CSAPR’s Demise: The Big Picture

Issue 9 and Volume 116.

The court’s rejection of CSAPR will slow, not alter, the transition to gas-fired generation and stricter emission limits.

By Russell Ray, Managing Editor

It was not a unanimous decision, but it was the correct decision.

Last month, an appeals court struck down the Environmental Protection Agency’s Cross State Air Pollution Rule, a costly and unreasonable measure designed to cut NOx and SOx emissions that make meaningful contributions in noncompliant states. The proposed rule would have applied to 28 states, many of which challenged the rule in court, claiming the EPA preempted state authority by issuing its own plan to cut emissions in downwind states.

The three-judge panel voted 2 to 1 to vacate the rule, which would have forced power producers to shutter a significant amount of reliable coal-fired generation.

The ruling preserves the reliability of a national grid that was built around coal and gives the industry much needed time to develop responsible, cost-effective strategies for reducing NOx and SOx.

The ruling also showed that the EPA’s method for calculating the limits on NOx and SOx was fundamentally flawed. Just as important, it highlighted the EPA’s propensity to skirt the law in its war on coal.

“It’s the third or fourth ruling by a federal court that shows the EPA to be overriding the authority that the states have and conducting an unlawful regulatory program against coal,” said Luke Popovich, a spokesman for the National Mining Association.

The court found that the EPA exceeded its authority. Specifically, the court pointed to the rule’s statutory text, which “grants EPA authority to require upwind states to reduce only their own significant contributions to a downwind state’s nonattainment… EPA has used the good neighbor provision to impose massive emissions reduction requirements on upwind states without regard to the limits imposed by the statutory text.”

Translation: The EPA ignored individual state contributions to pollution problems in downwind states and imposed thresholds without regard to their actual contributions.

Oklahoma Attorney General Scott Pruitt put it like this: The rule “would have required Oklahoma to spend millions of dollars to retrofit power plants to address theoretical compliance issues in one county in Michigan.”

While the ruling served a valuable purpose by redefining the EPA’s authority over the U.S. power sector, don’t expect it to change much in the long term. The ruling will slow, not alter, the transition to gas-fired generation and stricter emission limits. The effect of CSAPR’s demise will be a significant delay in the implementation of utilities’ Air Quality Compliance Solutions.

There will be less fuel switching, but the low price of gas, the prospect of more regulation and the MATS (Mercury Air and Toxics Standards) rule will continue to drive the transition to simple cycle and combined cycle plants.

It may take years, but CSAPR will be reincarnated in one form or another. Some believe the EPA will re-write the Clean Air Interstate Rule, the rule CSAPR was meant to replace.

“CSAPR was the most complicated rule-making I’ve ever been engaged in,” Gina McCarthy, assistant administrator for EPA’s Office of Air and Radiation, said last month at COAL-GEN 2012. “We had to look at two years of air modeling to understand where the pollution was coming from.”

The reaction from utilities has been mixed. A utility in Kentucky, Big Rivers Electric Corp., has asked state regulators for permission to drop its plan to comply with CSAPR, a move that would save the utility $270 million. For the most part, though, utilities’ plans to retire coal-fired generation have not changed. Luminant, the largest power provider in Texas, said it will continue its capital investment program to comply with pending and expected environmental regulations.

“The court’s decision that the EPA overstepped its authority with CSAPR has the potential to slow the sector’s transition from coal to gas as a primary fuel,” said Laurie Oppel of Navigant. “While the decision can be seen as a short-term win for the coal industry, it likely won’t alter the path the electricity sector is currently on.”

So what’s next? The EPA has until Oct. 5 to request a rehearing before the three-judge panel that vacated CSAPR, or it could request a review by the full court. If a rehearing is denied, the EPA may then appeal the decision to the U.S. Supreme Court. However, an appeal to the Supreme Court is unlikely because the odds of a favorable ruling are next to nil.

“The most likely outcome will be that EPA will go back to the drawing board, using its current modeling but taking into account current state attainment designations, and will come up with a new SIP (State Implementation Plan) call,” Jane Montgomery, partner at Schiff Hardin LLP, told Power Engineering.