Policy & Regulation, Policy & Regulations

A Tailor-Made Fit

Issue 11 and Volume 118.

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

In June 2014, the Supreme Court ruled on EPA’s Tailoring Rule, resulting in partial victories for all sides. EPA’s authority to regulate greenhouse gases (GHG) was upheld, while industry got a small, but important, concession.

Writing for the majority, Justice Scalia chastised the EPA, saying, the EPA, “was mistaken in thinking the Act compelled a greenhouse-gas-inclusive interpretation of the PSD and Title V triggers,” and that its greenhouse-gas-inclusive interpretation of the PSD and Title V triggers was “impermissible.” The Court ruled that a federal agency like the EPA has no power to “tailor” legislation to bureaucratic policy goals by rewriting unambiguous statutory terms. Therefore, EPA could not defend the Tailoring Rule as an exercise of the agency’s enforcement discretion. Agencies can only exercise discretion where there is “statutory silence or ambiguity,” the Court said. But when the statute is unambiguous, the agency must give effect to the “expressed intent of Congress.”

In perhaps his most scathing comments, Justice Scalia wrote that EPA’s Tailoring Rule attempted to assert “newfound authority” to regulate millions of small sources, such as retail stores, offices, apartment buildings, shopping centers, schools, and churches, and to decide, on an-ongoing basis (without regard for the thresholds prescribed by Congress) which of those sources to regulate. “We are not willing to stand on the dock and wave goodbye as EPA embarks on this multiyear voyage of discovery,” said Scalia.

Numerically, EPA was granted license to regulate 83% of stationary-source greenhouse gas emissions, versus the 86% of sources included in the original rule. But those 3% of sources granted a reprieve are an important concession.

In Step 1 of the original Tailoring Rule, EPA wanted to regulate emissions from 83% of stationary GHG sources. These were known as “anyway” sources, since they were already subject to major source Prevention of Significant Deterioration (PSD) construction permitting and major source Title V operation permitting because of emission from another pollutant, such as nitrogen oxides (NOx) or sulfur dioxide (SO2). Step 1 was upheld by the Court; it was Step 2 that the Court struck down.

Step 2 sources were subject to PSD and Title V solely because of their GHG emissions. Both PSD and Title V are complex regulatory programs best entered into cautiously. Classification as a PSD major source means that future expansion is either limited or subject to Best Available Control Technology (BACT) add-on control devices and dispersion modeling. PSD permits take on average 12-18 months to be issued, delaying construction and increasing costs. Title V is a permit for the on-going operating of a major facility that requires extensive recordkeeping and reporting. Fines for even paperwork violations of Title V requirements start in the $10,000-$100,000 range. Both programs should be avoided if at all possible.

Two very important types of power plants fell into Step 2: simple-cycle peaking plants and reciprocating engine plants. These plants are of increasing value in light of EPA’s proposed Clean Power Plan, which shifts generation to renewables and natural-gas fired assets.

Many simple-cycle gas turbines were constructed with limits to avoid classification as a PSD major source. Due to their limited operation, it was relatively easy to keep emissions below the major source threshold of 250 tons per year (tpy) of a criteria pollutant. But under Step 2, the major source threshold for GHG was 100,000 tpy, which although a large number, is trivial given the order of magnitude of GHG emissions. Suddenly, these peaking plants were PSD major sources, with future plant expansions tripping PSD at 40 tpy NOx instead of 249 tpy NOx.

Reciprocating engine plants have become an important growth industry in the country’s evolving power mix. Recip plants are quick to construct, much less expensive than turbine plants, and can go from zero to full load in under 10 minutes, making them ideal to balance out wind generation. With individual engines rated at 9-18 MW, building blocks of engines allows great flexibility in meeting power demands. Under Step 2, just 30 MW of recips tripped major PSD permitting, but with the Court ruling, 120 MW can realistically be permitting as a PSD minor source.

But what if your plant was already issued a PSD or Title V permit based solely on GHG emissions? EPA has yet to issue guidance on how to rescind or revise these now unnecessary permits. However, it seems logical to assume that there are sufficient grounds for repermitting as a minor source and for the removal of some emission and operating limits.

You could get whiplash trying to determine your plant’s applicability under the EPA’s Tailoring Rule. But with the Supreme Court partially striking down the rule, the power industry caught a break, albeit a small one.

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