Editor's note: This article is part a series of stories by InsideClimate News reporters exploring the future of the coal industry, Coal's Long Goodbye: Dispatches From the War on Carbon.

Kentucky has consistently opposed federal efforts to impose environmental rules on the state's power plants. First, lawmakers passed a bill to exempt the state from submitting a plan to meet the proposed air regulations that work against coal. Then it sued the Environmental Protection Agency over the rule.

Now, the state may go from defiance to compliance––without meaning to.

Cheap natural gas is flooding the market as environmental regulations take effect and because upgrading aging plants is cost-prohibitive, coal-fired power plants across Kentucky are shutting down, as they are across the country. In Kentucky alone, more than a quarter of the coal-fired plants have already shut down, or are expected to in the next two years.

Last year, the Obama administration released the draft version of the Clean Power Plan, which aims to cut carbon dioxide emissions from power plants and sets emission targets for each state. Kentucky is supposed to reduce emissions 15 percent by 2020––and a total of 18 percent by 2030––from 2012 levels. It's also required to submit a plan showing how it will reach those goals.

With the announced retirements alone, Kentucky will reach the EPA's goal, energy analysts and state officials believe.

"Kentucky could be well in compliance with the targets" provided the state replaced the coal power with clean energy sources, said Amlan Saha, a vice president at M.J. Bradley and Associates, an environmental consulting group. "That's not the case with many other states."

Coal is a vital part of Kentucky's culture. Despite flagging production numbers and new lows in coal jobs, the attachment to coal runs deep, and the industry continues to maintain a hold over the state's politics.

Hands Up, or Hands Off?

Kentucky was the first state in the country to pass a law restricting what its environmental agency can include in a state plan to the EPA. Well before the EPA released the details of its draft rule for power plants, the legislature passed a law limiting the state environmental agency's ability to submit a compliance plan.

If Kentucky does not submit a plan––or submits one that does not pass muster––the EPA will create one for the state. Since the EPA likely doesn't have the authority to force a state to expand its renewable energy production or impose energy efficiency measures, it would probably target emissions from coal plants. Reducing those emissions is more expensive than other strategies and will likely lead to higher electricity rates and less flexibility for the state, according to coal industry groups and environmental attorneys.

Gov. Steve Beshear, a Democrat, is critical of the EPA's carbon regulations but has declined to sign on to Sen. Mitch McConnell's call to boycott the federal rule. Oklahoma is the only state so far to publicly refuse to submit a compliance plan.

"We strongly believe that a Kentucky-developed policy for reducing greenhouse gases would be superior to a one-size-fits-all policy imposed by Washington, D.C.," Beshear said in a statement earlier this month.

The state law puts the Energy and Environment Cabinet, the agency responsible for drafting Kentucky's compliance plan, in a bind. On the one hand, the agency is being directed to cut carbon emissions while operating in a state where 92 percent of the electricity is generated in coal-fired plants. On the other hand, state law prohibits the agency from submitting a plan that shifts power production away from coal.

"Why the state would want to shoot itself in the foot and not have control over its own destiny in this clean energy transition really defies logic," said Jeff Deyette, the assistant director of energy research and a senior energy analyst at the Union of Concerned Scientists.

Also, last year, buoyed by the coal industry, Democratic attorney general Jack Conway joined his counterparts from 11 other states in a lawsuit alleging the Clean Power Plan is unlawful and would cripple state economies. (Conway is a candidate for governor in this year's election.)

A Workaround

In trying to simultaneously placate the EPA and adhere to the law, Kentucky might now have found––unintentionally––a solution.

As of 2012, the state had almost 18,000 MW of coal-fired power from 19 plants. Of that, 3,900 MW has already been retired, or has been scheduled for retirement in the next two years. According to a compliance tool created by M.J. Bradley, the environmental consulting firm, the emissions associated with those shutdowns alone are more than sufficient to meet the EPA's targets.

Saha, who developed the tool, said the state will be over-complying by 2.6 million tons of carbon, provided the EPA's final rule resembles the draft rule closely––and the state replaces the coal power with low-emitting sources of energy such as solar or nuclear power. Environmental groups, utilities and state agencies have been using the tool to forecast different scenarios under which states can meet their targets.

John Lyons, assistant secretary for climate policy in Kentucky and the person in charge of putting together the state's plan, said the M.J. Bradley analysis "wasn't exactly right, but it was pretty close," to his department's own calculations.

Kentucky's energy and environment secretary, Leonard Peters, also seems to consider the retiring coal plants as the state's best option.

The strategy's success depends on whether the EPA's final rule, to be released late this summer, diverges significantly from its draft rule. If the targets are raised, for instance, the state could find itself in a difficult position. The EPA could also decide that retirements occurring in response to factors other than the Clean Power Plan can't be submitted in a state plan.

Lyons said he hopes that isn't the case.

"We strongly submitted [to the EPA] that retirements should count regardless of the reason retirements occur," Lyons said. "We're talking about real carbon dioxide emission reductions."

Other Hurdles

Many utilities are retrofitting coal units to meet air quality standards. The control technology targets toxic emissions such as sulfur dioxide and nitrogen dioxide, which cause haze and create health issues. But in tackling those emissions, the pollution controls emit carbon dioxide as a byproduct. Carbon emissions from plants installing control technology will "spike dramatically at the same time as other plants come offline," said Nachy Kanfer, a deputy director at the Sierra Club's Beyond Coal campaign.

For instance, nine units at the Shawnee plant in southwest Kentucky are slated to be fitted with dry sorbent injection equipment. The technology works by injecting alkaline substances that react with sulfur dioxide emissions, partially converting it into carbon dioxide, Kanfer said.

Lyons said the state hadn't looked at the penalties for installing those controls but theorized that they wouldn't increase the state's carbon dioxide emissions significantly.

The state also needs to plan for how it will replace the power lost by the shutdowns. Environmental groups contend that the state could see huge emission reductions through energy efficiency measures.

"Kentucky hasn't historically been a leader on energy efficiency which means there's a lot of low-hanging fruit that can be tapped into at pretty low cost of avoided carbon dioxide," said Deyette.

Lyons said the state hasn't gotten far in its planning and pointed out that the gubernatorial election in November complicates the situation. So far, both the Democratic and Republican nominees have indicated that they will not allow the state to submit a plan to the EPA.

Lyons said the best he could do was work on a transition plan for the next administration.