimated that the investor-owned utili-
ties in the six ORBES states (not just the portions in the ORBES region) pro-
duce approximately 90 percent of the electric power in those states (1).
But the total regionalization in both the ORBES region and in the states as
a whole includes public elements and cooperatives, which have both public
and private characteristics.
Probably in most -- if not all instances ~ this regionalization of
electric power has resulted from the encouragement or even at the direction
of national policymakers. From almost every perspective regionalization of
electric power makes sense. It is apparently technically sound to do so. A
host of other supporting factors could be listed.
Both the national governments and the states have made limited efforts
to "keep up" with this development. New national legislation recognizes it,
and a few state legislatures have mandated appropriate agencies to cooperate
with their counterparts across state lines. For example, such a provision
is provided in the legislation creating the Ohio Power Siting Commission.
But for the most part, both technical complexity and the pressure of other
governmental problems have kept policymakers at either the national or state
level from staying abreast of the industry's expanding regional character.
8.1 PUBLIC CONFUSION
And if the full-time policymaker has difficulty in understanding elec-
tric power production, particularly these emerging regional phenomena, the
average citizen -- if even barely aware of the complexity of the situation --
is most often bewildered by it all. To make such an observation is not to
criticize the electric power industry. One could probably seize upon the
problems of any other industry or area of life in the country and make a
similar statement about it. For example, in comparison to health care sys-
tems, judicial and law enforcement systems, and transportation systems -- to
mention only a few areas — the electric power industry is probably doing
relatively well in informing the public of its activities, including what
is cited above as "recrionalization".
However, to ignore the complexity of the interstate character of elec-
tric power operations in the face of the apparent intent of the mandating
U.S. Senate committee would seem irresponsible. Expectations of some mem-
bers of the Senate appeared to center on the development of regional elec-
tric power generation information which "citizens" might understand and use
in participating in the decision-making process themselves. In a press re-
68
-------
lease issued shortly after the ORBES mandate was issued to EPA, one senator
declared:
This study will allow everyone involved in the
decision-making process about power development
to share the same information, to speak the same
language. It will give a much clearer picture of
which offices are responsible for which decisions.
It will go a long way toward putting the individual
concerned citizen on an equal footing with the state
and federal agencies and the power companies. We
need adequate power supplies. But we need to protect
ourselves and our environment, and that can't happen
unless the citizens of our communities play an active,
informed role in the decision-making process about
energy development (2).
It is quite possible that the senator's expectation of the ORBES study,
allowing "everyone involved in the decision-making process of power develop-
ments to share the same information, to speak the same language," has not
been realized. Further, it likely does not, in his words, "go a long way
toward putting the individual concerned citizen on an equal footing with
the state and federal agencies and the power companies." Hopefully it has
gone a short distance toward his objective. Why no farther?
8.1.1 Disagreement Among Specialists
It is difficult to describe the operation of a technical system to ci-
tizens, or "lay" persons, when even the designers, operators, and regulators
of the system fail to fully understand it. With regard to the interstate
characteristics of generation and transmission of electric power, there ap-
pears to be honest differences of opinion among recognized experts on many
aspects of the subject. The understandable desire of the national govern-
ment, since the northeastern blackout of 1965, to encourage the utilities to
strengthen interconnections across state lines — and even into Canada --
has brought what is an effective reliability system but one which is almost
impossible to explain to the "average citizen." Recent national legisla-
tion requires that various guidelines be developed in regard to operation of
interstate electric power interconnections. During discussions among utili-
ty reliability specialists and various national agencies such as the Depart-
ment of Energy (DOE) to develop such guidelines, problems have apparently
developed in interpreting the meaning of such legislation in the context of
interstate matters.
When technical and legal specialists who have spent lifetimes studying
these matters find it difficult to reach agreement, the senator's "indivi-
dual concerned citizen" must indeed feel bewildered. When the operation of
"big technology" produces such complicated disagreements among specialists,
interest groups tend to suspect conspiracy. Some critics of electric utili-
ties in the ORBES region have charged collusion -- if not conspiracy -- on
the part of utilities. ORBES research does not appear to identify any such
69
-------
extreme "wrongdoing." But a great deal of confusion and conflicting inter-
pretations among specialists leads to the conclusion that ma,ny of the in-
terstate techno-legal-organizational arrangements among the utilities have
raced ahead of the ability of the appropriate state and national institu-
tions to regulate them within our federal system.
A critical relationship exists between electric power and every citi-
zen in the ORBES region and in the entire country. Its function as a "life-
line" for all, plus its growing economic burdens, could well bring political
pressures forcing all appropriate parties -- utilities officers, government
officials, and s tidents of the area -- to interpret with more precision the
interstate operations of electric utilities.
8.1.2 The Export Question
Of course the concern of some residents of the Ohio Valley that their
region was destined to become a "sacrifice" area for exporting electric po-
wer across state lines played a major role in the origins of the ORBES study.
These concerns have not been satisfied, and the emotional conflicts over the
export question are destined to continue.
The complications surrounding the so-called "export question" illustrate
well the extent of the complexity of interstate transmission of electric
power. It is tempting here to use the phrase "interstate generation" of
electric power. Of course, the generation of power occurs at a specific site
which — unless a generating unit were to straddle a line between two states
— is located in a single state. But once the electric current surges into
a utility's transmission lines and instantaneously moves on to the increas-
ing number of interstate grids, there is apparently no way to determine the
source of the power.
This reality is apparently the reason so many utility leaders argue
that the concept of "electric power export" is really meaningless. (There
is no way to attach "tracers" to electric current.) Power export may be
meaningless technologically, but politically the concept is developing in-
creasing relevance. Failure of utility leaders and government officials
to devise more effective conceptual explanations and more creative institu-
tional arrangements which address perceived interstate and inter-region
inequities is destined to worsen an already-serious gap between those who
manage technology and those who could destroy it with their political power.
8.1.3 Linkage of Export and Air Quality Issues
A major perceived inequity, as discussed throughout this paper, is air
pollution produced locally by a plant which is transmitting much -- or all
-- of the power generated to communities many miles away. Residents living
near such plants, particularly in the area between Louisville and Cincinnati,
have often argued that it is unfair for them to suffer the abuses of air
pollution when the distant communities receive the benefits of the power.
70
-------
The complexities of air quality management have already been discussed.
But many of these complexities were not fully appreciated in the early se-
venties when concern over air quality was mounting in the Louisville to
Cincinnati stretch of the Ohio Valley. When the many issues surrounding air
quality, export of power, nuclear power plants, and the regionalization of
electric power first became recognized by residents and political leaders
in that area, there was a feeling among many that an interstate mechanism
for siting new power plants was a realistic way to attack the problem.
8.2 KENTUCKY INTERSTATE SITING PROPOSAL
By the time EPA announced grants to universities to carry out the ORBES
study late in August of 1976, the idea of a regional siting arrangement for
new power plants was being discussed by officials in several of the ORBES
states and by leadership in various environmental groups.
However, only one governor in an ORBES state has formally invited his
counterparts in other Ohio River states to Join in the development of such
an interstate device. Such an invitation was issued by Kentucky Governor
Julian M. Carroll at a press conference conducted on September 23, 1976. .
(Carroll served as Kentucky governor from late 1974 until December, 1979.)
As a former utility attorney, Carroll was familiar with broad problems as-
sociated with power plants, and he often addressed sitinn issues, partic-
larly during his early years as governor.
At the 1976 press conference, Governor Carroll described his proposal
as a "Regional Power Plan." Speaking to a group of reporters including
journalists from several other states,Carroll revealed that he had asked
governors of Indiana, Illinois, West Virginia, and Ohio -- plus the chair-
man of the Tennessee Valley Authority (TVA) -- to join him in designing the
Regional Power Plan. The sixth ORBES study region state, Pennsylvania, does
not share the Ohio River as a border with another state, and it is presumed
this was why Governor Carroll did not include the Pennsylvania governor on
his invitation list. (A small portion of southern Pennsylvania is included
in the TVA service area.)
In his remarks, Governor Carroll said the regional power plan should
concentrate on the energy needs of the states involved. As for energy needs
to the east and west, Carroll said, "We would prefer to mine the coal, send
it to them, and let them burn it there. Kentucky should not become the ash
pit of the nation" (3).
The Kentucky governor emphasized how each state's regulations limited
it to considering matters within its own boundaries when deciding on sites
for new power plants. In particular, he stressed the lack of a formal
mechanism to jointly consider the interstate effects of power plants such
as the Public Service Indiana Marble Hill nuclear plant, thirty miles up-
stream from Louisville, and the nearby Louisville Gas and Electric Co. fa-
cility in Trimble County, Ky.
Carroll also acknowledged that some states' regulations are stricter
71
-------
than others. CFor example, some observers believe that the Cincinnati Gas
and Electric Co, decided to locate its East Bend coal-burning plant on the
Kentucky side of the Ohio River, south of Cincinnati, because of less strin-
gent regulations.)
Governor Carroll reported that a formal letter had been sent to fellow
governors and the TVA chairman, emphasizing the importance of orderly econo-
mic growth to avoid damaging the environment. He also said there was in-
creasing concern about the ability of the Ohio River Valley to support con-
tinued unplanned development without severe environmental and social da-
mage (4).
8.2.1 Limited to Power Plants
Although Carroll apparently did not intend to include facilities other than
power plants in his suggested plan, he did note that other large facilities
were competing for prime development land along the Ohio River. He cited
"coal conversion facilities, municipal expansion, industrial parks and agri-
cultural pursuits" (5).
At the time of Carroll's call for a regional siting plan, an aide —
Dr. Frank Stanonis, commissioner of the state's Bureau of Environmental
Quality — said: "The site-by-site analysis of this is now passe'. We have
to look at the total evidence" (6).
The press immediately published favorable responses from aides of two
neighboring governors:
"The initial reaction is positive here," said William Watt, administra-
tive assistant to Governor Otis Bowen of Indiana. "We're hopeful the other
states will react the same way" (7).
"It's a good idea," said Norton Kay, press secretary to Illinois Go-
vernor Dan Walker (8).
Carroll himself apparently has not publicly revealed the nature of any
responses from his fellow governors. But his aides implied in the months
ahead that the other governors felt the idea would be negatively received
by legislators and the general public. They also hinted that the neighboring
state chief executives cautioned him against further pursuit of the idea.
However, at least two Ohio Valley newspapers responded favorably in
editorials. Among these was the Kentucky Post, published in Covington, Ky.,
directly across the Ohio River from Cincinnati:
Nobody's looking at the whole picture...what needs
to be done is to look at the whole Ohio River Valley
-- our future energy needs and how they will be met.
Governor Carroll took a good first step in that
direction seven weeks ago when he called for five
72
-------
states along the river to join in a binding alliance
to prevent the valley from becoming "the ash pit of
the nation,1'
But his call has gone unheeded, The idea of an "Ohio
Valley Compact" needs to be pushed, and pushed hard.
The future of the river depends on it (9),
A non-Kentucky newspaper, the Herald-Dispatch of Huntington, W.Va.,
declared that Governor Carroll had developed "a sensible and worthwhile plan
to patrol construction of power plants along the Ohio River" (10). The West
Virginia publication argued that it was time to seek "a more orderly, coor-
dinated development of riverfront land". It was also felt that Carroll's
plan would serve as an appropriate forum for exploring the question "of
what types of plants should be developed along the Ohio River, the nation's
principal artery for barges carrying low-sulfur coal to coal-burning power
plants and steel mills" (11).
8.2.2 Shift to Broad Facilities Siting Emphasis
This last endorsement could offer one possible explanation of why
Governor Carroll and his staff did not follow up the initial press confe-
rence with equally vigorous presentations in behalf of the plan. The edi-
torial's reference to the "types of plants" to be developed and mention of
barge traffic and steel mills suggests some misunderstanding of Carroll's
original plan. It seemed clearly aimed at interstate siting of power plants
alone. Arguments have been made in various quarters through the years that
orderly siting of power plants alone without regard to other installations
would not achieve the objective desired by Governor Carroll.
In any case, the record reveals no further strong and specific advo-
cacy by Governor Carroll and his staff of the five-state Regional Power
Plan as described in the September 1976 press conference. Instead, they
appeared to shift the emphasis to what they usually called simply the need
for "multi-state" energy facilities siting arrangements.
For example, Frank Harscher, an assistant to Governor Carroll, de-
clared on February 17, 1977 that "planning among states for the potential
increase in new power plants has been clumsy" (12). But instead of using
this opportunity to advocate the old Regional Power Plan, Harscher empha-
sized that Governor Carroll was now leading an effort within the National
Governors' Conference (NGC) to give greater attention to energy facility
siting problems.
Harscher, Carroll's chief representative to the NGC, made these state-
ments in testimony before Kentucky's Commission on Environmental Quality.
He pointed out that Carroll, as chairman of the NGC's Natural Resources and
Environmental Committee, had just appointed a Subcommittee on Energy Facili-
ty Siting. Chaired by Oregon Governor Robert W. Straub, the new committee
included governors from four of the ORBES region states. (Governor James
R. Thompson of Illinois, who had just succeeded Dan Walker as governor there;
73
-------
Governor Otis R, Bowen, Indiana; Governor James A. Rhodes, Ohio; and Gover-
nor John D. Rockefeller IV, just inaugurated as governor of West Virginia,)
Another aide to Governor Carroll also appeared at the February 17 Com-
mission meeting and specifically addressed the earlier Regional Power Plan,
He was Damon Harrison, long-time Kentucky official and then acting director
of Kentucky's Policy Advisory Committee on Energy (PACE), Harrison noted
that day-to-day management of the energy crisis through the fall of 1976 and
early winter of 1977 had "slowed down" the PACE committee's work on develop-
ing the regional power plan for Kentucky and the states whose energy re-
sources and demands were linked to it (13).
8.2.3 State-Oriented National Siting Plan Studied
These appearances, then, by Harscher and Harrison early in 1977 seem to
distinctly mark an effort by the Carroll administration to refashion its
earlier proposal for a regional "power" plan. Such a reformation would ap-
pear to emphasize two new approaches: (1) the probable need for any Ohio
Valley plan to be a part of a broader state-oriented national siting arrange-
ment; and (2) the desirability that any plan -- regional or national --
include all large energy-related facilities, not power plants alone.
Governor Carroll's staff, particularly Harscher, was active through 1977
in coordinating the work of Carroll's NGC Committee on Natural Resources En-
vironmental Management with Governor Straub's Subcommittee on Energy Facility
Siting. In August of 1977, the NGC released a subcommittee report entitled
State Perspectives on Energy Facility Siting (14). The report addressed pro-
blems associated with the siting of all energy-related facilities.
One year later (in 1978) Governor Carroll was elevated to the chairman-
ship of the National Governors' Association (NGA). (The old NGC had been re-
named late in 1977.) During his final year as governor, Carroll served often
as the spokesman for the NGA in negotiations with President Carter and other
national officials. He apparently decided not to personally pursue the Ohio
River Regional Pov/er Plan within a few months after making the proposal in
September of 1976.
8.3 INTEREST FROM ORSANCO
Governor Carroll's apparent decision not to seek support from fellow
governors for a regional power siting plan did not end his indirect influence
in other discussions on this topic. A cabinet-level appointee in Carroll's
administration was to become the major spokesman for expanding ORSANCO's
authority so that it might become involved in the interstate siting of power
plants and_ other major energy-related facilities in the Ohio Valley. This
was Eugene F. Mooney, appointed early in 1978 by Governor Carroll to be
Secretary of the Kentucky Department of Natural Resources and Environmental
Protection.
-------
8,3.1 Warning of Possible Pre-emption
Mooney's interest In interstate siting of power plants in the ORBES
region preceded his appointment to the Carroll cabinet by at least one year.
In August of 1977, while serving as executive director of the Kentucky Pu-
blic Service Commission, Mooney accompanied Carroll to a Midwestern Gover-
nors' Conference as a speaker. During his address, "The Impact of the
Carter Energy Plan on State Public Utility Regulation," (15) Moonev cited the
complex siting challenges facing Ohio River Valley states. He also warned
the Midwestern governors of the possibility of national "pre-emption" in
facilities siting and related areas if the states did not assume leadership
themselves (16).
Two months later, in October of 1977, Mooney specifically addressed the
question of alternatives for interstate energy facility siting in the Ohio
River Valley. This came in a speech delivered at a conference known as the
Ohio River Valley Assembly, held at Hueston Woods, Ohio, October 10-12, 1977.
More than seventy public officials from the six ORBES states and from rele-
vant regional and federal agencies heard Mooney's comments. He argued that
federal officials were ignoring interstate problems associated with energy
production:
Coal production is to double by tomorrow (but)
...Nothing yet has been said about interstate power
plant and transmission line siting, fossil fuel pro-
duction and transportation, or the concomitant pollu-
tion and economic development problems inherent in
these contradictory goals.
...One suspects that the federal computer is going to
dictate state "energy plans" and, again, is neither
going to address the underlying interstate realities
nor allow anyone else to do so (17).
Mooney compared the nation's interstate energy plight in late 1977 to a
similar dilemma which was being faced in 1970 when "the environmental crisis
had just been discovered" (18). According to him, national environmental
protection statutes dealing with air pollution, water pollution, and solid
waste all appropriately charged the states with the job of implementing new
federal programs. This was necessary, he said, because national officials
realized that only states and local governments have the power "to regulate
smokestacks, build sewers and locate landfills" (19). Hooney continued:
The federal laws spoke highly of intergovernmental coop-
eration, expressly eschewed federal preemption, and de-
signated the interstate compact as the chosen instrument
for addressing problems of multistate and interstate pollu-
tion. The federal government would choose the criteria
and set permissible national pollution standards, and the
states would enforce them with federal funds, expertise, and
the threat of preemption to back them up and stiffen their
spines.
-------
It was a bold and magnificent conception, but alas,
it was never to be. Most of our pollution problems
lay squarely across state lines, and we have only the
creaky constitutional machinery of the interstate
compact to deal with them (20).
Mooney then reviewed Article 1, Section 10, of the U,S, Constitution,
which allows interstate compacts but requires the consent of Congress in
such instances. He also reminded his audience that "the compact is the
only method sanctioned by the Constitution for legislation concerning pro-
blems in an area less than the entire nation and larger than a single state
(21).
8.3.2 Advance Agreement Interstate Compact Proposed
Mooney proposed an answer to the cumbersome procedures which have re-
quired an average of eight years for negotiation of interstate compacts.
This was a system whereby Congress would, by law, give its consent in ad-
vance to the terms of an interstate compact which any state could join.
Further, the law would authorize the party states to enter into "supplemen-
tary agreements" among themselves to address interstate environmental pollu-
tion. Mooney reviewed a bill containing these provisions, cited in Chapter
1, which had been passed unanimously by the U.S. Senate in September of 1971.
However, the measure, known as the "Interstate Environmental Compact Act,"
never went to a vote in the House of Representatives because the House
Judiciary Committee did not permit it to reach the floor.
Ohio River Valley Assembly participants were urged by Mooney, on leave
from the University of Kentucky law faculty, to seek the exhumation of the
Interstate Environment Compact Act with particular reference to the Ohio
River Valley. He suggested that either the Ohio River Valley Water Sanita-
tion Commission (ORSANCO) or the Ohio River Basin Commission (ORBC), in com-
bination with the Interstate Environment Compact Act, might provide an ef-
fective intergovernmental mechanism for addressing multiple siting problems
of the valley on a regional basis.
Mooney recalled that the original Interstate Environment Compact Act
included a provision relating to land use practices affecting the environ-
ment of more than one state. This provision, he said, "was included to
permit agreements among states concerning electric power plants and trans-
mission line siting" (22).
Assembly participants stopped short of endorsing Mooney's proposal but
at the close of the conference a majority reached general agreement on a
statement which encouraged the governors of the six ORBES states to pursue
"mutual planning for the orderly development and use of energy resources in
the region" (23).
As alreadv discussed in this and previous chanters, Governor Carroll
later appointed Moonev secretary of the Kentucky Department of Natural Resources
and Environmental Protection. In this role, Mooney served as a commissioner of
ORSANCO, and for a time he provided leadership in the consideration of nossible
ORSANCO involvement in broad facility sitinq.
76
-------
Chapter 8
Notes
1, Carroll, elected as lieutenant governor in 1971, became governor late
in 1974 when his predecessor, Wendell Ford, entered the U.S. Senate,
He was elected in 1975 to serve a full four-year term, Under the Ken-
tucky Constitution, governors may not be elected to serve full consecu-
tive terms, so Carroll left office in December of 1979. Succeeding him
was John Y. Brown, Jr.
References
1. Jan L. Saper and James P. Hartnett (Eds,), The Current Status of the
Electric Power Industry in the Ohio River Basin Energy Study States,
Prepared for ORBES, April 1980.
2. News release from office of Sen. Birch Bayh (Indiana), July 22, 1975.
3. Quotation from Martin E. Biemer, "Carroll Urges Five-State Power-Pi ant
Control Plan," Louisville Times, September 23, 1976.
4. Quotation from Martin E. Biemer, "Carroll Urges Five-State Power-Plant
Control Plan," Louisville Times. September 23, 1976.
5. Quotation from Howard Fineman, "Carroll Hopes Plan for Power Growth Will
Curb N-plant," Louisville Courier-Journal. September 23, 1976.
6. Quotation from Howard Fineman, "Carroll Hopes Plan for Power Growth Will
Curb N-plant," Louisville Courier-Journal, September 23, 1976.
7. Quotation from Howard Fineman, "Carroll Hopes Plan for Power Growth Will
Curb N-plant," Louisville Courier-Journal, September 23, 1976.
8. Quotation from Howard Fineman, "Carroll Hopes Plan for Power Growth Will
Curb N-plant," Louisville Courier-Journal, September 23, 1976.
9. Editorial, Kentucky Post, November 17, 1976.
10. Editorial, Huntington Post-Dispatch, September 29, 1976.
11. Editorial, Huntington Post-Dispatch, September 29, 1976.
12. Associated Press news story, Louisville Courier-Journal, February 17, 1977.
13. Associated Press news story, Louisville Courier-Journal, February 17, 1977.
14. National Governors' Conference, State Perspectives on Energy Facilities
Siting: A Workshop Summary ( NGC Subcommittee on Energy Facility Siting),
Washington, D.C., August 1977.
77
-------
15, Eugene R, Mooney, "The Impact of the Carter Energy Plan on State Public
Utility Regulation," delivered at Sixteenth Annual Meeting, Midwestern
Governors' Conference, Grand Lake O'the Cherokees, Oklahoma, August
8, 1977,
16. Ibid.
17. Eugene F. Mooney, "Another Look at the Interstate Compact: A Supple
Device," in Boyd R. Keenan (Ed.), Energy and Environment: An Inter-
governmental Perspective. Proceedings of the Ohio River Valley Assem-
bly, Urbana, Illinois: University of Illinois, 1978, p. 135.
18. Ibid., p. 136.
19. Ibid, p. 136.
20. Ibid, p. 136.
21. Ibid, p. 136.
22. Ibid, p. 137.
23. Boyd R. Keenan (Ed.), Energy and Environment: An Intergovernmental Per-
spective, Proceedings of the Ohio River Valley Assembly, Urbana, Illi-
nois: University of Illinois, p.4. (See Appendix A for the complete
statement.)
78
-------
Chapter 9
TRANSCENDING OPTIONS
Several of the preceding chapters are concerned mainly with background
materials. But at least four chapters deal with complex matters of policy
choice with respect to interstate problems associated with electric power
generation. In chapter 3, attention was given to remedies available to
mitigate negative interstate air quality impacts. Next, in chapter 4, the
discussion was broadened to include other possibilities for addressing such
impacts.
In chapter 7, the power industry's own structural efforts to respond to
broad interstate dynamics relating to power plants -- not just those limited
to air quality -- were reviewed. Finally, in chapter 8, other interstate
power options explored in recent years were covered. Thus, each of the suc-
ceeding chapters moved to policy options for broader forums of decision
making. This approach implies no preference for options which span broader
areas of activity. Rather, it reflects an apparent trend in the "real world"
since the ORBES study was launched in the fall of 1976.
The process also reflects a growing interest in siting of energy faci-
lities, as opposed to other operational aspects of such installations. For
example, prior to late 1976 neither top state officials nor representatives
of regional organizations in the ORBES study region had proposed an inter-
state-regional siting arrangement for power plants. However, as described
above, a Kentucky governor made such a proposal shortly after the ORBES
study was initiated. Then, in less than two years, a water-related regional
organization — ORSANCO — began an examination of its possible role in
interstate siting, not of just power plants but apparently of all major en-
ergy facilities. An ORSANCO task force (which later became a ircommi ttee")
decided that one of the most difficult tasks in such a deliberation was to
determine what kinds of facilities might logically be included in an inter-
state siting arrangement, if indeed one were even brought into being.
One thread, then, but not necessarily the most important one, appears
to move through public interstate discussions of the past few years. It is
the consideration of interstate-regional siting mechanisms which transcend
options for any one type of energy facilities alone such as power plants.
Though it persists, many believe the thread is hanging from false premises
assuming that a regional siting mechanism could mitigate negative impacts
from either power plants or other facilities. For example, the ORBES core
team, while not explicitly rejecting interstate siting of power plants as a
promising route, did not -- as a unit -- prove or attempt to prove that the
device would be helpful to the region as a whole. Its most positive find-
ing was a cautious assessment that interstate power plant siting could re-
duce "hot spot" air pollutant concentrations.
Thus, this chapter's discussion of interstate siting, particularly as
79
-------
it relates to non-generating facilities, should not be ascribed to the core
team or other ORBES researchers. However, it appears to this author that a
review here of regional siting and operational considerations for energy
facilities in addition to power plants is consistent with the original ORBES
mandate.
9.1 UNEXPECTED DEVELOPMENTS
As emphasized throughout this report, ORBES findings suggest that air
quality problems associated with coal-fired power plants now appear to represent
the most difficult challenges for the region in the years ahead. But other
developments -- regional, national, or international — could set in motion
broader strategies transcending the coal scene in the ORBES region and even
the overall total energy sector there. Any realistic examination of inter-
state options within'the constraints of our federal system must acknowledge
such remote possibilities.
The present uncertainty with respect to the use of nuclear energy for
electrical generation is a case in point. ORRES research does address nuclear
facilities. However, portions of the ORBES main report dealing with nuclear
energy will not deal with the possibility that concern over siting and operation
of nuclear plants could stimulate new and more relevant deliberations over
siting and operation of coal-fired plants as well.
Many deliberations have occurred in recent years, particularly at the
national level. Some leaders originally most concerned about the siting and
operation of nuclear plants have concluded that a siting and operations plan
cannot be effective if it is designed to deal with only one type of fuel use.
Further, if it is reasonable to use interstate or multi-state mechanisms in
siting and operating nuclear power plants, why not use them in siting other
installations associated with the broad nuclear fuel cycle? Should all such
installations, including electrical generating facilities, nuclear weapons
facilities, uranium mines, uranium enrichment facilities, and waste disposal
sites be covered by such a mechanism?
Thus, discussions of interstate or multi-state siting and/or operating
mechanisms for coal-fired electrical generating facilities realistically cannot
be separated from consideration of nuclear-fueled generating facilities or
other nuclear installations. And the complexity does not end there. Given
the national policy for reducing our dependence upon foreign oil, regional or
national proposals for energy facility siting have increasingly included other
types of installations.
Particularly relevant here is the renewed interest in the ORBES region
in coal-based synthetic fuel plants, using both gasification and liquefaction
processes. Such plants are not projected in the ORBES scenarios, chiefly because
these installations are not expected to be a significant energy source by the
year 2000 in the study region.
80
-------
In July 1980, the President signed a bill that allocates $20 billion
to spur the production of synthetic fuels to replace foreign oil. The
legislation sets a goal of synthetic fuel production equivalent to 500,000
barrels of oil a day by 1987 and 2 million barrels a day by 1992. In
practical terms, policymakers will likely be faced with the task of assessing
the possible interaction of the impacts from new synthetic fuel plants with
certain of the impacts from power plants. Synthetic fuel plants are not
expected to have major negative effects on air quality,but it is anticipated
they will increase water consumption and thus degrade water quality. Thus,
any case being made for future interstate, multi-state, or national power
plant siting and operations mechanisms would likely include consideration of
incorporating synthetic fuel installations.
The success of the nation in using larger amounts of coal in order to
reduce its dependence on foreign oil will rest in part on the response capability
of various coal transportation modes: railroads, waterways, highways, and
pipelines (for slurry). Many of the transport problems to be faced are intra-
state in nature. Solutions to most of the intrastate problems will be built
on long legal and institutional histories. However, the possible need to
expand existing riverports or to construct new port facilities is one inter-
state aspect of coal transport that presents new challenges. Protracted
conflict between states over major riverport and coal terminal sites on the
Ohio River conceivably could bring pressure for such installations to be
included in any proposal for an interstate facility siting and operations
mechanism.
Much of the discussion in this report and in other ORBES publications
relate to possible multi-state action designed to mitigate air quality
impacts. However, unexpected events also could trigger the relaxation of
existing regulations. For example, Congress could decide that the need to
develop energy facilities is so overriding that a mobilization posture is
required. The President's 1979 proposal for a national Energy Mobilization
Board (EMB), stalled in Congress in late June 1980, assumes such a need for
energy development. The EMB proposed by the President would have exercised
sweeping powers to expedite energy projects including the lowering of
environmental standards for certain energy projects. If the President's
proposed EMB or similar legislation should be passed in subsequent sessions
of Congress, this would indicate a climate in which further discussions of
regional action to mitigate negative air quality would not likely be taken.
Also, it must be kept in mind that the legislation already passed with
respect to coal-based synthetic fuel plants and a rapid pace of development
of these plants might cause concerns over synthetic fuel plants in the ORBES
region to eclipse those concerns over power plants which originally led to the
ORBES study.
9.2 FOCUS STILL LACKING
When the mandate for the ORBES study was issued by a Congressional committee
in 1975, it appeared to some that the focus for interstate action in the energy
field would center on siting and operation of power plants. Although problems
being identified then are still with us, other concerns — such as synthetic
fuel plants -- have also become prominent. But a focus for concentrating upon
interstate energy matters is still lacking.
81
-------
Chapter 10
CONCLUSION
This examination of interstate energy options has moved through
various stages. Because the mandate from the Congress emphasized power
plant impacts, such effects were first examined, and, because of the ORBES
study preoccupation with air quality, two complete chapters were devoted
to interstate air impacts. Next, basin waterways and nuclear power plants
were explored, before an overall look was taken at the broad interstate
structure of the power industry. Then followed a sample of non-industry re-
sponses for interstate power options -- again, broader than air quality.
Finally, chapter 9 (the proceeding chapter) presented "transcending" options
for regional interstate structural arrangements in the ORBES study area.
This was the only chapter which moved beyond electric power facilities and
developed a context including several other kinds of energy installations.
Now, in this closing chapter, we are faced with the need to offer any
conclusions which appear to be justified. Again, because of the nature of
the directive from the Congress and the direction taken by the overall
ORBES study itself, comments in this chapter will be limited to the elec-
tric power industry and the sectors of government which must deal with that
industry. Further, since most of the impacts identified during the ORBES
study relate to the bulk power supply sector of the industry, the emphasis
is upon problems facing that sector.
10.1 POWER CONSUMPTION REDUCED
Although the condition has not been emphasized in this report on inter-
state options, it should be noticed here that the annual rate of electric
power consumption has been reduced considerably since the study was man-
dated by Congress. From an overall national annual growth rate of approxi-
mately 7 percent, the rate has dipped to about one-third of that around
the country and even less than that in some sections. The ORBES region has
not been an exception. It is quite possible, then, that a continued lower
growth rate than that projected in 1975 will result in fewer new power
plants concentrated in the study region than had been anticipated when the
Congress issued the study directive. And, in such a situation, the impacts
from the plants -- interstate and otherwise -- might not represent problems
of the scope originally expected.
However, the ORBES study results seem to suggest that difficulties can
be expected in the region even if a relatively moderate rate of electric
power growth continues. Also, with political leaders in both major political
parties talking of "re-industrialization," other high energy "futures" flash
into focus. If such should come to pass, it seems likely that high power
growth rates would once again prevail.
82
-------
10.2 COMMON DILEMMA FOR INDUSTRY AND GOVERNMENT
Regardless of the future rate of growth -- and particularly if higher
rates should obtain — this report on interstate affairs emphasizes that
the problems facing the electric power industry and those served by it are
truly interstate and/or regional in nature, it also suggests that neither
the electric power industry nor the governments responsible for its over-
sight are well structured to achieve maximum interstate benefits from the
resources expended.
These are not new ideas. They go back at least 55 years to a Ya1e Law
Review article which Professor James McLaughlin, a member of the West Vir-
ginia Law faculty, has utilized in his study of interstate power challenges
(1). The article was written by Felix Frankfurter, later to become a Su-
preme Court justice, and James Landis. They wrote:
...the range of experimentation must not exclude the
capacity for cooperation between States. An effective
response to the complex of forces loosed by electric
power must adapt or devise legal instruments and safe-
guards adequate to cope with the phenomenon as an entity.
And while electric power development does not present a
nation-wide system, it does break through the confines of
individual States (2).
Surprisingly, given the political ideologies of both Frankfurter and
Landis, the two legal scholars chose to cite Herbert Hoover, then Secretary
of commerce, as a prophet of what was to come with respect to regional in-
tegration of the power industry:
There is a phase of this whole public relationship that
seems to me to be slowly emerging and that is that the
United States will naturally divide itself into several
power areas. For instance, the barren areas of power
consumption formed by the Adirondacks on the east and
the character of natural resources along the Mason-Dixon
line on the South create a natural district in the New
England and Mid-Atlantic States. Another district lies
to the west of the Alleghanies and east of the Mississippi
River...And if we are to make a rightful solution of na-
tional problems we should consider their development
as essentially separate problems (3).
Hoover went on, of course, to become a U.S. president who was unable to
control unprecedented economic and social forces. He was, in some respects
an accurate prophet, but the development of national electric power grids as
well as a separate" arrangement for the various regions reveals that he un-
derestimated the scope of problems late in the 20th century
83
-------
However, from Hoover's time forward many specialists in both the in-
dustry and in government increasingly maintained that the most basic pro-
blems are interstate and regional. State lines are simply impediments in
effective legal and policy resolutions to power problems. This report ap-
pears to show that officials in both sectors are aware of this reality
but are often paralyzed by state line configurations, interstate rela-
tions and interfaces between states and the national government. There
seems to be a "will" on the part of national officials to meet such pro-
blems, but the burdens of tradition and structure are often too much to
overcome. In this conclusion, it seems appropriate to attempt to draw
parallels and contrasts between the power industry and various levels of
governments in their responsiveness to present conditions and possibilities
for the future.
10.2.1 Responsiveness of Power Industry
If interstate-regional problems are actually critical now with resnect to
the operation and regulation of the electric power industry, one might ask
why the utilities have not been more responsive in attacking them? Of
course the most extreme of critics might argue that they have selfish rea-
sons for not doing so. However, this report and most of the available li-
terature argues that possibilities for economy of scale and other factors
are best served when utilities give attention to interstate-regional is-
sues. Why, then, have they seemed reluctant at times to address some of
these problems?
Straightaway, let us acknowledge that they have made many attempts.
The long and finally successful efforts of AEP to acquire C&SOE is probably
a case in point. But the spector of holding company abuses of the 1920's
was raised again by those seeking to prevent the acquisition.
The early history of public abuses suffered at the hands of electric
power holding companies cannot be erased. And these lingering attitudes
are certainly among the several reasons for the industry not being more
rationally structured and not being more responsive to the interstate-
regional problems at hand.
Perhaps as a result of the memories of the holding company abuses,
the Department of Justice has apparently gone on record as favoring "ooolinq" in ioin
ventures as a means of achieving regional-interstate coordination rather than
through mergers.
With such counsel, the utilities have made attempts to develop pools
consistent with urging from several national agencies. However, as implied
in chapter 7 (and elsewhere) "management by committee" and apportionment of
system costs among pool members often involve significant problems. These
are complicated when pool members operate in different states. The problems
are made even more difficult by the existing systems of virtually all state
regulations which are still concerned largely with traditional rate base
questions rather than with capacity planning and utilization, which seem to
be the principal determinants of future system costs. Further, many special-
ists believe that state regulation is by its very nature ill-equipped to
84
-------
effectively deal with the regional character of bulk power supply opera-
tions.
Against this backgrop, then, it appears understandable why utility
companies are reluctant to address many of the interstate-regional ques-
tions emphasized by the ORBES study.
10.2.1.1 Pre-occupation of ORBES
It seems safe to say that the single issue which has claimed most pub-
lic attention as a result of ORBES preliminary findings has been that of
long-range interstate transport of air pollutants. If the reasoning utilized
in most of this report is accurate it would seem that maximum benefits
to both air enforcement officials and utility operators would be forthcoming
if bulk power segments were integrated across state lines more effective-
ly. As noted below (and elsewhere), of course technical capability to fully
address the long-range transport question has not yet been perfected.
10.2.1.2 Understandable obstacles
Obstacles to such integration are both understandable and tinged with
irony. Utility leadership is apparently reluctant to risk the criticism
which comes with efforts to integrate on a formal basis. They also ap-
parently are increasingly finding that the more voluntary approaches, such
as pooling arrangements, dissipate a great deal of time and resources.
A host of conditions have delayed the dialogue with respect to integra-
tion of bulk power supply sectors over the past few years. Among these
has been the flurry of new energy legislation addressed at questions felt
to be more pressing. Debate over a possible Energy %bilization Board
is another factor. Finally, of course, the 1980 presidential and congres-
sional election-have consumed the energies of many who might otherwise have
been giving attention to such matters.
10.2.1.3 Previous Reconmendations
A study completed for the old Federal Energy Administration (FEA).
prior to the creation of DOE, recommended that legislation be developed and
enacted that would federally charter regional bulk power corporations to
operate on a multi-state basis and market electricity wholesale (4). The
study's authors contended this approach would offer many of the advantages
of both consolidation and coordination in achieving the benefits of larger
systems with relatively few of the disadvantages.
Contents of this report seem to support this recommendation. But from
the viewpoint of the customer and the general public enactment of the recom-
mendation might bring a new set of problems. In the case of vertically in-
tegrated companies which produce, transmit, and distribute retail power, the
customer can at least envisage a single "entity" in the form of a company
from whom he can seek answers. Companies limited to production and whole-
saling activities would be far removed from the general public.
85
-------
As noted previously, the bulk power supply sector is probably the most
critical element of the total electric power system. Though citizens would
probably continue to he most interested in the distribution system because
it is there that they come face to face with the rate structure, the most
alert of them would demand (and deserve) an understanding of the total
industry.
The FEA-sponsored study is not alone in its recommendation for reducing
the number of companies operating at the bulk power level. Many leaders within
the industry have recommended over more than a decade that a limited number
of bulk power supply systems, say 12 to 15, be developed. They seem to feel
that such a step would permit the industry to operate effectively on a
regional basis with a minimum of multi-jurisdictional conflicts and would
ensure effective regulation. The author of this report certainly cannot
respond to the desirability of such a step, but in view of the contents of
this paper the idea appears worth careful study.
Perhaps one reason it deserves attention is that discussion of structural
changes in the electric power industry might generate public interest in the
nation's largest industry, in terms of capital expenditures. No one can deny,
surely, that we are in need of greater public awareness of the difficulties
being faced by the utilities.
10.2.2 Responsiveness of Government
The difficulty of governmental understanding of and action taken with
respect to the bulk power sector has been demonstrated in this paper. The
report and other ORBES documents have emphasized in particular the difficulty
of regional air quality control. The problems facing three EPA regional
offices which must monitor the Ohio River Valley, a natural bulk supply sector,
have been well documented. The EPA task is made even more difficult by the
understandable interests of the six ORBES states in maintaining considerable
control themselves over air quality as it relates to the electric power
industry.
As government officials wrestle with this problem, should they give
attention to the recommendation, noted above, that a limited number of bulk
power supply systems be developed? The proposal seems to make sense only to
the degree that it would produce a closer match between the boundaries of
regulation -- particularly air quality control -- and the boundaries of bulk
power supply systems. But the public cannot be ignored in discussions of such
possible reorganizations.
10.3 NEED FOR EDUCATION
As already emphasized, any change in the bulk power supply sector should
be accompanied by a conscious effort on the part of the government -- and the
electric power industry — to encourage the public to view the various sectors
of the industry together. This study has shown that the complexity of the
industry is so great that few citizens can reasonably be expected to understand
even the broadest dimensions of this important sector of society.
86
-------
Complex conditions such as joint ownership of plants, power pools
operating across state lines, and general interconnections of systems
are so linked to the public interest that continued inability of a sizeable
percentage of opinion leaders to understand these matters is certainly
not in the national interest.
Present conditions suggest that environmental abuse will continue for
some time. More importantly, perhaps, present conditions lead us to
believe that electric power rates will be driven higher and higher by
national and world conditions. As this occurs, it seems logical that
citizens will respond negatively and with considerable emotion. Social
and political disenchantment could result. Our free society can likely
withstand such conflict and frustration if our opinion leaders know the
electric power industry sufficiently well to explain to their neighbors
and friends just why rate increases and continued pollution are necessary.
But if these opinion leaders have not been educated themselves to the
changing intricacies of this most critical industry -- particularly its
interstate aspects -- our political system could face one of its most
severe domestic challenges of this century.
Any such educational process must begin somewhere. Probably no other
region of the country presents such a combination of critical electric power
resources and a richness in interstate dynamics. If the ORBES study can
stimulate the initiation of such a truly interstate educational process,
it will surely have justified the expenditure of considerable resources
which were provided by the national government, the states (through
counsel and involvement), the electric utilities (through time and help of
various kinds), and the public itself, whose dedicated representatives made
efforts to keep the undertaking from becoming an irrelevant academic exercise.
87
-------
Chapter 10
References
1. James A, McLauqhlin, Legal and Institutional Aspects of Interstate
Power Plant Development in the Ohio River Basin Energy Study Region.
2. Felix Frankfurter and James Landis, "The Compact Clause of the
Constitution: A Study in Interstate Adjustments," 34 Yale Law Journal,
685 (1925), p. 712.
3. Ibid., p. 713.
4. Gordian Associates, "Structural Reform in the Electric Power Industry"
(Prepared under contract to the Federal Energy Administration, Contract
No. CO-Q5-50152-00. 1976, pp. 28-29.)
------- |