6 Jun 2011

Taxing carbon: Congress and Maryland won’t so Montgomery County is trying

Written by theenergyfix

The 4th District Court of Appeals in Richmond, Virginia holds the key to a first-of-its-kind attempt by Montgomery County, Maryland to place a $5-per-ton tax on emissions from the predominantly coal-fired Mirant Corp. power plant in the county. Because it is the only large source of carbon emissions in the county that would be liable for such a tax, Mirant’s new owner, GenOn Energy, is needing to mount an expense challenge to a ruling that could turn emissions regulations on their head. It could also set a precedent other counties might turn to to forge their own local emissions taxes because Congress and the states won’t.

The 844 megawatt Dickerson power plants sits along the Potomac River in Montgomery County, MD, just northwest of Washington, DC. Credit: Mirant/GenOn Energy, via the Gazette newspapers

Maryland is part of the Regional Greenhouse Gas Initiative which places a cap on carbon emissions from from large polluters. But RGGI, as it’s known, suffered a serious blow last month when New Jersey Governor Chris Christie announced the Garden State is out of RGGI at year-end. Cap and trade programs in other jurisdictions are experiencing mounting opposition.

The move by Montgomery Country in the spring of 2010 on the 844 megawatt power plant drew little serious attention save for its novelty until the United States District Court for the District of Maryland dismissed Mirant’s suit. In its filing, Mirant asserted that the carbon tax constitutes an unconstitutional bill of attainder and an excessive fine.  The company also claims numerous state and federal constitutional grounds such as due process and equal protection.

The 4th District Court of Appeals has had the case for more than a year now so clean energy advocates and power generators anticipate a ruling soon.

Montgomery Councilmember Roger Berliner, an energy attorney, joined colleagues seeking a new source of revenue to fund measures that would reduce greenhouse gas emissions in the county.

Also in its defense, Mirant invokes Maryland’s implementing legislation and regulations for RGGI. The company argues that RGGI pre-empts any county measure addressing carbon dioxide emissions. According to this analysis on the SolveClimate.com blog, Maryland has a fairly substantial jurisprudence on preemption of local law so this case will not be decided in a vacuum.

“Whether preempted or not, from our seat we believe it will be difficult for a state to achieve an effective greenhouse gas policy if a county government can influence the activities of the utilities within county boundaries and tap those utilities as new revenue streams,” SolveClimate stated.

Mirant points out in its complaint that “leakage” (the sale of electricity into Maryland by utilities outside the RGGI states and thus not subject to carbon dioxide proscriptions) will occur if it is forced to bear higher costs in Montgomery County than its non-regulated competitors. Further, because other jurisdictions have less stringent air pollution regulations, the effect of the Montgomery tax will be to actually increase the amount of pollutants such as Nitrous Oxides (NOx), Sulfur Oxide (SOx), mercury, and particulate matter (PM10) emitted into the atmosphere.

Houston-based RRI Energy acquired Mirant last December and formed GenOn Energy. The transaction ended a tortuous ride through the deregulation of power supply markets in Maryland and other states which thrust Mirant into bankruptcy. A tax on the Dickerson plant might place a heavy burden on the plant, even with the balance sheet of one of the nation’s largest competitive power generators backing it up.






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