Luminant, AEP to Mothball Coal Units, Implement Derates on CSAPR Compliance Concerns

Dallas-based Luminant, Texas’ largest power generator, on September 9 filed a legal challenge against the Environmental Protection Agency’s (EPA’s) Cross State Air Pollution Rule (CSAPR) but said the newly finalized rule that will require generators to dramatically reduce sulfur dioxide and nitrogen oxide emissions from power plants had forced it to idle two coal-fired units and reduce capacity at three other units. This decision follows a similar decision made by American Electric Power to shutter 6GW of coal-fired plants in June.

Dallas-based Luminant, Texas’ largest power generator, on September 9 filed a legal challenge against the Environmental Protection Agency’s (EPA’s) Cross State Air Pollution Rule (CSAPR) but said the newly finalized rule that will require generators to dramatically reduce sulfur dioxide and nitrogen oxide emissions from power plants had forced it to idle two coal-fired units and reduce capacity at three other units. The decision follows talks between the company and the EPA, in which the agency suggested the closures are not the “only path forward.”

The company would be forced to idle its Monticello Units 1 and 2 and implement derates resulting from switching to 100% Powder River Basin (PRB) coal at Monticello 3 and Big Brown Units 1 and 2 to meet the rules’ “unrealistic deadline and requirements,” Luminant said. These actions would reduce the company’s generating capacity by about 1,300 MW—about 9% of the company’s total. Luminant would also cease mining Texas lignite at three mines and implement several other actions to reduce emissions, including making substantial investments in its facilities, it said.

The legal challenge against the rule would serve “to protect facilities and employees, and to minimize the harm this rule will cause to electric reliability in Texas,” the company said in statement.

Luminant is committed to complying fully with EPA regulations, but it had spent the last two months “identifying all possible options to meet the requirements of this new rule, and we are launching a significant investment program to reduce emissions across our facilities. However, meeting this unrealistic deadline also forces us to take steps that will idle facilities and result in the loss of jobs,” said David Campbell, Luminant’s CEO.

"At every step of this process, we have tried to minimize these impacts, and it truly saddens me that we are being compelled to take the actions we’ve announced today. We have filed suit to try to avoid these consequences.”

Luminant: “Rule’s Mandates for Texas Are Unlawful”

The EPA finalized the CSAPR rule this July, requiring 27 states—including, for the first time, Texas—to significantly reduce power plant emissions that contribute to ozone and fine particle pollution in other states starting on Jan. 1, 2012. A December 2008 court ruling had directed the EPA to issue a new rule to replace its court-vacated 2005 Clean Air Interstate Rule.

The EPA has estimated CSAPR could cost $800 million a year in 2014, along with roughly $1.6 billion in capital investments a year to comply with the rule—but the agency has maintained that the final rule could yield $120 billion to $280 billion in annual health and environmental benefits. “This rule will not disrupt a reliable flow of affordable electricity for American consumers and businesses,” it says on its website. “Health benefits will be achieved at a very low cost, and while the effect on prices for specific regions or states may vary, they are well within the range of normal electricity price fluctuations. Any such costs will be greatly outweighed by the benefits.”

But Luminant, backed by other companies and the state of Texas, has said it believes the rule’s mandates for Texas are “unlawful.” “A year ago, the EPA’s proposed rule did not include Texas in the annual SO2 and NOx reductions programs. Now, one year later, the CSAPR imposes a 47% SO2 reduction and substantial NOx reductions by Texas sources beginning in January 2012. And notably, the rule requires a 64 percent reduction of SO2 emissions to Luminant’s fossil fuel generating units.”

The company’s suit filed in the U.S. Court of Appeals for the District of Columbia Circuit seeks to invalidate the CSAPR in Texas. It also seeks a judicial stay of the rule, citing the “immediate and irreparable harm that it will inflict.” Among key points that Luminant plans to demonstrate is that “The standard time frame for permitting, constructing, and installing new emission controls is several years, yet the rule allowed less than six months.” It will also argue that Texas would bear 25% of the SO2 reduction burden imposed under CSAPR—more than twice the state’s contribution to the total SO2 emissions of all states included in the rule. “Before these mandates go into effect, current SO2 emissions rates for the state’s power generation plants are already lower than the average of the other states included in the rule.”

“Idling Plants Will Be Necessary”

Compliance in the “extremely compressed time frame” will force implementation of production and operational changes, including idling of Units 1 and 2 (a total capacity of about 1,200 MW) at the three-unit 1,980-MW Monticello Power Plant in Titus County, Texas, and switching Monticello Unit 3 from Texas lignite to 100% PRB coal. The Thermo and Winfield mines will cease mining Texas lignite with the idling of Monticello Units 1 and 2 and the fuel switching at Monticello Unit 3, but Luminant will continue reclamation activities at these sites, the company said.

At the 1,150-MW Big Brown power plant—a PRB Coal Users’ Group (PRBCUG) Plant of the Year—and its supporting mine in Freestone County, Texas, Units 1 and 2 will cease using Texas lignite and operate on 100% PRB coal, replacing a mix of 42% PRB coal and 58% lignite.

Luminant also said it would begin a “substantial investment program” at Monticello Unit 3 and two other generation facilities, the Martin Lake Power Plant in Rusk County and the Sandow 4 Power Plant in Milam County. Actions include upgrading existing environmental control equipment and installing new environmental control equipment—though these won’t occur before the CSAPR deadline. The upgrades and new controls are expected to cost about $280 million by the end of 2012 and more than $1.5 billion before the end of the decade, Luminant said.

AEP to Retire 6 GW of Coal Generation

American Electric Power (AEP) also announced in June plans to retire nearly 6 GW of coal-fired capacity and upgrade or refuel another 11 GW as part of an estimated $8 billion plan to comply with a series of regulations proposed by the EPA.

About 25 GW of AEP’s 38-GW capacity is coal-fired—making it the biggest coal-based utility in the nation. The announced closures will affect five coal plants and several aging units at other plants that were built between 1944 and 1961. AEP also said it would upgrade or install new advanced emissions reduction equipment on another 10,100 MW; refuel 1,070 MW of coal generation as 932 MW of natural gas capacity; and build 1,220 MW of natural gas-fueled generation.

The cost of the Ohio-based utility’s compliance plan could range from $6 billion to $8 billion in capital investment through 2020, AEP said. “High demand for labor and materials due to a constrained compliance time frame could drive actual costs higher than these estimates. The plan, including retirements, could change significantly depending on the final form of the EPA regulations and regulatory approvals from state commissions.”

AEP said it had already spent more than $7.2 billion in retirements and retrofits to its coal-fired fleet since 1990. “Annual emissions of nitrogen oxides from AEP plants are 80 percent lower today than in 1990. Sulfur dioxide emissions from AEP plants are 73 percent lower than in 1990.” Coal would fuel approximately 57% of AEP’s total generating capacity by the end of the decade, according to the plan.

“The cumulative impacts of the EPA’s current regulatory path have been vastly underestimated, particularly in Midwest states dependent on coal to fuel their economies,” said Michael G. Morris, AEP chairman and CEO. “We have worked for months to develop a compliance plan that will mitigate the impact of these rules for our customers and preserve jobs, but because of the unrealistic compliance timelines in the EPA proposals, we will have to prematurely shut down nearly 25 percent of our current coal-fueled generating capacity, cut hundreds of good power plant jobs, and invest billions of dollars in capital to retire, retrofit and replace coal-fueled power plants.”

Morris added that the closures could result in a “sudden increase in electricity rates,” which would impact state economies “at a time when people and states are still struggling.” The closures would also result in a loss of about 600 power plant jobs (with annual wages totaling about $40 million) as a result of compliance with the proposed federal rules.

The potential impacts on the reliability of the transmission system—particularly in the Midwest—were also significant, Morris said. “The proposed timelines for compliance aren’t adequate for construction of significant retrofits or replacement generation, so many coal-fueled plants would be prematurely retired or idled in just a few years.

“With more time and flexibility, we will get to the same level of emission reductions, but it will cost our customers less and will prevent premature job losses, extend the construction job benefits, and ensure the ongoing reliability of the electric system,” he said.

The five plants slated for closure by Dec. 31, 2014, are: the 335-MW Glen Lyn Plant, Glen Lyn, Va.; the 630-MW Kammer Plant, Moundsville, W.Va.; the 400-MW Kanawha River Plant, Glasgow, W.Va.; the 1,050-MW Phillip Sporn Plant, New Haven, W.Va. (of which 450 MW will be retired this year and 600 MW retired in 2014); and the 100-MW Picway Plant, Lockbourne, Ohio.

AEP also expects to retire or convert the following units:

  • Big Sandy Plant, Louisa, Ky.– Units 1 and 2 (1,078 MW) retired by Dec. 31, 2014; Big Sandy Unit 1 would be rebuilt as a 640-MW natural gas plant by Dec. 31, 2015;
  • Clinch River Plant, Cleveland, Va.– Unit 3 (235 MW) retired by Dec. 31, 2014; Units 1 and 2 (470 MW total) would be refueled with natural gas with a capacity of 422 MW by Dec. 31, 2014;
  • Conesville Plant, Conesville, Ohio– Unit 3 (165 MW) retired by Dec. 31, 2012; Units 5 and 6 (800 MW total) would continue operating with retrofits;
  • Muskingum River Plant, Beverly, Ohio– Units 1-4 (840 MW) retired by Dec. 31, 2014; Muskingum River Unit 5 (600 MW) may be refueled with natural gas with a capacity of 510 MW by Dec. 31, 2014, depending on regulatory treatment in Ohio;
  • Tanners Creek Plant, Lawrenceburg, Ind.– Units 1, 2 and 3 (495 MW) retired by Dec. 31, 2014; Unit 4 (500 MW) would continue to operate with retrofits; and
  • Welsh Plant, Pittsburg, Texas– Unit 2 (528 MW) retired by Dec. 31, 2014; Units 1 and 3 (1,056 MW) would continue to operate with retrofits.
  • The two coal-fueled generating units at Northeastern Plant (935 MW) in Oologah, Okla., would be idled for a year or more while emission reduction equipment is installed. Both units would be idled beginning Jan. 1, 2016. One unit would return to service by Dec. 31, 2016. The other unit would return to service by Dec. 31, 2017.

Sonal Patel is a senior staff writer for COAL POWER

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