EPA tells Senate panel that MATS rule can be taken in stride

The U.S. Environmental Protection Agency got a pretty usual Democrats love ‘em, Republicans not so much reception at a March 20 hearing of the Senate Subcommittee on Clean Air and Nuclear Safety.

The hearing was entitled, “Oversight: Review of the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) for Power Plants.”

That rule, made final in February, sets a tight three-year deadline to reduce toxics emissions from mostly coal-fired power plants. The power generation industry says that MATS, on top of other recent rules like the Cross-State Air Pollution Rule, will force the shutdown of thousands of megawatts of older coal-fired power plants.

Subcommittee Chair Tom Carper, D-Del., said in his opening statement: “As someone who has tried for years to work across the aisle to find a way to clean up our nation’s power plants, I was encouraged to see the EPA finally act to address these harmful emissions. Furthermore, as someone who also believes the role of government is to provide a nurturing environment for job growth and job preservation, while ensuring corporations act as good citizens – I was encouraged by how the EPA’s issued the Mercury and Air Toxics Rule.”

Some utilities will decide to close down their dirtiest, most inefficient coal plants rather than comply, Carper noted. And as these plants close, some communities will be impacted more than others. However, most communities will see great benefits from these rules, with up to $90bn in public health benefits, he added.

Minority member James Inhofe, R-Okla., took the more obviously partisan path, calling MATS part of “President Obama’s war on affordable energy.” He added: “First, I’ll say that Republicans are for clean air. In fact, I championed one of the first bills to reduce mercury – the Clear Skies Act. That legislation struck a balance between environmental protection and economic development. Unfortunately, Clear Skies was killed by radicals in the environmental movement because it didn’t require reductions in carbon – in other words, it didn’t cause enough economic pain. In 2005, when the Bush administration issued mercury regulations under the Clean Air Act, they also fell victim to environmental groups’ court challenges.”

Mirroring the President’s cap-and-trade agenda for CO2 control, MATS isn’t about saving lives or the environment, Inhofe said. “It’s part of a calculated effort to kill traditional forms of energy, like coal, to benefit Obama’s political allies. Backed by false claims and EPA propaganda, this regulation will fulfill Obama’s campaign promise of skyrocketing electricity rates.”

The MATS rule is ostensibly designed to reduce hazardous air pollutants (HAP), namely mercury, Inhofe noted. But over 99% of the benefits claimed by EPA are from reducing fine particle matter (PM) – not mercury – even though PM is strictly regulated under other Clean Air Act programs, including the National Ambient Air Quality Standard (NAAQS) for PM2.5.

Inhofe used as an example the Avon Lake coal plant in Ohio. It is among eight mostly coal plants, with a total of about 3,140 MW of capacity, in Ohio, Pennsylvania and New Jersey that GenOn Energy (NYSE:GEN) said Feb. 29 it will have to deactivate in the June 2012-May 2015 period due to EPA regulation.

“Indeed, the plant being closed in Avon Lake, OH, is but one example of what is happening in cities and towns across the country as a result of EPA’s rules,” Inhofe said. “In fact, as of today, nearly 22 Gigawatts (that’s the equivalent of approximately 50 medium-sized plants) operating in 20 states are slated to shut down, with more expected. These closures have been projected to increase electricity prices by as much as 20 percent, sending a ripple effect though the economy that could kill up to 1.64 million jobs.”

EPA’s McCarthy said rule impacts can be handled

Regina McCarthy, Assistant Administrator at EPA, testified on behalf of the agency. McCarthy said that over the years, many power plants have invested in modern pollution controls to reduce their emissions. Many other power plants, however, have delayed investments in pollution control equipment that have been widely available for years – including equipment to reduce emissions of mercury and other toxic air pollutants. As a result, power plants remain the country’s largest source of mercury and SO2 emissions, and the largest stationary source of NOx emissions.

EPA modeling indicates the annual cost of implementing MATS will be about $9.6bn, significantly less than the estimated annual benefits of $37bn-$90bn. EPA’s modeling for the final standards indicates that any change in retail electricity prices will be about 3% on a national basis and will not cause prices to rise even to 1990 levels. In fact, EPA’s modeling shows that after both MATS and the Cross-State Air Pollution Rule (in the base case) are implemented, electricity rates are projected to stay well within the range of normal historical fluctuations and below levels seen as recently as 2009.

In addition, the updated standards will support thousands of good jobs for American workers who will be hired to build, install, and operate the emissions-control equipment to reduce health-threatening emissions of mercury, acid gases, and other toxic air pollutants. EPA estimates that investments made to comply with MATS will provide 8,000 long term jobs in the power sector and 46,000 short term construction jobs.

In response to stakeholder comments that EPA received on operational concerns related to the magnitude and technical feasibility of needed retrofits, the agency made a number of substantive changes to the compliance requirements. These changes include switching to a filterable particulate matter (PM) emissions limit and providing sources the option to use a more flexible facility-wide averaging approach as long as it provides equivalent reductions in mercury. EPA is also providing separate sub-categories of standards for limited use and non-continental oil-fired units, as well as more achievable new source standards.

EPA also paid attention to comments raised by stakeholders regarding the time available to achieve compliance with MATS, as well its impacts on electric reliability. Before MATS was finalized, EPA and the U.S. Department of Energy (DOE) conducted several analyses of its effects on electric generation resources. EPA’s and DOE’s analyses demonstrate that the vast majority, if not all, sources will be able to meet the MATS requirements within the time frames provided under the Clean Air Act, McCarthy said. Besides capacity shutdowns due to the rule, new capacity will be added between now and 2015, she said.

The agency analysis projects that, as a result of MATS, plant operators will choose to retire less than one half of one percent (4.7 GW) of the more than 1,000 GW that make up the nation’s electric generating capacity. “This retiring generation capacity is an average of more than fifty years old, relatively inefficient, and does not have modern pollution controls installed,” McCarthy said. “It should be noted that over the last few years low natural gas prices and an aging coal generation fleet have been pushing the industry towards less reliance on coal and greater reliance on natural gas.”

EPA took steps in the final MATS standards to address stakeholder concerns that compliance with MATS could not be achieved within the maximum three-year compliance date authorized under the statute. In the final rule, EPA described in detail the wide range of situations where it believes an additional year for compliance could be granted. This fourth year is provided by the Clean Air Act as needed to complete installation of control technologies.

EPA is suggesting that permitting authorities make this fourth year broadly available to sources that require it to complete their compliance activities, including emissions control projects, constructing on- or off-site replacement power, and upgrading transmission. EPA is also encouraging the fourth year to be available as needed to units that continue to operate for reliability purposes while other units are installing pollution controls. EPA staff, including both headquarters and regional offices, is available to quickly provide assistance and answer any questions as needed. As a result, EPA estimates that sources generally will have until spring of 2016 to comply – one year longer than EPA’s analysis indicates is necessary for most sources.

EPA is being flexible in its approach, McCarthy said

As part of the Obama Administration’s commitment to maximize flexibilities under the law, MATS was accompanied by a Presidential Memorandum that directs EPA to take a number of steps to ensure continued electric reliability. These steps include:

  • working with state and local permitting authorities to make the additional year for compliance with MATS provided under section 112(i)(3)(B) of the Clean Air Act broadly available to sources;
  • working with the DOE, FERC, state utility regulators, Regional Transmission Organizations, the North American Electric Reliability Corp. and regional electric reliability organizations, other grid planning authorities, electric utilities, and other stakeholders, as appropriate to promote early, coordinated, and orderly planning;
  • and making available to the public, including relevant stakeholders, information that describes the process for identifying circumstances where electric reliability concerns might justify allowing additional time to comply.

One regional transmission organization, PJM Interconnection, which operates a competitive wholesale electricity market and manages the high-voltage electricity grid to ensure reliability for more than 58 million people in the eastern U.S., has already begun asking its members for MATS compliance planning information.

“As we did more than two decades ago during debate of the Clean Air Act Amendments of 1990, we are hearing claims that our rules will lead to potential adverse impacts on electric reliability,” McCarthy stated. “Our analysis and past experience indicate that warnings of dire consequences of moving forward with these important rules are exaggerated at best. For example, during development of the 1990 Clean Air Act Amendments, one utility warned of unrealistic compliance dates and issues with electrical reliability. Industry estimated at the time that the cost of the new requirements for sulfur dioxide would be $7.5 billion per year; in reality, the cost of achieving the reductions was around $1.5-$2 billion per year – a fraction of the costs estimated by those seeking to prevent enactment of that landmark legislation. The resulting emission reductions are providing substantial health and ecosystem benefits with a monetized value of between $170 billion and $430 billion per year (2008$). The dire predictions were not true then, and industry’s remarkably similar claims about the current Clean Air Act regulations are not true now.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.