1628 Sts. John Road 

Keystone, CO 80435 

Phone: 970-513-5800 

Fax: 970-262-0152 

www.keystone.org 

National and

State Energy

Policy Trends

Appalachian

Region Energy

Blueprint

Research Brief

August 2006
 

The Keystone Center 2

This report was funded by the 

Appalachian Regional Commission. 

For more information contact: 

Catherine Morris 

Senior Facilitator 

Director, Energy Practice 

Center for Science & Public Policy

Washington, D.C. Office 

1730 Rhode Island Avenue, NW 

Suite 509 

Washington, DC 20036 

Phone: 202-452-1590 

Fax: 202-452-1138 

Heather Bergman 

Associate Facilitator 

Center for Science & Public Policy

Denver, CO Office 

1580 Lincoln Avenue 

Suite 1080 

Denver, CO 80203 

Phone: 303-468-8860 

Fax: 303-468-8866

www.keystone.org 
 

The Keystone Center 3
 

The Keystone Center 4

National and State Energy Policy Trends 

Appalachian Region Energy Blueprint Research Brief 

Prepared by: The Keystone Center 

Introduction

The following is a compilation of recent national and state energy policies and programs that are 

an important backdrop to the development of the Appalachian Region Energy Blueprint.1 The 

national energy policy overview provides a better understanding of the energy technologies and 

supply alternatives that are being promoted through federal incentives and research, and presents 

the array of federal energy demand-side policies and programs, such as promotion of increased 

end use efficiency. The state energy policy overview focuses first on what is happening in the 13 

Appalachian states and then provides examples of other state and regional policies and initiatives 

that are setting trends across the country. We have provided suggestions for how the 

Appalachian Regional Commission and states might build on these efforts to develop a more 

cohesive regional energy blueprint. 

National Energy Policy and Program Trends 

Over the past five years, the primary objectives for national energy policy have been ensuring 

energy reliability and affordability and advancing energy independence and security. There are a 

number of tools that both state and federal government rely on to meet energy policy objectives, 

and each approach has its own advantages. Below are the categories of approaches described 

throughout this report. 

 Technology Research and Development and Demonstration programs (e.g., integrated 

gasification and combined cycle coal and carbon capture and sequestration) are typically directed 

to emerging technologies to help advance the effectiveness and demonstrate the reliability of the 

technology. 

 Investment Incentives (e.g., coal liquefaction and alternative fuel stations) are more likely 

to be used where the technology is proven but there investment is lagging because of the 

technology is only marginally economic or there is uncertainty about consumer demand. 

 Production Incentives (e.g., renewable energy production credits and manufacture tax 

credits) can be effective tools to spur production of energy sources or efficient products, 

particularly where there is underutilized production capacity or existing capacity can be 

redeployed to make new products. 

 Consumer Adoption Incentives (e.g., Energy Star labeling and tax incentives) include 

providing information to advance preferable products to consumer rebates and tax incentives that 

reduce the cost of technologies and products that are more expensive to purchase but provide life 

cycle benefits. 

 Standards and Mandates (e.g., renewable fuel standards and building codes) are 

exercised when there is a compelling public policy reason and market-based approaches are not 

effective. 

 

1

 This is not intended to be a comprehensive review of national energy policy, rather a summary of those policies 

and programs that are most relevant to the Appalachian region. 
 

The Keystone Center 5

 Reducing regulatory burdens (e.g., nuclear licensing changes) is a low cost but effective 

approach which may be helpful when there are multiple jurisdictions or agencies that have 

responsibility for approving implementation of an energy technology. 

I. Supply Side Energy Policies and Programs

To meet national energy policy objectives of energy independence, affordability and reliability, 

supply-side policies are designed to increase availability and diversity of fuel sources, advance 

technologies that use fuels more efficiently, and address fuel constraints through development of 

alternative energy sources. Below is the U.S. DOE, Energy Information Administration’s (EIA) 

2006 Annual Energy Outlook reference case forecast of U.S. energy production through 2030. 

Of increasing concern are predictions of the depletion of global oil supplies (peaking oil), the 

national security implications of importing fuels from unstable regions of the world, and the 

climate change impacts of fossil fuel energy sources. EIA predicts that national energy 

consumption will continue to outstrip domestic energy production over this period, increasing 

the U.S. dependence on imported energy. This increasing gap between forecasted demand and 

domestic supply, combined with the predictions that we are nearing peak oil production and 

entering a downward production slope, presents an unprecedented challenge for the U.S. 

According to several experts, the U.S. is likely to face steeply increasing prices and price 
 

The Keystone Center 6

volatility with substantial economic and social ramifications unless mitigation efforts begin at 

least a decade before peak oil years.2

 

Therefore, many of the policies and programs described below are designed to take greater 

advantage of domestic energy sources such as coal and renewable energy or to find alternative 

energy sources such as biofuels to displace imports of oil. This strategy of import substitution 

can not only increase energy security and price stability, but can lead to the generation of new 

energy-based industries and jobs. As will be discussed later, demand-side energy policies and 

programs also contributed to import substitution, the generation of new energy services and 

industries, and economic development opportunities. 

 

A. Coal

1. Clean Coal Research, Development, and Demonstration (RD&D)

Support for clean coal technologies RD&D has increased substantially under the 

Bush administration. Building on the commitment to invest $2 billion in clean coal 

technologies by 2012, the President’s 2007 budget includes $281 million in funding 

for the Coal Research Initiative. This program includes $54 million for the 

FutureGen Initiative,

3

 a public-private sector partnership formed to develop 

innovative, low-emission technologies to produce hydrogen and electricity from coal 

and capture the carbon emissions for geologic storage. The proposed Integrated 

Gasification Combined Cycle Technology (IGCC) will be built and partially-funded 

by FutureGen Industrial Alliance, an international non-profit consortium of major 

coal and electricity companies.4 Seven states (Illinois, Kentucky, North Dakota, Ohio, 

Texas, West Virginia, and Wyoming) are competing for the site of the plant which is 

expected to take ten years to complete. The goal of the project is to establish the 

effectiveness and reliability of the technology and help lower costs to make IGCC 

competitive, particularly with Eastern high rank coal. 5

 DOE recently announced that 

four sites in Texas and Illinois were named today as finalists for the FutureGen 

project.6

Additional federally-funded research is focused on ultra supercritical pulverized coal 

(UCSPC) plants, which hold the potential of increased efficiency and lower emissions 

than conventional pulverized coal plants, and are more suitable for low rank coals 

such as Powder River Basin.7

 Although estimated to be less expensive than IGCC, 

 

2

 Robert Hirsch, Roger Bezdek and Robert Wendling, Peaking of World Oil Production: Impacts, Mitigation , and 

Risk Management., Feb. 2005. 

Also NRC, Workshop on Trends in Oil Supply and Demand, Potential for Peaking in Conventional Oil Production, 

and Possible Mitigation Options, 2006. 

3

 http://www.fossil.energy.gov/programs/powersystems/futuregen/ 

4

 Alliance members include a number of companies with interests in the Appalachian region: American Electric 

Power, Southern Company, Peabody, Foundation and Kennecott Coal companies, CONSOL Energy and PPL 

Corporation. (http://www.futuregenalliance.org/alliance.stm) 5

 In 2004, American Electric Power announced it planned to move ahead in the construction of an IGCC plant. AEP 

hopes to complete the demonstration plant by 2010 and is currently reviewing potential sites in OH, KY and WVA. 6

 Greenwire, July 25, 2006 

7

 For more information on IGCC and PC technology and costs, see EPRI’s 6/19/06 presentation to EPA State Clean 

Energy-Environment Technical Forum. www.keystone.org/ 
 

The Keystone Center 7

UCSPC plants cannot capture carbon emissions cost-effectively in comparison to 

IGCC and cannot be retrofitted for carbon capture.. 

Energy Policy Act of 2005 (EPACT) includes new tax investment incentives for clean 

coal facilities and allows a seven-year accelerated recovery period on pollution 

controls on coal-fired electric power plants. 

2. Carbon Capture and Geologic Sequestration (CCS) RD&D

CCS technology is the key to making IGCC competitive under a carbon management 

system. However, with current technology capturing the CO2 emissions during the 

gasification process is energy intensive and expensive, adding as much as 40% to the 

capital costs and a 20% energy penalty. To advance the technology, DOE is 

sponsoring seven public-private RD&D partnerships. The program is designed to 

demonstrate a portfolio of safe, cost-effective greenhouse gas capture, storage, and 

mitigation technologies at the commercial scale by 2012.8 

One of the partnerships, the Southeast Regional Carbon Sequestration 

Partnership (SECARB), includes a number of number of Appalachian states. 

SECARB, led by the Southern States Energy Board (SSEB), Norcross, GA, 

represents the 11 southeastern states (Alabama, Arkansas, Florida, Georgia, 

Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Texas and 

Virginia). 

SECARB hopes to accomplish its objectives by identifying the sources and sinks for 

CO2: identifying the most promising capture, sequestration, and transport options and 

infrastructure needs in the region; developing public involvement and education 

mechanisms; and developing action plans for implementation and technology 

validation. 

The Midwest Partnership also includes a number of Appalachian States including 

Ohio, Pennsylvania, Kentucky, West Virginia and Maryland. 

3. Coal Production Incentives and Challenges

The Energy Policy Act of 2005 (EPACT) has a number of provisions to promote coal 

production and use, including: repeal of the current 160-acre cap on coal leases; 

allowing the advanced payment of royalties from coal mines in lieu of continued 

operation requirements; and a mandate to assess coal resources on federal lands that 

are not National Parks. 

Mountaintop removal of coal began in Appalachia in the 1970s and has been the 

focus of heightened environmental concerns. Most recently, in June 2006, the Army 

Corps of Engineers suspended four mountaintop removal coal mining permits in West 

Virginia following the start of a lawsuit alleging the permits are illegal. All four 

 

8 http://www.netl.doe.gov/technologies/carbon_seq/index.html; 

http://www.netl.doe.gov/technologies/carbon_seq/index.html
 

The Keystone Center 8

permits are for new or expanded mines proposed by Massey Energy. The Army Corps 

regulates companies seeking mountaintop coal mining permits because they often 

need to use explosives to blast apart entire hilltops to uncover valuable, low-sulfur 

reserves. The suit filed by environmental groups is based on concerns that the 

mountaintop removal technique is harmful to water quality and forest habitats. 

Safety in coal mines has received renewed attention at the national level in the past 

year.9

 As the result of increased mining accidents, Congress is looking into increased 

oversight of mine safety. Since May 20 seven miners have died, bringing the number 

of U.S. miners killed this year to 33—compared with 22 last year. Data suggests the 

higher incident of fatalities is due to the proliferation of smaller, undercapitalized 

mines. The Department of the Interior’s Office of Surface Mining is responsible for 

carrying out the Surface Mining and Control Act and overseeing the Abandoned Mine 

Land program. 

4. Coal to Liquids and Synthetic Fuels

Producing synthetic fuels, such as Fischer-Tropsch, methanol, from coal has been 

touted as one of the key ways to help meet the need for U.S. transportation fuels as 

naturally occurring oil reserves decline.10 Liquefaction of coal can be accomplished in 

two basic ways, 1) Direct liquefaction involving complex chemical reactions at high 

temperatures with the introduction of hydrogen and catalysts; and 2) Indirect 

liquefaction that requires first gasifying the coal and then converting it to a liquid 

with catalysts. The technology of liquefaction to produce Fischer-Tropsch fuel was 

first developed in 1925, but commercial production was abandoned as oil prices 

declined. The EPACT of 2005 includes financial incentives for coal-to-liquids 

development, including loan guarantees and tax investment incentives and a $1 

billion, three-year authorization. 

Current energy hearings have focused on increasing these incentives, despite the fact 

that DOE did not seek additional funding for projects or research because, according 

to one DOE official, it is a "mature technology receiving funding from the private 

sector for evolutionary advances and incremental improvements." Environmental 

challenges of liquefaction are primarily the increased greenhouse gas emissions from 

the production process which could be addressed through advancements in IGCC 

technology. In 2003 DOE announced a 5,000 bpd demonstration project using the 

process shown above, to demonstrate advanced FT fuel production. The project will 

co-produce 35 MW of electricity, in Gilberton, PA. Despite rising oil prices, to date 

there is no commercial coal-to-liquid plant in operation in the United States. 

 

9

 Warrick, J. “Safety Violations Have Piled Up at Coal Mine” Washington Post, Wednesday, January 4, 2006; Page 

A04 

10 Robert Hirsch, “Peaking of World Oil Production: Impacts, Mitigation and Risk Management,” Feb. 2005, SAIC. 
 

The Keystone Center 9

B. Oil & Gas

1. Oil & Gas Production Incentives

Much of the federal support for the oil and gas industry is to increase production in 

less accessible, more costly areas such as coal seams, deep reserves, oil sands and 

shales, and marginal wells. These “unconventional” oil and gas resources actually 

exceed the potential of “traditional” resources remaining in Appalachia as indicated 

below. In addition to synthetic fuels income tax credit, EPACT provides tax credits 

of $3.00 a barrel-equivalent for oil shale, tight sands, coal seams, and tar sands sold. 

Oil and Natural Gas Resource Potential in the Appalachian and Illinois Basins

Conventional Oil 2 BBbl

 

Unconventional Oil 

Stranded and unconventional oil 2-4 BBbl 

Oil sands in place 3-4 BBbl 

Oil Shale in place 400 BBbl 

 

Conventional Natural Gas 20-40 Tcf

Unconventional Natural Gas 

Coal bed Methane 9-17 Tcf

Gas shales 12-17 Tcf

Tight gas Sands 35-55 Tcf

From: Interstate Oil & Gas Compact Commission, Mature Region, Youthful Potential, Sept. 05.

2. Enhanced Oil Recovery 

According to DOE, enhanced oil recovery (EOR) methods have the potential to 

recover an estimated 200 billion barrels of the remaining discovered oil resource in 

the U.S. EOR processes involve injecting a gas or fluid into the reservoir to increase 

reservoir pressure or reduce oil viscosity in order to mobilize the oil. Injectants 

include steam (thermal processes); polymers and gels (chemical processes); and 

carbon dioxide, nitrogen, and natural gas (gas processes). A fourth process is 

microbial EOR. In 2003, thermal recovery projects produced 52% of the total oil 

produced from EOR methods in the U.S., CO2 projects produced 31%, and other gas 

injection and chemical methods produced the remaining 17%. CO2 recovery also can 

be a way to sequester the CO2 generated by power plants and other industries. EOR 

methods are more expensive production methods; however, in the face of continued 

high oil prices, interest is being revitalized in EOR technologies for increasing 

recovery.11 

 

11 http://www.netl.doe.gov/technologies/oil-gas
 

The Keystone Center 10

a. Oil Sands

Canada is the leading producer of tar sand reserves in North America, but 

Appalachia also has oil sands reserves, primarily in Kentucky. Extraction of oil 

sands typically requires mining and heating the reservoir. One study estimated 

that two tons of material is needed to produce one barrel of oil. The Canadian tar 

sands' currently has an output of over 1 million barrels a day, but has also been 

the focus of public attention about the environmental impacts, particularly the 

disturbance of land caused by the mining operations and the greenhouse gas 

emissions from production. With current technology, the Appalachian oil sands 

are not yet economic to extract, but could be in the future. 

b. Oil Shale 

The United States holds more than 50 percent of the world's oil-shale resources, 

the equivalent of 2.6 trillion barrels of oil, of which 1.5 trillion barrels are 

recoverable. As indicated above, part of this potential lies in the Appalachian and 

Illinois basins. Tons of rock and three barrels of water are needed to produce one 

barrel of oil with much higher GHG emissions than conventional oil.12 Oil shales 

production also raises a number of other environmental challenges including 

leaching of salts and toxics from spent shale, disturbance of land and air 

emissions from the production site. The largest oil shale deposits in the world are 

in the Green River Formation in parts of Colorado, Utah and Wyoming. However, 

Oil shale has not been exploited in the US because of its production costs and 

technological and environmental challenges. 

EPACT included provisions for accelerated oil shale development under the Oil 

Shale and Tar Sands Development Act. During recent hearings on oil shale 

development, concerns were raised about water rights and the need for a better 

understanding of the amounts of water that will be consumed to produce oil from 

shale and to restore the disturbed lands. 

3. Deep Trek R&D

To date, less than one percent of all wells drilled in the United States (and only 11 

wells in Appalachia and Illinois Basin) have penetrated below 15,000 feet, yet their 

production accounts for nearly seven percent of domestic production. DOE cost-share 

projects, dubbed “Deep Trek,” focus on developing the advanced technologies needed 

to tackle drilling and production challenges posed by natural gas deposits lying more 

than 20,000 feet below the earth's surface. There, drillers and producers encounter 

extraordinarily high temperatures (greater than 400 °F) and pressures (greater than 

15,000 psi), as well as extremely hard rock and corrosive environments. In June, 

DOE announced seven new awards. The projects selected include Electrochemical 

Systems Inc., Knoxville, TN, which is developing a high-temperature, rechargeable 

battery cell to power electronics in drilling and logging systems used in wells where 

temperatures could reach 482 °F.13 

 

12 Rand Corp., Oil Shale Development in the United States: Prospects and policy Issues, 2005 13 http://www.netl.doe.gov/publications/press/2006/06036-Deep_Drilling_Technology_Awards.html
 

The Keystone Center 11

4. Low-Impact Natural Gas and Oil (LINGO) Development 

LINGO is another DOE public-private funding initiative that hopes to take best 

advantage of current technologies and practices in ways that minimize adverse 

environmental impacts from the recovery of oil and gas. At the same time, the 

initiative seeks to boost the economic recovery of oil and gas by addressing the 

environmental concerns that block such recovery. The projects will be managed by 

DOE's National Energy Technology Laboratory as cooperative agreements in which 

project performers share at least 20 percent of the cost for research and development 

projects, and at least 50 percent of the cost for demonstration and commercialization 

projects. DOE funds available under the LINGO initiative total $1.3 million. 

C. Electricity

1. Renewable Energy Production Credits (REPC)

The energy bill contained $3.4 billion over ten years in tax incentives to encourage 

the production of electricity using renewable wind, solar, biomass, and geothermal 

energy sources, including the first-ever tax credit for residential solar energy systems. 

REPC now applies to the following resources: 

a. Wind 

b. Closed-loop biomass14 

c. Open-loop biomass 

d. Geothermal energy 

e. Small irrigation power (150 kW - 5 MW) 

f. Municipal solid waste 

g. Landfill gas 

h. Refined coal 

i. Hydropower 

j. Indian coal 

The REPC provides a tax credit of 1.5 cents/kWh, adjusted annually for inflation, for 

wind, closed-loop biomass, and geothermal, increasing in 2005 to 1.9 cents/kWh. 

Electricity from open-loop biomass, small irrigation hydroelectric, landfill gas, 

municipal solid waste resources, and hydropower receive half that rate—currently 0.9 

cents/kWh. REPC have been critical to spurring the flow of investment in wind and 

other renewable resources, and the industry has continued to push for longer-term 

credits to avoid the stagnation in investment that occurred when the extension of the 

credit was uncertain. 

 

14 Closed loop biomass refers to the biomass (organic matter) that is planted exclusively for the purpose of 

production of energy. This does not include biomass waste products such as wood chips, or standing timber. 

Biomass energy includes direct combustion of organic matter to chemical or biological conversion biomass to fuels. 

The net energy balance of each bioenergy option is an important factor to consider in determining the economic and 

environmental benefits. 
 

The Keystone Center 12

2. Wind 

In addition to production tax credits, the federal government has addressed some of 

the barriers associated with siting wind facilities on public lands. The Bureau of Land 

Management (BLM) prepared a Programmatic Environmental Impact Statement 

(EIS) to evaluate issues associated with wind energy development on Western public 

lands administered by the BLM. The EIS, which was finalized in late 2005, 

implements a Wind Energy Development Program within the Department of the 

Interior, and establishes policies and best management practices for wind energy 

right-of-way authorizations. These guidelines could also be adapted to use on stateowned land.15 

The President’s 2007 budget includes $44 million for wind energy research—a $5 

million increase over FY06 levels. The research is expected to help improve the 

efficiency and lower the costs of conventional wind turbine technologies. It will also 

help develop new small-scale wind technologies for use in low-speed wind 

environments. 

3. Solar 

The President’s 2007 budget proposes a new $148 million Solar America Initiative—

an increase of $65 million over FY06—to help achieve the goal of making solar 

competitive with other renewable generation by 2015. The Solar America Initiative 

will accelerate the development of advanced photovoltaic materials that convert 

sunlight directly to electricity. 

Rather than a mandatory renewable power portfolio standard, current federal policy is 

to encourage voluntary commitments by providers to provide renewable energy as an 

option to consumers. The Green Power Partnership enlists large electricity users to 

purchase a portion of their power as renewable energy, thereby reducing the 

environmental impacts associated with power generation. 

4. Distributed Generation: Microturbines, Fuel Cells, and Combined Heat / Power

EPACT 2005 includes tax credits for a number of advanced distributed generation 

technologies. Individuals or businesses are eligible to receive up to $1,000/kW for 

tax credit (or 30% of the cost) for stationary fuel cell power plants and a 10% tax 

credit capped at $200/kW for microturbine power plants. These credits are intended 

to increase the economic competitiveness in the near term and help spur purchases 

that improve production economies of scale in the longer term. 

5. Nuclear Power

The 2005 energy bill provides several new programs to encourage investments in 

nuclear power, including a 1.8 cent-per-kilowatt-hour tax credit for new nuclear 

generation, and a series of loan guarantees, investment protections intended to cover 

costs of unforeseen legal or regulatory challenges to plant operations, Price-Anderson 

Act extensions, and decommissioning trust tax policy changes, which amounts to 

 

15 http://www.blm.gov/nhp/what/lands/realty/FWS_wind_turbine_guidance_7_03.pdf 
 

The Keystone Center 13

about $5.7 billion in benefits for the nuclear industry. The tax credit is for the first 

6,000 megawatts of new nuclear-generating capacity and is limited to the first eight 

years of operation and a total of $125 million per 1,000 MW of capacity. 

Wall Street analysts and some nuclear industry officials say they are not sure that 

those incentives will lead to construction of the first new nuclear plant since 1973, 

absent a resolution of the long-running fight over the Yucca Mountain nuclear waste 

repository.16 

The Global Nuclear Energy Program (GNEP) was announced this year by the 

Administration as an initiative to build an international coalition to promote advanced 

nuclear power and address the waste problem through reprocessing. Reprocessing the 

waste into reusable nuclear fuel for advanced reactors is intended in the long-run to 

reduce the toxicity and volume of the waste to be stored at Yucca Mountain. This is a 

reversal of prior U.S. policy to not invest in the R&D of reprocessing because of 

concerns over nuclear proliferation risks. 

D. Alternative Fuels

1. Biofuels

EPACT requires industry to reach a 4 billion gallon renewable fuel production target 

by 2006. Refiners, importers, and gasoline blenders are expected exceed this target 

which is based on renewable fuel volumes reaching at least 2.78 percent of the total 

gasoline used. The requirement increases to 4.7 billion gallons by 2007, and 7.5 

billion by 2012. As required by the legislation, U.S. EPA will propose a credit-trading 

system this summer for ethanol and other renewable fuels aimed at helping establish a 

"functioning market" for alternative transportation fuels. By 2007, EPA is expected 

to establish a system that holds individual entities responsible for meeting their 

portion of the standard. EPACT also extended tax benefits. Ethanol production 

capacity increased from 3.4 billion gallons in 2004 to 4.4 billion gallons in 2006, with 

another 2.1 billion gallons of capacity currently under construction 

EPACT also provides a 30% tax credit for installation of alternative fuel stations, up 

to a maximum of $30,000 per year. Currently only 556 public “E85” (85% ethanol) 

fueling stations exist in the U.S., and many more will be needed to increase the use of 

renewable fuels above the 10% that can be blended into conventional gasoline. 

To help reduce the costs of producing advanced biofuels from cellulosic biomass, 

such as agricultural and forestry residues, material in municipal solid waste, trees, and 

grasses, the President’s 2007 budget increases DOE’s biomass research funding by 

65%, to a total of $150 million. The President’s goal is to make cellulosic ethanol 

cost-competitive with corn-based ethanol by 2012, enabling greater use of this 

alternative fuel to help reduce future U.S. oil consumption. 

 

16 Ken Silverstein, Editor in Chief, EnergyBiz Insider, “Federal Support May not Offset Nuclear Risks,” Jan. 2006. 

EnergyBiz Insider 
 

The Keystone Center 14

2. Hydrogen 

In his 2003 State of the Union Address, President Bush announced a $1.2 billion 

Hydrogen Fuel Initiative aimed at developing the technology for commercially-viable 

hydrogen-powered fuel cells to power cars, trucks, homes, and businesses. The 

President’s 2007 budget includes increased funding for hydrogen technology research 

to further the administration’s commitment to develop competitive hydrogen fuel 

vehicles by 2012. 

II. Demand-Side National Energy Policy Trends 

Demand-side policies and programs are focused on reducing the need for energy and 

encouraging end-users to produce energy more efficiently and closer to the point of end use. As 

evident in EIA’s forecast of energy consumption by sector, the transportation sector has the 

fastest growing projected energy consumption over the next 25 years. Despite expected increased 

prices for oil and gasoline over the long term, demand for petroleum will continue to grow, fed 

by increased per capita vehicle miles traveled and 

A. Energy Efficiency

EPACT includes a number of tax incentives to promote implementation of energy 

efficiency measures and purchase of efficient appliances by residential, commercial, and 

industrial energy consumers for the years 2006 and 2007. 
 

The Keystone Center 15

1. Residential consumers can apply for tax incentives for appliances that meet specific, 

high energy-efficiency standards including: 

a. Central air conditioners 

b. Air and ground-source heat pumps 

c. Furnaces or boilers and furnace blowers 

d. Electric heat pump water heaters 

e. Natural gas, oil, and propane water heaters 

Since most of these highly-efficient appliances currently have a very small market 

share, the impact of the incentives is likely to encourage the introduction of new 

models that meet the standard. It is not expected to lead to substantial penetration or 

energy savings.17 

2. Home builders can receive tax credits for new homes that use 50% less energy than 

homes built to 2003 standards or manufactured homes that use 30% less than the 

standard code. Commercial building owners can receive a tax deduction of up to 

$1.80 per square foot for new building space that reduces energy use by 50% 

compared to 2001 ASHRAE construction standards or by upgrading two or more 

existing buildings’ systems to achieve 50% efficiency improvements. The building 

tax incentives also end in 2007. 

3. Homeowners are eligible for a 10 percent tax credit (up to $500) for improving 

existing home building envelopes (primarily insulation, roofing material, and 

windows) to meet model codes for new homes. 

4. Manufacturer Credits

Manufacturers of very efficient refrigerators, clothes washers, and dishwashers sold 

in 2006 and 2007 are also eligible for certain tax credits under EPACT. The level of 

credits is tiered to give higher credits for higher levels of efficiency. These credits 

might be passed through partially in consumer prices and should help achieve market 

penetration of these appliances. 

5. Appliance Standards

EPACT also set first-time energy efficiency standards for 14 large appliances and 

raised existing standards for others. Appliance standards are the most effective way to 

achieve market transformation to more energy-efficient appliances and are preferably 

set at the national level. Many of the new federal standards are “catching up” with 

California’s lead in increasing the efficiency standards for appliances. 

 

17 ACEEE, “The Federal Energy Policy Act of 2005 and its Implications for Energy Efficiency Program Efforts.” 

Sept. 2005. 
 

The Keystone Center 16

6. Technical Assistance for Voluntary Efficiency Commitments

DOE and EPA also sponsor a number of voluntary partnership programs that are 

intended to encourage commitments by industries, states, and the commercial and 

institutional sectors to best practices in energy efficiency in exchange for technical 

assistance including:18

a. EPA’s Clean Energy-Environment State Partnership Program is a voluntary statefederal partnership to encourage states to develop a comprehensive strategy for 

using existing and new energy policies and programs to promote efficiency, clean 

distributed generation, renewable energy, and other clean energy sources. 

b. The Combined Heat and Power Partnership works with industry, state and local 

governments, universities, and other energy users to facilitate the development of 

clean, efficient combined heat and power projects. 

c. ENERGY STAR Product Certification Program to encourage investments in 

energy efficiency by clearly defining products, new homes, and practices that 

save energy without any sacrifice in desired features. 

d. The SmartWaySM Transport Partnership is a voluntary collaboration between U.S. 

EPA and the freight industry designed to increase energy efficiency while 

significantly reducing greenhouse gases and air pollution. 

B. Transportation

The administration increased fuel efficiency standards (CAFÉ) for light trucks and SUVs 

for the first time in a decade, raising the standard from 20.7 mpg to 22.2 mpg for the 

current model year 2007 vehicles. 

EPACT includes income tax credits of up to $3,400 per vehicle for purchasers of hybrid 

vehicles, and the Energy Tax Incentives Act of 2005 includes additional “green” vehicle 

incentives for purchasers of fuel cell, advance lean burn diesel, and other alternative fuel 

vehicles. The new law provides a substantially higher tax benefit for hybrid vehicles than 

the preceding one. In 2005, sales of hybrid vehicles exceeded 200,000 for the first time 

ever, based in part on tax incentives. 

To help bring down the cost of plug-in hybrid vehicles, the President’s 2007 budget 

includes $31 million in new research funding to support advanced battery research, a 

27% increase over 2006 levels. 

Challenges and Opportunities for Appalachia

The Appalachian Regional Commission and the individual Appalachian states can take 

advantage of the national energy initiatives by positioning the region to compete 

effectively for research and demonstration funding, by educating businesses and 

consumers about federal incentives, and by leveraging federal programs with additional 

state and ARC resources to maximize energy goals for the region. Below are some 

specific suggestions and some challenges for consideration by the Energy Advisory 

Board. 

 

18 For a list of all the programs on EPA’s website: http://www.epa.gov/partners/programs/index.htm#regional
 

The Keystone Center 17

Challenges Possible ARC Opportunities

Affordable and stable energy prices are 

important to a healthy economy, but state and 

regional policies can not make substantial 

impact on global energy costs. 

Utilities are reluctant to invest in unproven 

technologies such as IGCC without some 

protection against lower than expected 

performance, higher than expected costs and 

regulatory risks. 

Future production of oil & gas from 

unconventional sources will require use of new 

technologies and practices. Small independent 

firms, who make up the majority of oil & gas 

producers in the region, will need both 

technical and financial assistance to adopt the 

advanced production approaches. 

Although the US does not have a national 

climate policy, many of the firms operating in 

Appalachia have interests in other countries 

that do, and are also operating in states that 

have adopted climate policies. 

States do have the ability to significantly 

increase efficiency of energy use. Encouraging 

utilities and state agencies to tailor their 

energy-saving programs to take advantage of 

and complement new federal tax incentives. 

ARC can provide education and promotion of 

the federal incentive programs, technical 

assistance and funding partnership programs to 

advance new technologies in clean energy. 

Strong regulatory oversight of production and 

use of energy, particularly its environmental 

impacts, will be important in safeguarding the 

public’s interests and confidence. ARC could 

work to identify and encourage best practices 

among Appalachian states, particularly in 

establishing new regulatory frameworks for 

CO2 storage. 

Development of remaining oil, gas and coal 

resources will require collaboration between 

states, industries and the federal government in 

developing the needed infrastructure, including 

data collection and analysis, technology 

transfer and construction of pipelines and 

other distribution systems. ARC can help 

coordinate these partnerships. 

Identifying the energy practices and 

investments that have the greatest overall 

returns under a number of carbon management 

scenarios (i.e. under different carbon caps or 

prices) could help investors and policymakers 

better weigh the risks and opportunities of 

future domestic climate policy at the state or 

national level. 
 

The Keystone Center 18

Appalachian States Energy Policy/Program Trends19

I. Supply Side

As was stated above, supply-side policies are designed to increase availability and diversity 

of fuel sources, advance technologies that use fuels more efficiently, and address fuel 

constraints through development of alternative energy sources. 

A. Coal

1. Production Tax Incentives

Production tax incentives for coal provide project owners with tax incentives 

(generally in the form of tax credits) for producing coal. Although coal is a major 

Appalachian resource, only Alabama and Virginia have production incentives for 

coal.

2. Indigenous Coal Use Incentives

Indigenous coal use (or employment) incentives provide tax incentives (usually tax 

credits) for use of coal produced in a given state in energy generation or 

manufacturing. Kentucky, Maryland, and Virginia have these incentives. Only 

Virginia has both production incentives and use incentives. 

3. Clean Coal Incentives

Clean coal incentives offer tax credits or other benefits for construction of new 

facilities based on clean coal technologies. Kentucky, New York, Ohio, and 

Pennsylvania currently have such incentives in place. 

4. Environmental Policies

Environmental policies that impact coal development can take a variety of forms. In 

accordance with the federal Clean Air and Clean Water Acts, all Appalachian states 

have standards regarding emissions to air and water. Of note among these policies 

are stricter regulations for mercury emissions that are being considered in North 

Carolina20, New York21, and Pennsylvania22. These regulations, if implemented, 

would certainly affect coal facilities in these states. Maryland recently passed its “4 

Pollutants” initiative, which increases restrictions on emissions of sulfur dioxide, 

nitrogen oxide, particulate matter, and carbon dioxide.23 This regulation will affect 

coal facilities in Maryland. Several Appalachian states offer tax incentives for the 

purchase of pollution control technologies. 

 

19 References and resources on state policy resources are in Appendix A. 

20 North Carolina Mercury Rule. http://daq.state.nc.us/rules/rules/D537-541.pdf 

21 “Governor Announces Major Initiative to Reduce Mercury Emissions.” May 25, 2006. 

http://www.ny.gov/governor/press/06/0525063.html 

22 Pennsylvania’s Proposed Mercury Reduction Rule. 

http://www.dep.state.pa.us/dep/deputate/airwaste/aq/regs/Mercury_Rule.htm 23 “Maryland to Join Eastern States in Regulating Carbon Dioxide.” April 4, 2006. 

http://www.ens-newswire.com/ens/apr2006/2006-04-04-09.asp 
 

The Keystone Center 19

5. Production Taxes

Management of federal production royalties and state severance taxes offer another 

opportunity for states to affect production and use of coal in Appalachia. When the 

United States government leases public lands for mineral production, it pays part of 

the income to the state where the leased land is located. Federal law requires that a 

portion of the royalty funds be given back to the local governments where the mineral 

extraction occurred. Likewise, several states in Appalachia require severances taxes 

on all coal production within the state, usually based on a per-ton rate or a percentage 

of the revenue. Alabama, Ohio, Tennessee, Kentucky, Virginia, and West Virginia 

all have state severance taxes at varying levels. The level, distribution, and use of 

these funds can be designed to incentivize production, address environmental 

remediation, or encourage certain production methods and technologies. 

West Virginia is one of several states that also imposes an export tax on coal. In the 

case U.S. Steel Mining Co. et al. v. Helton, the coal companies are arguing that West 

Virginia's tax on exported coal is illegal because the Constitution's "Import-Export" 

clause prohibits state governments from imposing any "imposts or duties on imports 

or exports.” On appeal to the Supreme Court is a May 2004 ruling by Kanawha 

Circuit Court that upheld the West Virginia severance tax imposed on all coal mined 

in the state. The court found that the tax does "not infringe upon the federal 

government's ability to speak with one voice when regulating foreign commerce." 

The state Supreme Court upheld the lower court’s decision in December 2005.24

6. Other Leading State Policies

California and Wyoming have entered into a Memorandum of Understanding 

(MOU) to create a joint IGCC task force to take advantage of federal funding 

opportunities to help develop a commercial-scale integrated gasification combined 

cycle coal project with carbon sequestration in Wyoming.25 The California Energy 

Commission, the Public Utilities Commission, and the Governor's Climate Action 

Team have all recommended that any long-term investments in new power generation 

for California have a greenhouse gas emission characteristic that is equal to or better 

than a state-of-the-art IGCC plant. 

Coal Barriers/Challenges Possible ARC Opportunities

Clean coal technologies hold promise for 

increasing use of Appalachian coal for energy 

production. However, there is concern about 

the difficulty of permitting clean coal facilities, 

such as those using integrated gas combined 

cycle (IGCC) and carbon capture and 

sequestration (CCS) technologies. 

In order to facilitate future permitting of IGCC 

and CCS plants, states need more information 

about these technologies. ARC could invite 

state regulators to participate in a roundtable 

discussion of how to streamline the permitting 

process for IGCC and CCS facilities. 

 

24 Greenwire, May 5, 2006 & Sept. 21, 2005 

25 “California and Wyoming Sign Agreement on Development of Clean Coal Technology.” April 19, 2006. 

http://www.schwarzenegger.com/news.asp?id=2153 
 

The Keystone Center 20

Coal Barriers/Challenges Possible ARC Opportunities

Capital costs for IGCC facilities are 

substantial. 

ARC could serve as a broker for funding for 

IGCC facilities in Appalachian states. 

B. Electricity

1. Systems Benefit Funds

Systems (or public) benefit funds are programs developed through the electric utility 

restructuring process as a measure to assure continued support for renewable energy 

resources, energy efficiency initiatives, and low-income support programs. Such 

funds are commonly supported through a charge to all customers on electricity 

consumption, e.g., 0.2 cents per kilowatt hour of energy used. New York, for 

example, applies some of the proceeds from its systems benefits fund to research 

innovative energy technologies. Systems benefit funds are generally supported 

through a charge to all customers on electricity consumption. In addition to New 

York, only Ohio and Pennsylvania currently have systems benefit funds. However, 

several other states have expressed an interest in examining the possibility of 

implementing systems benefits funds in the future. 

2. Policies for Demand Response

Demand response (or load management) programs allow electricity customers to 

reduce their energy consumption at critical times or in response to market prices. All 

Appalachian states except Mississippi and Tennessee have some sort of demand 

response program.26

 

26 http://www1.eere.energy.gov/femp/program/utility/utilityman_energymanage.html 

New England States

Connecticut, Delaware, 

Massachusetts, New Jersey, New 

York, Pennsylvania, Rhode Island 

Maine, New Hampshire, Vermont

Maryland 

Source: Pew Center on Global Climate Change 
 

The Keystone Center 21

3. Resource Portfolio Standards

Resource portfolio standards require that a certain percentage of a utility's overall or 

new generating capacity or energy sales must be derived from renewable resources, 

such as requiring that 1% of electric sales be from renewable energy in the year 2010. 

Portfolio Standards most commonly refer to electric sales measured in megawatt 

hours (MWh), as opposed to electric capacity measured in megawatts (MW). 

Currently, only Maryland, New York, and Pennsylvania have renewable portfolio 

standards. However, several other states have expressed an interest in exploring the 

possibility of implementing such standards in the future. 

Adapted from Pew Center on Climate Change 

4. Energy Efficiency Resource Standard (EERS)

An EERS requires energy providers to meet quantitative targets for energy savings, 

typically in the electricity and natural gas sectors. State public utility commissions or 

other regulatory bodies specify explicit numerical goals that must be met on an 

annual and cumulative basis. An EERS may specify that implementation will involve 

coordination with a public benefit fund (PBF)27 and may be linked to a renewable 

portfolio standard (RPS). In Appalachia, only Pennsylvania has an EERS. 

5. Generation Disclosure Requirements

"Disclosure" refers to the requirement that utilities provide their customers with 

additional information about the energy they are supplying. This information often 

 

27 www.keystone.org/ceetf background document for 
 

The Keystone Center 22

includes fuel-mix percentages and emissions statistics. Maryland, New York, Ohio, 

Pennsylvania, and Virginia have generation disclosure requirements. 

6. Other Leading State Policies

Massachusetts regulations include a four-pollutant cap on emissions for six coal 

power plants.28 In addition to limits on emissions of sulfur dioxide, nitrogen oxide, 

and mercury, Massachusetts also requires plants to reduce their carbon dioxide 

emissions. There are no requirements about how reductions must be made, although 

the state does have a preference for conversion of plants from coal to natural gas. 

Deadlines for achieving the new standards are delayed for any plant that converts to 

natural gas. 

Statewide Renewable Portfolio Standards have now been adopted by 13 states and 

efforts are beginning to establish and coordinate these programs regionally. 

California, Colorado, Texas, and most of the Northeast states are among the states 

that have implemented the RPS through a Renewable Energy Credit (REC) Trading 

System. REC trading among load serving entities is designed to achieve the RPS 

standard more cost-effectively and allow better tracking of transactions and 

compliance. 29

Electric Power Barriers/Challenges Possible ARC Opportunities

As is indicated above, several states have 

expressed an interest in pursuing systems 

benefit funds and renewable portfolio 

standards. Documents prepared by these 

states suggest that state officials want to 

assess the feasibility of these policies and 

study their potential impacts to the 

economy. 

1. ARC could provide research or assessment 

funds to assist in these efforts. 

2. ARC could host conference calls or 

discussion groups in which states who 

currently have systems benefits funds 

and/or renewable portfolio standards could 

share their knowledge and experience with 

other states. 

Some states in Appalachia are experiencing 

electricity supply problems. Others are 

concerned about minimizing risk of supply 

disruptions in the future. 

ARC could initiate and/or host a regional energy 

compact and regional planning for energy 

supply/infrastructure redundancies. 

C. Natural Gas and Oil

1. Production Incentives for Natural Gas and/or Oil

Alabama, New York, Pennsylvania, Virginia, and West Virginia offer production 

incentives for natural gas. Alabama, Kentucky, New York, and West Virginia offer 

 

28“Greenhouse and Statehouse: The Evolving State Government Role in Climate Change.” Barry G. Rabe, Pew 

Center on Global Climate Change. November 2002. 

http://www.pewclimate.org/global-warming-in-depth/all_reports/greenhouse_and_statehouse_/index.cfm 

29 EPA, Clean Energy-Environment Guide to Action for States, Chapter 5.1, 2006. 

www.epa.gov/cleanrgy/stateandlocal/guidetoaction.htm 
 

The Keystone Center 23

incentives for oil production. These incentives generally take the form of tax credits 

for produced natural gas or oil. Other incentives include tax exemptions for resource 

studies and permit exemptions. Alabama offers incentives for offshore deep wells. 

2. Enhanced Oil Recovery Incentives

Enhanced recovery techniques allow for extraction of additional reserves of oil and/or 

prolonged production in more mature wells. By increasing production efficiency, 

enhanced oil recovery can extend the economic life of older wells that can no longer 

be tapped by traditional extraction methods. Enhanced recovery techniques include 

gas re-injection, carbon dioxide flooding, and horizontal drilling. Alabama, 

Mississippi, and Virginia offer incentives for enhanced oil recovery. 

3. Streamlined Permitting and/or Reporting

Streamlined permitting and/or reporting can take a variety of forms. In Appalachian 

states, these include allowing well completion statements to serve as hazardous 

chemical inventories and electronic permit applications. Ohio and Pennsylvania have 

these policies. 

4. Other Leading State Policies

California’s Liquefied Natural Gas Interagency Permitting Working Group30 works 

closely with agencies who are involved in the permitting process for any LNG facility 

in the state. The Working Group also provides guidance to potential LNG developers 

on how to navigate the state’s permitting process. 

Kentucky and Wyoming are among several states that have created state energy 

infrastructure authorities that can finance (through revenue bond) and build new 

projects not being advanced by the private sector. Kentucky’s Oil and Gas 

Infrastructure Authority is specifically created to support natural gas and coal bed 

methane storage, gathering, and transportation projects.31

Virginia passed legislation to help facilitate oil and gas production form coal bed 

methane where mineral rights are in dispute. As is often the case when prior coal 

developers and current oil and gas developers are two different entities, lengthy 

litigation is often the only avenue for resolving multiple claims. The Virginia law 

passed in 1990 requires pooling of proceeds from production in an escrow account 

while the dispute is legally settled.32 

 

30 http://www.energy.ca.gov/lng/working_group.html 31 DOE, Interstate Oil and Gas Compact Commission, Mature Region, Youthful Potential, Oil and Natural Gas 

Resources in the Appalachian and Illinois Basins, Sept. 2005 32 DOE IOGCC 
 

The Keystone Center 24

Natural Gas Barriers/Challenges Possible ARC Opportunity

Several states have expressed interest in 

expanding natural gas production, storage, and 

delivery. However, they must first do 

feasibility and impact assessments. 

ARC could provide funds for feasibility and 

impact assessments. 

Some states have identified problems with 

natural gas distribution. Insufficient pipeline 

capacity is of particular concern. 

ARC could fund a study or convene a 

discussion group examining natural gas 

distribution problems and possible solutions. 

D. Alternative Fuels

1. Production Incentives for Biofuels

Kentucky, Maryland, Mississippi, South Carolina, and Virginia offer production 

incentives for biofuels, such as ethanol and biodiesel. These incentives generally take 

the form of tax credits for produced fuel. 

2. Other Leading State Policies

A new law in Michigan creates incentives for the production, distribution, and 

purchase of ethanol-based alternative fuels.33 A more expansive law in Louisiana

provides for a new mandate that ethanol produced from domestic biomass material 

comprise two percent of all the gasoline sold in the state.34 This mandate would go 

into affect six months after the state produces 50 million gallons of ethanol or ten 

million gallons of biodiesel. Washington is pursuing legislation to require fuel 

companies to sell 20 million gallons of biodiesel each year and have biodiesel 

comprise at least two percent of the state's total diesel sales.35 

Biofuels Barriers/Challenges Possible ARC Opportunity

Several states would like to increase 

production and on-road delivery of biofuels. 

1. Coordination of production and 

delivery across states could minimize 

harmful duplication or omission of 

services and service areas. 

2. Increased demand for biofuels would 

make expansion of production and 

delivery of biofuels more feasible. 

ARC could: 

1. Help coordinate planning of biofuels 

production and delivery across 

Appalachia by hosting a database of 

planned and implemented projects. 

2. Help states coordinate efforts to attract 

facilities that produce alternative fuel 

vehicles that run on biodiesel. 

 

33 “Granholm Says Alternative Energy Development Critical to Diversifying Economy.” April 7, 2006. 

http://www.michigan.gov/gov/0,1607,7-168-23442-146879--,00.html 

34 “Governor Blanco signs HB 685.” June 12, 2006. 

http://www.gov.state.la.us/index.cfm?md=newsroom&tmp=detail&articleID=1945 35 “Washington State Adopts Biodiesel Requirement.” March 30, 2006. 

http://www.biodiesel.org/resources/pressreleases/gen/20060330_wa_b2.pdf
 

The Keystone Center 25

II. Demand-Side Policies/Programs

Demand-side policies and programs are focused on reducing the need for energy and 

encouraging end-users to produce energy more efficiently and closer to the point of end use. 

A. Renewable Energy (RE)

1. Renewable Energy Investment Incentives

Every Appalachian state except Georgia, North Carolina, and Tennessee has some 

sort of incentive for residential and/or business consumers to invest in renewable 

energy technologies. These programs include state loans, grants, rebates, and tax 

incentives for the purchase and installation of renewable technologies for local 

(residential or business) solar, wind, and geothermal energy production and use.

2. Production Incentives for Renewable Energy

These incentives, which were mentioned above as a type of supply-side policy, also 

serve as demand-side policies. Production incentives encourage residential and 

business consumers to invest in renewable technologies for their own use and/or for 

contribution to the larger local energy supply (see Interconnection and Net-Metering 

below). This use of renewable energy decreases their demand on other energy 

sources. In Appalachia, only Alabama, Kentucky, South Carolina, Virginia, and 

West Virginia do no have production incentives for renewable energy. 

3. Interconnection Standards

Interconnection standards regulate how distributed sources of energy (like residential 

and commercial production of renewable energy) can be connected to the larger 

energy power system. The lack of uniform installation and interconnection 

requirements can result in technical and economic inefficiencies, interconnection 

delays, and unnecessary expenses. Many Appalachian states have interconnection 

standards: Georgia, Maryland, New York, North Carolina, Ohio, Pennsylvania, and 

Virginia. 

4. Green Power Purchasing Requirements

States or other government entities can require that government agencies buy 

electricity from renewable resources. Green power purchasing can be required for 

municipal facilities, streetlights, water pumping stations, government buildings, etc. 

Maryland, New York, Pennsylvania, and South Carolina have green purchasing 

requirements. 

5. Net Metering Rules

For those consumers who have their own electricity-generating units, net metering 

allows for the flow of electricity both to and from the customer through a single, bidirectional meter. During times when the customer's generation exceeds his or her 

own use, electricity from the customer to the utility offsets electricity consumed at 

another time. Most Appalachian states have net metering rules: Georgia, Kentucky, 

Maryland, New York, North Carolina, Ohio, Pennsylvania, and Virginia. 
 

The Keystone Center 26

6. Alternative Fuel and Alternative Fuel Vehicle Incentives and/or Requirements

States can provide incentives for the consumption of alternative fuels through tax 

exemptions on fuel, tax rebates or credits for alternative fuel vehicles, and other 

mechanisms. They can also require that state or other vehicle fleets consist of 

alternative fuel vehicles. All Appalachian states except Alabama have one or 

mechanisms for encouraging consumptions of alternative fuels. 

7. Other Leading State Policies

The Connecticut Clean Energy Fund (CCEF) is offering $21 million in financial 

support to stimulate demand for installations of distributed renewable energy at 

commercial, industrial, and institutional buildings in Connecticut.36 Support is 

available for projects that reduce the cost of energy-generating equipment for solar, 

fuel cells, wind, biomass, landfill gas, and hydropower though the On-Site Renewable 

Distributed Generation Program. 

In New Jersey, combined federal and state tax credits have lowered the price of a 

$27,000 residential solar electric system to $10,000. Oregon offers a Business 

Energy Tax Credit designed to stimulate investment in energy conservation, 

renewable energy, recycling, and renewable fuels. The credit offers 35% of eligible 

project costs (incremental cost beyond standard practice).37 

The Western Governors’ Association is working with the California Energy 

Commission to create the Western Renewable Energy Generation Information 

System, a voluntary system for renewable energy credits that tracks renewable energy 

credits across the region to facilitate trading to meet renewable energy portfolio 

standards.38

 

36 “On-site Renewable DG Program.” 

http://www.ctcleanenergy.com/investment/onsite_renewable_dg_program.html 37 ACEEE, Energy Efficiency Tax Incentives, 2006. 38 http://www.westgov.org/wieb/wregis/ 

New England States

Rhode Island 

Connecticut, Pennsylvania

Delaware, Maine, Maryland, 

Massachusetts, New Hampshire, 

New Jersey, New York, Vermont 

Adapted from Pew Center on Global Climate Change 
 

The Keystone Center 27

8. Green Pricing

Utilities can offer customers the option to pay a premium on their electric bills to 

have some or all of their power provided from renewable sources. While the 

electricity generated by renewable sources is not delivered directly to the customers 

who pay for it, the utility certifies that renewable energy has been generated in an 

amount equal to the customer’s purchase. Eight Appalachian states offer green 

pricing: Alabama, Georgia, Kentucky, Mississippi, North Carolina, Ohio, South 

Carolina, and Tennessee. 

 

B. Energy Efficiency

1. Investment Incentives for Energy Efficiency Technologies

Many Appalachian states offer investment incentives for energy efficiency 

technologies: Alabama, Georgia, New York, North Carolina, Ohio, Pennsylvania, 

South Carolina, Tennessee, and West Virginia. These incentives generally take the 

form of rebates, grants, loans, or sales tax exemptions. Eligible technologies 

generally include weatherizing, efficient home appliances (including heating and 

cooling systems), energy-efficient windows and other building materials, and 

combined heat and power production. 

2. Appliance Efficiency Standards

Maryland and New York have set minimum energy efficiency standards for products 

that are not covered by mandatory federal standards. A waiver from the U.S. 

Department of Energy is required before states can set standards for products covered 

by existing federal standards. New York’s appliance efficiency standards are very 

comprehensive and quite ahead of most other states. 

New England States

Connecticut, 

Massachusetts, Vermont 

Delaware, Maine, Maryland, 

New Hampshire, New Jersey, 

New York, Pennsylvania,

Adapted from Pew Center on Global Climate Change 

None 
 

The Keystone Center 28

3. Green Building Standards

Green building standards provide a framework for encouraging and assessing energy 

efficiency in building. Green building standards emphasize state-of-the-art strategies 

for sustainable site development, water savings, energy efficiency, materials 

selection, and indoor environmental quality. The U.S. Green Building Council’s 

LEED (Leadership in Energy and Environmental Design) standards are the most 

common building standards. The Green Building Initiative has also created a greenbuilding verification program. Three Appalachian states have green building 

standards: Maryland, New York, and Pennsylvania. 

New England States

Connecticut, Maine 

Maryland

New Jersey, New York, Pennsylvania 

Adapted from Pew Center on Global Climate Change 

LEED Certification Required for State 

Buildings and/or State-Funded Buildings 

LEED Certification Recommended for State 

Buildings and/or State-Funded Buildings 

LEED Certification Required AND Green 

Globes Certification Required or 

Recommended for State Buildings and/or 

State-Funded Buildings 

LEED Certification Recommended AND 

Green Globes Certification Required or 

Recommended for State Buildings and/or 

State-Funded Buildings 

None 

Delaware, Massachusetts, New 

Hampshire, Rhode Island, Vermont 

New England States

Delaware, Maine, New 

Hampshire, Pennsylvania, 

Vermont 

Adapted from Pew Center on Global Climate Change 

Connecticut, Maryland, 

Massachusetts, New Jersey, New 

York, Rhode Island 
 

The Keystone Center 29

4. Energy Codes (Residential and Business)

Energy codes establish a minimum level of energy efficiency for buildings. 

Generally, codes specify requirements for "thermal resistance" of the building shell 

and windows, and minimum heating and cooling equipment efficiencies. Energy 

codes can target residential and/or commercial buildings. International Energy 

Conservation Codes (IECC) introduced before 1998 and American Society of 

Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) standards 

introduced before 1999 do not meet the requirements of the federal Energy 

Conservation and Production Act (ECPA). All but three Appalachian states 

(Alabama, Mississippi, and Maryland) have energy codes for residential buildings. 

All but Alabama, Mississippi, Maryland, and Tennessee have energy codes for 

commercial buildings. 

New England States

Massachusetts, New Jersey 

Adapted from Pew Center on Global Climate Change 

Connecticut, Delaware, New 

Hampshire, New York, 

Pennsylvania, Vermont 

Maine, Maryland, Rhode Island 

Residential Energy Codes

New England States

Delaware, New Jersey, 

Pennsylvania 

Connecticut, Maine, 

Massachusetts, New Hampshire, 

New York, Rhode Island, Vermont 

Maryland 

Commercial Energy Codes

Residential Energy Codes
 

The Keystone Center 30

5. Output-Based Regulations

Output-based regulations encourage efficient energy generation by establishing 

emission performance criteria for energy generation (for instance, tons of nitrogen 

oxides (NOx) per megawatt hour (MWh) generated rather than the more traditional 

emission limits of tons of NOx per British thermal unit of heat input.) In some cases, 

states have made provisions that allow energy efficiency and renewable energy to 

compete equally with other methods of reducing emissions by setting aside a pool of 

emission allowances for eligible EE/RE projects.39 Maryland, New York, and Ohio 

have output-based regulations. 

6. Other Leading State Policies

A number of states have adopted building efficiency and purchasing requirements for 

state facilities to both reduce energy costs and lead-by-example. The Oregon State 

Energy Efficiency Design Program requires energy conservation that is 20% beyond 

code standards for state facility renovation and construction projects. 

New Hampshire requires state agencies to reduce energy use by 10%. Equipment 

purchases must have ENERGY STAR rating. State facility construction and 

renovations must exceed code by 20%. Clean fleets programs require state vehicles 

to achieve a minimum of 27.5 mpg (highway). 

California has the most extensive and long-standing appliance efficiency standards. 

The state’s standards preceded national standards. 

A number of states, including Pennsylvania, California, and Connecticut, have 

adopted Energy Efficiency Portfolio Standards that are typically an expansion of the 

renewable energy portfolio requirements. The Texas Public Utility Commission 

adopted energy efficiency goals for utilities as a part of the implementation process 

for the state’s 1999 restructuring law. Electric distribution utilities were required to 

offset 10% of forecasted load growth through energy efficiency. To achieve this 

goal, the utilities were required to provide incentives through standard offer programs 

or targeted market transformation programs. Incentives were to be paid to energy 

services companies or retail electric providers for the implementation of the energy 

efficiency programs. 40

EPA and state environmental agencies offer Supplemental Environmental Projects 

(SEPs) as an option for partial settlement of violations of environmental regulations. 

An SEP allows the regulated entity to develop an environmentally-beneficial project 

in lieu of part of its fine, which often takes the form of energy efficiency projects that 

benefit the public. For instance, the settlement of an enforcement case in Texas 

funded the purchase of alternative fuel buses and vehicles in Odessa and Houston. A 

 

39 EPA Clean Energy-Environment , Chapter 5.3, 2006 www.epa.gov/cleanrgy/stateandlocal/guidetoaction.htm 

40 http://www.keystone.org/html/documents.html#eeportfolio 
 

The Keystone Center 31

South Carolina utility implemented $1 million worth of energy efficiency measures 

as the result of an SEP.41

RE and EE Barrier/Challenge Possible ARC Opportunity

Regional planning and implementation of renewable 

energy and energy efficiency policies and programs 

is disjointed. 

ARC could coordinate regional planning 

of RE and EE policies by hosting a 

database, meetings, and/or conference 

calls. 

Creating demand for RE and EE technologies is a 

critical factor in growing this sector. 

ARC could host discussions about 

regional criteria for green building. 

C. Statewide Energy Planning42

Eight Appalachian states have comprehensive, statewide energy plans. These plans 

indicate a likely trajectory for energy policy in the region over the next five to ten years. 

In addition to addressing many of the issues discussed above, state energy plans tend to 

include policy plans or recommendations regarding the following issues. Because most 

of these issues are in their infancy, any one of them could become an ARC opportunity 

through research efforts, regional visioning, and/or coordination of planning. 

1. Single-Sector Policies and Programs

a. Increasing availability of and access to renewable energy and energy efficiency 

technologies 

b. Conversion of animal waste into energy 

c. Examination of coal bed methane potential 

d. Green building incentives 

e. Energy workforce development 

2. Cross-Cutting Policies and Programs

a. Comprehensive transportation plans and policies, including state fleet 

requirements 

b. Energy education 

c. Air and water quality improvement plans and policies 

d. Incentives for innovative technology research and development 

e. Climate change policies, including reduction of greenhouse gases and planning 

for possible carbon emissions regulations and/or possible greenhouse marketplace 

 

41 Background Document. EPA Clean Energy-Environment Technical Forum, Feb. 28, 2005. www.keystone.org 

42 Georgia - http://www.georgiaenergyplan.org/ 

Kentucky - http://www.energy.ky.gov/NR/rdonlyres/8E6F3FFE-5DC6-4FC6-9B5AEA9D2AC89E7A/0/KentuckyEnergyPlan.pdf 

New York - http://www.nyserda.org/Energy_Information/energy_state_plan.asp 

North Carolina - http://www.energync.net/sep/docs/sep_12-04.pdf 

Pennsylvania - http://jsg.legis.state.pa.us/ENERGY_2.PDF 

Tennessee - http://www.state.tn.us/ecd/pdf/energy/energy_policy.pdf 

Virginia - http://www.mme.state.va.us/De/chap2b.html 

West Virginia - http://www.wvenergyroadmapworkshops.org/reports/WestVirginiaEnergyRoadmap08-20-02.pdf 
 

The Keystone Center 32

 In addition to, or in lieu of, including climate change in statewide energy 

plans, seven Appalachian states have completed Climate Action Plans to 

outline specific policies to address climate concerns. 

3. Other Leading State Policies

A key feature of California’s Energy Action Plan II is the "loading order" that 

describes the priority sequence for adding energy resources in the state. The loading 

order indicates a preference for cost-effective energy efficiency and demand 

response, followed by renewable power sources and distributed generation, such as 

combined heat and power applications. To the extent that these resources fall short of 

meeting demand, the state supports clean, efficient, fossil fuel-fired generation.

D. Climate Change

1. Greenhouse Gas Emissions Reductions 

New Mexico has set targets for greenhouse gas emissions reductions.43 The targets 

include achieving 2000 emissions level in 2012, 10% less than 2000 levels in 2020, 

and 75% less than 2000 levels by 2050. New Mexico is the first state that is a major 

producer of coal, oil, and gas to state targets for reducing greenhouse gas emissions. 

California is also setting aggressive reduction targets, aiming to achieve 2000 

emissions levels by 2010 and 1990 levels by 2020.44

 

43 Climate Change and Greenhouse Gas Reduction. New Mexico Executive Order 05-33. 

http://www.governor.state.nm.us/orders/2005/EO_2005_033.pdf 

44 Assembly Bill 1493. http://www.arb.ca.gov/cc/ab1493.pdf 

New England States

All New England states 

Adapted from Pew Center on Global Climate Change 
 

The Keystone Center 33

2. Climate Change and Agriculture 

Nebraska has created and funded the Carbon Sequestration Advisory Committee to 

address issues of carbon sequestration and agriculture in the state.45 The Committee 

members represent agriculture, energy, and state government, and its work has helped 

to identify the next steps in implementing a state policy for carbon sequestration. 

There is evidence that agricultural lands have great potential to store carbon. The 

Illinois Conservation and Climate Initiative is already implementing a voluntary 

program that offers credits to farmers for their efforts to reduce greenhouse gas 

emissions.46 Such efforts may include conservation tillage, planting grasses and trees, 

and capturing methane from animal operations. Earned credits will be sold to the 

Chicago Climate Exchange, which is a market for trading greenhouse gas emission 

credits. 

3. Climate Change and Transportation

California has led the way and been joined by nine other states that propose to 

regulate greenhouse gas emissions from vehicles. Currently under challenge in the 

courts, the legislation requires the state to develop and adopt regulations that achieve 

the maximum feasible reduction of greenhouse gases emitted by passenger vehicles 

and light-duty trucks. The California regulations were issued in 2004 and require 

new vehicles in 2012 to emit 22 percent less carbon dioxide than today's vehicles. 

Greenhouse gas reductions of up to 30 percent would be required by 2016. 

California also recently passed legislation that would set aside 75,000 permits for 

drivers of hybrids that get at least 45 miles per gallon to drive alone in carpool lanes. 

E. Regional Planning Initiatives 

1. West Coast Governors’ Global Warming Initiative

The three states on the West Coast (California, Oregon, and Washington) are 

collaborating to reduce greenhouse gas emissions through the West Coast Governors’ 

Global Warming Initiative.47

2. Clean and Diversified Energy Initiative

The 18 western states that comprise the Western Governors’ Association (WGA) 

have created a Clean and Diversified Energy Initiative to investigate strategies to 

increase efficiency and renewable energy sources in western electricity systems. 

There are 8 technical task forces that have been exploring new strategies for advanced 

coal, biomass, energy efficiency, geothermal, solar, transmission, and wind.48

 

45 “Greenhouse and Statehouse: The Evolving State Government Role in Climate Change.” Barry G. Rabe, Pew 

Center on Global Climate Change. November 2002. 

http://www.pewclimate.org/global-warming-in-depth/all_reports/greenhouse_and_statehouse_/index.cfm 

46 http://www.iges.or.jp/en/cp/pdf/activity06/23.pdf 47 http://www.ef.org/westcoastclimate/ 

48 Western Governors’ Association. “Clean Energy, a Strong Economy and a Healthy Environment.” Report of the 

Clean and Diversified Energy Advisory Committee to the Western Governors. June 2006. 

http://www.westgov.org/wga/initiatives/cdeac/CDEAC06.pdf 
 

The Keystone Center 34

3. Powering the Plains

Powering the Plains is a project seeking to craft alternative energy strategies, policies, 

and demonstration projects for Minnesota, Iowa, Wisconsin, the Dakotas, and 

Manitoba Province (in Canada). Agricultural practices that minimize climate impacts 

are also addressed.49

4. Southwest Climate Change Initiative

The Southwest Climate Change Initiative is a partnership between the governors of 

Arizona and New Mexico to work together to reduce greenhouse gas emissions and 

address other aspects of climate change in the southwest.50

5. Regional Greenhouse Gas Initiative (RGGI)

RGGI is an agreement among seven northeastern and mid-Atlantic states. It is a capand-trade system that addresses carbon dioxide emissions from regional power plants. 

RGGI offers flexibility in terms of mechanisms for achieving reductions targets, 

including credits for emissions reductions achieved outside the electricity sector.51

6. Eastern Climate Registry

RGGI states have partnered with Pennsylvania, Massachusetts, and Rhode Island to 

develop a regional greenhouse gas registry.52

7. Northwest Power and Conservation Council (NPCC)

Created by Congress in 1980 because of the Federal Power System in the Northwest, 

the NPCC includes two representatives from each state. The Council is developing a 

20-year electric power plan for reliable energy at the lowest economic and 

environmental cost. The energy plan gives highest priority to cost-effective 

conservation, followed by renewable resources, to the extent they are cost-effective. 

The current plan (5th Plan) includes specific targets and action items for conservation, 

demand response, and wind resources.53

8. Conference of New England Governors and Eastern Canadian Premiers 

(NEG/ECP) 

Created in 1973, the Conference of New Governors and Eastern Canadian Premiers is 

an international association of leaders cooperating to advance the interests of 

participating states and provinces through collaboration with the private sector. The 

Conference has addressed environmental protection, economic development, tourism, 

energy, fisheries, trade, and agriculture. The participating U.S. states are 

Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. 

 

49 http://www.gpisd.net/resource.html?Id=61 

50 http://www.governor.state.az.us/press/2006/0602/022806_SouthwestClimateChangeInitiative.pdf 51 http://www.rggi.org/about.htm 

52 http://www.easternclimateregistry.org/ 

53 EPA, Clean Energy-Environment Guide to Action for States. 

www.epa.gov/cleanrgy/stateandlocal/guidetoaction.htm 
 

The Keystone Center 35

Possible Planning Opportunities for ARC

Host meeting or series of calls for Appalachian states to learn from non-Appalachian leaders in 

energy policy about integrating state actions at the regional level 

Initiate regional climate action planning for Appalachia 

New England States

Delaware, Maryland, New 

Jersey, New York 

Connecticut, Maine, New 

Hampshire, Vermont 

Massachusetts, Rhode Island 

Adapted from Pew Center on Global Climate Change 

Pennsylvania 
 

The Keystone Center 36

Appendix A: Relevant State Policy References and Resources

Alabama “Alabama Tax Incentives for Industry.” 

http://www.ador.state.al.us/Taxincentives/IncentivesForIndustry.pdf 

Kentucky Kentucky Revised Statutes 

http://www.lrc.ky.gov/krs/titles.htm 

Maryland Maryland-Mined Coal Tax Credit 

http://business.marylandtaxes.com/taxinfo/taxcredit/coal/default.asp 

New York Advanced Clean Coal Power Plant Initiative 

http://www.gorr.state.ny.us/ACCPPI-welcome.html 

Ohio “Ohio Coal Development Agenda” 

http://www.ohioairquality.org/ocdo/coaldevagenda.asp 

Pennsylvania “Effects of Global Warming on the State of Pennsylvania” 

http://www.rprogress.org/e2/e2_pennsylvania.pdf 

Virginia Virginia Tax Policy Library 

http://www.policylibrary.tax.virginia.gov/OTP/Policy.nsf 

Multiple 

States: Oil 

and Gas 

“2005 Investments in Energy Security: State Incentive Security.” 

http://www.iogcc.state.ok.us/PDFS/2005-Investments-in-Energy-Security-StateIncentives.pdf 

Multiple 

States: EE / 

RE 

Database of State Incentives for Renewable Energy. http://www.dsireusa.org/ 

Pew Center on Global Climate Change. “Learning from State Action on Climate 

Change.” June 2006 Update. 

http://www.pewclimate.org/policy_center/policy_reports_and_analysis/state/index.cfm

Pew Center on Global Climate Change. “State Action Maps.” 

http://www.pewclimate.org/what_s_being_done/in_the_states/state_action_maps.cfm 

Rabe, Barry G. “Greenhouse and Statehouse: The Evolving State Government Role in 

Climate Change.” Pew Center on Global Climate Change. November 2002. 

http://www.pewclimate.org/global-warming-indepth/all_reports/greenhouse_and_statehouse_/index.cfm 

U.S. Department of Energy. “Federal and State Incentives.” 

http://www.eere.energy.gov/afdc/laws/incen_laws.html 

U.S. Environmental Protection Agency. Clean Energy-Environment Guide to Action. 

2006. 

http://www.epa.gov/cleanrgy/stateandlocal/guidetoaction.htm 
 

The Keystone Center 37

Appendix B: Appalachian Energy Policies (State–by-State)
 

The Keystone Center 38

Appendix C: National & State Energy Trends, Challenges and ARC Opportunities

 Barriers/Challenges Possible ARC Opportunities

Coal 1. Clean coal technologies hold 

promise for increasing use of 

Appalachian coal for energy 

production. However, there is 

concern about the difficulty of 

permitting clean coal facilities, such 

as those using integrated gas 

combined cycle (IGCC) and carbon 

capture and sequestration (CCS) 

technologies. 

2. Capital costs for IGCC facilities are 

substantial. 

3. Utilities are reluctant to invest in 

unproven technologies such as 

IGCC without some protection 

against lower than expected 

performance, higher than expected 

costs and regulatory risks. 

1. In order to facilitate future permitting of IGCC 

and CCS plants, states need more information 

about these technologies. ARC could invite 

state regulators to participate in a roundtable 

discussion of how to streamline the permitting 

process for IGCC and CCS facilities. 

2. ARC could serve as a broker for funding for 

IGCC facilities in Appalachian states. 

3. Strong regulatory oversight of production and 

use of energy, particularly its environmental 

impacts, will be important in safeguarding the 

public’s interest. ARC could work to identify 

and encourage best practices among 

Appalachian states, particularly in 

establishing new regulatory frameworks for 

CO2 storage.

Oil & Gas 1. Future production of oil & gas from 

unconventional sources will require 

use of new technologies and 

practices. Small independent firms, 

who make up the majority of oil & 

gas producers in the region, will 

need both technical and financial 

assistance to adopt the advanced 

production approaches. 

1. Development of remaining oil, gas and coal 

resources will require collaboration between 

states, industries and the federal government 

in developing the needed infrastructure, 

including data collection and analysis, 

technology transfer and construction of 

pipelines and other distribution systems. ARC 

can help coordinate these partnerships. 

Electricity 2. As is indicated above, several states 

have expressed an interest in 

pursuing systems benefit funds and 

renewable portfolio standards. 

Documents prepared by these states 

suggest that state officials want to 

assess the feasibility of these policies 

and study their potential impacts to 

the economy and the environment.. 

3. Some states in Appalachia are 

experiencing electricity supply 

problems. Others are concerned 

about minimizing risk of supply 

disruptions in the future. 

1. ARC could provide research or assessment 

funds to assist in determining the costs/benefits 

of RPS and SBF policies. 

2. ARC could host conference calls or discussion 

groups in which states who currently have 

systems benefits funds and/or renewable 

portfolio standards could share their knowledge 

and experience with other states. 

3. ARC could initiate and/or host a regional 

energy compact and regional planning for 

energy supply/infrastructure redundancies. 
 

The Keystone Center 39

Biofuels Several states would like to increase 

production and on-road delivery of 

biofuels. 

3. Coordination of production and 

delivery across states could minimize 

harmful duplication or omission of 

services and service areas. 

4. Increased demand for biofuels would 

make expansion of production and 

delivery of biofuels more feasible. 

ARC could: 

1. Help coordinate planning of biofuels 

production and delivery across Appalachia 

by hosting a database of planned and 

implemented projects. 

2. Help states coordinate efforts to attract 

facilities that produce alternative fuel 

vehicles that run on biodiesel. 

RE / EE i. Regional planning and 

implementation of renewable energy 

and energy efficiency policies and 

programs is disjointed. 

ii. Creating demand for RE and EE 

technologies is a critical factor in 

growing this sector. 

1. ARC could coordinate regional planning of RE 

and EE policies by hosting a database, 

meetings, and/or conference calls. 

2. ARC could host discussions about regional 

criteria for green building standards.. 

3. ARC can provide information to utilities and 

state agencies to tailor their energy-saving 

programs to take advantage of and 

complement new federal tax incentives.

Possible Planning Opportunities for ARC

• Host meeting or series of calls for Appalachian states to learn from non-Appalachian leaders in energy 

policy 

• Initiate regional energy and/or climate action policy for Appalachia 

Additional Issue Areas / Possible Opportunities for ARC

Single-sector policies and programs

o Increasing availability of and access to renewable energy and energy efficiency technologies 

o Conversion of animal waste into energy 

o Examination of coal-bed methane potential 

o Green building incentives 

o Energy workforce development 

Cross-cutting policies and programs

o Comprehensive transportation plans and policies, including state fleet requirements 

o Energy education 

o Air and water quality improvement plans and policies 

o Incentives for innovative technology research and development 

o Tracking policy and program developments at the federal level. Disseminating information to states. 
 

The Keystone Center 40

Appendix D: Western Governors' Association

Policy Resolution 06-10

June 11, 2006 

Sedona, Arizona 

Clean and Diversified Energy for the West 

A. BACKGROUND

1. Traditional resources such as oil, natural gas, coal and hydropower have played and will 

continue to play a significant role in meeting future energy needs. At the same time, 

resources such as energy efficiency, solar, wind, geothermal, biomass and advanced coal 

technologies are relatively untapped but hugely promising. Together, the combination of 

these resources provides the foundation for a clean, diversified and secure energy future 

for the West. 

2. The Western Governors’ Association launched its Clean and Diversified Energy 

Initiative in a June 2004 resolution (04-13) that set out the objective of “identifying ways 

to increase the contribution of renewable energy, energy efficiency, and clean energy 

technologies within the context of the overall energy needs of the West.” This resolution 

identified the need for new clean and diversified energy sources for transportation, 

buildings, electricity, and other needs, and outlined four important goals: 

i. additional development of 30,000 megawatts of clean energy by 2015 

from resources such as energy efficiency, solar, wind, geothermal, 

biomass, clean coal technologies, and advanced natural gas technologies; 

ii. a 20% increase in energy efficiency by 2020; 

iii. an ability to meet the transmission needs of the West for the next 25 years; 

and 

iv. better position the Western energy system to respond to new 

environmental challenges, including potential limitations on emissions. 

3. The Western Governors’ Association recognizes that a clean and diversified energy 

system will: 

♦ Protect the Western economy from energy shortages and price spikes that 

are harmful to businesses and consumers and disruptive to investment; 

♦ Augment our pursuit of a national energy policy that will result in a 

diverse energy portfolio; 

♦ Accommodate the energy needs of a growing, mobile Western population; 

♦ Better position the Western energy system to respond to new local, 

regional and environmental challenges; and 

♦ Take advantage of the development of new technologies that will lower 

the cost of renewable energy and reduce the cost of controlling emissions 

from the West’s vast fossil fuel resource base. 
 

The Keystone Center 41

4. Western states have a variety of energy efficiency and clean energy policies and 

programs in place. For example, eight states have established renewable energy 

standards, twice the number in place when the resolution launching the Clean and 

Diversified Energy Initiative was passed. Nine states manage funds to promote energy 

efficiency. 

5. Western Governors agreed to collaborate and offer their support for regional and subregional 

initiatives being undertaken among Western states to: 

i. Improve the balance and overall adequacy of all energy resources 

in a manner which will strengthen economic growth, promote 

energy price stability, mitigate environmental impact, maximize 

reliability and result in an abundance of diversified resource 

supplies; and 

ii. Promote the integration of traditional and new energy resource 

technologies. 

6. The Western Governors’ Association formed the Clean and Diversified Energy Advisory 

Committee (CDEAC) to identify technically and financially viable policy mechanisms, 

stressing non-mandatory, incentive-based approaches, to meet the goals. In turn, the 

CDEAC created a series of task forces to specifically consider options related to solar, 

wind, biomass, geothermal, advanced coal, advanced natural gas, energy efficiency and 

transmission. 

7. The CDEAC and the technology task forces met over the intervening period to: 

♦ Review and consider the feasibility of the clean and diversified energy 

goals; 

♦ Examine the deliverability and adequacy of energy resources, including an 

assessment of promising new resources and technologies; 

♦ Examine the obstacles to both intrastate and interstate transmission siting 

and construction in order to access clean energy resources; 

♦ Consider price, reliability, and the mitigation of environmental impacts of 

all recommendations; 

♦ Develop energy efficiency recommendations that take into account all 

types of energy used in buildings, not just electricity; and 

♦ Address both technical and policy issues. 

8. The CDEAC submitted its report to the Western Governors in May, 2006 with a series of 

recommendations designed to meet the goals of the governors’ initiative. The CDEAC 

report identified strategies and policy options for resources such as solar, wind, 

geothermal, biomass, advanced coal technologies, and advanced natural gas technologies 

that can far exceed the target of 30,000 MW by 2015. It also identified cost-effective 

energy efficiency that can reduce annual load growth in the West from around 2% to 

0.5% while saving customers and businesses billions of dollars a year. 
 

The Keystone Center 42

B. GOVERNORS’ POLICY STATEMENT

1. The Western Governors acknowledge and recognize the positive contribution of more 

than 250 CDEAC process participants who dedicated time, resources and energy to this 

comprehensive project, as well as those who provided financial support. The CDEAC’s 

work has been productive, collaborative and influential. The Western Governors accept 

the CDEAC report with commendation to the many individuals, organizations and staff 

that made it a success. 

2. Western Governors agree to draw upon the full range of recommendations contained in 

the CDEAC report as a basis on which to advocate for energy policy changes at the 

federal and regional levels and their respective states, where appropriate. 

3. Western Governors are supportive of federal energy polices that: 

♦ Provide for a long-term (10 year) extension of the production tax credit for all 

renewable energy technologies, with complementary polices for consumerowned 

utilities and tribes; 

♦ Provide tax credits for energy efficiency investments 

♦ Raise the cap on the residential investment tax credit to $10,000 for renewable 

energy or distributed generation systems; 

♦ Support improvements in national appliance efficiency standards; 

♦ Encourage adequate funding for state programs, including energy efficiency, 

clean generation and storage technology research, development and 

demonstration; 

♦ Encourage federal agencies to collaborate with Western states and regional 

organizations on facility siting and infrastructure planning, consistent with 

sound, sustainable environmental practices; 

♦ Extend the federal IGCC tax credit for five years and provide a tax credit 

program for carbon capture and sequestration for at least five years; 

♦ Support increased federal support and tax incentives for the construction of 

multiple pilot facilities that demonstrate IGCC, in the Western United States in 

high altitude areas using western coal; and 

♦ Encourage proactive, transparent, stakeholder-driven regional transmission 

expansion planning, defer to existing regional and sub-regional processes that 

meet such standards, and reform imbalance penalties to allow for greater use of 

the existing transmission system. 

4. Western Governors find that a strong and resilient transmission and distribution grid is 

critical to electricity affordability and reliability. Grid expansion must also be undertaken in 

an environmentally responsible manner. We encourage regulators, policymakers, utilities, 

transmission operators and other stakeholders to consider the recommendations identified 

within the CDEAC report in order to eliminate barriers to greater utilization of clean energy 

resources across the west. 
 

The Keystone Center 43

5. Western Governors agree to collaborate in advancing regional and sub-regional policies 

for major interstate clean energy projects and programs, and to promote implementation 

of the Western Regional Energy Generation Information System to facilitate 

development of regional markets 

6. Western Governors support reforms in the U.S. Federal Energy Regulatory Commission's 

Open Access Transmission Tariff to implement the recommendations of the CDEAC that 

promote (a) regional transmission planning expansion and (b) expanded use of the 

existing transmission grid by reforming imbalance penalties. 

7. Western Governors recognize that a combination of state, regional and federal policy 

action will be required to advance a clean and diversified energy system and deliver the 

reliability, cost and environmental benefits to Western energy consumers. Accordingly, 

Western Governors support the promotion and distribution of the CDEAC report in 

advancing such action. 

C. GOVERNORS' MANAGEMENT DIRECTIVE

1. The Western Governors direct the WGA staff to work toward federal adoption of the 

policies supported in this resolution. The adoption and implementation of clean energy 

policies remains a high priority for Western states. 

2. The Western Governors’ Association will assist, as available and appropriate, with the 

development of regional or interstate policies and projects that are consistent with this 

resolution. 

3. The Western Governors direct the WGA staff to consider options to ensure continued 

broad stakeholder involvement into energy policy discussions regarding energy 

efficiency and conservation, supply and energy use, including the development of 

funding mechanisms to continue the work. 

4. The Western Governors direct Western Governors’ Association to identify mechanisms 

to assist the Governors in enacting policies that achieve clean and diversified energy 

goals and report back to the governors not later than the winter 2006 meeting. These 

mechanisms should include: 

♦ Act as a clearinghouse by collecting and disseminating information on 

adopted policies and programs; 

♦ Measurement and reporting of progress against energy efficiency and clean 

energy generation goals; and 

♦ Regularly collaborate with existing regional policy organizations, WGA 

affiliates such as the Western Interstate Energy Board, the Western Regional 

♦ Air Partnership, and other entities to develop and implement regional clean 

energy policies. 

F:\06resos\May 16 Proposed Resos\clean-energy 6-1-06.doc
 

The Keystone Center 44

Colorado Headquarters 

1628 Sts. John Road 

Keystone, CO 80435 

Phone: 970-513-5800 

Fax: 970-262-0152 

www.keystone.org 

Washington, D.C. Office

1730 Rhode Island Avenue, NW 

Suite 509 

Washington, DC 20036 

Phone: 202-452-1590 

Fax: 202-452-1138

Denver, CO Office 

1580 Lincoln Avenue 

Suite 1080 

Denver, CO 80203 

Phone: 303-468-8860 

Fax: 303-468-8866