Energy Future Holdings plans $1bn by 2020 in environmental spending

Capital expenditures for the environmental projects of Texas power generator Energy Future Holdings totaled $270m in 2012 and are expected to total approximately $100m in 2013 for environmental control equipment to comply with regulatory requirements.

Based on analysis and testing of options to comply with the U.S. Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS), as well as estimates related to other EPA regulations, including expenditures previously incurred related to the court-invalidated Cross-State Air Pollution Rule (CSAPR), between 2011 and the end of the decade the company estimates that it will incur more than $1bn in capital expenditures for environmental control equipment, the company said in its Feb. 19 annual Form 10-K report. The ultimate total of that spend will depend on the evolution of pending or future regulatory requirements.

“Based on regulations currently in effect, we estimate that we will incur approximately $500 million of environmental capital expenditures between 2013 and 2017, including amounts required to maintain installed environmental control equipment,” the company added. “Our current plan includes the ongoing use of lignite coal as part of the fuel mix at all of our coal facilities, in varying proportions that reflect the economically available fuel supply as well as the configuration of environmental control equipment for each unit.”

The reference to lignite in the “fuel mix” is to the fact that a common way to reduce certain emissions, like SO2, is to mix in a higher proportion of low-sulfur Powder River Basin coal, displacing ever greater percentages of higher-sulfur lignite. That PRB coal is generally more costly, though, since it has to be railed in from Wyoming, as opposed to the minemouth lignite supply.

Material capital expenditures would be required to comply with the CSAPR, as revised in June 2012, as well as with other pending and expected environmental regulations, including the MATS, for which Energy Future and certain states and industry participants have filed petitions for review in the D.C. Circuit Court of Appeals. The company can’t predict the outcome of these petitions.

Spend by 2020 falls from $1.5bn to current $1bn

Prior to the publication of the final MATS rule and the vacatur and court remand of the CSAPR to EPA, Energy Future estimated that expenditures of more than $1.5bn before the end of the decade in environmental control equipment would be required to comply with regulatory requirements, including the CSAPR and MATS. It has revised its estimates of capital expenditures for environmental control equipment to comply with regulatory requirements, based on analysis and testing of options to comply with the MATS rule, as well as estimates related to other EPA regulations, including expenditures previously incurred related to the CSAPR.

“We cannot predict whether the EPA or any other party will appeal the D.C. Circuit Court’s decision with respect to the CSAPR to the US Supreme Court or, if such appeal is granted, how the US Supreme Court will rule on any such appeal of the CSAPR,” the company said. “As a result, there can be no assurance that we will not be required to implement a compliance plan for the CSAPR, the Final Revisions, the Second Revised Rule or any replacement rules in a short time frame or that such plan will not materially affect our results of operations, liquidity or financial condition.”

The company’s Luminant subsidiaries have a lignite/coal-fueled generation fleet capacity that totals 8,017 MW and consists of the Big Brown (two units), Monticello (three units), Martin Lake (three units), Oak Grove (two units) and Sandow (two units) plants. Luminant’s lignite/coal-fueled fleet operated at a capacity factor of 70% in 2012, 83.5% in 2011 and 82.2% in 2010. This reduced performance reflects increased economic backdown of the units and the suspension of operations until summer 2013 of two units at Monticello. There is 1,130 MW of capacity at those two Monticello units for which operations have been suspended until summer 2013 due to low wholesale power prices in ERCOT and other market conditions.

In 2009 and 2010, Luminant completed the construction of three lignite-fueled units with a total capacity of 2,180 MW. The three units consist of one unit at a leased site that is adjacent to an existing lignite-fueled unit (Sandow) and two units at an owned site (Oak Grove). The Sandow unit and the first Oak Grove unit achieved substantial completion (as defined in the engineering, procurement and construction (EPC) agreements for the respective units) in the fourth quarter 2009. The second Oak Grove unit achieved substantial completion (as defined in the EPC agreement for the unit) in the second quarter 2010.

About 71% of the fuel used at Luminant’s lignite/coal-fueled generation units in 2012 was supplied from surface-minable lignite reserves dedicated to the Big Brown, Monticello, Martin Lake and Oak Grove plants. Luminant owns or has under lease an estimated 735 million tons of lignite reserves dedicated to these sites, and has an undivided interest in 200 million tons of lignite reserves that provide fuel for Sandow. Luminant also owns or has under lease approximately 85 million tons of reserves not currently dedicated to specific generation plants. In 2012, Luminant recovered about 31 million tons of lignite to fuel its plants.

Luminant meets its fuel requirements at Big Brown, Monticello and Martin Lake by blending lignite with low-sulfur, higher-Btu coal from the Powder River Basin in Wyoming. The coal is purchased from multiple suppliers under contracts of various lengths and is transported from the PRB by railcar. Based on its current planned usage, Luminant believes that it has sufficient lignite reserves for the foreseeable future and has contracted the majority of its anticipated PRB coal requirements through 2013 and all of the related transportation through 2014.

Major emissions controls in place at various coal units

Each of Luminant’s coal facilities is currently equipped with substantial emissions control equipment.

  • All lignite/coal-fueled facilities are equipped with activated carbon injection systems to reduce mercury emissions.
  • Flue gas desulfurization systems designed primarily to reduce SO2 emissions are installed at Oak Grove Units 1-2, Sandow Units 4-5, Martin Lake Units 1-3, and Monticello Unit 3.
  • Selective catalytic reduction to reduce NOX emissions is installed at Oak Grove Units 1-2 and Sandow Unit 4.
  • Selective non-catalytic reduction systems for NOx emissions are installed at Sandow Unit 5, Monticello Units 1-3, and Big Brown Units 1-2.
  • Fabric filter systems designed primarily to reduce particulate emissions are installed at Oak Grove Units 1-2, Sandow Unit 5, Monticello Units 1-2, and Big Brown Units 1-2.
  • Electrostatic precipitators designed primarily to reduce particulates are installed at Sandow Unit 4, Martin Lake Units 1-3, Monticello Units 1-3, and Big Brown Units 1-2.
  • Sandow Unit 5 uses a fluidized-bed combustion process that facilitates control of NOx and SO2.
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.