Environmental update

Environmental update

May 07, 2012

The US Environmental Protection Agency issued its first proposed limits on carbon dioxide emissions in March. 

The proposed rule would limit emissions from new fossil fuel-fired power plants to 1,000 pounds of carbon dioxide or CO2 per megawatt hour. The proposed standards would apply to new fossil fuel-fired power plants of greater than 25 megawatts in size. They would not apply to existing fossilfuel power plants. 

EPA believes that the proposed rule would have only a limited impact because the low price of natural gas has already pushed most developers who are not using renewable energy to choose natural gas over coal and oil. Most natural gas plants in the US already meet the proposed standard. Coal-fired power plants could meet them by installing carbon capture and sequestration technology.

The proposed rule exempts some coal-fired projects that already have construction permits, provided that they commence construction within one year. The proposed rule also allows for some flexibility by judging compliance with the rule over a time frame of 30 years and providing an initial exemption for highly efficient coal-burning plants for the first decade of operation before requiring them to reduce their CO2 emissions. This alternate compliance plan would allow new coal-fired power plants to come on line without carbon capture and sequestration technology if the plant
commits to an enforceable limit of 1,000 pounds averaged over a 30-year time frame. This means that although a new coal plant could begin operating without carbon capture technology, it would be required to add it within the first 10 years of operation.

In a March 27, 2012 conference call, EPA Administrator Lisa Jackson said the agency has no current plan to issue a rule limiting CO2 emissions from existing fossil fuel-fired plants, though some speculate that such a proposal could come after the November election. Jackson also said the proposed rule does not apply to existing power plants that undergo major modifications, even if those modifications increase CO2 emissions. Comments to the proposed rule must be received on or before June 12, 2012. Lawsuits have already been filed challenging it.

Fracking

Federal regulators are continuing to focus on the potential environmental effects of hydraulic fracturing, also known as fracking.

Fracking is used to extract natural gas trapped in shale rock  formations. Such gas could account for more than 20% of the US gas supply by 2020, according to EPA. Fracking refers to the process by which fluids (water and chemical additives and sand or similar materials) are injected under high pressure down a very deep well. These fluids force existing fractures in the subsurface to open wider while a propping agent (sometimes sand) holds the fractures open as natural gas is released and extracted. This process uses tremendous amounts of water, up to two to five million gallons for a horizontal well, which then leads to concern about the availability of that much water. 

The states largely regulate the process of fracking. Federal underground injection control program regulations only cover fracking related to oil, gas or geothermal energy production if diesel fuel is used as a propping agent. In addition, oil and gas wells are exempted from a requirement under the federal Emergency Planning and Community Right to Know Act to report the amounts of toxic chemicals released, stored or transferred each year.

In early May, EPA issued guidance implementing permitting regulations that includes a definition of “diesel fuel” to make it clearer which substances trigger permitting requirements. Under the proposal, diesel fuel and diesel fuel containing one of six constituents trigger permitting under the underground injection control program. Comments are due by July 9, 2012.

However, this was after announcing in April that proposed air emissions standards for fracking operations are being delayed until 2015. The regulations will require fracking operations to use air emissions control devices aimed at reducing the emissions of methane, volatile organic compounds and hazardous air pollutants. EPA delayed the implementation of the rules until 2015 to make sure that the required air emissions equipment is available. The regulations require use of emissions control equipment called “green completions.” 

Industry sources say that about 300 sets of equipment are available, but another 1,000 sets would be needed to comply with the rule.

The federal Bureau of Land Management proposed changes to 30-year old regulations governing fracking on federal land. The BLM estimates that roughly 90% of wells currently drilled on BLM-managed lands are stimulated using hydraulic fracturing techniques. The proposed rule changes impose additional reporting and approval requirements, including a requirement for the BLM to approve all well stimulation activities, confirm that precautions are taken to prevent the migration of fluids into usable water sources and use pressure tests of wells to confirm well integrity every five
years or after significant new information is revealed. 

The BLM also explained that the proposed rule requires that fracking operations be isolated from all “usable water” (that containing up to 10,000 parts per million of dissolved solids). According to the BLM, this is not a new standard and simply eliminates confusion in interpreting the prior regulations that apply to onshore operations that refer to “fresh water” (that containing 5,000 parts per million or less of dissolved solids). Operators will also have to certify that they have complied with all federal, state, tribal and local rules and regulations, disclose the identity of the chemicals used in the fracking fluids, report on the management and disposal of fluids in the fracking process and store recovered fluids in tanks or lined pits. BLM says the rule change is consistent with existing industry practice and American Petroleum Institute recommendations for handling such fluids. 

Although the industry expressed concern that the proposed rule will lead to delays in fracking on federal land, BLM is determined to provide the required authorizations in a timely manner.  Comments to this rule are due within 60 days after publication in the Federal Register.

Methane Hydrate

The extraction of natural gas from methane hydrate could lead to a 30% reduction in natural gas prices by 2025, according to the US energy secretary, and some surveys estimate that the natural gas extracted from methane hydrate reserves could power the US for the next 1,000 years. Methane hydrate exists in Alaska and offshore in continental shelf lands all over the world. Methane hydrate is a three-dimensional lattice ice structure loaded with trapped methane. Methane is the primary component of natural gas. In April, researchers from the US Department of Energy,  ConocoPhillips and Japan Oil Gas & Metals National Corporation demonstrated a method to unlock this natural gas by injecting CO2 and nitrogen into methane hydrate reserves in Alaska.  According to the DOE, one cubic meter of methane hydrate can release 164 cubic meters of natural gas.

The technology is not economically viable today, but the same could have been said for commercial-scale fracking just a few years ago. The DOE is funding research on the extraction of this potential vast source of natural gas and examining the potential environmental impacts of such extraction.

Utility MACT Rule 

The Environmental Protection Agency issued its final “utility MACT rule” last December setting standards for air toxics — which can include mercury, arsenic, chromium, dioxins, lead, formaldehyde and other substances — and establishing requirements for the use of “maximum achievable control technology” or “MACT” to control such emissions from power plants larger than 25 megawatts that burn coal or oil. The rule fills a regulatory hole that Congress left for air toxics from power plants when Congress amended the Clean Air Act in 1990.

EPA met a court-ordered deadline for issuing the new rule to which it agreed in a settlement with environmental and health advocacy groups in American Nurses Association v. Jackson. The rule does not apply to natural gas-fired power plants unless the fuel used is produced by gasifying coal or oil.

The final rule retains the strict mercury limits contained in an earlier proposed version of the rule, but offers some flexibility to utilities that need more than the three years that the Clean Air Act allows for installing the required air emissions control technology. The first year of compliance is 2015, but a presidential memorandum clarifies that regulators can allow a one-year extension if companies can demonstrate that extra time is needed. EPA can also use its enforcement discretion to grant a fifth year to comply by issuing an administrative order or entering into a consent decree with the respective facility. The EPA office of enforcement and compliance assurance released a memorandum outlining how utilities could obtain compliance extensions. Critics of the new emissions control requirements urged a delay on grounds that it would reduce the cost of compliance by allowing retirements and retrofits to take place in a more sequential manner and providing time to address potential grid reliability issues while still achieving the EPA’s objectives. 

Critics also argued against consent decrees and administrative orders as a means of obtaining extensions to the deadline for compliance both because those companies might be seen as being in violation of the law and because entering into consent decrees could put them at risk of citizen suits for noncompliance.

The rule also revises new source performance standards for new coal and oil-fired power plants and sets standards for emissions of particulate matter, SO2 and NOx. 

Combined Impact of New Rules 

The impact of the utility MACT rule must be viewed in combination with a separate cross-state air pollution rule called “CSAPR” and pronounced “Casper.” CSAPR was scheduled to take effect  January 1, 2012 with reductions to begin in 2014, but was delayed by a US appeals court pending resolution of legal challenges. In the meantime, a predecessor rule, the Clean Air Interstate Rule or CAIR, remains in effect.

Utility MACT sets standards for mercury and other toxic pollutant emissions from power plants. The rule mainly affects coal-fired power plants, and the impact will be greatest in the midwest and in the coal belt, especially in Kentucky, West Virginia and Virginia. CSAPR sets emissions caps that will require reductions in SO2 and NOx emissions from existing power plants in 28 states, mostly east of the Mississippi River, but as far west as Texas. CSAPR addresses the interstate transport of SO2 and NOx from upwind states to those downwind. CAIR does largely the same thing.

Utility MACT and CSAPR together are expected to cut mercury emissions from power plants by more than 90%, SO2 by more than 70% and NOx emissions by approximately 50%. EPA says the reductions in these emissions will prevent more than 120,000 asthma attacks and more than 11,000 heart attacks annually by 2016, translating into somewhere between $37 billion and $90 billion in savings.

The new rules may also to lead to the retirement of generating capacity sufficient to power more than 11 million homes, or 14.7 gigawatts, by 2015. In addition to the closures, EPA estimates that the rules may cost utilities $9.6 billion by 2016 for installation of new control equipment. A recent Associated Press survey estimates that the combined rules could speed the closure of more than  8% of the nation’s coal-fired generating capacity, with the combined total number of plants in jeopardy capable of generating enough electricity to power more than 22 million homes. In addition, about 500 or more coal-fired units will need to be idled temporarily in the next few years during installation of pollution controls. The average age of the plants in jeopardy is more than 50 years.
Utility MACT is projected to increase the cost of electricity nationwide by 3%.

Opponents Down But Not Out

Thirty lawsuits have now been filed challenging the utility MACT standards for power plants, including lawsuits by 24 states and various industry groups.

EPA sets limits for each individual pollutant under utility MACT based on the performance of the 12% of US facilities that emit the smallest quantity of the particular pollutant. Critics argue that no single power plant can meet MACT standards set in this way because the standards do not represent the actual emissions reductions achieved by any real plant. In other words, the rule uses a pollutant-by-pollutant approach on a shifting group of best-performing units. Previous efforts to challenge MACT applications in other industries were thrown out on procedural grounds.