Environmental Update - June 2001

Environmental Update

June 16, 2001

Plans by the US Environmental Protection Agency to regulate mercury and hazardous air pollutants from power plants that burn coal or oil have come under fire. The plans could cost the power industry between $1.6 and $5 billion to comply.

Meanwhile, the US Supreme Court upheld other air rules the Environmental Protection Agency issued that require reductions in nitrogen oxides, volatile organic compounds and particulate matter. The US government is now moving forward to implement the rules. Implementation could lead to additional NOx, VOC and PM reductions at many US power plants.

Mercury

The Edison Electric Institute filed suit at the end of February in the US court of appeals in Washington challenging a decision by the US Environmental Protection Agency to regulate mercury and other hazardous air pollutants from coal- and oil-fired steam generating plants. The Edison Electric Institute is the trade association for the regulated utilities.

A group of electric utilities petitioned the agency separately to reconsider its position.

At this point, the US government has merely announced an intention to regulate these pollutants. It is expected to issue a proposed rule by December 2003 and to have the final rule out by the end of 2004 with industry expected to achieve compliance by the 2007 to 2008 timeframe. Compliance will be expensive.

Supreme Court Action

The US Supreme Court said in late February that Congress did not unconstitutionally delegate its legislative authority when it left it to the Environmental Protection Agency to come up with “national ambient air quality standards,” or “NAAQS,” for ozone and fine particulate matter under the Clean Air Act. The case is Whitman v. American Trucking Associations. “NAAQS” are standards that set an acceptable level of a pollutant in the ambient air that, in turn, triggers federally-required air emission reductions in areas that do not meet the standards.

The court also said that it reads the Clean Air Act to say that the agency is not supposed to balance air quality standards against the cost to comply with them in setting a NAAQS. However, the court said that the states — which are charged with figuring out how to reach national ambient air quality standards — can consider economic costs and technological feasibility when coming up with their own implementation plans.

The decision is important because it means that the Environmental Protection Agency can continue to establish NAAQS as it has done for over 30 years, including turning a blind eye to cost.

While the Environmental Protection Agency’s standard setting process was upheld, the Supreme Court overturned the agency’s plan to implement the new “8-hour ozone NAAQS” on grounds that the agency had misinterpreted what the Clean Air Act requires. The “8-hour ozone NAAQS” — which is more restrictive than the current 1-hour ozone NAAQS — will ultimately translate into more stringent NOX and VOC emission standards. The government will now have to come up with a new implementation plan.

The new 8-hour ozone standard and the new particulates standard will trigger the designation of new ozone and particulate matter nonattainment areas that could result in added emission reduction requirements for existing sources in these areas and more stringent environmental requirements for new and modified sources in the future.

NOx SIP Call

The Environmental Protection Agency won a round before the US Supreme Court in early March. The court declined to review a decision by a US appeals court that largely affirmed the “NOx SIP call rule.” The case is Michigan v. EPA.

The “NOx SIP call rule” requires 22 states covered by the rule to take steps to reduce nitrogen oxide emissions to a specified budget level by 2007. The US appeals court had said the federal government was within its rights to apply the rule to at least 19 of the 22 covered states as well as the District of Columbia. The three states where the status of the rule is in doubt are Georgia, Missouri and Wisconsin. In the case of these three states, the Environmental Protection Agency proposed in January to exempt Wisconsin and only include portions of Georgia and Missouri in the NOX SIP call rule.

All the covered states are in the eastern United States. These are states whose nitrogen oxide emissions migrate and contribute to air pollution in neighboring states. Power plants and other large “sources” within the covered states are required to comply with the new NOx standards by May 31, 2004.

Carbon Dioxide

President Bush backed away from a promise during the presidential campaign to reduce carbon dioxide emissions at power plants. The president explained his position in a March 13 letter to Senator Chuck Hagel (R.-Nebraska). In the letter, he reaffirmed his opposition to the Kyoto protocol and indicated he supports a “multi-pollutant strategy” to require power plants to reduce sulfur dioxide, nitrogen oxide and mercury emissions. However, he said that there should not be any mandatory reductions in carbon dioxide emissions.

Bush gave two reasons for his change in position. One is he does not believe that CO2 is a “pollutant” covered by the Clean Air Act. The other is a recent US Department of Energy report called “Analysis of Strategies for Reducing Multiple Emissions from Power Plants” that warned that CO2 emission caps as part of a multiple emissions reduction strategy would lead to a dramatic shift from coal to natural gas and result in significantly higher electricity prices compared to scenarios in which only sulfur dioxide and nitrogen oxide are reduced. Bush had said during the campaign that he favored CO2 reductions as part of a multi-pollutant control strategy.

Congress

The Republican head of the Senate Environment and Public Works Committee is expected to release soon a set of “principles” for a multi-pollutant bill that would regulate nitrogen oxide, sulfur dioxide and mercury emissions from power plants. Senator Robert Smith (R.-New Hampshire) had previously expressed a willingness to consider mandatory CO2 emission reductions as part of the legislation. However, it appears now that he is moving toward proposing a voluntary system for recognizing CO2 reductions.

Meanwhile, a bipartisan group of moderates has introduced its own multi-pollutant bill that would impose controls on NOx, SO2, CO2 and mercury emissions from power plants. The bill — S. 556 — was introduced in mid-March by Senators Jim Jeffords (R.-Vermont), Joseph Lieberman (D.-Connecticut) and Susan Collins (R.-Maine).

California

California governor Gray Davis took steps in early February to jumpstart the siting and construction of new power plants. The governor issued six executive orders that are designed to streamline the review process for developers who want to bring new power plants on line through 2004 and to increase output from existing plants.

The governor has set a target of bringing another 5,000 megawatts of additional power on line by July 2001 and another 5,000 megawatts by July 2002.

The executive orders were issued under a provision in the California Emergency Services Act that gives the governor broad authority to suspend most state statutes and regulations and issue orders that have the force of law during times of emergency.

However, his actions do not affect — and would be greatly limited by — federal laws and regulations that apply to California projects.

One of the orders streamlines the review process for certifying peaking plants that could come on line by July 31, 2001. Peaking plants that have a contract with the ISO, or independent system operator, and can be on line by July 2001 may be permitted under the California Energy Commission’s emergency siting process and will be exempted from the California Environmental Quality Act, or “CEQA,” requirements as emergency projects. The CEC is instructed to complete its expedited review for these plants within 21 days. Further, the review of CEQA documents is shortened to seven days for all plants below 50 megawatts and that are proposed to be on line by the summer of 2001. (Plants below 50 megawatts are not subject to CEC review in the first place.) Finally, the CEC’s four-month emergency permitting authority was reinstated. It applies now to any simple-cycle plant that can be brought on line by August 31, 2002 with an application accepted by the CEC as complete by December 31, 2001.

Another executive order directs local, regional and state agencies to “work cooperatively and expeditiously” with the CEC and within the CEC’s timeline to review all applications for certification.

Another order directs the local air districts to modify hours of operation limits for existing plants to allow existing plants to generate up to an additional 50 megawatts using existing installed capacity. The CEC recently released guidance implementing the 21-day siting process for new or expanded peaking plants that included standard permit conditions.

— contributed by Roy Belden in Washington.