EPA’s CO2 Future is Now

EPA has imposed endless costs on coal plants by turning routine repairs and maintenance into “modifications,” although modifications to existing plants were supposedly going to escape regulation.

By Richard Bornemann l June 12, 2013

EPAObama and Lisa Jackson

Most media analysts and even some industry executives seem to believe that EPA restrictions on carbon and other alleged greenhouse gases (GHGs) are geared mainly to future coal plants – plants that will probably never be built because, as it’s said almost everyday, today’s low natural gas prices will persist and dominate the electricity generation market for years to come. But there are two levels of threat to the existing generation of power plants, one anticipated and one that’s little known.

On the anticipated side are 2010’s Tailpipe, Timing, and Tailoring Rules – now being challenged at the Supreme Court. They imposed the Clean Air Act’s Prevention of Significant Deterioration (PSD) permitting program on large stationary sources of GHGs in general. New Source Performance Standards (NSPS) for new and modified coal-fired power plants, refiners, smelters, etc., require Best Available Control Technology (BACT) if the “carbon dioxide equivalent” of a family of common emissions cross certain annual tonnage thresholds. (An issue before the Court is EPA’s unilateral re-write – “Tailoring” – of those statutory tonnage thresholds, so as to limit the political damage from their otherwise capturing millions of small emitters, like apartment buildings, schools, shopping malls and hospitals).

If no new coal-fired power plants are ever built, the harm posed to today’s coal fleet by the Tailpipe, Timing and Tailoring Rules kicks in when those plants are modified, or alleged by EPA, in enforcement actions and litigation, to have been significantly modified. And, EPA has imposed endless costs on coal plants by turning routine repairs and maintenance into “modifications.” In short, the rules capture the present while targeting the future.

But there’s more to EPA and climate change than the challenged PSD rules for general GHG emissions from all large sources. In March 2012, EPA proposed new performance standards under section 111 of the Clean Air Act (the Act) that were specific to carbon dioxide (CO2), and specific to fossil-fueled electric plants. Going forward, “Electric Utility Generating Units” (EGUs) with capacities greater than 25 MW could emit no more than 1,000 lbs. of CO2 per megawatt-hour – a rate that even EPA acknowledged can be met today only with combined-cycle gas turbine plants.

EPA took pains in its 2012 proposal to stress that the rule would be “strictly limited to new sources.” Even modifications to existing plants were supposedly going to escape regulation: “EPA is not proposing requirements for NSPS modifications.” And, to be really clear, then-EPA Administrator Lisa Jackson personally told the media, “We don’t have any plans to address existing plants.” The media repeated the supposed future-ness of it all, and the Big Green groups didn’t complain – even as they chanted about fossil fuels accounting for 40% of today’s US CO2 emissions.

But Administrator Jackson was very mistaken, with regard to both EPA’s own commitments, and the requirements of the Act itself. First, there’s a December 2010 agreement that EPA had reached to settle a Bush-era lawsuit (State of New York et al. v. EPA). EPA made two major pledges in settling with New York and twelve other state and city governments, as well the Sierra Club, the Natural Resources Defense Council and the Environmental Defense Fund.

First, EPA was to have completed final rules for regulating not only new coal plants by May 26, 2012, but also modifications of existing plants under the same NSPS requirements of section 111(b) of the Act.

EPA is in default on its binding agreement with its allies by managing only to publish its proposed March 2012 rule for new plants (1000 lbs. CO2 per megawatt-hour) – as though EPA could override both its own settlement agreement and the Act’s requirements for regulation of modifications.

Delay in the finalization of even the purely “future coal” rule has been caused by EPA’s having to review some 2 million comments. There’s also concern about EPA’s stretching legal precedent by lumping two source categories (coal and gas-fired plants) together as EGUs. But we know the regulations are coming. Why? Because the Sierra Club, the Natural Resources Defense Council and the Environmental Defense Fund filed a 60-day Notice of Intent in April to sue EPA to force them.

But the big goal of Big Green has always been to use NSPS under section 111(b) to regulate CO2 from existing power plants – and not simply in terms of modifications. They can do this because of the non-place Congress created for CO2 in the Act. CO2 isn’t one of the Criteria Air Pollutants (sulfur dioxide, ozone, particulate matter, nitrogen oxides, lead and carbon monoxide) for which EPA sets National Ambient Air Quality Standards (NAAQS), and it isn’t one of the 180-plus “hazardous air pollutants” listed under section 112 of the Act.

And, when a “pollutant” – CO2 in this case – is neither a Criteria Pollutant, nor a substance listed in section 112, then new and modified source regulation of that pollutant under section 111(b) triggers regulation of existing sources under section 111(d). And, under section 111(d) a standard of performance would apply as though “such [an] existing source were a new source . . .”

This is what the media missed about the implications of a purely-future regulatory posture for CO2 regulation, and it’s why the Big Green groups weren’t complaining in 2012; they knew what they were getting, delayed though it may be. Besides, the Green Groups and their state allies still held a second major EPA pledge from the December 2010 settlement agreement in New York v. EPA: final rules implementing 111(d) for existing sources were also due on May 26, 2012.

To be sure, we can’t really know exactly what section 111(d) regulation of CO2 will look like because there isn’t much precedent under that part of the Act. There just aren’t that many “pollutants” – like CO2 – that are neither part of Criteria group, nor among the many unpronounceable “hazardous air pollutants” of section 112.

And, EPA guidelines, so far, give the states lots of flexibility under 111(d). States have leeway in establishing standards of performance under a Best System of Emission Reduction that’s set by EPA. So, Big Green isn’t going to be able to shut down 40 percent of the nation’s electricity generation overnight by imposing, say, a CO2 limit of 1000 lbs. per megawatt-hour on every unit or site in the country.

But they’ll try hard to force EPA to make it painful and expensive. They’ll push EPA to guide performance standards that ruin as much as possible the economics of billions of on-going utility investment in controlling mercury and other substances. After all, CO2 isn’t “captured and sequestered” by scrubbers, filter baghouses, selective catalytic reduction, or by activated carbon injection.

Timing is everything, and we can expect Big Green to be more maximalist than usual in pushing CO2 regulation under 111(d). After all, this will crystalize in the wake of their losing their climate change-based fight against the Keystone Pipeline. Regulatory compensation will be demanded after the coming “betrayal,” for all the contributions spent, and for all the activist mobilizations and arrests. The White House will be inclined to pay up.

Richard Bornemann has provided strategic legislative and regulatory counsel to American energy and surface transportation companies of all sizes for more than 20 years. He is an energy and environment analyst for the Selous Foundation for Public Policy Research, and author of American Energy Independence: A Policy Review 1973-2012. Mr. Bornemann is also a contributor to SFPPR News & Analysis.