The U.S. Environmental Protection Agency is taking public comment until Dec. 14 on a proposed settlement that will require the Public Service Co. of Oklahoma (PSO) unit of American Electric Power (NYSE: AEP) to shut coal-fired capacity at the Northeastern power plant.
EPA gave notice in the Nov. 14 Federal Register of the proposed settlement, which would address a lawsuit filed by PSO in the U.S. Appeals Court for the Tenth Circuit. In February, the utility challenged the issuance of EPA’s final rule covering a federal implementation plan (FIP) for Oklahoma. That final rule had partially approved and partially disapproved Oklahoma’s state implementation plan (SIP) submitted under the “visibility” and “interstate transport” provisions of the Clean Air Act (CAA). The final rule included a FIP establishing Best Available Retrofit Technology (BART) emission limitations on SO2 for Units 3 and 4 of the Northeastern plant. The Sierra Club intervened in the appeal.
The proposed settlement establishes a deadline for EPA to take action on a SIP to be drafted and submitted by Oklahoma addressing the Northeastern units. Specifically, the proposed settlement outlines the timeframe in which the Oklahoma Department of Environmental Quality (ODEQ) develops and the Oklahoma Secretary of Environment submits to EPA for review SIP revisions containing specific elements.
The Sierra Club said in a Nov. 14 statement that this deal brings the Northeastern capacity “one step closer to retirement.” It noted that all parties had announced an agreement in principle in April of this year to phase out the aging coal plant.
“I am pleased that the plan to phase out the Northeastern coal plant is moving forward,” said Whitney Pearson, organizer with Sierra Club’s Beyond Coal campaign. “In preparing for the plant’s retirement, PSO has been a leader and a model for prioritizing its workers while also honoring their duties under the Clean Air Act. Oklahomans will breathe easier once the Northeastern plant is retired, but we must also remember that there are still aging, dirty coal plants in Oklahoma contributing to serious air quality concerns. We need further action.”
Under the agreement, the first coal-burning unit at Northeastern will be phased out by April 16, 2016. The second unit will remain in use but will have pollution control technology installed by April 16, 2016. Between 2021 and 2026, AEP-PSO will significantly reduce the amount of coal burned at the unit until it is decommissioned no later than Dec. 31, 2026.
AEP said in a Nov. 13 presentation that the 470-MW Northeastern Unit 3 would get installations of activated carbon injection, dry sorbent injection and baghouse systems, while the plant’s 465-MW Unit 4 would get retired in 2016. Records show the plant is fired with Powder River Basin coal from producers like Peabody Energy (NYSE: BTU) and Cloud Peak Energy (NYSE: CLD).
The early 2016 closure of Unit 4 at Northeastern is also part of a PSO environmental compliance plan filed Sept. 26 with the Oklahoma Corporation Commission (OCC).
The Sierra Club said in its Nov. 14 statement that separately, Oklahoma Gas & Electric (OG&E) is fighting Clean Air Act health protections, with litigation pending now. “OG&E has the opportunity to show the same type of leadership for Oklahoma that PSO has shown in this responsible plant retirement,” said Pearson. “Instead of shirking their responsibility to provide electricity without harm, OG&E should prioritize protecting public health and keeping rates stable with cleaner sources of energy.”
Currently, Oklahoma has six coal-fired power plants that collectively emit significant amounts of soot, smog, and mercury pollution, the Sierra Club said.
Oklahoma Gas & Electric battles in its own court case
The OG&E unit of OGE Energy (NYSE: OGE) is bracing for new air emissions control needs, which includes possible SO2 scrubber and dry sorbent injection installations on some of its coal-fired capacity. OGE noted in a Nov. 7 Form 10-Q quarterly report that the EPA’s regional haze rule, with its BART provisions, is a big factor in its decision-making.
“As required by the Federal regional haze rule, the state of Oklahoma evaluated the installation of BART to reduce emissions that cause or contribute to regional haze from certain sources within the state that were built between 1962 and 1977,” OGE wrote. “Certain of OG&E’s units at the Horseshoe Lake, Seminole, Muskogee and Sooner generating stations were evaluated for BART. On February 18, 2010, Oklahoma submitted its SIP to the EPA, which set forth the state’s plan for compliance with the Federal regional haze rule. The SIP was subject to the EPA’s review and approval.”
The Oklahoma SIP included requirements for reducing NOX and SO2 from OG&E’s seven BART-eligible units at Seminole, Muskogee and Sooner. The SIP also included a waiver from BART requirements for all eligible units at the gas-fired Horseshoe Lake station based on air modeling that showed no significant impact on visibility in nearby national parks and wilderness areas.
The SIP concluded that BART for reducing NOX at all of the subject units should be the installation of low NOX burners with overfire air (flue gas recirculation was also required on two of the units) and set out associated NOX emission rates and limits. OG&E preliminarily estimates that the total capital cost of installing and operating these NOX controls on all covered units, based on recent industry experience and past projects, will be about $100m.
For SO2 emissions, the SIP included an agreement between the Oklahoma Department of Environmental Quality and OG&E that established BART at four coal-fired units located at OG&E’s Sooner and Muskogee stations as the continued use of low-sulfur coal (along with associated emission rates and limits). The SIP specifically rejected the installation and operation of dry scrubbers as BART for SO2 control from these units because the state determined that dry scrubbers were not cost effective.
In December 2011, the EPA issued a final rule in which it rejected portions of the Oklahoma SIP and issued a FIP in their place. While the EPA accepted Oklahoma’s BART determination for NOX in the final rule, it rejected Oklahoma’s SO2 BART determination with respect to the four coal-fired units at Sooner and Muskogee. The EPA is instead requiring that OG&E meet an SO2 emission rate of 0.06 lbs/MMBtu within five years. OG&E could meet the proposed standard by either installing and operating dry scrubbers or fuel switching at the four affected units. OG&E estimates that installing dry scrubbers on these units would include capital costs to OG&E of more than $1bn.
OG&E and the state of Oklahoma filed an administrative stay request with the EPA on Feb. 24. OG&E and other parties also filed a petition for review of the FIP in the U.S. Court of Appeals for the Tenth Circuit on Feb. 24 and a stay request on April 4. On June 22, the appeals court granted the stay request. The stay remains in place until a decision on the petition for review is complete, which will delay implementation of the haze rule in Oklahoma. On June 15, OG&E, the state of Oklahoma and other parties filed their brief in support of the petition for review of the final regional haze rule of the EPA. The briefing by all parties was completed in October.
In its Oct. 9 brief filed at the court, OG&E said: “EPA overstepped its authority when it vetoed Oklahoma’s BART determination under the Clean Air Act’s (‘CAA’s’) Regional Haze program and replaced it with EPA’s own analysis. The CAA unequivocally grants Oklahoma the authority to make BART determinations for sources within its borders. In this case, the State properly exercised that authority and made a BART determination that met its statutory obligations. The State’s determination, however, did not satisfy EPA’s over-arching desire to have scrubbers installed on coal-fired power plants. EPA thus put itself in Oklahoma’s place and hired a consultant, conducted its own BART analysis, and issued a Final Rule requiring scrubbers. EPA had no authority to act in this manner, and, for this reason alone, the Final Rule cannot be sustained. Moreover, EPA’s BART determination is arbitrary and capricious in that it departs from EPA’s own guidance and is based on novel theories that were not presented for notice-and-comment.”