Law and the Environment : Environmental Lawyer & Attorney : Foley Hoag Law Firm : Boston, Washington D.C.

If anyone had any doubts about the significance of the conventional pollutant regulations that EPA would be rolling out, even in the absence of a full cap-and-trade program for GHG, Wednesday’s release of EPA’s revised power plant MACT proposal should go a long way towards eliminating those doubts. As most readers know, the rule replaces the Bush-era MACT rule that would have created a trading program.

The rule poses a problem for critics of EPA. While arguments can be made about the feasibility of some of the standards and the cost to comply, they cannot credibly allege that it is a back-door effort to regulate coal out of existence. The rule is required by statute and the courts already rejected EPA’s attempt to implement a trading program for mercury.

Apparently, EPA acknowledges that this rule will result in the shut-down of approximately 10 GW of coal-fired capacity, though EPA is taking the position that most of that capacity would shut down for other reasons.

As to substance, the rule is too long – the currently available version weighs in at 946 pages – to describe here. EPA has a reasonably helpful summary, though it doesn’t describe the actual standards. Suffice it to say that, given the absence of a trading program, and the imposition of very low emission standards for mercury and PM (or non-mercury metals), control technology will be necessary to comply with the standards. I don’t think that there’s any such thing as low mercury or low PM coal. The days of uncontrolled coal units are coming to an end.

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Is mercury a local problem or not? For years, power plant operators have claimed that mercury deposition is really a global problem. Environmentalists have pointed to studies arguing that hot spots affected by local emissions do exist. This week, according to the Cape Cod Times, John Colman, a USGS researcher – hardly likely to be a shill for the power industry – is going to report results of a study showing that mercury accumulation in both soil samples and fish tissue are comparable in Cape Cod and the Olympic Peninsula in Washington. Given prevailing wind directions, it’s hard to find a local source for mercury on the Olympic Peninsula.

According to the Cape Cod Times, Mr. Colman said that "the idea that burning coal is screwing up fish all over the Northern Hemisphere is kind of terrifying.” And I’ll bet that the United States power generation industry finds it terrifying that it may have to make very substantial – and costly – reductions in mercury emissions even though US emissions are about 5% of the world total and may not have a significant impact on the US environment.

I’m not discounting the need for regulation in the United States. Mercury is a real toxin. However, it would also be wrong to ignore the global aspect. To regulate the US power generation industry because doing so will solve a significant public health and environmental problem is one matter. To regulate the US power generation industry because we have to send a signal to the world that we are willing to regulate ourselves in order to persuade China to control mercury from its own coal-fired power plants is another. When the state of our nation is such that businesses are looking to put “China-Free” labels on their products, it will not be easy to persuade a significant segment of the population to support costly mercury controls when there is evidence that a substantial part of the problem stems from cheap coal-fired energy in China that delivers a twofer – allowing China to make goods more cheaply, while exporting its mercury pollution downwind to the United States.

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Last March, I noted that Gina McCarthy’s belief that, in the near term, the biggest impact on GHG emissions would come from EPA’s traditional regulatory programs, rather than through GHG regulation. A report recently released by Credit Suisse indicates that she might be right. Looking at EPA’s upcoming promulgation of the Clean Air Transport Rule and the mercury MACT rule, Credit Suisse predicts that between 50 and 69 gigawatts of old coal plants will be retired between 2013 and 2017 as a result of implementation of the two rules. Credit Suisse also predicts that approximately 100 gigawatts of capacity will require significant additional investment to comply with the rules.

For those with money to invest, Credit Suisse recommends clean plants in dirty markets – a not surprising conclusion. 

For those more interested in the regulatory side of things, it is worth noting that the Credit Suisse analysis is admittedly fairly simplistic. They pretty much just looked at small plants lacking scrubbers as candidates for closure. As the report puts it:

environmental control costs are non-linear (they’re more expensive on a unit of capacity basis at a small coal plant) and because these plants are generally older and less efficient in energy conversion.

Without details about individual plants, the Credit Suisse approach is certainly reasonable. I note only that, where plants are not closed, installation of scrubbers for SO₂ or SCRs for NO_x actually increases GHG emissions, because scrubbers and SCR require additional station service, making the plants less efficient to operate than previously. Overall, I don’t doubt that the closure of coal plants will outweigh the decrease in efficiency in the coal plants that remain operational, but both effects should be included in any analysis of the impact of the Transport Rule and the MACT rule on GHG emissions.

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While Congress may be fiddling on climate legislation, Senators Carper and Alexander are attempting to put three pollutant legislation back on the congressional agenda. Yesterday, they introduced an aggressive three pollutant bill. Here are the highlights. The bill would:

Codify the CAIR program through 2011

Gradually reduce the cap on SO₂ emission allowances to 1.5 million tons by 2018 – substantially more stringent than the CAIR would have imposed. 

Reduce NO_x caps to 1.6 million tons by 2015. 

Create two NO_x trading zones. Zone 1 includes 32 Eastern states and the District of Columbia. Zone 2 includes the remaining 16 contiguous states.

Coal- and oil-fired power plants would have to reduce mercury emissions by 90%. There would be no trading program for mercury.

I still find it remarkable that Senator Alexander, a coal-state Republican, is a co-sponsor of the bill. Nor does he seem to be half-hearted about it. Money quote:

We have a number of different things to work out on carbon.…  But there's no excuse for waiting a minute on SOx, NOx and mercury because we have the technology, we know what to do, and we shouldn't be operating coal plants without pollution control equipment. (My emphasis.)

I have, until recently, assumed that climate change legislation would happen this year. Now that that seems less likely, and with Senator Alexander as a sponsor, it will be interesting to see if the Senate is able to move this legislation, as an alternative. It is worth noting that climate change legislation necessarily would also have resulted in reductions in SO₂, NO_x, and mercury. Unfortunately, the converse is not also true. In the absence of GHG controls, three pollutant legislation would actually increase GHG emissions, because the traditional means of reducing emissions of SO₂, NO_x, and mercury are energy hogs. Oh, well.

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As I noted a couple of weeks ago, Representative John McHugh (R-NY) has introduced legislation that would require significant reductions in emissions of SO₂ and NO_x, and mercury from power plants. Now, Senators Carper (D-Del.) and Alexander (R-Tenn.) have announced that they will be introducing their own three-pollutant legislation in the Senate. Since they have not yet introduced a bill, we’ll all just have to imagine the specifics for now, but a few interesting nuggets have jumped out of the press releases and news reports.

First, Representative McHugh apparently wants to tie his legislation to the climate bill. However, Senator Alexander, at least, affirmatively wants to keep three-pollutant legislation separate from the climate bill. Senator Alexander seems to be looking to make a name for himself as a Republican willing to advance environmental causes. In addition to this bill, he is also sponsor of legislation that would preclude mountaintop removal. Keeping this bill separate from climate legislation may be a way to walk a fine line, since one can still imagine a scenario in which there is significant pressure from the GOP leadership to have all Republican Senators oppose climate legislation.

Second, Senator Carper specifically referred to using market forces to regulate SO₂ and NO_x, but he did not use similar language for mercury, which suggests that, like the McHugh legislation, the Senate bill will also require facility-specific mercury reductions, rather than allowing a cap-and-trade program for mercury.

EPA is apparently indicating that it may take two years to promulgate new regulations to replace its ill-fated CAIR regulations. In that context, if the movers and shakers in Congress perceive that three-pollutant legislation can pass relatively quickly, it might be seen as an appropriate way to show some environmental progress while climate change proposals get turned into legislative sausage.

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Harking back to legislative efforts of a few years ago, Representative John McHugh (R-NY) yesterday introduced legislation that would require significant reductions in emissions of SO₂ and NO_x, and mercury from power plants. The highlights of the bill include the following:

• No later than two years from enactment, EPA must promulgate regulations requiring that powerplants:
  • reduce SO₂ emissions by 75% over the Phase II levels contained in the current CAA acid rain program
  • reduce NO_x emissions by 75% over 1997 levels
• Even aside from the above-described reductions, on the later of 5 years from enactment or 30 years from initial operation, powerplants must meet applicable new source performance standards, or NSPS
• Mercury emissions from coal-fired powerplants will be restricted to 0.6 pounds per trillion Btu. These limits will go into effect:
  • As of the date of operation, for facilities beginning operations after December 31, 2010
  • As of January 1, 2013, for facilities existing as of December 31, 2010

There is no provision for a cap-and-trade program with respect to mercury. The bill would impose a penalty of $10,000 per ounce on facilities that exceed the mercury limit.

Representative McHugh has said that he hopes to attach the legislation to the climate change bill. I haven’t seen any discussion yet regarding the bill’s prospects, but the fact that it was introduced by a Republican, albeit one from New York, suggests that something like this is at least possible. 

To me, the requirement that existing facilities attain NSPS may be the most interesting part of the bill. While the regulated community is diverse, I think that, given sufficient time to meet NSPS, at least some fraction of owners of existing facilities would be willing to do so, if – and it’s a big if – Congress would in return make changes to the NSR/PSD rules so that facility owners would not have to engage in a difficult, expensive, and uncertain NSR review for every conceivable facility modification. Freedom from NSR review in return for compliance with NSPS by a reasonable date certain? That would be an interesting trade-off.

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Coal has taken its lumps this week. Today, legislation was introduced in Congress to require EPA to promulgate MACT standards for mercury emissions from coal-fired power plants within one year of enactment of the legislation.

There has been some suggestion that the legislation was filed simply to prod EPA to drop its appeal of the decision by the D.C. Circuit Court of Appeals rejecting EPA’s Clean Air Mercury Rule (CAMR), which would have created a cap and trade program for mercury emissions. If so, it worked, if only by telepathy, because, in a separate announcement today, EPA withdrew that appeal.

One way or another, it is clear that EPA will be promulgating, as soon as it reasonably can manage, MACT standards for mercury emissions. What is also clear is that complying with those standards will be more expensive than compliance with the CAMR would have been. What’s not clear is whether EPA will figure out a way to harmonize the mercury rule with other air rules issued and to be issued, so that, while compliance will have to occur on a facility-specific basis, it can at least be achieved as cost-effectively as possible at each facility.

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