Locke Lord QuickStudy: EPA Forges Ahead with New Emission Rules for Power Plants

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    EPA Forges Ahead with New Emission Rules for Power Plants

    Despite numerous complaints from affected utilities, EPA at year’s end issued final regulations limiting emissions of mercury and other hazardous air pollutant emissions (“HAPs”) from fossil fuel-fired power plants. These new regulations, known as the Utility MACT rule, were initially proposed in March 2011 and will require many coal-fired power plants to install significant new or upgraded pollution controls.

    In the Works for Over a Decade
    Initially in 2000, EPA sought to regulate mercury through the use of a cap-and-trade system. Challenged by environmental groups in federal court, the system was overturned as inconsistent with the requirements of the Clean Air Act. EPA entered into a consent decree with the environmental groups and agreed to issue a new set of regulations, beginning with a proposed rule in March 2011 and a final rule by November 16, 2011 (extended to December 16, 2011).

    EPA’s final rule, issued December 22, 2011, imposes specific numerical limits for particulate matter, mercury and total metals, hydrogen chloride, and hydrogen fluoride. The numeric limits vary based on the type of fuel used in the power plant. Work practice standards are also required for organic HAPs. Compliance is required within three years, although the rule provides that a facility can apply for a one-year extension.

    In Response, EPA Provides Few Changes and a Little Discretionary Wiggle Room
    Many of the comments to the rule came from the regulated community, expressing significant opposition to the Utility MACT as proposed. Yet, that criticism has not been universal. Some companies within the industry (particularly natural gas-fired power plants, which are not subject to the rule’s requirements) generally support the proposed Utility MACT rule, viewing these new rules as reasonable and as leveling the playing field.

    Some of the loudest complaints and EPA’s responses are summarized below.

    Electric Reliability
    Industry groups warned that the new rule will require numerous older electric generating facilities to shut down, threatening electric power reliability. While EPA acknowledged that costs of the required improvements may indeed cause some facility shutdowns, the agency insists that the remaining electric generating capacity will be sufficient to meet demand. In addition, companies operating natural gas-fired facilities are in some cases increasing capacity based on both current and expected demand.

    Compliance Timeline
    Under the proposed rule, affected facilities will have three years, with a potential one-year extension, to comply with the rule’s requirements. Arguing that this timeline is impractical due to the significant complexity of installation of pollution control equipment, including planning, procurement, permitting, and coordinating with local grid operators, industry groups proposed that a timeline of five years (or more) was more realistic. In the text of the final rule, EPA did not budge on this issue. According to EPA, three years will provide most affected utilities with sufficient time to comply with the rule. However, EPA suggested that the one-year extension should be broadly available whenever the source makes a sufficient demonstration that the availability of reliable electrical power may be impacted if the extension is not granted. EPA also offered a memo indicating that EPA will use its enforcement discretion, issuing compliance orders for one additional year (for a total of five years) if a utility cannot come into compliance within four years and ceasing operations would impact electric reliability. But, because the agency is skeptical that there will be many deficiencies in electric generating capacity, the route to an extra year or two for compliance may be very hard to travel.

    EPA’s projections place the Utility MACT’s compliance costs at approximately $10 billion annually, making it one of the most costly rules in EPA history. Industry argued that $10 billion is an underestimate, because EPA is out of touch about the upgrades that are needed. Utilities said that they will likely need to use more expensive pollution control technologies, like scrubbers, as opposed to newer, less expensive technologies, like the dry solvent injection that EPA used in its projections. Despite industry’s arguments that EPA’s cost estimate was unreasonable, EPA asserted that these less expensive control technologies were readily available, and no changes to the proposed rules were warranted.

    Testing and Monitoring
    The testing and monitoring requirements in the proposed rule were also criticized. As proposed, the rule required extensive and often redundant testing and monitoring requirements that had the potential to increase compliance costs. For example, facilities that used continuous emissions monitoring systems (CEMS) were still required to conduct frequent stack testing and perform fuel sampling. In the final rule, EPA modified the proposed rule in response to industry complaints. The final rule allows an affected source to utilize CEMS or conduct quarterly emission monitoring with no requirement to perform fuel sampling.

    What’s Next?
    It appears nearly certain that the final word has not yet been spoken regarding the Utility MACT rule. Members of Congress are working on various proposed bills either to extend the timelines of the rule, or invalidate it altogether. If Congress does not address the rule, utilities are likely to pursue litigation, making the final form of the rule subject to the decisions of federal court where it began over 10 years ago.

    For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors: 

    Elizabeth Mack | T: 214-740-8598 | emack@lockelord.com 
    Jerry Higdon | T: 713-238-3709 | jhigdon@lockelord.com 
    Richard Franchek | T: 214-740-8483 | rfranchek@lockelord.com 
    Susan Rainey | T: 214-740-8559 | srainey@lockelord.com 
    Scott Elliott | T: 713-226-1578 | selliott@lockelord.com

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