When a coal-burning power plant is your city’s biggest taxpayer, it isn’t easy being green.
On Jan. 18 Gov. Deval Patrick signed an interstate pact to reduce carbon dioxide emissions and promote alternative energy sources. Within hours, Mayor Kim Driscoll and state Rep. John Keenan issued a joint statement calling for the governor to consider a package that would spare Salem a "disastrous" loss of revenue.
For environmental activists, the Regional Greenhouse Gas Initiative (RGGI) means higher standards for CO2 emissions, and that Massachusetts is catching on relatively early to a national push for renewable energy sources and addressing climate change and air quality concerns.
For city leaders and officials at the State House, it also means that Salem Harbor Station could plummet in value, taking with it a huge chunk of city revenue. The power plant is the city’s largest taxpayer, providing about $4 million, or 4 percent, of Salem’s annual operating budget.
"As for mitigation, I do believe Salem is uniquely situated and should be made whole for any potential loss of tax revenue," Keenan said this week. "As we all agree reducing emissions is a good thing, we ought to all agree to share the cost as well."
Driscoll and Keenan, both supporters of Patrick during the campaign and since his election, called the RGGI policy laudable. But Driscoll also proclaimed the potential loss of revenue "devastating" to Salem, while Keenan said the timing is "disastrous." The mayor has just begun tax negotiations with Dominion, the Virginia-based parent company of Salem Harbor Station.
RGGI will cap CO2 emissions from the Massachusetts’ large power plants at 26 million tons from 2009 through 2014, with an additional requirement to reduce emissions by 2.5 percent over each of the next four years.
If power plants want to exceed the emissions cap, they will have to acquire a permit. At this point, it’s uncertain whether the permits will be sold off by the state, but it’s clear that they may be traded among companies — a plant that produces less emissions will be able to sell its permit to a large plant. The idea, say proponents, is to make it tougher to pollute.
Local officials fear the policy will make the Salem power plant less valuable, and therefore cut into Salem’s revenues. The city has only recently battled down a serious deficit in the budget, which entailed layoffs and cutbacks, and the question remains whether Salem can handle such a loss.
Keenan, Driscoll and state Sen. Frederick Berry have already met with Energy Secretary Ian Bowles to discuss a possible mitigation package, and are planning to gather again with Dominion officials.
"(Bowles) expressed a desire to work with local officials to understand and reduce any potential financial impacts to the city," Driscoll said in a statement. "We are at the beginning of this dialogue and it will take some time to evaluate and work through potential implications."
RGGI has also engendered debate over whether Massachusetts residents will pay more on their utility bills. While the per-kilowatt prices are expected to rise, some say that people will actually use less electricity because changes at the power plants will make them more efficient.
Still, the policy itself has been championed at a time when politicians from the Oval Office on down call for renewable energy sources. Local activists for the environment and public health, like S.A.F.E. (Salem Alliance for the Environment) and HealthLink, cheered Patrick’s Jan. 18 decision.
"To be honest, the Regional Greenhouse Gas Initiative is a victory for the entire state and in fact for the entire region," said Jeffrey-Barz-Snell, a member of Salem’s renewable energy committee. "It is the first piece of legislation to push us in the direction we need to go in terms of reducing CO2 emissions."
Barz-Snell, who is currently acquiring a master’s degree in urban and environmental policy from Tufts University, describes the policy as "the equivalent to realizing you’re driving down the wrong road, stopping the car and turning around."
The color of money
S.A.F.E. and HealthLink are in agreement about the policy itself, but its members have not yet come to a consensus about what it means for Salem. Another member of the two groups, Pat Gozemba, worries that a mitigation package for Salem and similarly affected communities would divert money away from RGGI, and away from the alternative energy programs it is likely to fund.
"My feeling is we fought really hard to get that (policy adopted), and if RGGI is allowed to be used for mitigation, what it is essentially doing is making up the taxes that Dominion should be paying," Gozemba said.
Gozemba has looked at the financial reports for Salem Harbor Station and Dominion, and believes the company is financially capable of dealing with any increased expenses related to RGGI. Others aren’t so sure.
"At this point, I don’t think anyone can predict with any degree of certainty what the financial impact will be on Dominion or Salem," said Keenan. "There are far too many moving pieces and RGGI doesn’t start until 2009."
Barz-Snell also believes that the power plant will be adversely affected by the greenhouse gas policy.
"The people who run that plant are committed professionals who run it as best as it can be done," he said. "It is nonetheless a 1950s, vintage coal-fire power plant. The moment you have to factor in the cost of emitting CO2, the numbers will not work out nearly as well as they do currently."
Like Driscoll and Keenan, Barz-Snell has no problem asking the state to alleviate the financial burden RGGI could cause in Salem and similar communities, even if it means diverting funds from renewable energy programs. Barz-Snell calls it the "social justice" component — Salem residents have lived with environmental and health issues due to the plant’s proximity.
"Salem has born a disproportionate cost of having a power plant here for the last 40 to 50 years," he said.
Gozemba said Dominion knew what they were getting into when they purchased Salem Harbor Station, and they should handle the policy change without passing it off to the city and its residents.
Past energy regulation reduced Dominion’s tax payment from roughly $8 million to the current $4 million, and Gozemba believes it’s unreasonable for the company to pay less.
"I think we have to hold the line," she said. "How can they pay less than $4.2 million in taxes?"
She also has faith in Mayor Driscoll’s ability to negotiate a fair agreement.
Although Keenan said it’s too early to tell what the effect will be for Dominion and Salem, ultimately Salem should not be asked to sacrifice in any way that other communities aren’t.
"As for mitigation, I do believe Salem is uniquely situated and should be made whole for any potential loss of tax revenue," the representative said. "As we all agree reducing emissions is a good thing, we ought to all agree to share the cost as well."
What the future holds
There is no lack of environmental activism in Salem. In addition to the two citizen groups of S.A.F.E. and HealthLink, the mayor last year created the Renewable Energy Task Force, and Keenan has supported the idea of constructing a wind turbine on one of Salem’s shores.
The question remains whether new environmental policies and alternative energy sources, both nationally and locally, will mean the end of coal-driven power plants like the one in Salem.
"Whether or not Salem Harbor Station will survive through in the long term through the RGGI ‘regime’ is something no one’s been able to answer yet," Keenan said, pointing out that past and current regulations could take a toll.
For others, the question is not if, but when.
"There will come a time in the next 10 to 20 years when we will no longer be able to run coal-fired power plants like the one in Salem because of business reasons and moral reasons," said Barz-Snell. Regulations will essentially force plant owners to pay for pollution, he said, making them uneconomical. At the same time, the effects on the environment and public health will outweigh any profits.
In the meantime, officials expect it will take a while to sort out the details of RGGI and how it will be implemented by 2009. Among other things, the governor has not yet said whether emissions permits will be sold or given to companies, which could play a huge role in how profitable the program is, and how much money can be funneled into alternative energy and energy efficiency programs.
Nor is it clear how the policies will affect states outside the region that have not joined the pact, and whether participating states could still buy electricity from those states.
"I think it is still very early on in the implementation of RGGI here and in all the other participating states," said Keenan. "We need to first understand how it is going to work and second what impact it will have on electricity rates for consumers and businesses as well as its potential impact on fuel diversification in terms of stability, reliability and national security."
