United States
                    Environmental Protection
                                                Office of Policy
                              September 1998
vvEPA      Climate Change  Solutions
                 Oregon Switches  to  Cleaner Power
       Ttilities and power plant developers across the
       /lation can play a significant role in slowing
  ^^X global climate change. In 1996, Oregon took an
important step in this direction when it approved the
construction of a power plant that incorporates measures
to offset its emissions of carbon dioxide, an important
greenhouse gas. The new plant will be located in
Klamath Falls in southern Oregon.
In 1997, Oregon went even further and enacted a
landmark law that establishes a "carbon dioxide
standard" for all new power plants of 25 megawatts or
more. The CO2 standard requires natural gas-fired plants
to achieve 0.7 pounds of CO2 emissions for each
kilowatt-hour of power produced—a reduction of
17 percent below the most
efficient gas-fired
plant currently
operating in the
United States. The
standard can be
met by any
combination of
cogeneration, and
offsets from off-site
In addition to
efficiency, the Klamath
Falls plant will offer the
following portfolio of
mitigation measures:
   • A high-efficiency generator  for
    cogeneration of steam that will be used by a
    lumber mill for kiln-drying lumber.
   • Reforestation of 6,250 acres  of Douglas fir
    in western Oregon.
   • Expansion of geothermal district heating in the town
    of Klamath Falls to 78 additional buildings.
   • Generation capacity of 32 megawatts from waste
    methane recovered from sewage treatment plants
    and coal mines in the United States.
   • Capital support to install 182,000 20- or 35- watt
    photovoltaic systems over a 30-year period in remote
    households in India, China, or Sri Lanka to provide
    electricity to replace kerosene lamps.
According to the Oregon Energy Facility Siting Council,
this is the first time in the United States that global
warming has played a role in a major decision regarding
the regulation of energy resources.

Historical Background
In 1971 Oregon passed a state law regulating the
                         certification of new energy
                            facilities. The law
                              established  a
                               requirement that
                                developers of new
 I           TOWER Yd*         power plants must
                                prove the need for
                                a new facility. This
                                "need for facility"
                               or "need for
                               power" standard
                              required utility
                             developers to
                            demonstrate that
                           present supply is
                        insufficient to meet energy
                      demand as shown in utility
                 least-cost plans. A number of
        additional requirements must be met as well,
including financial, public safety, and environmental
standards such as impacts on wildlife refuges and other
protected areas.
Very few power plants were constructed in Oregon
during the 1980s. By 1995, representatives of the utility
industry had persuaded legislators to introduce a bill that


     • The plant uses a high-efficiency 305-megawatt
      natural gas-fired generator rated at approximately
      6,800 Btu's per kilowatt-hour (currently the most
      efficient natural gas-fired plant is 7,200 Btu/kwh).
     • The plant is expected to emit 34 million tons of
      carbon dioxide during its projected 30-year life.
     • The mitigation measures are predicted to offset
      11.6 million tons of carbon dioxide over 100 years
      through photovoltaics, reforestation, and the other
      off-site measures, coupled with steam cogeneration.
     • Klamath  is committing to $3.1 million for off-site
      mitigation projects.
     • The project is expected to result in offsets
      equivalent to taking 2.6 million cars off the road.

would eliminate the need for power standard. When it
appeared that the governor would veto the bill, a one-
time-only exemption was approved instead. Oregon's
Energy Facility Siting Council established a competition
to select a company to receive the exemption. At the
same time, the governor and legislature created a task
force to review the process of siting power plants.

The Klamath  Cogeneration Project
The Klamath Cogeneration Project won the competition
for the one-time exemption from the need for power
standard. The competition was based on a comparative
evaluation of proposed plants' environmental impacts on
air,  water, and land resources.
The first test was for air emissions of carbon dioxide,
nitrogen oxides, and particulate matter. To rank the
proposed projects, tons of emissions per kilowatt-hour
were multiplied by a cost value for each pollutant in
an effort to internalize environmental costs. The test
employed values of $10 per short ton of carbon
dioxide and $2,000 per short ton of nitrogen oxides
and particulates.
Klamath, which received its final site certification in
August 1997 and expects to begin construction in the
next two  years, is committing  $3.1 million to its  off-site
mitigation projects. It also expects to raise $1.5 million
in matching funds for the reforestation project. The
offset projects, along with the  steam cogeneration,
should offset 11.6 million tons of carbon dioxide over a
period of 100 years, well beyond the 30-year lifetime of
the plant. The offsets will equal a third of the plant's
expected emissions—and would be even more if the
methane benefits were factored in. The carbon dioxide
offsets over 100 years are equivalent to taking 2.6 million
cars off the road.

Lessons Learned
The competition encouraged innovation
The competition encouraged a diversity of proposals for
innovative offset measures. One of the two losing
competitors, for example, proposed guaranteed
sequestration of 1.1 million tons of carbon dioxide
through conservation easements intended to extend the
average life of protected forests. Unlike the Klamath
project, which offset carbon dioxide emissions through
new tree plantings, this proposal offered offsets from
managing growth in existing forested areas. Managing
existing forests is intended to ensure that those trees will
continue to sequester carbon dioxide.
The other applicant proposed a mitigation fund of $7.5
million without specifying measures. The council
selected the Klamath package because it had significantly
greater offsets. It also offered greater innovation,
cogeneration, reforestation, geothermal heating, methane
recovery, and photovoltaics.
     The offset projects, along with the
   steam cogeneration,  should offset 11.6
    million tons of carbon dioxide over a
              period of 100 years.
The council required guarantees of offsets in those areas
that are within the developer's control. The developer is
required to live up to the representations made. If the
Klamath plant fails to achieve the estimated efficiency or
cogeneration goal and the actual emissions are greater
than the projections, the developer is required to
compensate through new offsets. The council did not
require guarantees for off-site projects.

Competitions reduce the time for siting power plants,
but setting a standard is preferable
The competition was a unique situation that fit the
circumstances at the time. Under the usual siting process,
the Energy Facility Siting Council can negotiate with the
developer if the proposal fails to meet the standards and
suggest amendments so  that it complies. A developer who
does not accept the amendments can withdraw. With a
competition, however, no amendments or modifications
were allowed. "Because  it was a competition," says Sam
Sadler, an energy analyst with the Oregon Office of
Energy, "the council had to take a hard line and make
them stick to what was first proposed."

Proposals can be reviewed fairly
In addition to encouraging a diversity of proposals, the
competition showed that it is possible to apply
     The offsets from the Klamath
     plant are equivalent to taking
      2.6 million cars off the road.
consistent evaluation standards for reviewing diverse
projects. In quantifying offsets, for example,  the
council established conventions such as considering
all three plants as operating at WO percent capacity
for a 30-year life.
Carbon dioxide offsets are financially viable
All three developers who participated are independent
power producers who must produce energy at a
competitive  rate in order to sell it in the marketplace to
utilities or large industrial customers. The fact that the
independent power producers were willing to offer
offsets showed that it is feasible to address global climate
change and still remain competitive.

The Task Force
The Energy  Facility Siting Task Force created by the
governor and legislature was charged with reviewing the
process of siting power plants. The task force included
seven members with diverse perspectives. Among them
were a state senator and professor of political science,
who was appointed by the president of the Senate; a state
representative and businessman, appointed by the
speaker of the House; a professor of economics and
former Public Utility Commission chairman; an eastern
Oregon county planning director; a labor union official
and former state representative; a state environmental
policy coordinator and former law school professor
currently assigned to a federal natural resource agency;
and a business council president and former state
official—the last five appointed by the governor.
In the task force's final report, the chairman, Mike Katz,
wrote: "The issues considered by the task force are
contentious, to put it mildly. Parties at interest include
utilities, environmentalists, power plant developers,
consumer representatives, the Oregon  Office of Energy,
and the Energy Facility Siting Council."  He concluded,
"Here is something notable: the task force's
recommendations are unanimous."
In a landmark decision, the task force called for a law
 Architect's rendering of proposed Klamath Falls power
 plant, which will be built in 1997-1999.

requiring all new power plants to offset their carbon
dioxide emissions. The task force's recommendation was
incorporated in the law passed in 1997 to revise the
siting standards for energy facilities. The law mandates
that natural gas-fired generating facilities intended for
base-load use achieve a reduction of 17 percent below
the emissions of the most efficient, combined cycle,
combustion turbine, gas-fired plant commercially
operating in the United States. Utilities, developers,
environmentalists, and state energy agencies all
supported the law.

 Klamath Falls City Hall uses geothermal district heating.

The task force, in a quid pro quo with power plant
developers, also recommended jettisoning the need for
power standard,  having concluded that it is outdated.
Developers today choose to build plants that burn
natural gas and are less polluting and cheaper than
large-scale nuclear and coal-fired plants. The task force
decided that these market forces rather than
consideration of cost-effectiveness should determine the
need for new power plants.

Additional Global Warming Activities
Oregon started in 1988 laying the foundation for these
historic decisions. First, the state inventoried its carbon
dioxide emissions and analyzed the potential impacts of
global warming on Oregon. Next, the state received
financial and technical support from the U.S.
Environmental Protection Agency's State and Local
Climate Change Program for an updated inventory of
emissions and an action plan of cost-effective strategies.
Oregon's latest plan was completed in 1995.
The state laid the groundwork through these studies, and
then citizens' panels took action. In 1992, the Oregon
Progress Board adopted a benchmark requiring that the
state's emissions be held to 1990 levels. Then in  1995 and
1996, the Oregon Energy Facility Siting Task Force and
the Oregon Energy Facility Siting Council—both citizens'
panels—provided the leadership that set the carbon
dioxide standard  and conducted the competition that
inspired the innovative Klamath project.
As the task force report states, Oregon has sent a signal to
the nation that the state "is prepared to do its fair share" to
address global climate change.
            For More Information
  To review the text of the legislation that revises
Oregon's energy facility siting standards (HB 3283,
A-Engrossed), see the Oregon legislature's website at


             Search site for "3283"

  To review the order for the competition and the
  Oregon Energy Facility Siting Task Force's final
report, see the Oregon Office of Energy's website at

                  Sam Sadler
             Oregon Office of Energy
             625 NE Marion Street
               Salem, OR 97310
     Phone: 503-373-1034 Fax: 503-373-7806
        E-mail: samuel.r.sadler@state.or. us

  U.S. Environmental Protection Agency
 State and Local Climate Change Program
            401 MStreet, SW (2171)
             Washington, DC 20460
     Phone: 202-260-3354 Fax: 202-260-0290
Internet:http://www. epa.go v/globalwarming/actions/state