Industry, regulators disagree on GHG and other EPA rules

Managers with large coal-burning utilities said July 9 that the Environmental Protection Agency’s new greenhouse gas proposal would effectively halt new construction of coal plants while EPA proposals on other emissions are causing generators to reconfigure their fleets.

Both Frank Prager, an Xcel Energy vice president dealing with environmental policy, and John Voyles, a Louisville Gas & Electric/Kentucky Utilities vice president, said they don’t see any new coal plants being built under an EPA GHG standard that appears to be designed for natural gas power plants.

LGE and KU are Kentucky utilities that are now part of PPL (NYSE: PPL).

“We are concerned that the rule has stretched the Clean Air Act to the breaking point,” Prager said. “It effectively bans new coal plants” because nobody is going to invest $1bn in a new coal plant in hopes that CCS will be commercially practical soon, Prager said.

Voyles agreed that the EPA carbon proposal will scare people away from building new coal plants. The LG&E and KU utilities are moving to build a major new combined-cycle gas plant in Kentucky, while also drawing up capital plans for more environmental retrofits.

The power company officials made their comments during the two-day ‘3N’ Conference. The gathering was sponsored by a trio of groups that represent state energy and environment organizations: the National Association of Utility Regulatory Commissioners (NARUC), the National Association of Clean Air Agencies (NACAA) and the National Association of State Energy Officials (NASEO).

Joseph Goffman, an EPA senior counsel in the Air and Radiation Office, said that while the greenhouse rule proposal does push new coal generation toward carbon capture and storage (CCS), it also includes an emission “averaging” clause that would enable a new coal plant to run for several years prior to installing CCS.

Current coal plants, including those already permitted or soon to go online, would not be affected by the proposed EPA standard, Goffman said. The EPA attorney noted that the agency has also decided not to draft a “plant modification” standard.

But some power company officials worry that EPA might one day treat significant plant retrofits as generating units that should be required to comply with the proposed rule.

Environmental Defense Fund attorney Megan Ceronsky said a carbon control standard would reduce global warming and the extreme weather events that tend to go along with it. Recent large forest fires out West along with severe electrical storms in the Midwest and East have definitely hurt grid reliability, Ceronsky said.

Ceronsky actually found agreement with some industry officials when she said EDF would favor developing GHG policy that addresses carbon emissions from the electric system as a whole.

Coal generators wrestle with other rules also

Some coal generators, and officials from heavy coal power areas, said the GHG proposal is not the only vexing EPA standard they are coping with.

The Mercury and Air Toxics Standards, or MATS, was drafted as a successor rule to the George W. Bush Administration’s Clean Air Mercury Rule, which was struck down by the courts. Likewise, the Bush era’s Clean Air Interstate Rule was also rejected by the federal courts and the Obama Administration has produced the Cross-State Air Pollution Rule or CSAPR.

Complying with the MATS rule within three years, or obtaining an EPA extension for a fourth or fifth year to achieve compliance, generated much discussion among industry people on the program.

It appears power companies cannot get assurance of a fifth year of operation (prior to obtaining compliance) “basically until the end of the fourth year,” said Southern Co. (NYSE: SO) System Planning Vice President Jeffrey Burleson.

Southern already has scrubbers or selective catalytic reduction (SCR) systems installed on much of its coal-fired capacity, Burleson said. At the same time, however, it appears the Southern fleet will have to either retrofit, retire or convert to natural gas about 8,000 MW of generation.

Building new combined-cycle gas plants isn’t as simple as it sounds, Burleson said, explaining that there is scant available capacity available on the two major natural gas transmission lines serving most of the Southern territory. Lining up access to a large supply of pipeline gas, like installing scrubbers on a coal unit, can take years to carry out, Burleson said.

Not everyone thought compliance with new environmental standards would be too tough. Generators have successfully complied with Maryland’s multi-pollutant Healthy Air Act with minimal impact on ratepayers or reliability, said Tad Aburn, an air and radiation director with the Maryland Department of the Environment.

Ohio, however, is facing the retirement of more than two dozen coal-fired generating units and 6,100 MW of generating capacity, said Public Utilities Commission of Ohio Chairman Todd Snitchler. “No one on this panel is in favor of dirty air or dirty water,” Snitchler said, adding that U.S. EPA timetables are creating some headaches.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.