Environmental Update

Environmental update

December 01, 2002 | By Keith Martin in Washington, DC
The Republican victory in the mid-term elections in November should help the Bush administration advance two of its high-profile environmental initiatives — the “clear skies initiative” to reduce emissions of nitrogen oxides, or “NOx,” sulfur dioxide, or “SO2,” and mercury for power plants, and a comprehensive energy bill.

Clear Skies

The Bush administration’s “clear skies initiative” was introduced as the “Clear Skies Act” at the end of July, but the measure did not advance due to opposition from Senator James Jeffords (I.-Vermont), then chairman of the Senate Environment Committee, as well as from most Democratic members of the committee. With the Republicans assuming the committee chairmanships in the next Congress, the clear skies initiative should receive renewed consideration.

Senator James Inhofe (R-Oklahoma), the expected new chairman of the Senate Environment Committee, has indicated that he plans to make reauthorization of the Clean Air Act one of his top legislative priorities. Senator Inhofe has been a strong advocate of injecting “sound science” and employing a “cost-benefit analysis” in Clean Air Act rulemaking. Portions of the Bush administration’s clear skies initiative may also ultimately be incorporated into Congressional proposals to reauthorize the Clean Air Act.

The clear skies initiative calls for steep reductions in NOx, SO2, and mercury emissions in a two-phase process with specific reduction targets for years 2010 and 2018. The president’s proposal does not address carbon dioxide, or “CO2,” emissions, a greenhouse gas. The initiative would create a mandatory “cap-and-trade” emission allocation program similar to the federal acid rain program. The legislative language provided by the administration calls for reductions by 2018 of approximately 70% in SO2 emissions, about 66% in NOx emissions, and approximately 68% in mercury emissions from current levels. The Bush legislative proposal would also create a “backstop” ceiling price for emission allowances of $4,000 for each ton of SO2 or NOx and $2,187.50 for each ounce of mercury. If the market price of allowances starts to rise above these backstop amounts, then plants could go directly to the US Environmental Protection Agency to purchase the allowances instead of buying them from another company on the open market.

The clear skies initiative would also exempt power plants from having to comply with other, similar programs such as the “new source review” permitting program and the “best available retrofit technology,” or “BART,” standards that apply to older sources of air pollution located near national parks and wilderness areas, as well as from certain air toxics standards. Exemption from these programs would be a quid pro quo for having to meet new stringent emission reductions targets under the initiative. If a version of the Bush plan is ultimately enacted, many older power plants would have to be retrofitted with costly pollution control technology or spend significant funds to purchase a sufficient number of allowances to ensure compliance.

Not surprisingly, many environmental groups have claimed that Senator Inhofe and his counterpart in the House, Rep.W.J. “Billy” Tauzin (R.-Louisiana.), will engage in efforts to roll back over 30 years of progress made under the Clean Air Act. Senate Democrats have pledged to fight against reforms that weaken the Clean Air Act.

While sweeping reforms of the Clean Air Act may be debated in the respective Congressional committees in the next Congress, it seems unlikely that wholesale changes will be made, with the possible exception of the implementation of a multi-pollutant emission reduction program for power plants that draws upon some of the concepts addressed in the administration’s clear skies initiative. If agreement cannot be reached next year on reauthorizing the Clean Air Act and other limited reforms, then both sides will probably prefer to wait until after the 2004 elections before tackling the issues again.

Other Legislative Initiatives

In addition to reforming the Clean Air Act, the incoming Republican Congress hopes to work towards other environmental goals. One of the top priorities is passage of a comprehensive energy bill that adopts many of the proposals advanced by the Bush administration. The president’s wish list for the bill includes programs to increase domestic oil and gas supplies (such as permitting limited exploration in the Arctic National Wildlife Refuge in Alaska and adding more financial incentives for oil and gas exploration in other areas), electricity reform to promote increased competition and encourage renewable energy, conservation, and alternative fuels, and increased funding for energy research and development.

Chemical security legislation is also likely to receive attention in the new Congress. There is a growing consensus in Washington that a measure requiring enhanced security at chemical plants and other facilities, including some power plants, is needed. Senator Jon Corzine (D.-New Jersey) introduced a bill in the Congress that just ended that would have required preparation of vulnerability assessments and response plans and required that they be submitted to the federal government for approval. The Corzine bill would have affected as many as 15,000 facilities. The regulated community largely opposes the bill on grounds that it is overly prescriptive and would conflict with voluntary measures that many chemical companies are already committed to implement. An effort to add the Corzine bill to legislation creating the new federal Department of Homeland Security failed. The new Republican Congress is expected to pass a chemical security bill, but in a form that tracks what private industry is already doing.

Congress may also consider legislation to streamline asbestos litigation and impose consistent triggers for when a claim for asbestos liability can be filed. There has been an explosion of asbestos cases in recent years involving plaintiffs who were allegedly exposed to asbestos, but do not exhibit any symptoms of asbestos-related illnesses. Thousands of asbestos cases have been filed against power companies and boiler manufacturers related to asbestos present in boilers, piping insulation, and other areas at power plants.

EPA Issues NSR Reforms

After years of waiting, the US Environmental Protection Agency released a final rule that rewrites several provisions of the “new source review,” or “NSR,” air permitting program. The EPA’s announcement on November 22, 2002 immediately drew a firestorm of criticism from leading environmental groups and several Democratic members of Congress. Nine attorneys general from northeastern and mid-Atlantic states said they plan to challenge the NSR revisions in court.

The final rule makes some important changes in the program, but the revisions are not as broad as many in the regulatory community had hoped.

The NSR permitting program imposes a fairly rigorous pre-construction review of new and modified major sources of pollution in so-called “nonattainment” areas (areas that do not meet federal ambient air quality standards) and for all major emitters in “attainment” (clean) areas. The NSR program has been criticized by the regulated community in the past as being overly time consuming and excessively burdensome and costly. Industry has asserted that the NSR program discourages the modernization of existing plants and hampers the siting of new, more efficient, and less-polluting plants. EPA’s final rule is intended to address some of these criticisms and provide added certainty to the NSR permitting process.

The final rule has five key components. Each of the five is a reform that was originally proposed in 1996 by the Clinton administration. The first change affects “baseline actual emissions.” Sources of pollution other than power plants will calculate pre-change emissions based on a “baseline” period of any consecutive 24-month period in the past 10 years, instead of the current practice of generally using the most recent two-year period of emissions. The current policy for power plants — a baseline period of a consecutive 24-month period in the past five years — would become law. The baseline calculation is important because it is the starting point for measuring an emissions increase. The higher the baseline, the lower the projected emissions increase.

Under the second major component of the final rule, EPA’s rule for calculating emission increases for power plants that have begun normal operations (i.e., comparing past actual emissions to projected future actual emissions) will also apply to other industrial facilities, including plants with industrial boilers.

Third, sources that keep their emissions below a plantwide cap will be able to make operational changes and equipment modifications without undergoing a major source NSR permitting process. Such a plantwide applicability limit would generally be effective for 10 years.

Fourth, plants that have recently installed state-of-the-art pollution control technology on new or modified emission units as part of an NSR or similar state permitting process would have operational flexibility to make certain future changes without trigging additional NSR permitting for a 10-year period.

Finally, under the final rule, EPA will formally adopt its current policy of excluding pollution control and prevention projects from NSR permitting review where such projects result in a net beneficial impact on the environment. The final rule contains a presumptive list of technologies that will automatically qualify for the exclusion.

In addition to the above reforms to the final rule, EPA proposed a separate rule that defines what qualifies as exempted “routine maintenance, repair, and replacement.” The EPA proposal lists a range of options for two types of qualifying categories of “routine maintenance, repair, and replacement.” These categories are annual maintenance, repair and replacement allowances and an equipment replacement approach. With respect to the former, the proposed rule will establish an industry-specific cost allowance, and certain types of activities that fall under the allowance cap would qualify for the exemption. With respect to the second category, most projects replacing existing equipment with functionally-equivalent new equipment would generally qualify for the exemption so long as a cost threshold was not exceeded. For this category, the cost threshold would generally be pegged to a percentage of the replacement cost of the particular process unit. EPA is seeking comments on whether one or the other category is more appropriate or whether both categories of “routine maintenance, repair, and replacement” should be adopted.

Because it is only a proposed rule, the “routine maintenance, repair, and replacement” proposal will be subject to public notice and comment. The proposed rule is controversial. The ongoing, high-profile EPA enforcement actions against older utility plants assume that the equipment modifications and upgrades over the years did not qualify as exempted “routine maintenance, repair, and replacement” activities. This makes the latest EPA proposal especially sensitive, and explains why the proposal has already elicited a strong negative reaction from environmental groups and certain elected officials.

Kyoto Protocol

The Canadian government said in November that it will attempt to implement the Kyoto protocol requirements through negotiated voluntary emission reduction agreements with the major Canadian industrial sectors. A back-up regulatory structure will be put in place to ensure that the industrial sectors follow through on their voluntary reduction commitments.

The Canadian government is under pressure from several key industrial sectors to reject the Kyoto protocol. The prime minister, Jean Chretien, hopes the House of Commons will approve the treaty by the end of 2002.

Canadian ratification is not essential to implementation of the treaty. International implementation of the Kyoto protocol hinges on ratification by Russia and at least one smaller country. Chances of the Kyoto protocol entering into force by the end of 2002 were recently dashed when Russia announced that its parliament will take three months to a year to decide whether to ratify the treaty. In the end, Russia is expected to ratify, largely because it will have a surplus of carbon credits to sell to other “Annex I” (more industrialized) countries. At a meeting of the protocol parties last year, Russia succeeded in doubling its allocated amount of carbon sequestration credits from 17 megatons to 33 megatons on account of its carbon-absorbing forests. Even more surplus credits will be available because greenhouse gas emissions from Russian industry have declined since 1990 due to the breakup of the former Soviet Union. Russia is expected to use the surplus carbon credits to help modernize its energy sector.

The Kyoto protocol will enter into force after it is ratified by 55 or more countries (including both industrialized Annex I nations and Annex II developing countries) whose emissions represent at least 55% of the carbon dioxide emissions from Annex I countries in 1990. Once in effect, the Kyoto protocol will require approximately a 5.2% reduction in greenhouse gas emissions during the first commitment period — 2008 to 2012 — compared to 1990 emission levels.

Brief Updates

EPA recently announced that it is preparing to test a web-based database that will provide public access to environmental compliance information on over 80,000 regulated facilities. The “enforcement and compliance history online,” or “ECHO,” database will reportedly include information on permitting status, inspection reports and compliance history for a broad range of facilities regulated under the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act and other federal programs. A notice was published in the November 20, 2002 Federal Register seeking comments on the proposed database. Comments are due by January 21, 2003.

California unveiled a new voluntary greenhouse gas state registry — the California climate action registry — that is intended to track in-state emissions of greenhouse gases. The program has 23 charter members, including British Petroleum and pacific Gas & Electric.

Senator John McCain (R.-Arizona), the incoming chairman of the Senate Commerce Committee, has said the committee will hold hearings on the potential effects of climate change on the US economy, the environment and public health, and may consider legislative proposals to address climate change in the next Congress.

EPA recently agreed as part of a settlement with nine environmental groups to issue final designations of new nonattainment areas by April 15, 2004. The agency is obligated to identify areas not meeting the 1997 air quality standard for ozone. According to EPA, more than 290 US counties fail currently to meet the new ozone air quality standard. The designation of these counties as nonattainment areas will trigger actions by the states to develop plans to bring these areas into compliance with the ozone standards. States may be forced to implement new emission limitations on power plants and other industrial sources in order to meet federally-mandated reductions.

EPA is reportedly weighing whether to launch a new Clean Air Act investigation into excess air emissions generated during start up, shutdown, or malfunction periods at power plants and other pollution sources. If the agency’s investigation concludes that significant pollution is being emitted during these periods, EPA could launch new enforcement actions against sources with high incidences of unexcused excess emissions during start up, shutdown and malfunction periods.

Finally, several environmental groups are accusing EPA of reneging on its word to develop new solid waste regulations to govern the disposal of coal combustion ash in mines. EPA is currently evaluating whether coal ash used as mine fill should be subject to special handling and management regulations. EPA was originally scheduled to propose new coal combustion ash regulations in 2004 with a final rule slated for 2005.

contributed by Roy Belden in New York