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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The U.S. Environmental Protection Agency (EPA) (Washington, D.C.) last week proposed technical changes to its Cross State Air Pollution Rule (CSAPR), which it had finalized earlier this year. The proposed revisions, about 100 pages in length, will be published in the Federal Register, and the agency will take public comments on them for 30 days. These changes could affect operating plans and environmental compliance efforts at utilities in a variety of states in the eastern and central portions of the U.S.
CSAPR, finalized by the EPA on July 6, 2011, requires generators in 27 states to significantly lower emissions of sulfur dioxide (SO2) and oxides of nitrogen (NOx) over a two-phase period. Affected generators are generally located in the Eastern and Central portions of the U.S., generally east of the Mississippi River. By 2014, the rule requires a 73% reduction in SO2 emissions and a 54% reduction of NOx emissions, compared to a 2005 baseline. For more information on CSAPR, see July 12, 2011, article - Environmental Protection Agency Finalizes Cross-State Air Pollution Rule.
EPA's proposed revisions, released quietly on October 6, were largely focused on correcting inaccurate data and typographical errors. For example, in its finalized rule, the agency relied on inaccurate data showing pollution-control equipment had been installed at eight generators in Michigan, Nebraska, New Jersey, Texas and Wisconsin. In fact, this equipment has not been installed. The agency's proposed changes also corrected an error that showed a Florida nuclear power plant was operating, when in fact it is not operating. Other proposed revisions reflected consent decrees resolving litigation involving utilities with plants in Alabama, Indiana, Kansas, Kentucky, Ohio and Tennessee.
But the agency did not propose changing the rule's implementation timelines or reopen for comment the methodology it used to calculate required emissions reductions. EPA proposed the changes by posting materials on its website but not issuing any press releases.
One of the most significant changes proposed by the agency involved increasing the amount of emissions allowances for 10 states, to correct for the factually inaccurate data EPA relied on to calculate emissions baselines and reduction requirements in its cross-state rule.
Another proposed change relates to the penalties for companies that rely too heavily on purchasing emissions allowances to meet their mandated emissions reductions. During Phase I of CSAPR, which starts next January, utilities that buy or sell power across state lines will be permitted to meet a significant portion of their required emissions reductions by buying emissions allowances from other entities. However, starting in January 2014, utilities can only rely on purchased emissions allowances for 18% of their emissions reduction targets. Utilities that exceed that 18% limit after 2014 can expect heavy fines from the EPA.
EPA said the changes to the emissions allowance trading program, also called the "assurance" provisions (to assure that actual emissions reductions were taking place), were necessary to give utilities "limited, but necessary, flexibility so that they can continue to comply with this rule in years in which more fossil-fuel generation occurs than projected in the average base-case year." Allowing utilities to rely more heavily on emissions allowance trading during the 2012-14 period will "promote the development of allowance market liquidity as these revisions are finalized," the agency added in a fact sheet explaining the proposed changes to CSAPR.
"Companies that have been begging for more time to assess the impact of this rule now have some additional time," said Brock Ramey, Industrial Info's manager of research for the North American Power Industry. "The proposed changes may reduce the number of environmental compliance projects, but it's too early to say for sure. The compliance market is extremely dynamic right now. As yet, we have not seen any compliance plans put on hold because of these proposed changes."
EPA proposed these revisions to its finalized cross-state rule on October 6 in response to howls of protest and reams of litigation from utilities, business groups and state and federal lawmakers after EPA originally wrapped up work on CSAPR three months ago. Some of the loudest protests came from Luminant (Dallas, Texas), the largest electric generator in the state of Texas. Luminant, a unit of Energy Future Holdings (Dallas), cried "foul" because the final rule included generators in Texas, whereas the previous draft rule did not. Luminant said that the Lone Star State's 11th Hour inclusion in the final rule would force it to idle about 1,200 megawatts (MW) of lignite-fired generation, close three lignite mines and spend $280 million by the end of 2012 to upgrade existing pollution-control equipment at five other generators. These actions also would force Luminant to eliminate about 500 jobs.
Luminant and others also alleged that CSAPR, as originally finalized, could cause the lights to go out in Texas. During this past summer, the state's transmission operator, the Electric Reliability Council of Texas (ERCOT) (Austin, Texas), issued several pleas for electricity conservation as high heat and humidity levels pushed up electric demand and threatened brownouts or rolling blackouts. (See August 12, 2011, article - Summertime Not a Fun Time for ERCOT.) Although the lights did not go out in Texas this summer, losing an estimated 1,200 MW of electric generation from Luminant could make that more likely, unless new generation could be brought online quickly. Texas has an extremely limited ability to import electricity from other states, as its transmission system has only small interconnections with other states.
"Texas' annual emissions of SO2 and NOx were not included in the proposed Clean Air Transport Rule, thus there was no meaningful opportunity for notice and comment on those annual emissions reductions," Luminant Chief Executive David Campbell said in testimony last month before separate committees in the Texas House and Senate. "EPA's own draft rule, issued in 2010, did not include Texas because the agency's own modeling did not support it," he told Texas state lawmakers. But, one year later, "EPA suddenly switched course. It decided not only to include Texas, but to require massive reductions in less than six months. This rule imposes severe limits on Texas power plants and requires compliance in an unprecedented timeframe."
Luminant operates about 8,000 megawatts (MW) of coal-fired generation in Texas. As originally finalized, CSAPR would have forced Luminant to reduce SO2 emissions by 64% and NOx emission by 22% by next January, Campbell said. In his September testimony, the Luminant CEO said it takes an average of three years to design, permit, and construct new power-plant emissions reduction equipment. "Reducing emissions this much, this soon, will require significant operational changes. There's no way around it." The operational changes he mentioned included temporarily idling two lignite-fired units at the Monticello Power Station.
Business groups and lawmakers, perhaps smelling blood in the water, attacked EPA's proposed CSAPR revisions as not going far enough. The Wall Street Journal quoted U.S. Rep. Ralph Hall (R., Texas), chairman of the House Science Committee, as saying the EPA needed to "step back, reboot and start over." The Journal also quoted Texas Attorney General Greg Abbott as saying, "By making the minor changes announced today, the Obama administration effectively concedes that its rules were flawed--but inexplicably refuses to resolve the real defects." The National Association of Manufacturers (NAM) (Washington, D.C.) and the National Mining Association (NMA) (Washington, D.C.) said the proposed changes didn't go far enough.
EPA's proposed changes drew a lukewarm response from Luminant: In a statement, the utility said, "Changes to CSAPR are necessary to correct flaws in the rule and to avoid damaging near-term impacts on Texas jobs, power prices and electric reliability. It is a step forward that the agency has now proposed changes, validating that the rule issued in July 2011 has flaws in its provisions for Texas. We are in the process of reviewing the proposed revisions and will provide comment to the EPA. Notably, the rule still imposes the same imminent effective date of Jan. 1, 2012."
Recently, the Obama administration's environmental regulation efforts have taken heavy and continual fire from Republicans on Capitol Hill. Last month the president forced the EPA to stop a proposed rulemaking on ground-level ozone. For more on that issue, see September 8, 2011, article - Business Groups Cheer EPA's Withdrawal of Draft Rule on Ground-Level Ozone. A few weeks ago, the House of Representatives approved legislation, H.R. 2401, the Transparency in Regulatory Analysis of Impacts to the Nation (TRAIN) Act, to slow EPA environmental rulemakings affecting manufacturers and energy companies. The rule requires an interagency review of the cumulative impacts of EPA rules on jobs, energy prices, electric reliability and America's overall global economic competitiveness. It faces an uncertain future in the Senate, as coal-state Democrats are expected to join Republicans in supporting it.
View Plant Profile - 1002103 1521126
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
CSAPR, finalized by the EPA on July 6, 2011, requires generators in 27 states to significantly lower emissions of sulfur dioxide (SO2) and oxides of nitrogen (NOx) over a two-phase period. Affected generators are generally located in the Eastern and Central portions of the U.S., generally east of the Mississippi River. By 2014, the rule requires a 73% reduction in SO2 emissions and a 54% reduction of NOx emissions, compared to a 2005 baseline. For more information on CSAPR, see July 12, 2011, article - Environmental Protection Agency Finalizes Cross-State Air Pollution Rule.
EPA's proposed revisions, released quietly on October 6, were largely focused on correcting inaccurate data and typographical errors. For example, in its finalized rule, the agency relied on inaccurate data showing pollution-control equipment had been installed at eight generators in Michigan, Nebraska, New Jersey, Texas and Wisconsin. In fact, this equipment has not been installed. The agency's proposed changes also corrected an error that showed a Florida nuclear power plant was operating, when in fact it is not operating. Other proposed revisions reflected consent decrees resolving litigation involving utilities with plants in Alabama, Indiana, Kansas, Kentucky, Ohio and Tennessee.
But the agency did not propose changing the rule's implementation timelines or reopen for comment the methodology it used to calculate required emissions reductions. EPA proposed the changes by posting materials on its website but not issuing any press releases.
One of the most significant changes proposed by the agency involved increasing the amount of emissions allowances for 10 states, to correct for the factually inaccurate data EPA relied on to calculate emissions baselines and reduction requirements in its cross-state rule.
Another proposed change relates to the penalties for companies that rely too heavily on purchasing emissions allowances to meet their mandated emissions reductions. During Phase I of CSAPR, which starts next January, utilities that buy or sell power across state lines will be permitted to meet a significant portion of their required emissions reductions by buying emissions allowances from other entities. However, starting in January 2014, utilities can only rely on purchased emissions allowances for 18% of their emissions reduction targets. Utilities that exceed that 18% limit after 2014 can expect heavy fines from the EPA.
EPA said the changes to the emissions allowance trading program, also called the "assurance" provisions (to assure that actual emissions reductions were taking place), were necessary to give utilities "limited, but necessary, flexibility so that they can continue to comply with this rule in years in which more fossil-fuel generation occurs than projected in the average base-case year." Allowing utilities to rely more heavily on emissions allowance trading during the 2012-14 period will "promote the development of allowance market liquidity as these revisions are finalized," the agency added in a fact sheet explaining the proposed changes to CSAPR.
"Companies that have been begging for more time to assess the impact of this rule now have some additional time," said Brock Ramey, Industrial Info's manager of research for the North American Power Industry. "The proposed changes may reduce the number of environmental compliance projects, but it's too early to say for sure. The compliance market is extremely dynamic right now. As yet, we have not seen any compliance plans put on hold because of these proposed changes."
EPA proposed these revisions to its finalized cross-state rule on October 6 in response to howls of protest and reams of litigation from utilities, business groups and state and federal lawmakers after EPA originally wrapped up work on CSAPR three months ago. Some of the loudest protests came from Luminant (Dallas, Texas), the largest electric generator in the state of Texas. Luminant, a unit of Energy Future Holdings (Dallas), cried "foul" because the final rule included generators in Texas, whereas the previous draft rule did not. Luminant said that the Lone Star State's 11th Hour inclusion in the final rule would force it to idle about 1,200 megawatts (MW) of lignite-fired generation, close three lignite mines and spend $280 million by the end of 2012 to upgrade existing pollution-control equipment at five other generators. These actions also would force Luminant to eliminate about 500 jobs.
Luminant and others also alleged that CSAPR, as originally finalized, could cause the lights to go out in Texas. During this past summer, the state's transmission operator, the Electric Reliability Council of Texas (ERCOT) (Austin, Texas), issued several pleas for electricity conservation as high heat and humidity levels pushed up electric demand and threatened brownouts or rolling blackouts. (See August 12, 2011, article - Summertime Not a Fun Time for ERCOT.) Although the lights did not go out in Texas this summer, losing an estimated 1,200 MW of electric generation from Luminant could make that more likely, unless new generation could be brought online quickly. Texas has an extremely limited ability to import electricity from other states, as its transmission system has only small interconnections with other states.
"Texas' annual emissions of SO2 and NOx were not included in the proposed Clean Air Transport Rule, thus there was no meaningful opportunity for notice and comment on those annual emissions reductions," Luminant Chief Executive David Campbell said in testimony last month before separate committees in the Texas House and Senate. "EPA's own draft rule, issued in 2010, did not include Texas because the agency's own modeling did not support it," he told Texas state lawmakers. But, one year later, "EPA suddenly switched course. It decided not only to include Texas, but to require massive reductions in less than six months. This rule imposes severe limits on Texas power plants and requires compliance in an unprecedented timeframe."
Luminant operates about 8,000 megawatts (MW) of coal-fired generation in Texas. As originally finalized, CSAPR would have forced Luminant to reduce SO2 emissions by 64% and NOx emission by 22% by next January, Campbell said. In his September testimony, the Luminant CEO said it takes an average of three years to design, permit, and construct new power-plant emissions reduction equipment. "Reducing emissions this much, this soon, will require significant operational changes. There's no way around it." The operational changes he mentioned included temporarily idling two lignite-fired units at the Monticello Power Station.
Business groups and lawmakers, perhaps smelling blood in the water, attacked EPA's proposed CSAPR revisions as not going far enough. The Wall Street Journal quoted U.S. Rep. Ralph Hall (R., Texas), chairman of the House Science Committee, as saying the EPA needed to "step back, reboot and start over." The Journal also quoted Texas Attorney General Greg Abbott as saying, "By making the minor changes announced today, the Obama administration effectively concedes that its rules were flawed--but inexplicably refuses to resolve the real defects." The National Association of Manufacturers (NAM) (Washington, D.C.) and the National Mining Association (NMA) (Washington, D.C.) said the proposed changes didn't go far enough.
EPA's proposed changes drew a lukewarm response from Luminant: In a statement, the utility said, "Changes to CSAPR are necessary to correct flaws in the rule and to avoid damaging near-term impacts on Texas jobs, power prices and electric reliability. It is a step forward that the agency has now proposed changes, validating that the rule issued in July 2011 has flaws in its provisions for Texas. We are in the process of reviewing the proposed revisions and will provide comment to the EPA. Notably, the rule still imposes the same imminent effective date of Jan. 1, 2012."
Recently, the Obama administration's environmental regulation efforts have taken heavy and continual fire from Republicans on Capitol Hill. Last month the president forced the EPA to stop a proposed rulemaking on ground-level ozone. For more on that issue, see September 8, 2011, article - Business Groups Cheer EPA's Withdrawal of Draft Rule on Ground-Level Ozone. A few weeks ago, the House of Representatives approved legislation, H.R. 2401, the Transparency in Regulatory Analysis of Impacts to the Nation (TRAIN) Act, to slow EPA environmental rulemakings affecting manufacturers and energy companies. The rule requires an interagency review of the cumulative impacts of EPA rules on jobs, energy prices, electric reliability and America's overall global economic competitiveness. It faces an uncertain future in the Senate, as coal-state Democrats are expected to join Republicans in supporting it.
View Plant Profile - 1002103 1521126
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
