By Roy Belden

The national energy plan that the Bush administration unveiled in late May includes a number of significant environmental proposals. The administration can implement some without waiting for Congress to act.

Bush Energy Plan

The plan calls for a market approach to controlling emissions of various pollutants similar to the approach used currently for sulfur dioxide, or SO2, emissions for electric utilities. The Clean Air Act Amendments in 1990 created a fixed number of “allowances” or rights to emit SO2, and these are traded in a national marketplace. This same approach would be extended to nitrogen oxide, or NOx, and mercury emissions at power plants. ^NOx emissions from power generators are already capped in the northeast but not in the rest of the country, although seven more states will be added to the ^NOx control area in 2003 to 2004. There are no federal controls currently on mercury. The plan directs the US Environmental Protection Agency to draft bill language that can be given to Congress to implement such a program. The cap on SO2 emissions would be ratcheted down from current limits.

The president’s support for multi-pollutant legislation may improve the chances of Congress passing a multipollutant measure by the end of next year. This would be the first major amendment to the Clean Air Act since 1990. Existing coal and oil-fired plants would probably bear the brunt of the emissions reductions.

President Bush took steps to implement one part of his plan on May 18. The president issued an executive order directing federal agencies to hasten their review of permits for energy projects. The order creates an interagency task force headed by staff of the Council on Environmental Quality to push for greater coordination of the permitting process at the federal, state, local and tribal levels. Project developers with horror stories about permitting delays at least now have an outlet for their complaints.

The plan directs the Environmental Protection Agency to take another look at its “new source review” program. This is a program that requires power plants and other major sources of air emissions to have obtained air permits before starting construction. EPA has been given 90 days to report back to the president on the impact of the program on investment in new utilities and refineries, energy efficiency and environmental protection. Power companies complain that the new source review program inhibits both new plant construction and upgrades of existing plants due in part to the long lead times to receive permits and the uncertainty in how much it will cost to install any pollution control equipment that the government might require as a condition for issuing permits. The EPA review may lead ultimately to an overhaul of current new source review requirements.

The president has also directed the attorney general to take another look at cases the government has pending in the courts against a number of electric utilities and refineries for violations of existing new source review standards. Some of these cases might ultimately be dropped or settled.

The president was stung by criticism over his decision for the US to withdraw from efforts to deal with the global warming problem through the Kyoto protocol. Perhaps for this reason, the Bush plan suggests that the federal government will look for other ways to get to the same place. It directs federal agencies to look for market mechanisms, new technologies and other innovative approaches to address global climate change. There is also a cabinet-level review underway of how the US might address climate change. However, the plan does not recommend any specific reductions in greenhouse gases, and the plan failed to include carbon dioxide, or CO2, among the list of pollutants that will be covered by draft multi-pollutant legislation being prepared by EPA. Environmental groups are lobbying Congress aggressively to include CO2 in any multi-pollutant bill.

Section 126 Rule

The US court of appeals for the DC circuit largely upheld a rule the Environmental Protection Agency issued to require reductions in ^NOx emissions from specific power plants and industrial plants in 12 states in the eastern half of the United States. The rule is called the “section 126 rule.” The court released its decision in mid-May.

The section 126 plants are required to comply with new federal NO_x standards by May 1, 2003. These standards are substantially similar to the government’s “NO_x SIP call rule.” The NO_x SIP call rule and the section 126 rule will force many existing power plants and industrial facilities to install costly pollution control devices—such as selective catalytic reduction systems—to reduce NO_x emissions. EPA is expected to coordinate implementation of the two rules. Companies required to comply with the NO_x SIP call rule have until May 31, 2004 to do so.

The court took issue with one feature of the section 126 rule. It set aside the rule to the extent it includes cogeneration facilities in the “large electric generating unit” category and sent the question of how to classify cogeneration facilities back to the Environmental Protection Agency for further consideration. The court said the government failed to show that cogeneration facilities can meet the more stringent electric generating unit NO_x standards as opposed to the standards for non-electric generating units.

Mercury

The Environmental Protection Agency asked a federal court in May to dismiss cases brought by the Edison Electric Institute and a group of utilities. The groups want the court to overturn a decision by EPA last December to regulate mercury emissions and other hazardous pollutants from coal and oil-fired power plants. The case is before the US court of appeals for the DC circuit.

The skirmishing in court is part of an ongoing debate over whether mercury emissions from power plants should be reduced.

EPA is expected to issue a proposed mercury and hazardous pollutants rule by December 2003 and to finalize whatever rule it proposes by the end of 2004 with industry compliance required during the 2007 to 2008 timeframe. Many coal and oil-fired plants may need to install expensive pollution control devices to comply with the new standards.

Massachusetts

Massachusetts directed the state’s six oldest power plants in April to reduce CO2 emissions. The plants must limit CO2 emissions to 1,800 lbs per mWh by October 1, 2006 or two years later if they repower. This represents a 10% reduction from the current average CO2 emission rates for the plants. Massachusetts is the first state to mandate CO2 reductions from power plants.

Massachusetts also imposes new NO_x and SO2 emission standards that are expected to reduce these emissions by as much as 50% and 74% respectively from current levels at the six plants. The reductions in SO2 and NO_x emissions have to be made between October 1, 2004 and October 1, 2008.

Massachusetts also put power plants on notice that it intends to propose limits on mercury emissions by June 1, 2003 with a compliance date of October 1, 2006.

Impaired Water Rule

The Environmental Protection Agency is in settlement talks with industry, the states and environmental groups over the agency’s hotly contested rule for setting “total maximum daily loads,” or TMDLs, for impaired water bodies. The TMDL rule, issued in July 2000, has been challenged by numerous industry groups in the US court of appeals for the DC circuit. EPA asked the court on May 11 for another 60 days to submit briefs in the case in view of the ongoing settlement talks. The TMDL rule directs states to identify polluted rivers, lakes and coastal waters and set strict wasteload allocations where water bodies are not meeting applicable water quality standards. These wasteload caps will ultimately translate into more stringent wastewater discharge limits for industrial dischargers.

The controversy has spilled over to Congress. Congress passed riders to EPA funding measures prohibiting the use of fiscal year 2001 and 2002 funds to implement the rule. Implementation of the TMDL rule is currently scheduled to start during fiscal year 2003.

California

EPA Region IX recently issued an “administrative order on consent” to a California power plant authorizing it to exceed air permit limits for peaking units at the plant on an emergency basis. The emergency order contains “mitigation fees” or stipulated penalties for exceeding hours of operation permit limits during peak demand periods. A mitigation fee of $20,000 per ton of excess NO_x will be assessed under the emergency order. The order requires that the plant return to compliance by January 1, 2002.

The California independent system operator has identified 37 peaking units that may exhaust allowable annual operating hours prior to this summer’s peak demand period, and a number of these plants may be able to seek similar emergency consent orders from EPA Region IX to continue operations. The emergency consent orders are intended to allow plants to exceed federally-approved emission limits and thus preempt potential federal enforcement actions.