It's been a few weeks since I last blogged, as the day job can be kind of a hindrance, so let me bring you up to speed on the three most significant EPA rule makings as they affect fossil power generation. I've addressed the status and implications of each rule, in decreasing order of certainty, with respect to what is currently known.
The Utility MACT Rule
The Utility MACT rule sets maximum achievable control technology (MACT) standards for coal and oil generating stations for removing mercury, acid gasses and a variety of toxic metals from the flue gases for coal- and oil-fired utility boilers. The EPA projects that the Rule’s annual incremental compliances cost will be $9.6 billion. This rule-making has been finalized and is largely viewed to be above legal challenge. The rule was first issued on March 16th, 2011 and finalized on December 16th, 2011. The MACT rule complies with a Consent Decree of the D.C. Court of Appeals that requires the EPA to fulfill the Clean Air Act (CAA) regarding hazardous air pollution from power plants. The Clean Air Act required the EPA to determine whether such regulation is “appropriate and necessary,” which the EPA did in 2000.
Industry efforts failed to extend the deadline for compliance when a federal court denied a requested one year postponement. Congress discussed and even voted bills that would delay the rule, but neither passed both houses and faced Presidential vetoes. Additionally, Section 307(b)(1) of the Clean Air Act stated that “any petitions seeking either administrative or judicial review of a final EPA rule must be filed within 60 days after the rule is published in Federal Register.” We are well past that phase now.
As described in my recent blog, some changes made during the public review process were embodied in the final rule. For example, filterable particulate matter can be used as a surrogate for non-mercury HAP metals, which contributes to substantially fewer scrubbers being installed on coal-fired units. In an important late addition required by MACT, "neural network" optimization systems now qualify for the "optimizing of NOx and CO". Boilers benefitting from such optimization can delay participation in the EPA best practices boiler operations evaluations by one year and reduce the frequency for subsequent evaluations from every 3 years to every 4 years. The EPA’s explicit recognition on the value of optimization not only reduces a painful regulatory burden by 25%; but it also signals that the EPA views closed-loop optimization as part and parcel of the best practices boiler operations as they pertain to minimizing non-measurable HAPS (i.e. fiurin and dioxin).
The CSAPR Rule
Now let's move on to a rule-making a bit more up in the air, so to speak. As I'm sure you’re aware, the US Court of Appeals for the D.C. Circuit issued a ruling on December 30th, 2011 to stay the Cross-State Air Pollution Rule (CSAPR), which had scheduled to take effect on January 1st, 2012. The rule requires 28 Eastern and Midwestern states to reduce SO2 and NOx emissions, accompanied by a supplemental rule finalized in December mandating five states to make summertime NOx reductions as part of CSAPR ozone season control program.
The D.C. Court appears to be keeping its promise of an aggressive schedule for addressing its judicial stay of CSAPR. The consolidated plaintiffs (Homer City, et. al) submitted their collective written arguments last month and the EPA submitted its brief in defense Oral arguments on March 13th, with a court ruling expected shortly thereafter. Here's a high-level summary of the EPA arguments:
• The Transport Rule’s approach to “significant contribution” is consistent with CAAA and this court’s precedent
• Cost considerations are a proper part of the Transport Rule’s “significant contribution” approach
• EPA’s approach does not result in “over-control” of emissions from upwind states
• Petitioners’ claim that states were not required to submit SIPs to meet their statutory obligation to address interstate transport is not properly before the court and is meritless
• EPA’s approval of CAIR SIPs does not eliminate its authority to issue the Transport Rule FIPs
• EPA reasonably addressed transmission constraints in establishing state budgets and allocating allowances to individual sources
• EPA was required to set expeditious compliance aligned with NAAQS attainment deadlines
• The emissions reductions required for 2012 and 2014 are practicable
The content and forcefulness of these arguments suggests that CSAPR’s originally published and modified regulations are consistent with the court's original reasons for over-turning CAIR with the requirements of the CAA and CAAA statues. Virtually everyone I’ve spoken to in the power industry expects and is preparing for CSAPR to move forward expeditiously later this year, in much the same fashion as it was originally issued.
GHG Standards for Existing Plants
And finally, the most speculative of all three, the long-awaited EPA promulgation of efficiency standards for existing plants for green house gas reduction. These regulations are EPA's response to the US Supreme Court's ruling that carbon dioxide emissions is a threat to public health and builds upon the court-mandated EPA endangerment finding. That finding has enormous implications, since it requires the EPA to regulate CO2 emissions under the CAA.
Though the Supreme Court has clarified that greenhouse gases (GHGs) were pollutants within the definition of the statute in Massachusetts v. EPA (2007), it did not specify which regulatory tools the agency must use for which sources of GHGs. States and environmental groups moved to resolve this uncertainty by suing the EPA in 2008, seeking required performance standards for GHG emissions from fossil fuel electric generating units (EGUs) and refineries. EPA settled the suit in December 2010 by agreeing to implement performance standards for new and existing generating units and refineries. The EPA stated that these regulations would be finalized by 2012 stating "it remains unclear exactly what that standard might be, whether a limit for greenhouse gas emissions per kilowatt-hour of electricity produced, pollution per amount of fuel burned, or a requirement for all coal-burning power plants to achieve a certain level of efficiency.”
The net result of all the legal wrangling is that GHGs must be regulated in the same manner as NOx and SO2 under the CAA. Accordingly, we can look toward the CAA to understand the applicable approaches subject to existing law. Under Section 111(d) of the statute, the EPA sets guidelines for states’ regulation of existing sources, i.e. those that are not new or being modified. The EPA is directed to identify the “best system of emissions reduction” for each pollutant and use that to set the standard or guideline. Emitters are not required to use the specific technology identified by EPA, but they must achieve similar emissions performance. In other words, the regulations are performance standards, as opposed to command-and-control technology mandates.
Consistent with this approach, the EPA published a technical document in October 2010 titled "Available and Emerging Technologies for Reducing Greenhouse Gas Emissions from Coal-Fired Electric Generating Units." In it, the EPA concludes that capture and sequestration are not commercially viable, but outlines six available, commercially viable technologies for reducing GHG at existing generating units, all of them taking the form of increased efficiency, i.e. heat rate improvement. These six technologies are as follows:
Combustion Control Optimization: identified technologies include neural networks. Expected Efficiency Gain: 0.15 to 0.84%
Cooling System Heat Loss Recovery: identified technologies include replacing the cooling tower fill (heat transfer surface) and tuning the cooling tower and condenser. Expected Efficiency Gain: 0.2 to 1%
Sootblower Optimization: identified technologies include intelligent or neural-network sootblowing (i.e., sootblowing in response to real-time conditions in the boiler) and detonation sootblowing. Expected Efficiency Gain: 0.1 to 0.65%
Flue Gas Heat Recovery: identified technologies include systems to recover energy lost in the flue gas to preheat boiler feedwater via use of a condensing heat exchanger. Expected Efficiency Gain: 0.3 to 1.5%
Low-rank Coal Drying: identified technologies include using waste heat from the flue gas and/or cooling water systems to dry low-rank coal prior to combustion. Expected Efficiency Gain: 0.1 to 1.7%
Steam Turbine Design: identified technologies include improved design of turbine blades and steam seals which can increase both efficiency and output. Expected Efficiency Gain: 0.84 to 2.6%
Looking at the range of efficiency improvements across these six technologies, it appears likely that the required GHG reductions (efficiency improvements) will be in the range of 0.5-1.5%. The reality is that the only way to reduce GHG emissions short of capture and sequestration is through improving efficiency; and there’s only a limited number of ways to do that short of massive boiler or steam cycle refurbishments.
The EPA mentions technologies such as optimization or turbine upgrades which are applicable to all steam-turbine generating units. Others are only relevant to boilers with systems in which these modifications apply. The range of efficiency improvements is the same range that NeuCo routinely achieves with our boiler optimization solution, BoilerOpt®, which combines the functions of both CombustionOpt® and SootOpt® solutions.
It remains to be seen when the EPA will publish the actual standards. Here we are more than a year later, with regulations already delayed once and supposedly being re-issued this May, it's still unclear as to how these regulations will take form. The Obama administration has been silent about the standard, which was sent to the Office of Management and Budget for vetting nearly six months ago. Clearly the issue is a political hot potato, particularly with the Presidential election in full-swing.
Looking at the entirety of the air emissions landscape as it affects our industry, the MACT rule appears to be firmly in place and the CSAPR rule is poised to be resolved in the near term with little modification. As for the GHG emissions for both new and existing power plants, the Congressional Review Act might be employed in efforts to block these regulations. However, most political observers believe these efforts cannot be successful under the current administration, as President Obama has repeatedly threatened to veto legislation that blocks EPA’s authority to promulgate these rules.
The issue of the EPA regulations, costs and benefits will likely continue to be a high profile issue. If history is any indication, these types of regulations will get worse before they get better, which is why most NeuCo customers I talk with are "preparing for the worst and hoping for the best."