With CSAPR still up in the air, Dynegy seeks to delay Illinois air case

With the U.S. Supreme Court taking up the legal dispute over the Cross-State Air Pollution Rule (CSAPR) in its October term, Dynegy Midwest Generation LLC (DMG) has asked the Illinois Pollution Control Board to shelve a request for an air rule variance for Dynegy’s coal-fired capacity in Illinois.

Dynegy on Aug. 14 asked the board for a stay of these proceedings until February 2014. In June 2012, DMG had filed a petition for variance from certain provisions of the state’s Multi-Pollutant Standard (MPS) for a period of about two years. DMG sought relief from MPS provisions that would prohibit DMG from trading SO2 allowances, if and when issued, under CSAPR.

Under the CSAPR, DMG would have been allocated a number of SO2 allowances that DMG wished to trade on the open emissions market. DMG sought the variance despite the CSAPR appeal by various industry parties in federal court in order to be situated to sell allowances as soon as the appellate court rendered its decision, assuming that the court sustained the CSAPR on appeal.

In August 2012, the appellate court vacated CSAPR in EME Homer City Generation L.P. v. EPA. At that point, aware that some parties might challenge the appellate court’s ruling, DMG waived a decision deadline in the board case in order to see whether any of the appealing parties would seek rehearing and/or appeal of the appellate court’s ruling and, if so, the outcome of any rehearing or appeal.

Rehearing of the appellate court’s ruling was sought and denied. On June 24, the U.S. Supreme Court granted certiorari.

By order of the high court, petitioners’ brief in the EME Homer City appeal is due by Sept. 4, and respondents’ brief is due by Oct. 31. Under the court’s rules, petitioners would have 30 days to file reply briefs, with briefing in the EME Homer City appeal is anticipated to be completed by December. The court has not yet scheduled oral argument in the EME Homer City appeal.

“DMG anticipates that should the U.S. Supreme Court overturn the lower court’s decision, it would need to make only minor changes to its Petition for Variance to reflect appropriate beginning and ending dates for the variance,” the company told the board in the Aug. 14 petition. “Assuming that the CSAPR is reinstated, DMG’s ability to sell CSAPR allowances as soon as its CSAPR allowance accounts are populated would be extremely important in the emissions allowances trading market, thus its decision to seek this Stay of Proceedings rather than to withdraw the Petition and have to restart the process. DMG is concerned that a withdrawal of the Petition for Variance and then a refiling would consume valuable time, including for preparation and filing of the new petition and related initial procedural matters.”

Under MPS rule, Dynegy has to surrender SO2 allowances to the state

Dynegy Midwest is seeking a variance from the MPS requirement that prohibits owners or operators of electricity generating units (EGUs) in an MPS Group from selling or trading to or otherwise exchanging with any person SO2 allowances allocated to EGUs starting with vintage year 2013 that would otherwise be available for sale or trade as a result of actions taken to comply with the SO2 standards under the MPS. The MPS requires that, in 2013 and 2014, EGUs in an MPS Group comply with an overall SO2 annual emission rate of 0.33 lbs/mmBtu or a rate equivalent to 44% of the base rate of SO2 emissions, whichever is more stringent.

Also, Dynegy Midwest is requesting a variance from the companion requirement that it surrender such excess SO2 allowances to the Illinois EPA.

“DMG seeks this variance because surrendering, during the first two years of implementation of the CSAPR, a large quantity of SO2 allowances with significant economic value generated by DMG’s significant capital investments in SO2 pollution control equipment deprives DMG of that significant economic value, causing DMG unreasonable hardship,” explained the June 2012 variation request.

DMG said that while parent Dynegy Inc. (NYSE: DYN) generally supports CSAPR as a well-designed program for emissions reduction, there are complications between CSAPR and the MPS related to how SO2 credits are handled.Dynegy Midwest currently owns and operates four coal plants in Illinois that emit SO2:

  • Baldwin (1,800 MW net) in Randolph County;
  • Havana (441 MW net) in Mason County;
  • Hennepin (293 MW net) in Putnam County; and
  • Wood River (446 MW net) in Madison County.

In November 2011, DMG permanently retired a fifth coal plant, Vermilion in Vermilion County.

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.