Environmental Certainty Anything but Certain

Issue 9 and Volume 107.

By Brian K. Schimmoller,
Managing Editor

The absence of any semblance of certainty for power plant owners with respect to emissions control and other environmental issues is threatening to cripple the industry. In my nightmare scenario, I envision corporate VPs, plant managers, and utility environmental managers sitting in a locked room with one of those black Magic Eight Balls asking a litany of questions: Should we invest in a boiler upgrade or wait until New Source Review issues are resolved? Should we plan for multi-pollutant control according to the Bush Administration’s Clear Skies Initiative or should we plan for mercury control independent of multi-pollutant control? What will we have to do to comply with the Clean Water Act’s 316(b) provision with respect to cooling water intake structures? When each of these questions is asked, all eyes focus nervously on the message that appears in the tiny display window. Instead of the original 20 answers, however, the Power Generation Magic Eight Ball only has access to the most ambiguous responses: Reply hazy, try again; Better not tell you now; Ask again later; Cannot predict now.

Sadly, this is reality, not a bad dream. Asset owners are being forced to gaze into their crystal balls — however cloudy they might be — and devise plans, or at least multiple options, for dealing with a host of environmental regulations. Regrettably, many of these environmental regulations are as uncertain and cloudy as the utilities’ crystal balls.

The lack of leadership from Washington is stultifying. Congress has let energy and environmental legislation drift to the backburner, EPA is waffling on several critical issues, and President Bush has only recently begun pushing his multi-pollutant emissions control initiative. The irony is that the power generation industry has stepped up and embraced additional emissions control legislation (and its associated costs) to provide much needed certainty. The Clear Skies Initiative, for example — which most utilities and generation asset owners support — would result in significant reductions in SO2, NOx, and mercury emissions, without oppressive economic repercussions and without forcing the wholesale abandonment of coal-fired power generation.

Exasperation in the power generation industry has recently grown particularly acute because many felt that environmental certainty was within sight early this year. The Clear Skies Initiative held promise, passage of an energy bill seemed likely, and EPA appeared to take a big step toward certainty when it finalized changes to the New Source Review program. Since then, however, the wheels have fallen off. Clear Skies has languished. The Senate passed an energy bill, but it was last year’s version, making resolution with the House version next to impossible. And in late July, EPA backtracked on NSR and announced that it was going to reconsider parts of the final rule.

EPA’s proposed ‘routine maintenance, repair and replacement’ (RMRR) provisions pertaining to NSR are also on shaky ground. The agency has reportedly received more than 200,000 comments related to RMRR, the majority of which probably disagree with the proposed rules. With so many comments to consider, rapid resolution toward a final rule is unlikely. Moreover, the recent Ohio Edison (FirstEnergy) NSR ruling will likely embolden EPA and the Department of Justice to pursue another round of NSR violation litigation.

The fate of multi-pollutant legislation — and its relation to mercury control — is just as uncertain. During a session on legislative and regulatory issues at COAL-GEN in August, the speakers were asked to predict the likelihood of passage of multi-pollutant legislation. The responses varied from 40 percent to 80 percent, which is uncertain enough, but the uncertainty multiplied when a host of caveats entered the discussion. For example, will EPA adhere to its court-ordered requirement to finalize MACT (maximum available control technology) rules for mercury control by December 2003, or will it delay and hope that multi-pollutant legislation is passed? If mercury MACT rules are enacted, will they be written to require the high (70-90) percent mercury removal levels that many expect, or will the reduction levels be relaxed somewhat to mesh with requirements that might emerge from subsequent multi-pollutant legislation?

Whichever way EPA proceeds, legal action from the losing side will likely ensue, accentuating the uncertainty. And we haven’t even added in the uncertainty stemming from the fact that 2004 will be a presidential election year, making any sort of legislative progress closer to a pipe dream than a lead-pipe cinch.

“EPA seems content to employ a ‘scattergun’ approach, using a variety of individual regulatory, legislative and enforcement initiatives each designed to get power plants to reduce emissions substantially,” said Carl Weilert, Manager of Air Pollution Control with Burns & McDonnell. “The EPA’s underlying philosophy appears to be that it doesn’t matter whether Congress passes multi-pollutant legislation if EPA can accomplish the same end with one of the other bullets that are now streaking toward the target. EPA is now reloading for yet another volley, which will include a Regional Transport rule.”

As an optimist, however, I’ll hold out hope. On August 11, President Bush nominated Mike Leavitt, Governor of Utah, as the next EPA Administrator. In announcing his nomination, President Bush used these words: “[Governor Leavitt] understands the importance of clear standards in every environmental policy. He respects the ability of state and local governments to meet those standards, rejects the old ways of command and control from above.”

Sounds like a call for certainty, but I’m not holding my breath. Good luck, Governor Leavitt, and good luck to those of you in the power generation industry that must translate the rhetoric of Washington into cost-effective emissions control strategies.

Environmental certainty is the only wind that will drive off the clouds and reveal the clear skies. I’ll keep hoping for the Magic Eight Ball to come up with Outlook good, but fully expect to see another one of its ominous answers: Don’t count on it.