The U.S. Third Circuit Court of Appeals on July 12 dealt a blow to NRG Energy (NYSE: NRG), ruling that the U.S. Environmental Protection Agency was acting within its power to impose new air emissions restrictions on the coal-fired Portland power plant in Pennsylvania.
“We hold that it was reasonable for the EPA to interpret Section 126(b) to be an independent mechanism for enforcing interstate pollution control, thereby giving it authority to promulgate the Portland Rule,” the three-judge appeals court panel that handled this case. “We also hold that the contents of the Portland Rule are not arbitrary, capricious, or abusive of the EPA’s discretion.”
Portland is a 427-MW, coal-fired, electricity generating plant located in Upper Mount Bethel Township in Northampton County, Pa. Portland is directly across the Delaware River within 500 feet of Knowlton Township in Warren County, N.J.
The EPA has found, under a 2010 petition from New Jersey regulators, that Portland emits SO2 in amounts that significantly interfere with the control of air pollution across state borders. Because of its location, Portland’s SO2 emissions travel directly across the river into areas of New Jersey.
In response to the petition under the Clean Air Act, the EPA issued a rule imposing direct limits on Portland‘s emissions and a schedule of restrictions to reduce its contribution to air pollution within three years.
NRG Energy subsidiary GenOn REMA LLC, the owner and operator of Portland, challenged the EPA’s November 2011 rule as inconsistent with the agency’s authority under the Clean Air Act and as arbitrary and capricious.
EPA’s Portland Rule requires Portland to reduce its SO2 emissions by approximately 81% at its two coal-fired generating units within three years of the rule‘s effective date and to adhere to interim SO2 emissions limits to ensure that Portland demonstrates the requisite increments of progress towards achieving final compliance.
NRG has already agreed to end Portland coal use in 2014
NRG Energy said May 15 that it has settled litigation by agreeing with the states of New Jersey and Connecticut on a shutdown schedule for coal use at two units of the Portland plant. The settlement, via a federal Consent Decree, allows the parties to avoid further litigation of a lawsuit that began in 2007.
“NRG only acquired the Portland plant in December 2012 when we closed our merger with GenOn – but we immediately started working with New Jersey and Connecticut and were able to resolve this issue without additional delay or cost to taxpayers,” said Lee Davis, President of NRG’s East Region, in the May 15 announcement. “As a part of the settlement, we committed to make a significant investment in projects that are beneficial to the environment consistent with NRG’s focus on providing power in a way that is environmentally responsible, reliable and affordable.”
The agreement ends a lawsuit brought by New Jersey and Connecticut for alleged non-compliance with the federal Clean Air Act at the Portland plant based on work done many years before NRG acquired the facility. NRG said it operates the Portland plant in full compliance with permits issued by Pennsylvania and denies there have been any violations of the Clean Air Act. However, the company agreed with New Jersey and Connecticut that settlement of this action is in the public interest and the most efficient means of resolving the dispute.
To meet the requirements of the settlement, NRG will stop using coal as fuel in two units at Portland by June 1, 2014, after receiving needed regulatory approvals. The units were previously scheduled to be deactivated on Jan. 6, 2015.
The Consent Decree must be approved by the U.S. District Court for the Eastern District of Pennsylvania. The two sides filed a July 10 motion with that court saying that the 45-day comment period on the decree has now expired and that it should be approved.
Notable is that the agreement to end coal use at Portland makes the July 12 appeals court ruling something of a moot point as it relates to that particular power plant. But, the power generation industry has taken a broader interest in the case due to its focus on the authority of EPA to act on state petitions like the one filed by New Jersey. So the July 12 ruling is also bad news for the generation industry as a whole.