Environmental Update

Environmental Update - June 2002

June 01, 2002
By Roy Belden

Haze in National Parks

A US appeals court struck down a key section of a US Environmental Protection Agency rule aimed at reducing haze in national parks in late May. The section in question would have allowed states to impose pollution control requirements on power plants or other industrial facilities as a class instead of analyzing how much pollution each individual facility contributes.

The decision, in a case called American Corn Growers Association v. EPA, could spare owners of some older power plants from having to spend millions of dollars on pollution control.

The EPA rule is the “regional haze rule.” It applies to facilities that contribute potentially to air pollution in “Class I areas,” which include national parks and federal wilderness areas. Power plants covered by the rule might be many miles away from a park, but be close enough so that their emissions affect how clear the air is at the park.

The case was brought by several industry groups, including one representing electric utilities.

The regional haze rule, written in July 1999, requires states to review all major air emission sources built between 1962 and 1977 that emit over 250 tons a year of any of five visibility-impairing pollutants and that are located up-wind from Class I areas. The five pollutants are nitrogen oxide, or NOx, sulfur dioxide, or SO2, particulate matter, volatile organic compounds and ammonia. The rule provides that sources that are reasonably anticipated to cause or contribute to Class I visibility impairment must install best available retrofit technology, or “BART.”

Last year, EPA issued proposed BART guidelines that appear to establish flue-gas desulfurization or scrubbers as the presumptive BART standard for utility boilers. Installing a scrubber on a large electric generating unit could cost from $50 million to $100 million. As proposed, the BART guidelines would set a presumptive SO2 control level requiring emissions reductions of 90 to 95% compared to uncontrolled operations, which is significantly more stringent than the existing federal acid rain program requirements. The BART guidelines were expected to be finalized later this year; however, the court’s decision could force EPA to re-propose certain portions of the guidelines. As a result, adoption of a final set of BART guidelines may be delayed.

Under the regional haze rule, states were required to identify BART-eligible sources based on a showing that a whole group of sources together emitted visibility-impairing pollutants within geographic areas that could affect a downwind Class I area. The court struck down EPA’s “collective contribution” approach as being inconsistent with the plain language of the “Clean Air Act.” The court said the regional haze rule impermissibly ties “states’ hands and forces them to require BART controls at sources without any empirical evidence of the particular source’s contribution to visibility impairment in a Class I area.”

Although the court upheld other provisions of the rule, its rejection of the “group source” determination is a significant victory for the utility industry. EPA must now come up with a new way for states to identify BART-eligible sources. The court suggested it would accept a new version of the regional haze rule if it contains a mechanism to allow states to exempt BART-eligible sources on the basis of a particular source’s emission contribution. It will be difficult in practice to demonstrate that an individual source affects visibility at a downwind Class I area, except for situations involving very large air emission sources. State rules implementing the regional haze rule program are due to be submitted to EPA in 2005. It is unclear whether this deadline will now slip in light of the appeals court decision. The EPA will have to put in place a new mechanism for identifying BART-eligible sources before the states can take any significant actions to implement the remaining requirements of the regional haze rule.

EPA has not indicated whether it will seek a rehearing by the appeals court or go directly to the US Supreme Court.

Kyoto Protocol

Japan is expected to approve the Kyoto protocol in early June 2002, marking a significant step toward implementing the treaty. The Kyoto protocol will enter into effect after it is ratified by 55 or more countries that represent at least 55% of total greenhouse gas emissions from all industrialized countries during 1990.

As of late May, more than 55 nations had ratified the Kyoto protocol, including all 15 European Union or EU member countries. Even though the number of countries that have ratified the treaty now exceeds 55, those 55+ countries do not yet fulfill the 55% requirement. The EU countries had hoped that the Kyoto protocol would be in effect by the upcoming world summit on development scheduled to start in late August in Johannesburg.

The Bush administration has already rejected the Kyoto protocol, and there is some doubt whether Canada and Australia will ratify the treaty. Assuming Japan’s ratification, attention now turns to Russia as it becomes the key country that must adopt the treaty in order for it to enter into force.

Canada is conditioning its acceptance of the treaty on the acceptance of its request for a “clean energy export credit.” Canada wants to receive credit for its “clean energy” exports of natural gas and hydroelectric power to the US. These credits would amount to almost one third of Canada’s Kyoto protocol reduction targets. The EU countries are strongly opposed to the Canadian proposal.

Russia is expected to delay its consideration of the treaty until early 2003. It is negotiating with EU countries and Japan for reductions in foreign debt as a precondition to ratification of the Kyoto protocol. Russia is expected to benefit from the Kyoto protocol because it will be a net supplier of greenhouse gas emission reductions to EU countries; many Russian industrial plants have shut down since 1990, the year on which target levels are based. Russia will also benefit from the development of new foreign-financed projects using newer technologies, which may result in collateral greenhouse gas reductions.

Greenhouse Gas Database

The national energy plan that passed the Senate on April 25 includes a requirement to establish a database of greenhouse gas emission reductions. The “National Greenhouse Gas Database” will be a comprehensive inventory of greenhouse gas emissions on a company-by-company basis, and it will give the government a means to track greenhouse gas emission reductions by each company.

Reporting greenhouse gas emissions for the database would be voluntary unless the database program fails to capture at least 60% of total US greenhouse gas emissions. Reporting would become mandatory if the 60% threshold is not achieved. If the program becomes mandatory, non-exempt companies failing to report could be subject to penalties of up to $25,000 a day.

Under the Senate bill, EPA would have the lead role in writing standards for measuring greenhouse gas emissions and verifying emission reductions. The Departments of Energy, Commerce, and Agriculture would also contribute.

The version of the national energy plan that the House passed last July does not provide for a greenhouse gas database, so the issue will have to be addressed by a joint House-Senate conference committee. In the meantime, the Department of Energy is revamping its existing voluntary registry of greenhouse gas reductions to ensure greater accuracy in the measurement and verification of such reductions.

Multi-Pollutant Legislation

The Senate Environment and Public Works Committee decided not to “mark up” a bill that calls for substantial reductions in emissions of NOx, SO2, mercury, and carbon dioxide, or CO2, from power plants on May 23 as originally planned. The markup is now expected on June 20.

The bill imposes tighter implementation timeframes and more drastic emission reduction targets than the Bush administration’s “clear skies initiative” that was unveiled in February.

Approval of the bill in committee appears doubtful because of an impasse over whether to include mandatory CO2 emission reductions. Several Republicans on the committee are also strongly opposed to the timeframes for implementing the reductions and the stringency of the reductions. The bill would require 75% reductions in NOx and SO2 from 1997 and 2000 baselines, a 90% cut in mercury levels from 1999 levels, and a reduction to 1990 CO2 levels. The reductions would have to be achieved by January 1, 2007.

The Bush administration is actively pushing its clear skies initiative, which calls for a two-phase approach to reducing air emissions from power plants. There would be a first phase of emissions reductions beginning in 2010, followed by an additional round of reductions starting in 2018. The cornerstone of the Bush plan is a new, nationwide “cap and trade,” market-based approach that is patterned after the existing acid rain SO2 emissions trading program.

The clear skies initiative has not yet been introduced in Congress, but Senator Bob Smith (R.-New Hampshire) is working on a draft bill. While for the idea of a multi-pollutant approach to address emissions from power plants enjoys broad support, there is a wide divergence of opinion on the best approach to achieve such reductions. Multi-pollutant legislation will remain a significant issue for the Congressional committees with jurisdiction over environmental matters, but meaningful progress this year is unlikely.

States Enact Multi-Pollutant Measures

Several northeastern states are taking steps to regulate multi-pollutant emissions from power plants. Connecticut and New Hampshire recently adopted new laws requiring reduced emissions from older power plants. In February, New York proposed new regulations designed to reduce NOx and SO2 emissions significantly from power plants in the state. Last year, Massachusetts adopted new regulations requiring NOx, SO2, and CO2 emission reductions from the six oldest power plants in the state.

In early May, Connecticut Governor John Rowland signed a bill into law that will require the six oldest fossil fuel-fired power plants to meet lower SO2 emission standards by January 1, 2005 without using emission trading credits. The six plants must meet an actual emission limit of 0.33 lbs/mmBtu starting January 1, 2005. In order to meet the stringent emission limit, the six plants will need to use lower sulfur coal or oil, switch to natural gas, or install costly pollution control equipment like flu gas desulfurization systems or scrubbers.

New Hampshire Governor Jeanne Shaheen signed the “Clean Power Act” into law on May 9. It requires the state’s largest utility — the Public Service Company of New Hampshire — to reduce NOx, SO2, mercury, and CO2 emissions from three of its plants built prior to 1977. Under the new law, NOx and SO2 emissions must be reduced by 70% and 75%, respectively, from current levels by the end of 2006. Mercury emissions will be capped at levels that will be driven by the results of a state study, and CO2 must be reduced to 1990 levels by 2010. The Clean Power Act allows the Public Service Company to use allowances from in-state or upwind states in the region to comply with the new requirements.

North Carolina Governor Mike Easley also recently unveiled a proposal to reduce NOx and SO2 by more than 70% from the state’s 14 coal-fired utilities. Legislation similar to Governor Easley’s proposal had passed the state Senate in April 2001; however, the measure died in the state House of Representatives.

Efforts by the northeastern states to achieve significant multi-pollutant emission reductions are proceeding at a much quicker pace than a proposed coordinated federal approach. The states’ efforts are generally focused on the older power plants that were originally “grandfathered” out of the permitting requirements of the federal “new source review” program implemented in 1977. With federal multi-pollutant legislative efforts now stalled, additional states may follow the lead of Connecticut, Massachusetts, New Hampshire and New York in adopting comprehensive multi-pollutant measures.

Brief Updates

A US appeals court heard oral arguments in May 21 in the case Tennessee Valley Authority v. EPA, where the central issue is EPA’s interpretation of what activities qualify as “routine maintenance” under the new source review permitting program. The TVA is challenging the federal government’s assertion that it made significant modifications to its plants without the requisite new source permits. The decision in the case is expected to influence the outcome of other pending new source review cases filed by the federal government against several major utilities.

The Earth Justice Legal Defense Fund filed a challenge to EPA’s final air toxics rule on April 25. The rule extends the deadline to May 15, 2004 for companies to file detailed applications to comply with case-by-case maximum achievable control technology, or “MACT,” emission limits. The so-called “MACT hammer rule” was designed to give EPA more time to issue MACT standards for the remaining categories of major air toxic sources, including combustion turbines and industrial boilers. EPA and the Earth Justice Legal Defense Fund are currently in settlement discussions. They may agree on a shorter timetable for complying with the MACT hammer requirements.

EPA recently released guidelines on the types of air pollution that are exempted from reporting under the federal “Superfund” law. The Superfund law requires the reporting of releases of hazardous substances above certain threshold levels. EPA’s guidance document classifies the type of releases that qualify as exempted “federally permitted releases.” Under the guidance document, air emissions that are authorized under an air permit with federally enforceable requirements or any other federally-enforceable emission limit, operational requirement or work practice standard in a federal rule or an EPA-approved state rule would qualify as a “federally permitted release.” Certain older power plants that are grandfathered from some federal emission reduction requirements may be subject to Superfund reporting if they emit certain hazardous air pollutants above a reportable threshold.