In my mind, the mid-term elections again proved that America prefers a house divided when it comes to federal government leadership. The question for the coal-fired generation industry is, will the Republicans’ ascendance in the House have any effect on the administration’s regulatory juggernaut against coal plants? I’m not optimistic that it will.
The coal industry has been fighting back on five key regulatory fronts during the past two years. The good news is that cap and trade is gone and forgotten. The subject is kryptonite in Washington, and the newly elected House will keep its distance.
It was an industry victory, although short-lived, against legislation that would have institutionalized what I believe to be an energy tax in disguise. The legislative path to controlling carbon emissions is now closed, perhaps for a decade or more, but that doesn’t mean that a battle won ends the conflict. The administration has all but given up on the legislative option of bringing the coal-fired power industry to heel. Instead, the Executive Branch has sidestepped the Congress and has put its full weight behind the "regulate to death" option.
The Two Options
In earlier editorials I have written about the two-pronged approach the administration took in its efforts to control carbon emissions. The "carrot" approach was to bring stakeholders to the negotiating table by making their support of the American Power Act economically worthwhile. Several major utilities (especially those with nuclear plants), most equipment manufacturers that sell to the industry, and even the Edison Electric Institute lined up in support of the legislation. I was especially amused by the strong support from nuclear utilities—I’m sure it had nothing to do with the formula for allocating allowances that would have brought a windfall worth hundreds of millions of dollars over time for sitting quietly on the sidelines. Thankfully, the Senate euthanized that legislation before it got much traction.
The Big Four
That brings us to my list of four big regulatory obstacles facing the U.S. coal-fired power generation industry in the coming years. In no particular order, they follow.
1. Carbon Regulations. The administration’s backup plan to the legislative option was the much less desirable approach (the "stick") to reducing carbon emissions: Let loose the Environmental Protection Agency (EPA) to regulate carbon under the imprimatur of the Clean Air Act (CAA). Over the past two years, the EPA has pushed forward regulations to control carbon from all segments of our economy. Most recently, it released rules for determining best available control technology. These regulations become effective January 2011, although the EPA has been exerting its authority to slow or stop new coal plant permit applications for some time.
Many lawsuits have been filed to stop these regulations from becoming effective. Some challenge the EPA’s science, others are challenging the process, while several suits challenge the EPA’s interpretations of the CAA, particularly with regard to its "Tailoring Rule," which has arbitrarily redefined the level of emissions from stationary sources that must be regulated. In addition, not all of the states are happy about the rapid introduction of carbon regulations given their administrative burden or because they believe the EPA doesn’t have the authority to impose the rules.
How the myriad lawsuits will play out in the future remains unclear, but given the EPA’s rush to carbon judgment and its remarkably poor record of writing rules that pass judicial scrutiny (remember the Clean Air Interstate Rule and the Clean Air Mercury Rule?) I suspect carbon regulations have little chance to remain whole over the next year or two.
2. Cooling Water Regulations. The North American Electric Reliability Corp. (NERC), in its annual report, "Potential Resource Adequacy Impacts of U.S. Environmental Regulations," identifies the Clean Water Act Section 316(b) regulations governing cooling water intake structures as having significant potential impact on system reliability. In essence, the regulations, still under development, will require plants that use ocean and river once-through cooling water to replace that process with cooling towers.
NERC notes in the report, "Implementation of this rule will apply to 252 GW (1,201 units) of coal, oil steam, and gas steam generating units across the United States, as well as approximately 60 GW of nuclear capacity (approximately a third of all resources in the U.S.)." The report goes on to note that the rule may have the effect of forcing smaller plants to close because of the high retrofit cost. However, it’s the nuclear industry that will take the big hit with derates up to 3.5% possible on 59 affected plants. Other sources list 413 coal plants affected by the regulation and estimate the cost of compliance from $300 million per coal plant up to $1 billion per nuclear plant.
This regulation has been written, released, and suspended over the past nine years. The regulation finally landed in front of the Supreme Court in 2009. The court held, in the words of an EPA fact sheet, that the EPA "may consider cost-benefit analysis in choosing among regulatory options, but did not hold that the Agency must consider it." Although it’s difficult to predict when a revised regulation will be finalized, the EPA is now working on a new Information Collection Request to "value the benefits" of the proposed regulations.
3. Coal Ash Regulations. I wrote last issue’s editorial, "Ash Me No Questions," about the EPA’s bifurcated approach to developing new regulations for wet ash impoundments. In sum, the EPA issued two proposed rules where wet coal ash was considered a "non-hazardous" or "hazardous" waste product (a Resource Conservation and Recovery Act Subtitle C or D classification). It’s hard to tell the likely outcome of this regulation given the difference of opinions among top-level administration staffers. Earlier, the EPA wrote that "maintaining a [non-hazardous] approach would not be protective of human and the environment," yet Carol Browner, President Obama’s top environmental aide, was the EPA administrator in 2000 when she ruled wet coal ash was non-hazardous. The word on the street was that the EPA would make a final decision by year-end.
4. Boiler MACT Regulations. The EPA has proposed rules to tighten limits on hazardous air pollutants (HAPs) from boilers of all types, including utility boilers. The rules would impose maximum achievable control technology (MACT) on any major HAP source, defined as any single source exceeding 10 tons per year or any combination that exceeds 25 tons per year. The rule applies to all existing fossil fuel–fired utility boilers by the end of 2013 and those built after the rule is finalized.
The EPA said the capital cost of the rule would be about $9.5 billion in 2013, and carry a total national annual cost of $2.9 billion, including fuel savings, control device operation and maintenance and monitoring, recordkeeping and reporting, and performance testing. Industry representatives complain that the MACT rules were developed for each HAP independently, with no consideration of their many interrelationships. A good example is a selective catalytic reduction system that is effective at removing NOx but may increase the amount of CO or ammonia in the flue gas. These regulations have the potential, despite the EPA’s estimates, to require enormous investment by utilities given how little research and development and testing has been done to determine what clean-up equipment might be necessary.
During a campaign stop on January 17, 2008, President Obama was interviewed by the San Francisco Chronicle about his views of coal-fired power generation. During that 48-minute and 33-second interview, Obama was quite clear about his dislike of coal-fired power plants and reiterated that it was his goal to put owners (and their employees) out of business.
Excerpts from the transcript of that interview and audio excerpts including the following quotes provide much insight into the goals and motivations of the Obama administration’s preoccupation with heaping new regulations on coal plants:
"So if somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted…
"The only thing I’ve said with respect to coal, I haven’t been some coal booster. What I have said is that for us to take coal off the table as a [sic] ideological matter as opposed to saying if technology allows us to use coal in a clean way, we should pursue it…
"So if somebody wants to build a coal-powered plant, they can. It’s just that it will bankrupt them."
These comments are usually written off as pandering to the electorate during a heated campaign season. I saw them then, as I do now, as Obama’s desired industry end state. The EPA’s regulatory agenda is merely his means to that end.
—Dr. Robert Peltier, PE, is COAL POWER’s editor-in-chief.