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    EPA's New Source Performance Standard as bad as Utility MACT?

    07/09/2012

    The EPA is proposing a tough new regulation on the energy sector, by creating a New Source Performance Standard for CO2 proposal requires new fossil-fuel electric generators to release no more than 1,000lbs of CO2 per MWh.  No currently operating coal-fired plant comes close to achieving this level.  Coal plants fitted with carbon capture and storage (CCS) equipment could meet the new standards, but the cost would surpass the cost of new natural gas cycle plants. The CCS equipment would increase cost around 80%for pulverized coal plants electricity. To put it simply, the EPA has created yet another standard that no coal plant can meet.  This should come as no surprise given President Obama’s agenda to bring an end to the coal industry. 

    The Competitive Enterprise Institute (CEI) has provided the following as reason why the “Carbon Pollution Standard” needs to be rejected: 

    • The rule would create an effective ban on the construction of new coal-fired plants; something Congress has not and would not approve if it was put up to vote.

    • The EPA has used a ‘bait-and-switch’ tactic and misled stakeholders. Otherwise, senators opposing the greenhouse gas regulations may have been able to gain enough support to stop the agency’s tough new mandates. 

    • The rule tries to use the Clean Air Act to regulate GHGs (greenhouse gases), a task for which the Act was not intended. 

    • CEI also believes that the proposed rule will create a precedent to create a National Ambient Air Quality Standards (NAAQS) for GHGs, which will lead to draconian new policy measures.

     The EPA has said that it would not require coal power plants to meet the same CO2 emission levels as natural gas combined cycle plants, but that doesn’t seem to be true now. For the past two years people have speculated that the EPA would define a Best Available Control Technology (BACT) for CO2 so rigorously that new power plants would not be able to comply without moving to natural gas.  Under the Carbon Pollution Standard the BACT is far more stringent than the NSPS and will put coal power plants in the same source category as natural gas plants, requiring them to meet the same standards, something the EPA promised it was not going to do. 

    Congress declined similar CO2 standards for coal power plants with the rejection of the Waxman-Markey, “American Clean Energy and Security Act”. In 2011 the House passed H.R.910, which would have overturned all GHG regulations from the EPA, with the exception of industries that already made the necessary investments to meet new requirements. Clearly the EPA is out of control; the public and Congress must take steps to rein in the EPA’s extensive power.

     As mentioned, the EPA is trying to regulate GHGs through the Clean Air Act, a statue that is wholly unsuited for such a task. In order to validate their proposal the EPA must make some highly questionable claims. First they categorize natural gas combined cycle electricity generation as a “control option” or “system of emission reduction” for coal-fired plants. The problem is that natural gas combined cycle is not a “system of emission reduction”; it is a type of power plant. The EPA is therefore suggesting that new coal-fired plants need to be natural gas plants. They are essentially saying that natural gas combined cycle is an “emission reduction system”, which means it has been “adequately demonstrated” for coal power plants. The EPA is defining a performance standard, so that the only way in which a facility can comply is by being a completely different facility. 

    The Carbon Pollution Standard proposal also allows for the exemption of modified coal power plants performance standard, even though CAA Sec. 111 requires these plants to be regulated as “new” sources as well.  The EPA justifies this stretch of the Clean Air Act by claiming they don’t have adequate information about the changes that a facility has made and how that has then affected the CO2 emission levels. This, however, is not true. The EPA has been gathering data on the modifications done by power plants since the 1970s. The EPA states it does not have “adequate information as to the types of control actions sources could take to reduce emissions, including the types of controls that may be available or the cost or effectiveness of those controls” when in reality they know the only way to meet the proposed requirements is for the plants to install CCS or re-power with natural gas. 

    Many believe this bait-and-fuel-switch tactic the EPA has devised is to make sure the major costs and impact of the rule are not felt until after the November elections. This costly new proposal could be a major political liability for President Obama during his re-election, especially in combination with the Utility MACT and Cross State Air Pollution rules that the EPA has alreaedy issued.. This is the most viable reason as to why the EPA is waiting to include modified facilities as “new.” until after November.

    Another red flag with this proposed rule is the fact that it has no monetized costs or benefits. They believe that there will be no “added cost” to the electric sector, because regardless of the proposal power companies will build new EGUs that would meet the regulatory requirements simply because that is how the market is turning. They can’t even find any benefits saying they don’t, “anticipate any notable CO2 emissions changes resulting from the rule”. If they EPA is correct in their assumptions then why is the rule required?  Especially when there are no measurable CO2 climate benefits and the CPS will not reduce the emission levels?

    The EPA may have more far-reaching plans for this unnecessary rulemaking. Namely, this proposal will increase the agency’s control over electric utilities; put fossil-fuel EGUs in the EPA’s regulatory bind due to CO2 emissions, and set a precedent for creating CO2 performance standards for other sources. 

    Finally, the EPA is playing fast and loose with claims on whether CCS is ot a commercially viable substitute to switching to combined cycle natural gas. The EPA has anticipated critiques that the CPS proposal will limit the construction of new coal-fired plants.  The EPA points to the fact that coal power plants will have the option to implement CSS control equipment rather than switch fuels, but, at the same time, the agency also acknowledges the CCS could raise coal electricity up to 80%. 

    The NSPS for CO2 will be costly and inefficient.  It also would effectively give the EPA, State AGs, and other environmental litigants the power to restructure the energy sector far beyond any legislative mandate from Congress.   Moving forward with this regulation in the wake of the Utility MACT rule and the Cross State Air Pollution rule suggests that the EPA train wreck is far from over.  The EPA is reshaping America’s energy policy in ways that raise energy costs, threaten the reliability of the electricity grid, and impose excessive burdens on middle and low income Americans—all without a vote.  Congress needs to hold these regulatory agencies accountable and challenge any claims that such massive regulatory incursions will not impose costs on the economy.