Environmental update

February 02, 2010 | By Andrew Giaccia in Washington, DC|New York

Many wind developers are asking whether they need “incidental take” permits after a decision in December by a federal district court in Maryland in case called Animal Welfare Institute v. Beech Ridge Energy LLC. The permits are issued by the US Fish and Wildlife Service under the Endangered Species Act.They allow certain projects to “take” a specified number of endangered or threatened species, but only in limited circumstances. Section 9 of the Endangered Species Act makes it unlawful to “take” any endangered or threatened species.“Take” is defined as “harass, harm, pursue, hunt, shoot, wound, kill, trap, capture or collect, or attempt to engage in such conduct.”Violation may lead to fines or even imprisonment.

The decision in the case is a reminder to investigate whether endangered or threatened species are present and to coordinate with the US Fish and Wildlife Service. Wind farm developers routinely assess the potential effects of their projects on federal or state endangered and threatened species as well as on bats and migratory birds. Many developers comply with voluntary guidance issued by the Fish and Wildlife Service on May 13, 2003, entitled “Avoiding and Minimizing Wildlife Impacts from Wind Turbines,” that provides suggestions as to the proper tower siting and monitoring to minimize wildlife impacts.

The federal district court in Maryland held on December 8, 2009 that Beech Ridge Energy LLC could not operate its existing wind turbines in West Virginia during certain times of the year without obtaining an incidental take permit because there is an endangered species of bat, called the Indiana bat, nearby. The court also ruled that Beech Ridge could not finish building out the wind farm without such a permit.

Although no take had occurred, the court said that in such a case, the animal rights group that sued to stop the project had shown by a preponderance of the evidence that the complained-of activity is “reasonably certain to imminently harm, kill, or wound the listed species.” After reviewing the facts, the court said there was a “virtual certainty” that the project would take endangered bats. The judge was critical of the project developer’s experts and expressed concern that the developer’s consultant ignored letters from the Fish and Wildlife Service recommending additional bat surveys.The court ended up barring operation of any turbines, except during winter when the Indiana bat hibernates, and issued an injunction prohibiting construction of the remaining turbines until an incidental take permit is issued.

8-Hour Ozone Standard

The US Environmental Protection Agency proposed lowering the 8-hour ozone standard in early January from 0.075 parts per million (ppm) to between 0.060 ppm and 0.070 ppm and also set a “secondary” standard to protect the environment. Although the practical effects on existing and new major sources of air emissions are unclear, EPA estimates that costs to comply could be as much as $90 billion a year by 2020.

Ground-level ozone is formed when nitrogen oxides and volatile organic compounds react in the presence of sunlight. Under the Clean Air Act, EPA must set “national ambient air quality standards” for six air pollutants — ozone, particulate matter, nitrogen oxides, carbon monoxide, sulfur dioxide and lead — that are considered harmful to human health and the environment. Each state must designate areas in non-attainment with these standards — meaning the air is dirtier than the law allows — and adopt a state implementation plan describing how the state plans to bring the air back in compliance.

It is unclear how states will reduce NOx and VOC emissions. Several options are available to the states, including regulating pollution from motor vehicles, requiring existing major stationary sources to use “reasonably available control technology,” reducing the thresholds that require a “new source review” under the Clean Air Act before companies can start construction of new sources or make major modifications to existing sources of air emissions and requiring offsets for new or modified major sources. EPA wants states to provide it with a list of non-attainment areas by January 2011 and submit a state implementation plan by December 2013. The New York Times quoted an Edison Electric Institute source on January 8, about the potential effect on utilities, who said,

[w]e probably won’t know for a couple of years just what utilities and other emissions sources will be required to do in response to a tighter ozone standard. States will have to cast a very wide net when targeting sources for emissions cuts, in part because utilities already have made substantial reductions in ozone-related emissions.

It is possible that more stringent ozone standards could require existing power plants to cut back hours of operation. If that were to happen, it could have ramifications under power purchase agreements.

Mercury Emissions from Coal

Coal-fired power plants are likely to become subject to more stringent mercury air emissions regulations.

Some speculate that more stringent regulations could have a huge financial effect on the coal-fired power industry; however, these concerns may be premature with respect to some facilities.

EPA abandoned an effort to develop a “maximum achievable compliance technology” or “MACT” for mercury in 2005 and came out instead with a “clean air act mercury rule” called “CAMR” to reduce the amount of mercury emissions from new and existing coal-fired power plants using a cap-and-trade approach.

A federal appeals court struck down the EPA proposal in February 2008.

Without CAMR, EPA must require owners of coal-fired power plants to install whatever it decides is the maximum achievable technology. For new sources, MACT represents the “emissions control that is achieved in practice by the best controlled similar source, as determined by the Administrator.” MACT for existing sources is determined using a potentially less stringent benchmark, specifically

the average emission limitation achieved by the best performing 12 percent of existing sources (for which the Administrator has emissions information) . . . in the category or subcategory for categories and subcategories with 30 or more sources” or “the average emissions limitation achieved by the best performing five sources (for which the Administrator has or could be reasonably obtain emissions information) in the categories or subcategories with fewer than 30 sources.

In 2004, EPA proposed MACT for mercury emissions from existing coal-fired power plants at a level of 2 lb/TBtu (bituminous coal-fired) and 5.8 lb/TBtu (subbituminous coalfired). For comparison, in June 2008,Virginia issued a permit allowing construction of a coal-fired power plant that included a mercury limit of 0.09 lb/TBtu. Existing air emissions controls already used at many facilities to reduce emissions of particulate matter, sulfur dioxide and nitrogen oxides also help reduce the amount of mercury emitted.

The Government Accountability Office, an arm of Congress, reported in October 2009 that approximately 25% of coal-fired power plants and boilers achieve a 90% or more reduction of mercury using existing air emissions controls. The efficiency of existing controls in controlling mercury depends on a number of variables, including plant configuration and type or rank of coal burned. Of course, depending on how stringent EPA sets the MACT for mercury, additional controls, such as sorbent injection systems, or changes in coal source may be needed.

Developers and lenders will need to assess the efficacy of current air emissions controls, as well as the costs of additional mercury reduction strategies, if needed, in connection with new and existing coal-fired power plants.

Coal Ash

EPA is considering revising its regulations for coal ash waste. The changes could make the cost of ash disposal prohibitively expensive for owners of some coal-fired power plants and could dramatically affect the market for reuse of coal ash.

Any changes would be in response to a December 2008 spill of approximately 5.4 million cubic yards of wet coal ash from a Tennessee Valley Authority coal impoundment in Tennessee.

EPA currently regulates coal ash as a solid, non-hazardous waste under the Resource Conservation and Recovery Act. It has several options as it considers what to do. It could retain the current regulations. It could regulate coal ash as a hazardous waste. It could regulate only some coal ash as hazardous. It could adopt some sort of hybrid approach.

Some commentators speculate that a hybrid approach might be used to define coal ash as hazardous when discarded, but as non-hazardous waste if recycled for a beneficial use.

If coal ash were defined as hazardous waste, then costs of ash disposal could increase dramatically. According to the Electric Power Research Institute, between 190 and 411 coal-fired units could shut down if ash is regulated as hazardous.

EPA postponed the anticipated release date of proposed coal ash regulations in December, citing the inherent complexity of the analysis.

One concern is that new regulations may dramatically affect the market for using coal ash for beneficial uses. In late December, the American Society for Testing and Materials, an international organization that publishes industry recognized voluntary standards as guidelines (including specifications for fly ash for use in concrete), sent a letter to EPA encouraging it not to classify dry ash as hazardous.The group said:

[a] “hazardous waste” designation, even with an exclusion for beneficial use, would cause the ASTM standard for fly ash to be removed from project specifications due to concerns over legal exposure, product liability, and public perception.This will likely result in little to no fly ash being used beneficially in concrete or other applications that support sustainability objectives.

Another consideration that EPA must also take into account is the fact that mercury air emissions limits are becoming increasingly more stringent. As a result, mercury that is not emitted into the atmosphere or discharged in wastewater may be deposited in ash. As the content of mercury in ash increases, the ash may become less suitable for reuse, making it more expensive to dispose of and possibly even voiding existing ash disposal agreements that were premised on the ash being non-hazardous.