Overview of EPA s Clean Power Plan. Presented by Brandy D. Olson, JD Director, Legal & Regulatory Services Muscatine Power & Water

Transcription

1 Overview of EPA s Clean Power Plan Presented by Brandy D. Olson, JD Director, Legal & Regulatory Services Muscatine Power & Water

2 Disclaimer The opinions expressed in this presentation are my own and do not represent the opinions of Muscatine Power & Water. This presentation is informational only and does not constitute legal advice to you or your utility. Situations and facts can be unique and varied. You should seek your own legal counsel.

3 Climate Change Policy Obama s Campaign Platform 2008 & 2012 Environmental activism Sierra Club, NRDC, and others Carbon Tax Proposals Waxman Markey bill (2009) Executive Order on Climate Change & White House Memorandum (June 2013) o 21 page Climate Action Plan o Mandates that the US Environmental Protection Agency (EPA) regulate carbon emissions under the Clean Air Act, Section 111 o Acceleration of renewable deployment in the US

4 Environmental Law 101 Clean Air Act Environmental Protection Agency Iowa Department of Natural Resources NAAQS Emission Standards and Limits Industry Specific Rules Power Plants 4

5 Overview of Air Regulations for Utilities Clean Air Act passed in 1967, amended in 70, 77, and 90 This legislation and the resulting regulation affect every sector of the economy 1990 Amendment required EPA to set National Ambient Air Quality Standards (40 CFR Part 50) for pollutants considered harmful to public health and the environment Over the last 40 years, the air and water in the US has become much cleaner.

6 NAAQS Criteria Pollutants Pollutant [final rule cite] Carbon Monoxide [76 FR 54294, Aug 31, 2011] Lead [73 FR 66964, Nov 12, 2008] Nitrogen Dioxide [75 FR 6474, Feb 9, 2010] [61 FR 52852, Oct 8, 1996] Primary/ Secondary primary primary and secondary Averaging Time Level Form 8-hour 1-hour Rolling 3 month average 9 ppm 35 ppm 0.15 μg/m 3 (1) Not to be exceeded more than once per year Not to be exceeded primary 1-hour 100 ppb 98th percentile, averaged over 3 years primary and secondary Ozone primary and [73 FR 16436, Mar 27, 8-hour secondary 2008] Particle PM 2.5 Pollution Dec 14, 2012 PM 10 Annual 53 ppb (2) Annual Mean ppm (3) Annual fourth-highest daily maximum 8-hr concentration, averaged over 3 years primary Annual 12 μg/m 3 annual mean, averaged over 3 years secondary Annual 15 μg/m 3 annual mean, averaged over 3 years primary and 24-hour secondary 35 μg/m 3 98th percentile, averaged over 3 years primary and secondary 24-hour 150 μg/m 3 Not to be exceeded more than once per year on average over 3 years Sulfur Dioxide primary 1-hour 75 ppb (4) 99th percentile of 1-hour daily maximum [75 FR 35520, Jun 22, concentrations, averaged over 3 years 2010] [38 FR 25678, Sept 14, 1973] secondary 3-hour 0.5 ppm Not to be exceeded more than once per year 6

7 New Normal of Changing Air Regulations Clean Air Act requires NAAQS to be evaluated for revision every five years NAAQS have tightened dramatically over the last 20+ years Other rules are revised by EPA as the science justifies Numerous steps are required to get a legally enforceable regulation, and any mistakes give rise to litigation, delays for court proceedings Repeated changes, delays, and improperly designed rules makes planning challenging States can also take their own legislative initiative to enact air quality regulation- CA is an example 7

8 Emission Standards & Limits What is it? Compliance with an emission standard or emission limit is dependent on emission rates either measured or calculated from a source point (often at the stack) Examples Acid Rain - SO 2 & NO x Air Toxics Rule o Mercury (Hg) and other hazardous air pollutant reductions Small Boiler MACT o applies to smaller, older units (less than 25 MW) o requires Mercury reductions, PM monitoring, operating efficiencies 8

9 Air Transport Rules CAIR/CSAPR Concerns SO 2 & NO x emissions 2008 court order to replace the Clean Air Interstate Rule (CAIR) stands; operate under CAIR until CSAPR goes back into effect. In 2011, EPA first revealed the replacement for CAIR, called the Cross State Air Pollution Rule (CSAPR). This rule spent nearly three years in litigation and was recently upheld by the US Supreme Court. Allowances given by EPA reduce over time to incent investment in controls and retirements of older units. Most commentators assume the soonest CSAPR will now go into effect is January 2016, but could be later if EPA makes more changes to the rule. There were a number of significant errors in the publication version in late 2011 and early 2012, so changes are possible. Recent filing of a Motion to Lift the Stay will litigate the new start date for CSAPR. 9

10 Hazardous Air Pollutants What is it? 187 air pollutants known or suspected to cause cancer or other serious health effects, or adverse environmental consequences HAPs/Air toxics are generally more localized than the criteria pollutants and the highest levels are close to their sources National standards for regulating sources of HAP are called National Emission Standards for Hazardous Air Pollutants (NESHAP) Examples Perchloroethylene from Dry cleaners Benzene from gasoline Refineries Electroplating facilities Lead from Mills Chemical Plants

11 11 CAA Works: 1970 Present

12 History of GHG regulation: How did we get here? EPA identifies six-greenhouse gases as a single air pollutant and assigns a Carbon Dioxide equivalent emissions based on the global warming potential of these gases: o Carbon dioxide (CO 2 )1:1 o Methane (CH 4 )21:1 o Nitrous oxide (N2 O )310:1 o Hydro fluorocarbons (HFCs)650:1 o Perfluorocarbons (PFCs)6,500:1 o Sulfur hexafluoride (SF 6 ) 23,900:1 Why address GHG? o o o Public Health and Climate benefits Drive innovation in clean energy technology Not here to debate climate science, just here to educate on the regulations!

13 History of GHG regulation: How did we get here? Where do GHG emissions come from? o Mobile sources- cars, trucks, trains, ships, etc. o Stationary Sources- Power Plants Iron and Steel Plants Cement plants Refineries Ammonia plants Metal smelting Natural Gas systems Incinerators

14 Annual Greenhouse Gas Emissions Relative to 1990

15 2012 Greenhouse Gas Emissions by Gas

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17 GHG Regulatory Overview GHG Reporting Rule: A nationwide rule that requires industrial stationary sources with GHG emissions above a certain level to report their emissions on an annual basis. GHG Endangerment Finding: A finding that GHG emissions endanger both the public health and the public welfare of current and future generations. GHG Emissions Control Standards: One or more standards that would limit GHG emissions and require certain control technology and/or emissions monitoring measures. GHG Permitting: EPA has taken the position that once a GHG emissions control standard for any type of source (a stationary or a mobile source), becomes effective, the Title I and Title V pre-construction and operating permit programs for major stationary sources would become applicable.

18 GHG Regulatory History Mass. v EPA, 549 US 497 (2007), SCOTUS held: o o o GHGs fall within Clean Air Act s air pollutant definition US EPA must regulate GHGs to the extent the Agency finds endangerment of health and welfare EPA must make scientific judgment whether greenhouse gases cause or contribute to climate change Endangerment Finding issued on December 15, 2009 o Litigated and upheld by DC Circuit, SCOTUS declined to review GHG Mandatory Reporting Rule effective in 2010 o o Often called the GHG Inventory EPA issues the US Annual GHG Inventory Report

19 GHG Regulatory History Tailpipe Rules for GHG emissions by mobile sources (light duty vehicles) o Finalized April 2010; required controls as of January 1, 2011 o Litigated and upheld by DC Circuit, question appealed to SCOTUS was whether EPA permissibly determined that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases" GHG Timing Rules o o o Triggered by EPA s statutory interpretation that once GHGs are regulated under any of Act s provisions, GHGs are air pollutant covered by major source permitting Holds GHGs not regulated for permitting purposes until control actually required i.e., January 1, 2011 Litigated and upheld by DC Circuit The early GHG related rules combined to trigger, by EPA s statutory interpretation, that once GHGs are regulated under any of Act s provisions, GHGs are air pollutants covered by major source permitting

20 GHG Tailoring Rule Finalized May 13, 2010, in litigation for a number of years Intended to control GHG emissions from stationary sources The emission limits set in this rule are based on the potential to emit in units of short tons of carbon dioxide equivalents (CO 2 e) rather than actual emissions New emission limits triggered by Title V permit renewal or revision Over time, the requirement that GHG be included in air permits started with larger facilities (Title V) and worked its way down to smaller emitters

21 GHG Tailoring Rule January 1, 2011: PSD permitting for GHGs applies to anyway source ( these are sources that are already subject to PSD review for other pollutants) July 1, 2011: PSD permitting for GHGs applies to sources at or above 250 tpy CO 2 on mass basis and 100,000 tpy CO 2 e emissions July 1, 2012: Title V permit application due for sources at or above 100 tpy CO 2 on mass basis and 100,000 tpy CO 2 e emissions

22 GHG Tailoring Rule UARG v. EPA case decided by SCOTUS on June 23, 2014 Considered a mixed decision since it did not turn over the Tailoring Rule but did rein it in: o o o o o o No CAA requirement that compels or requires PSD in Title V permits solely based on potential GHG emissions No EPA authority to tailor unambiguous statutory thresh holds BACT can be applied to sources emitting GHG but with some limitations EPA needs to establish a de minimus threshold to apply BACT for GHG to the anyway sources Remove Tailoring Rule provisions from state SIPs (unless there is independent state legal authority for GHG permitting) Remove GHG from pending PSD applications and remove it from pending PSD challenge cases

23 Clean Power Plan EPA s label for the combined GHG rules for power plants (new, modified and existing) The plan carriers out the agenda from the Executive Order There is an intentional order to the development of these rules. Each one paves the way for the next. No analysis or mention of power costs and effect on business environment, just benefits No analysis by EPA of the compounding effect of all the new and modified air rules on the utility industry No coordination with FERC regarding reliability concerns

24 GHG NSPS for New Power Plants Created new CO 2 emission limits that will apply to any new power plants Stringent limits will prevent construction of any new coal fired power plants Cited Clean Air Act Section 111(b) as authority Dates: o Announced in September 2013 o Published in the Federal Register in January 2014 o Extended Comment period closed May 9, 2014 o Over 2.5 million comments filed

25 Concerns: GHG NSPS for New Power Plants Early attempt at legal challenge by UARG was rebuffed by the courts, does not prevent future challenges CCS is unproven technology, legal challenge to any rule that uses it as the standard by which to set an emissions limit, no peer review studies to support Potential impact on Title V fees New coal limits cannot be met with the latest generation technology- must be technologically feasible

26 GHG NSPS for Modified and Reconstructed Units Cited Clean Air Act Section 111(b) as authority Applies to a unit that meets certain conditions described in CAA and its implementing regulations as modified or reconstructed o A modification is any physical or operational change to an existing source that increases the source s maximum achievable hourly rate of air pollutant emissions o A reconstructed source is a unit that replaces components to such an extent that the capital cost of the new components exceeds 50 percent of the capital cost of an entirely new comparable facility

27 GHG NSPS for Modified and Reconstructed Units Emission limits are based on the performance of available and demonstrated technology Per EPA, these proposed limits for modified and reconstructed sources do not require implementation of CCS technology, nor are they based on that technology EPA is proposing separate numeric standards for different types of units

28 GHG NSPS for Modified and Reconstructed Units For modified fossil fuel-fired units, EPA suggests two alternatives: All modified units would be subject to a single standard of performance, or, The specific form of the standard will depend on whether the source makes the modification before or after becoming subject to a CAA section 111(d) state plan. This recognizes that actions taken to comply with a Clean Air Act (CAA) section 111(d) state plan may result in improved performance at the source. In all cases, the level of the proposed standards is based on a combination of best operating practices and equipment upgrades.

29 GHG NSPS for Modified and Reconstructed Units Dates: o Announced on June 2, 1014 o Published on June 18, 2014 o Comment Period ends Oct. 16, no extension Concerns: o Similar concerns as the other GHG NSPS rules

30 EPA s Authority Under CAA 111(d) This is the framework for the Clean Power Plan as it applies to existing power plants. It includes guidelines from EPA and state responsibility for creating the specific plan requirements. EPA s guidelines set the floor for the state plans. CAA 111(d) does not directly authorize EPA to establish standards of performance for existing sources. EPA is directed to prescribe regulations which shall establish a procedure similar to that under [CAA 110] under which each State shall submit to [EPA] a plan which... establishes standards of performance for existing sources within the state. CAA 111(d)(1). EPA adopted regulations as required by CAA 111(d), see 40 C.F.R. Part 60, Subpart B, (called the Subpart B rules ).

31 EPA s Authority Under CAA 111(d) Under the Subpart B rules, the guideline document is the basic mechanism that EPA uses to guide state implementation of CAA 111(d). EPA provides the states through the guideline document such information as: (1) [a] description of systems of emission reduction that EPA has determined to have been adequately demonstrated for the existing facilities in question; and (2) [a]n emission guideline that reflects the application of the best system of emission reduction [( BSER )]... that has been adequately demonstrated C.F.R (b)(2), (5). Subpart B rules direct that EPA s emission guideline to the states for use in developing emission standards for existing facilities must specify different emission guidelines or compliance times or both for different sizes, types, and classes of existing facilities where the costs of control, physical limitations, geographical location, or similar factors make [such] subcategorization appropriate. Id (b)(5). Although the CAA authorizes EPA to subcategorize when establishing NSPS for new sources, it does not on its face require EPA to do so.

32 GHG NSPS for Existing Power Plants A/K/A the 111(d) rule Dates: o Announced June 2014 o Published on June 18, 2014 o Originally subject to 120 day comment period Extended to Dec. 1, 2014 o June 30, 2016 Initial State plan or complete plan due o June 30, 2017 Complete individual state plan due if state is eligible for a one year extension o June 30, 2018 Complete multi state plan due if state is eligible for two year extension o Progress report due June 30, 2017 o First goal benchmark is 2020

33 GHG 111(d) Overview Two main parts: state-specific goals to lower carbon pollution from power plants and guidelines to help the states develop their plans for meeting the goals The goal is a target that states have to meet by 2030, while starting to make meaningful progress toward reductions by 2020 States develop plans to meet their goals, but EPA is not prescribing a specific set of measures for states to put in their plans (this what EPA terms flexibility ) Each state s goal reflects the fact that CO 2 emissions from fossil fuel-fired power plants are determined both by how efficiently they operate and by how much they operate. State plans must incorporate the Best System of Emission Reduction (BSER), these are the building blocks in the proposed guidelines.

34 APPA s Table Showing Current CO 2 Emissions by Sector

35 GHG 111(d) State Reduction Goals Iowa 16% Illinois 32.9% Minnesota 40.6% Missouri 21.3% Nebraska 26.4% North Dakota 10.6% South Dakota 34.7% Wisconsin 34.2%

36 GHG 111(d) Four Guidelines for BSER (1) Make fossil fuel power plants more efficient o Improve equipment and processes to get as much electricity as possible from each unit of fuel o Using less fossil fuel to create the same amount of electricity means less carbon pollution o Value given in goal setting formula: Average heat rate improvement of 6% for coal steam electric generating units (EGUs) ; $6-12 per metric ton (2) Use low-emitting power sources more o Using lower-emitting power plants more frequently to meet demand means less carbon pollution. o Value given in goal setting formula: Dispatch to existing and under-construction natural gas combined cycle (NGCC) units to up to 70% capacity factor; $30/ton

37 GHG 111(d) Four Guidelines for BSER (3) Use more zero- and low-emitting power sources o Expand renewable generating capacity, which is consistent with current trends o Using more renewable sources, including solar and wind, and low-emitting nuclear facilities, means less carbon pollution o Value given in goal setting formula: Dispatch to new clean generation, including new nuclear generation under construction, moderate deployment of new renewable generation, and continued use of existing nuclear generation; Nuclear: $12-17/ton & Renewables: $10-40/ton (4) Use electricity more efficiently o Reducing demand on power plants is a proven, low-cost way to reduce emissions, which will save consumers and businesses money and mean less carbon pollution o Value given in goal setting formula: Increase demand-side energy efficiency to 1.5% annually; $16-24/ton

38 Concerns for Joint Owners and Wholesale Power Customers EPA staff at the Q&A webinar in Sept. made it very clear that this rule is applicable to EGUs only, not LSEs or wholesale customers of generating utilities. Any cooperation amongst utilities to get BB#4 Energy Efficiency will need to be by agreement and enforceable via a state plan Legally, EPA s jurisdiction under the CAA is air emissions from EGUs and other regulated sources for now.

39 Concerns for Joint Owners and Wholesale Power Customers What does your joint ownership agreement say about sharing environmental costs and who has final say in implementing compliance solutions? Consider the possibility that the plant operator (record owner for EPA purposes) opts to just pass the cost of compliance onto the participants? How might that cost of compliance be calculated? What if a generating utility needs your cooperation and participation in BB#4, what can you do to facilitate demand side reductions?

40 GHG 111(d)(cont.) How is the rule enforced? o CAA Section 111(a) does not specify consequences for failure of a state to meet emissions goals o EPA could impose a federal plan on noncompliant states o Citizen enforcement options

41 GHG 111(d) Concerns & Criticisms No utility specific credit for early adopters of renewables prior to 2012 Credit for resources located outside of the home state unclear, this is a common occurrence with wind and hydro projects Cross border issues with plants located in one state but serving load in another Illusion of flexibility Jurisdictional issues between EPA, state DNRs, Utility Commissions, FERC, ISO/RTO, etc.

42 GHG 111(d) Concerns & Criticisms ISOs have members from numerous states and utilities in states with higher goals could be negatively impacted; out of the money in the forward looking markets due to compliance costs that are higher than other coal plants in the same ISO 2012 baseline is an outlier as natural gas prices were at 10 year lows that year Plenty of opportunities for legal challenges!

43 Public Power Concerns & Criticisms The impact on local control and threat to the public power business model No factoring in for load growth Front loaded goals don t leave much time between when states adopt plans and the reductions are measured (2020 and 2022); short planning horizon Timeframe is short- can the states do it? Reliability Small utilities with EGUs- difficult to comply, less fuel diversity, no fleet to reallocate or refuel, and small customer base

44 Congressional Response Sen. Minority Leader McConnell s Coal Country Protection Act or the Protecting Jobs, Families, and the Economy From EPA Overreach Act introduced in June to counter the NSPS rules. Rep. McKinley (R-WV) introduced H.R. 4813, the Protection and Accountability Regulatory Act to nullify all of EPA s proposed GHG NSPS for new, existing, modified, and reconstructed power plants. It would prevent EPA from proposing similar regulations for five years from the bill s date of enactment. Currently, the measure has 72 cosponsors. In July, the House approved a 2015 EPA appropriations budget that would remove funding for new clean air regulations for new and existing power plants. Numerous legislators have signed off on a number of letters asking for the rules to be rescinded, reformed, and comment periods extended, etc.

45 Tools and Calculators EPA s AVERT Tool: NRDC s State Carbon Emissions Tool: ACEEE s State and Local Policy Database: APPA s Energy and Environmental Services Manager built a CO 2 NSPS State Baseline Calculator, accessible via APPA website

46 Online Resources APPA s NSPS library- Power points, calculator tool, legal memos and research materials at EPA s web sites: o o o Overview: Technical Documents: GHG Abatement Measures- more info on methods to reduce GHG under each Building Block:

47 What is Next? State level Stakeholder meetings happening now EPA presented a Clean Power Plan roadshow at the state stakeholder meetings EPA held regional public meetings to take comments (IAMU commented at the Denver meeting) Iowa DNR s 111(d) stakeholder group met three times IAMU organized a 111(d) work group for members Trade Associations and Industry Groups working on the written comments IDNR and IUB will be filing joint comments Utilities need to be engaged, help your associations to prepare comments, assess your compliance options, and participate in the process!