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Seeking Certainty

Issue 9 and Volume 115.

By Robynn Andracsek, P.E., Burns & McDonnell and Contributing Editor

Most people want to do the right thing. But what do you do when the “right” thing is unknown? Welcome to today’s Clean Air Act.

Utilities and environmental regulations have reached a critical juncture; the days of grandfathered coal are over. A myriad of emerging and evolving rules affect coal combustion, but while the time for a decision on what to do with uncontrolled coal assets approaches, each day brings a new setback to finalized rules. The Environmental Protection Agency’s (EPA’s) list of recent New Source Review (NSR) actions reads like a schedule of ships long overdue into port.1

For example, the rules for aggregation of sources within Prevention of Significant Deterioration (PSD) permitting have been stayed for over a year. There is an absence of urgency to solve this since the rule would actually help industry. Its permanent revocation seems inevitable.

Likewise, greenhouse gas (GHG) permitting requirements for carbon dioxide (CO2) emissions from biomass-fired and other biogenic sources have been delayed for at least three years. While this delay at first glance seems to help industry, the deferral is optional. It won’t take effect unless a state changes its State Implementation Plan (SIP) to allow the exemption. Therefore, check with your state to see if it intends to adopt the deferral and, if they do, when it will become effective.

Other delays are even more critical and affect multi-million-dollar decisions that need to be made now. Topping this list is the Industrial Boiler Maximum Available Control Technology (MACT) rule which will regulate hazardous air pollutants from almost 14,000 boilers. This rule has been proposed (2004), vacated (2007), re-proposed (April 2010), finalized (March 2011) and stayed and delayed (May 2011). In July, EPA petitioned the court to allow new standards to be proposed by October 2011 and finalized in April 2012. This would give EPA time to rewrite aspects of the rule. The courts and Congress have gotten involved, the former forcing EPA to issue the regulation and the latter proposing legislation to allow more time. If the latest deadline holds, the rulemaking process will have consumed eight years.

Similarly, the game-changing Utility Boiler MACT, which affects 1,350 utility boilers, has had a decade-long struggle. Initial named CAMR (clean air mercury rule) and finalized in 2005, the court vacated the rule in 2008. In March 2011, EPA released the new proposed rule, rebranded as MATS (mercury and air toxics standards)3 and extended the comment period, but with no change to the timeline for issuing final standards (yet). The rule uncertainty is evident to the courts, as shown by a ruling this August that found Xcel shouldn’t have to pay up to $2.25 million in penalties for not obtaining a MACT permit since the MACT requirements changed frequently from the time the application process began in 2004.4

Delays related to the Clean Air Interstate Rule (CAIR) are creating financial uncertainty for utilities. Initially promulgated in 2005, it was remanded to EPA by the courts in 2008 and lingers on its deathbed through 2011 to be reincarnated in 2012, initially as the Clean Air Transport Rule (CATR) and finally as the Cross-State Air Pollution Rule (CSAPR or “Casper”). Some utilities spent millions of dollars installing controls to bank allowances, the fundamental currency of cap-and-trade, only to find that CSAPR has made those allowances worthless.5 Allowance trading, successfully implemented in the Acid Rain Program, has been struggling under the lack of clear federal requirements and guidelines. The Northeast’s Regional Greenhouse Gas Initiative (RGGI), the only U.S. allowance trading program for greenhouse gases, has seen steep decreases in demand, participation and price. Recently, New Jersey abandoned RGGI and several other states are considering whether to follow suit.

The list of pending regulations directly affecting utilities goes on. The ozone National Ambient Air Quality Standard (NAAQS) has been delayed four times. Regulation of coal combustion residuals (coal ash) was proposed in June 2011 with public comment extended through this November. Limits on greenhouse gases from power plants won’t be implemented until sometime in 2012. Greenhouse gases are regulated to the extent that generators must count them and endure a longer permitting process, but there are no standards as yet. The only Best Available Control Technology (BACT) determinations to date have been high efficiency and good combustion; no numerical limits and no add-on control devices. New rules for cooling water intakes at existing facilities, which replace rules remanded by the Second Circuit and suspended by EPA in 2007, were proposed in April 2011 with public comment through mid-August and finalization in July 2012. These rules will likely require many power plants to modify their intake screens and possibly convert to closed-cycle cooling.

Boilers large and small are living in limbo. The prices of coal and natural gas are in flux. To repower, retrofit, retire or build is the question and utilities deserve to have uncertainty removed from the equation. Otherwise, we just may have to learn to live in the dark.

1 http://www.epa.gov/NSR/actions.html

2 EPA Regulatory Relief Act of 2011

3 http://www.epa.gov/airquality/powerplanttoxics/actions.html

4 http://www.chieftain.com/business/local/xcel-won-t-have-to-pay-penalty-judge-says/article_cb6123a2-bcaf-11e0-b330-001cc4c03286.html

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