Major EPA Regulations Affecting Coal-Fueled Electricity

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1 Major EPA Regulations Affecting Coal-Fueled Electricity Utility MACT EPA finalized the Utility MACT rule 1 (also known as the Mercury and Air Toxics Standards rule, or MATS) in December Utility MACT requires existing and new coal-fueled 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. EPA has re-proposed the requirements that apply to new coal units. The re-proposal would not affect the requirements for existing coal units. The Agency re-proposed new unit limits in November 2012 and plans to finalize them by March While this re-proposal could benefit new coal units, it will not substantially reduce the overall impacts of the rule. Impacts EPA estimated the annual cost of MATS to be $9.6 billion in 2015 but has not provided an estimate of the total cost of the rule. 2 NERA s analysis for ACCCE projected the annual cost to be $10.4 billion in 2015; total compliance costs to be $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 The rule required reductions in SO2 and NOx emissions in the eastern U.S. by January 1, 2012 (phase 1) and January 1, 2014 (phase 2). However, CSAPR was vacated by a three-judge panel of the D.C. Circuit on August 21, EPA and others have appealed the decision to the full D.C. Circuit. Impacts EPA has estimated the annualized cost of CSPAR to be $800 million. 4 BACT for GHGs 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 1 P age

2 Clean Air Act permitting and comply with Best Available Control Technology (BACT) requirements for CO2 emissions. The D.C. Circuit upheld these permitting regulations that had been challenged in lawsuits. The decision might be appealed to the Supreme Court. Impacts EPA s GHG permitting requirements would prevent the construction of new coal plants if permitting authorities decide that BACT requires the use of carbon capture and storage technology. 5 The impact on existing units is uncertain, but could be significant if major modifications to existing coal units trigger BACT requirements. 6 NSPS for CO 2 In March 2012, EPA proposed New Source Performance Standards (NSPS) for CO2 emissions from new fossil fuel-fired power plants. The proposal requires new coal units to meet a CO2 emissions standard of 1,000 lb CO2/MWh, which is equivalent to the CO2 emitted by a natural gas combined cycle unit. This standard effectively bans the construction of new coal units because achieving the standard would require the use of carbon capture and storage technology. The timing for promulgating a final rule is unknown, but latest reports indicate it will be finalized by March Legal challenges are expected once EPA issues a final rule. EPA has indicated that it will propose standards for existing and modified coal plants at some time in the future. 7 Impacts According to EPA s analysis, the proposed new plant rule would not have any impacts on the electric power sector. 8 However, the proposal prevents the construction of new coal plants. NERA s analysis for ACCCE indicates the proposed rule could increase electricity costs if natural gas prices are higher than EPA s projections and new coal plants cannot be built because they are unable to comply with the proposed CO2 standard. 9 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 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. 10 It is 2 P age

3 likely the new PM2.5 standards will be challenged in court. Impacts More stringent PM2.5 standards could lead to further reductions in SO2 and NOx emissions by approximately EPA s analysis suggests that coal units will not be required to reduce emissions beyond levels required by CSAPR, the Clean Air Interstate Rule (CAIR), and MATS. 11 Section 316(b) 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 June 27, 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. 12 Coal Combustion Residuals In May 2010, EPA proposed to regulate coal combustion residuals (CCRs, coal ash or fly ash ) as either a solid waste or a hazardous waste. Finalization of the CCR rule is expected in The House passed coal ash legislation in 2012, and bipartisan compromise legislation was introduced in the Senate. Both bills would have ensured that states have primary responsibility for regulating CCRs as a non-hazardous solid waste subject to reasonable disposal requirements. Impacts EPA estimates that hazardous waste regulation would cost approximately $1.5 billion annually, while nonhazardous waste regulation would cost approximately $600 million annually. 13 The Electric Power Research Institute (EPRI) estimated the cost of hazardous waste regulation at $5.3 billion to $7.6 billion annually. 14 Effluent Guidelines The Clean Water Act requires EPA to set effluent guidelines that the states use to set permit limits for the discharge 3 P age

4 of certain constituents into surface waters. EPA has entered into a consent decree requiring the Agency to update its effluent guidelines for power plants. The consent decree requires EPA to issue a proposal by April 19, 2013 and a final rule by May 22, According to EPA, this rulemaking will address power plant waste streams, including ash pond and scrubber wastewater discharges. Impacts Stringent effluent guidelines could require power plants to install dry coal ash handling systems and water treatment systems in order to comply with new permit limits. 15 However, the impacts are unknown until EPA proposes new guidelines. For a different rulemaking, EPA estimated the cost of dry ash handling for all power plants would be nearly $1.7 billion annually. 16 Regional Haze This past summer, EPA determined that compliance with CSAPR by power plants in the East should also satisfy the Clean Air Act requirement 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 recent 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 national parks and wilderness areas, but EPA has decided in many cases that more stringent requirements should be imposed through Federal Implementation Plans (FIPs) that preempt SIPs. States that are developing SIPs, responding to FIPs, or involved in regional haze litigation include Oklahoma, New Mexico, North Dakota, Arizona, Montana, Utah and Wyoming. Impacts SIPs or FIPs can require coal plants to install additional SO2, NOx and particulate matter controls. A full suite of controls for a medium-size coal unit could cost within the range of $300 million to $400 million. 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 announced the decision would be deferred until EPA is expected to re-propose revisions in 4 P age

5 late 2013 and make a final decision in Impacts More stringent ozone standards could lead to further reductions in NOx emissions from coal units prior to Current as of January 6, The term MACT refers to maximum achievable control technology. The Clean Air Act requires EPA to set MACT for major source categories (such as coal-fueled electric generating units) to control hazardous air pollutants, such as mercury, that are listed in the CAA. 2 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, U.S. EPA, Regulatory Impact Analysis for the Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and Ozone in 27 States; Correction of SIP Approvals for 22 States, June 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, See Comments of the Utility Air Regulatory Group on the Proposed Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, December 28, Under the terms of a settlement agreement, EPA was obligated to propose NSPS for existing and modified units by July 26, 2011 and finalize NSPS by May 26, However, EPA has failed to meet the schedule. 8 U.S. EPA, Regulatory Impact Analysis for the Proposed Standards of Performance for Greenhouse Gas Emissions for New Stationary Sources; Electric Utility Generating Units, March P age

6 9 NERA Economic Consulting, Analysis of EPA s Proposed GHG New Source Performance Standard for Electric Generating Units, June 25, 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. 11 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, See U.S. EPA, Steam Electric Power Generating Point Source Category: Final Detailed Study Report, October 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, P age