HD79 - The Study of the Regulation of Independent Power Producers and the Oil and Gas Act
Executive Summary: During 1989, the Virginia Coal and Energy Commission conducted studies on Virginia's Oil and Gas Act and the regulation of independent power producers in the Commonwealth. The Commission also considered the potential impact of the Bush Administration's proposed acid rain legislation on Virginia, as well as the problems being experienced by cogeneration projects in Virginia in receiving air permits. In addition, the Energy Preparedness Subcommittee met to review the status and use by the Commonwealth of oil overcharge funds and the negative implications which the lack of these funds has for current programs which rely on these moneys. The full Commission held five meetings during the year. Most of the Commission's time was spent developing recommendations for a new Virginia Gas and Oil Act. Public comment was allowed and considered by the Commission at each of its meetings. The Oil and Gas Subcommittee also held a meeting to receive public comment. After extensive review of these comments and consideration of a number of draft proposals, the Commission unanimously agreed to recommend that a new Gas and Oil Act be enacted by the General Assembly. Among other things, the new Act significantly reorganizes the current Act, consolidates the existing Virginia Well Review Board and Virginia Oil and Gas Conservation Board into a single Virginia Gas and Oil Board with statewide jurisdiction, provides a new pooling procedure designed to encourage the reduction of coalbed methane gas in Virginia, and enhances enforcement efforts by allowing civil penalties and civil charges to be assessed for violations of the Act. At its first two meetings of 1989, the Commission considered the extent to which independent power producers (IPPs) should be subject to state regulation While IPP representatives argued that competition makes state regulation unnecessary, officials from the State Corporation Commission suggested that continued regulatory oversight of IPPs in Virginia serves the public's best interest. The Commission made no findings or recommendations on this issue. The Commission did determine that the "allowance" or "offset" provisions of the President's proposed acid rain legislation would negatively affect electricity costs and the use of coal. In a letter to the two chairmen of the Congressional subcommittees considering the bill, the Commission voiced its concern over these provisions and indicated that such requirements might be unnecessary to ensure that a 10-million ton reduction in sulfur dioxide emissions is maintained. Commission members were disturbed by testimony which indicated that the issuance of air permits to a number of cogeneration projects in Virginia has been delayed because of an abrupt shift in policy by EPA. Commission members were also bothered by statements which seemed to indicate that EPA's Region III, which encompasses Virginia, was taking a different position on certain policy matters than Region IV, in which North Carolina is located. As a result of this policy shift and Region III's differing interpretation of policy, Commission members were told that investment in these cogeneration projects and the resulting employment and economic benefits may shift from Virginia to North Carolina. The Commission decided to forward a letter to Virginia's Congressional delegation informing them of the unnecessary problems caused by EPA's policy shift and differing interpretations of policy by region. |
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