Jonathan Streetman and Candy Neal, Herald Staff Writers

Indiana’s start on converting coal plants to natural gas and taking other aging facilities off line could help the overwhelmingly coal-dependent state meet a new federal goal of reducing its carbon emissions by 2030. But state officials are keeping a wary eye on how the new U.S. Environmental Protection Agency targets will affect manufacturing in the highly industrial state.

The EPA on Monday gave Indiana three years to come up with a plan to cut carbon emissions by 20 percent over the next 16 years as part of a sweeping national initiative to curb pollutants blamed for global warming. Indiana’s target presents a challenge in a state, sitting atop a major vein of coal, where more than 80 percent of power is produced by coal.

Dubois REC general manager Don Book said this morning said it’s early to determine the regulations’ effects, but there is a likely conclusion.

“Most of the folks in the industry believe it is going to mean more natural gas,” Book said.

Dubois REC receives its power from Bloomington-based Hoosier Energy. Book said Hoosier Energy will be retiring a coal-burning plant in 2015 and ramping down operations in other coal plants to remain compliant with the regulations.

“It’s not going to be the cheapest plant to operate anymore,” Book said, adding that the regulations will likely cause upward pressure on energy rates, which will likely mean higher bills for customers.

Book said finding the best way to operate at maximum efficiency and still remain compliant will be an ongoing process. He also said Hoosier Energy has increased interest in renewable energies, including solar and wind. These are necessary ventures, Book believes, to avoid becoming dependent on natural gas, which has been known to fluctuate in the market place.

“It’s a reliability issue. If we get too dependent on natural gas, that could cause problems in the future,” Book said.

Jasper Municipal Utilities General Manager Bud Hauersperger said this morning that the local utility doesn’t yet know how the changes will affect the costs for buying power.

“It’s a little too soon to tell,” he said. “It will depend on the plan the state comes up with. That will dictate what the power company does.”

Huntingburg Energy Superintendent John Reutepohler agreed, saying the 2030 deadline means changes will come slowly.

Jasper and Huntingburg purchase their electricity from the Indiana Municipal Power Agency. The Carmel-based company has coal-generating facilities in Gibson County and on the Kentucky side of the Ohio River just southwest of Madison. In 2012, IMPA finished building its latest coal-burning facility. The Prairie State Energy campus is a state-of-the-art facility in southwest Illinois that IMPA officials expect to be among the cleanest coal-burning plants in the nation.

“They have a few new plants online and are completely updated, so that should help with meeting the regulations,” Reutepohler said. “But if they have to continue updating those plants, the costs will be passed on to consumers. We may see electric rates creep up.”

What the state puts into its plan to decrease carbon emissions will determine what changes IMPA has to make to its facilities. And how those changes are handled will determine what costs, if any, IMPA will pass to the companies to which it provides electricity.

“We don’t know what the state will require, and we’re not sure what IMPA has in mind,” Hauersperger said.

Jack Alvey, IMPA’s senior vice president of generation, was not available this morning.

If and how the new EPA regulations will affect Jasper’s closed power plant is unknown. Officials plan to talk about the plant’s future after the contract that would have converted the plant into a biomass plant that burned natural gas and miscanthus grass expires June 20.

Atlanta-based Twisted Oak Corp. told the city in April that it was terminating the lease with the city for the center for financial reasons.

The EPA gave Indiana credit for already taking steps to reduce carbon emissions, such as encouraging utilities to set renewable energy standards, and environmental activists say they believe the goal can be accomplished.

“I think that meeting EPA’s goals is doable for Indiana, and it’s a challenge we really have to take on,” said Jodi Perras, Indiana’s representative for the Sierra Club’s Beyond Coal campaign.

Doug Gotham of the State Utility Forecasting Group, a state-funded, Purdue University research group, said moves that utilities are already making, like replacing aging coal-fired plants with ones that burn cleaner natural gas, will help Indiana move in the right direction to meet the 2030 goals.

But Gov. Mike Pence and a state manufacturers’ group fear the tougher standards will chill the state’s business climate. Pence vowed to oppose the regulations, saying in a statement that they would cost the state jobs and business growth and result in higher electricity rates.

Perras, however, said the changes have the potential to generate “green” jobs like manufacturing energy-efficient insulation, producing and installing wind turbines and solar panels, and other industries.

Tim Rushenberg, vice president for governmental affairs and tax policy for the Indiana Manufacturers Association, agreed that utilities already are making the switch away from coal in places like Indianapolis, where Indianapolis Power & Light is converting two coal-fired plants to natural gas. But he said he feared the new requirements “will stunt the growth of our Indiana manufacturing center.”

When energy costs rise, businesses must cut costs elsewhere to make ends meet, he said.

Indiana’s heavy reliance on coal is largely due to geography and economics. Gotham noted the coal vein beneath the southern part of the state, and that coal historically has been a cheaper source of energy.

“We’ve got coal. That’s a big part of it,” Gotham said.

The EPA said its targets were tailored to fit the states, but some states that relied less on coal had higher requirements than more-reliant states like Indiana. Those states tend to be ones that already get a large share of their power from alternative sources such as wind and nuclear.

Environmentalists said Indiana and the Midwest have already been suffering the effects of climate change caused by greenhouse gases that fuel global warming, including droughts and flooding that have cost farmers millions of dollars in crops and triggered the need for millions in disaster assistance.

Indiana’s power prices are currently among the lowest in the nation, but the changes announced Monday could raise rates enough to put Indiana in the middle of the rankings, Gotham said. The state’s electric rates are expected to be 32 percent higher in 2023 than they were in 2013, but that projected rate hike did not include the new federal pollution rules, according to the State Utility Forecasting Group.

Converting mid-sized coal-fired power plants to natural gas in Kentucky and Virginia has been estimated to cost as much as $50 million, but Gotham said such costs are generally tied to how close the plant is built to a natural gas pipeline.

Duke Energy, the largest U.S. utility by number of customers and market value and the largest in Indiana, said it was reviewing the EPA requirements.

“It is too soon to tell what impact the proposal will have on our operations, but we will work closely with the state to evaluate it and will be participating in the rulemaking process,” Duke said in the statement.

The Indiana Department of Environmental Management said it would thoroughly review Monday’s announcement before commenting.

The Associated Press contributed to this report.