The utility industry’s top Environmental Protection Agency (EPA) concern during the second Obama administration is “the impact that numerous converging new regulations for the coal space have on power plant retirement plans,” according to a new analysis by FBR.
Climate change is the most significant unfinished agenda item from the president’s first term, the firm said in a Dec. 10 analysis. The review was conducted in part by Virginia-based FBR Capital Markets Analyst Benjamin Salisbury.
A Supreme Court decision effectively requires the EPA to regulate greenhouse gases under the Clean Air Act (CAA). EPA is scheduled to soon make final carbon dioxide standards for new power plants.
But an aggressive push to regulate greenhouse gases at existing plants could harm the U.S. economy, “and think tanks are once again floating the idea of new GHG legislation, possibly in the form of a carbon tax.”
FBR, however, does not expect legislation to become law soon given Republican control of the House and a significant number of coal state Democrats in the Senate, the firm said.
The GHG rules in the EPA pipeline for new plants are already facing legal challenge, FBR said.
The draft regulations have already begun to be challenged in federal court. One challenge argues that the EPA unlawfully combined coal and natural gas plants into a single source category but that coal and gas should be regulated separately. There is also concern that some gas plants may struggle to meet the limits. Many Republicans in Congress see regulation of GHGs as unneeded and view the effort as a means of circumventing Congressional authority.
“The Obama Administration must also defend the mercury rule in court and will challenge the DC circuit’s rejection of the Cross-State Air Pollution rule,” FBR said. “A decision on Mercury and Air Toxics Standards (MATS) is unlikely before 4Q13, and we believe that the rule will remain largely intact. Assuming the CSAPR decision is not overturned, the rule will likely take years to rewrite.”
FBR also weighed in on several other key EPA regulations in the pipeline.
** On coal combustion residue, the EPA has delayed final coal ash regulation until 2014 amid controversy over the cost of the EPA’s preferred hybrid-hazardous approach and the viability of the ash recycling industry under stricter regulation. The goal at this time appears to be to push power plants toward dry handling of ash, FBR said.
** On cooling water, EPA must also finalize the 316(b) cooling water intake regulation expected in early 2013. The draft rule largely punted the issue to the states, but generators continue to express concerns about the cost and flexibility of new rules.
** Coal mining in Central Appalachia will continue to be the focus of much EPA attention. “We expect surface mine permits to continue to face challenges and anticipate a draft revision strengthening the Stream Buffer Zone rule sometime in mid-2013,” the firm said.
Some new rules could also be on the way.
The EPA is also scheduled to revise air quality standards for various pollutants including particulate matter and ozone known as NAAQS. The new standards do not directly require changes from power plants but will likely lead to greater state permitting requirements down the road.