NRG Energy (NYSE: NRG) has estimated that environmental capital expenditures in the 2012-2016 period will be about $553m, based on current expectations on regulatory requirements.
“These costs are primarily associated with mercury controls to satisfy the Mercury and Air Toxics Standards, or MATS, on the Company’s Big Cajun II, W.A. Parish and Limestone facilities and a number of intake modification projects across the fleet under state or proposed federal 316(b) [cooling water]rules,” said NRG Energy’s May 3 Form 10-Q filing. “NRG continues to explore cost effective compliance alternatives to reduce costs. While this estimate reflects anticipated schedules and controls related to the proposed 316(b) Rule, the full impact on the scope and timing of environmental retrofits from any new or revised regulations cannot be determined until these rules are final and any legal challenges are reviewed. However, NRG believes it is positioned to meet more stringent environmental regulations through its planned capital expenditures, existing controls, and increasing generation from renewable resources.”
Big Cajun II is a 1,495-MW coal plant in Louisiana, while W A Parish (2,490 MW) and Limestone (1,690 MW) are coal plants in Texas. In July 2004, the U.S. Environmental Protection Agency published rules governing cooling water intake structures at existing power facilities known as the 316(b) Rule. Due to a decision by the U.S. Court of Appeals for the Second Circuit, EPA suspended the rule in July 2007 while preparing a revised version. In March 2011, EPA released the proposed new 316(b) Rule. States such as California and New York have moved ahead with their own more stringent requirements.
NRG, through subsidiary Petra Nova LLC, is continuing development of an up-to 240 MW-equivalent Post-Combustion Carbon Capture commercial scale unit at the W.A. Parish coal plant in Texas, with the intent of using the captured CO2 in enhanced oil recovery operations in oil fields on the Texas Gulf Coast, the Form 10-Q noted. NRG is currently progressing through a pipeline front-end engineering and design (FEED) study and the environmental impact statement process for this project, the latter of which is required under the National Environmental Policy Act
In March 2010, NRG was selected by the U.S. Department of Energy to receive up to $167m to build a 60 MW-equivalent carbon capture demonstration unit at the W A Parish plant located southwest of Houston. In the first half of 2011, an application was submitted to and approved by the U.S. DOE to conduct a FEED study for an up-to 250 MW sized project, which would allow for larger volumes of CO2 production, leading to increased oil production. To further the project’s enhanced oil recovery operations, in October 2011, Petra Nova acquired a 50% interest in Texas Coastal Ventures LLC, which owns a 100% working interest in the West Ranch oil field in Jackson County, Tex.
A May 3 slide presentation issued along with NRG’s earnings shows that the company only consumed 4.6 million tons of coal in the first quarter, down sharply from 7.5 million tons in the year-ago quarter. NRG, like other U.S. power generators, has cut coal use due to factors like a warm winter and coal-to-gas switching, plus NRG had more coal plant maintenance outage days in the first quarter of this year. The average cost of coal was $2.20/mmBtu ($35.55/ton) in the first quarter, against $2.16/mmBtu ($35.22/ton) in the first quarter of 2011. NRG relies heavily on low-cost Powder River Basin coal, even at power generating facilities in the Northeast.