MAJOR EPA REGULATIONS AFFECTING COAL-FIRED ELECTRICITY

Transcription

1 MAJOR EPA REGULATIONS AFFECTING COAL-FIRED ELECTRICITY January 14, 2014 CO 2 STANDARDS FOR NEW COAL UNITS Twice, in April 2012 and September 2013, EPA has proposed New Source Performance Standards (NSPS) to control carbon dioxide (CO2) emissions from new fossil fuel-fired power plants. The 2012 proposal would have required new coal units to meet a CO2 emissions standard of 1,000 pounds of CO2 per megawatt-hour (MWh), thus requiring new coal plants to install carbon capture and storage (CCS) and, in effect, banning new coal plants. In 2013, EPA re-proposed a an emissions standard of 1,100 pounds per MWh, a standard that still requires CCS and bans new coal plants. Comments on the re-proposal are due by March 10. IMPACTS The proposed NSPS will limit fuel diversity and impact electricity customers if natural gas prices are higher than projected and baseload coal plants cannot be built. In response to the 2012 proposal, ACCCE recommended CO2 emission rates that would allow efficient new coal plants to be built without CCS. 1 CO 2 REQUIREMENTS FOR EXISTING COAL UNITS In June, the President directed EPA to propose CO2 requirements for existing power plants by June 1, 2014, and to finalize the requirements by June 1, IMPACTS The potential impacts are unknown until EPA issues a proposal. However, NRDC released a proposal in late 2012 for reducing CO2 emissions from existing coal and gas units. 2 According to NRDC, the proposal would cost $4 billion in 2020 and cause the retirement of more than 50,000 megawatts (MW) of coal-fired generating capacity. However, NERA s analysis of the proposal found that it could cost electricity consumers between $13 billion and $17 billion per year; cause as many at 83,000 MW of additional coal retirements; cause the loss of up to 214,000 1 P age

2 jobs in 2023; and cause double-digit electricity price increases in 13 to 29 states. 3 UTILITY MACT EPA finalized the Utility MACT rule 4 (also referred to as the Mercury and Air Toxics Standards rule, or MATS) in December Utility MACT/MATS requires existing and new coal-fired electric generating units to install emission controls for hazardous air pollutants by 2015, with limited time extensions available. A number of legal challenges to the rule are pending. IMPACTS EPA estimated the annual cost (in 2007$) of MATS to be $9.6 billion in 2015, but has not provided an estimate of the total cost of the rule. 5 NERA s analysis for ACCCE projected the following for MATS: an annual cost of $10.4 billion (in 2010$) in 2015; total compliance costs of $94.8 billion; peak year job losses of 180,000 to 215,000 in 2015; and up to 23,000 megawatts of coal plant retirements by CROSS-STATE AIR POLLUTION RULE CSAPR was finalized by EPA in July However, CSAPR was vacated by a three-judge panel of the D.C. Circuit on August 21, 2012, and the full D.C. Circuit declined to hear the case in EPA and environmental groups appealed the decision to the Supreme Court, which heard oral arguments in the case on December 10, Until legal challenges are resolved, the Clean Air Interstate Rule (CAIR) will remain in effect. EPA has initiated informal discussions with affected states and other stakeholders to develop a replacement rule. Several downwind states (e.g., Connecticut, Delaware, and Maryland) have filed lawsuits asking EPA to remedy the interstate transport of air pollution caused by upwind states. IMPACTS The impacts of any replacement rule are unknown at the present time. BACT FOR GHG EMISSIONS In 2011, EPA began requiring new power plants that emit more than 100,000 tons of CO2 per year and existing power plants that increase CO2 emissions by more than 75,000 tons per year to undergo CAA permitting and comply with Best Available Control Technology (BACT) requirements for CO2 emissions. The D.C. Circuit upheld these permitting regulations (which had been challenged in lawsuits). The D.C. Circuit s decision has been appealed to the 2 P age

3 Supreme Court, which has agreed to consider whether EPA s permitting requirements for power plants and other industrial sources are justified under the Clean Air Act. IMPACTS EPA s GHG permitting requirements could prevent the construction of new coal plants if permitting authorities determine, on a case-by-case basis, that BACT requires the use of carbon capture and storage technology. 7 The impact on existing units is uncertain, but could be significant if major modifications to existing coal units trigger BACT requirements. 8 PM 2.5 STANDARD On December 14, 2012, EPA finalized revisions to the national ambient air quality standard for PM2.5 ( fine particles ). The revised annual primary standard for fine particles is now 12 micrograms/cubic meter (µg/m 3 ), replacing the previous standard of 15 µg/m 3. EPA had proposed a new, separate secondary standard to protect visibility, but decided in the final rule not to adopt a new secondary standard. 9 The new PM2.5 standard has been challenged in court by industry groups. IMPACTS The revised PM2.5 standard could lead to further reductions in SO2 and NOx emissions. EPA s analysis suggested that coal units would not be required to reduce emissions beyond levels required by CSAPR, CAIR, and MATS. 10 However, CSAPR is the subject of ongoing litigation, so the impacts of the revised standard on the power sector are uncertain. 316(b ) RULE In March 2011, EPA proposed requirements for cooling water intake structures for existing power plants under section 316(b) of the Clean Water Act ( 316(b) rule ). Instead of requiring all existing power plants to install cooling towers, EPA proposed more flexible regulations to reduce impingement and entrainment of aquatic organisms. EPA issued two Notices of Data Availability (NODA) soliciting comment on, among other things, new information on alternative regulatory options. According to a settlement agreement, EPA must finalize the 316(b) rule by January 14, IMPACTS EPA estimates the annual cost to the electric power sector of the agency s preferred option is $386 million, and the cost of other options that would require cooling towers could be as much as $4.7 billion per year P age

4 COAL COMBUSTION RESIDUALS In May 2010, EPA proposed to regulate coal combustion residuals (CCRs) -- including fly ash, scrubber byproducts, and bottom ash -- as either a solid (nonhazardous) waste or a hazardous waste. Finalization of the CCR rule is expected in 2014 at the earliest. The House passed coal ash legislation in 2012, and bipartisan compromise legislation was introduced in the Senate. Representative McKinley (R-WV) introduced similar legislation (H.R. 2218) in 2013; the bill passed the House in July. IMPACTS EPA estimates hazardous waste regulation would cost approximately $1.5 billion annually, while non-hazardous waste regulation would cost approximately $600 million annually. 12 The Electric Power Research Institute (EPRI) estimated the cost of hazardous waste regulation at $5.3 billion to $7.6 billion annually. 13 EFFLUENT LIMITATION GUIDELINES On April 19, 2013, EPA proposed new effluent limitation guidelines (ELGs) under the Clean Water Act for fossil-fuel and nuclear power plants. The proposed ELGs set limits on the amount of pollutants that can be discharged into surface waters. EPA intends to coordinate the ELG rule with the CCR rule (above), and indicated in the ELG proposal that the risks from CCR disposal may be lower than previously estimated by as much as an order of magnitude. A consent decree requires EPA to issue a final ELG rule by May 22, IMPACTS EPA estimates the proposal would cost between $185 million to $954 million per year but would not cause any coal retirements under any of the regulatory options. 14 However, NERA analysis indicates the proposed rule could cost approximately twice EPA s estimates and cause up to 10,000 MW of additional coal retirements. REGIONAL HAZE In 2012, EPA determined that compliance with CSAPR by power plants in the East should also satisfy CAA requirements to install best available retrofit technology (BART), and that its earlier determination that CAIR satisfies BART requirements is no longer needed. The D.C. Circuit s ruling that vacated CSAPR (and reinstated CAIR) makes the outcome of CSAPR/CAIR equals BART uncertain. Litigation is ongoing over these determinations. States also are developing State Implementation Plans (SIPs) to improve visibility in 4 P age

5 national parks and wilderness areas, but EPA has decided in many cases that more stringent requirements should be imposed on coal-fired power plants through Federal Implementation Plans (FIPs) that preempt SIPs. States that are developing SIPs, are responding to FIPs, or are involved in regional haze litigation include Oklahoma, New Mexico, North Dakota, Arizona, Utah and Wyoming. IMPACTS SIPs or FIPs can require coal-fired power plants to install additional SO2, NOx, and particulate matter controls. OZONE STANDARD In January 2010, EPA proposed more stringent ambient air quality standards for ozone. A final decision was sent to OMB the following year, but President Obama deferred the decision. EPA is expected to re-propose revisions in IMPACTS A more stringent ozone standard could lead to further reductions in NOx emissions from existing coal units. 1 ACCCE s legal and technical analyses indicate that EPA should set achievable CO2 emission rates for four subcategories of new coal-fired electric generating units: 1,915 lb CO2/MWh for supercritical units using bituminous and subbituminous coals; 2,150 lb CO2/MWh for supercritical units using lignite; 1,900 lb CO2/MWh for ultrasupercritical units; and 1,950 lb CO2/MWh for integrated gasification combined cycle. ACCCE is considering whether to update the technical analysis to include additional data on ultrasupercritical units. 2 Lashof, Daniel, Starla Yeh, David Doniger, Sheryl Carter, and Laurie Johnson, Closing the Power Plant Carbon Pollution Loophole: Smart Ways the Clean Air Act Can Clean Up America s Biggest Climate Polluters, Natural Resources Defense Council, December NERA, A Carbon Dioxide Standard for Existing Power Plants: Impacts of the NRDC Proposal, November, MACT refers to maximum achievable control technology. The Clean Air Act requires EPA to set MACT for major source categories (such as coal-fired electric generating units) to control hazardous air pollutants, such as mercury, that are listed in the CAA. 5 U.S. EPA, Regulatory Impact Analysis for the Final Mercury and Air Toxics Standards, December NERA Economic Consulting, An Economic Impact Analysis of EPA s Mercury and Air Toxics Standards Rule, March 1, Comments of the Utility Air Regulatory Group on the Proposed Standards of Performance for Greenhouse Gas Emissions for New Stationary Sources; Electric Utility Generating Units, June 25, P age

6 8 See Comments of the Utility Air Regulatory Group on the Proposed Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, December 28, Primary ambient air quality standards are set at levels to protect public health with a margin of safety. Secondary ambient air quality standards are set to protect public welfare. Public welfare includes protection of visibility, monuments, buildings, and ecosystems. 10 U.S. EPA, Regulatory Impact Analysis for the Final Revisions to the National Ambient Air Quality Standards for Particulate Matter, December, U.S. EPA, Economic and Benefits Analysis for Proposed Section 316(b) Existing Facilities Rule, March 28, U.S. EPA, Regulatory Impact Analysis for EPA s Proposed RCRA Regulation of Coal Combustion Residues (CCR) Generated by the Electric Utility Industry, April 30, Electric Power Research Institute, Cost Analysis of Proposed National Regulation of Coal Combustion Residuals from the Electric Generating Industry, November, Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category; Proposed Rule at pages 3, 25, and (April 19, 2013). 6 P age