Environmental Update - February 2001

Environmental Update - February 2001

February 01, 2001

The Clinton administration managed — shortly before leaving office – to propose new rules for reducing air emissions that contribute to haze in national parks. However, these and other rules were blocked by the incoming Bush administration.

Regional Haze

The US Environmental Protection Agency proposed new guidelines in mid-January for states to follow in setting “best available retrofit technology” – or what environmental experts call “BART” – for a wide range of facilities, including existing power plants. The new guidelines could affect power plants located near national parks and federal wilderness areas – so-called Class I areas – where there are already regional haze problems due to local industrial sources. The proposed guidelines appear to establish flue-gas desulfurization or scrubbers as the presumptive BART standard for utility boilers. This could have the effect of reducing sulfur dioxide, or “SO2,” emissions at such boilers below the levels currently required by the federal acid rain program.

The new standards would apply to power plants that were constructed between 1962 and 1977, that emit more than 250 tons of SO2, nitrogen oxide (NOx), particulate matter (PM), volatile organic compounds (VOCs) or ammonia, and that are located upwind from Class I areas.

Under the new rules, states would have to submit their regional haze plans to EPA between 2004 and 2008, and the BART-level pollution controls would have to be installed within five years after EPA approves a state’s plan.

The Bush administration put a halt to implementation of all regulations issued in the final weeks of the Clinton administration to give the new Bush appointees time to assess what was done. The haze proposals have not appeared yet in the Federal Register because of the freeze.

Hazardous Air Emissions

Also trapped by the Bush freeze is a guidance document that the US Environmental Protection Agency was on the verge of issuing that would have explained what releases of hazardous air emissions are federally permitted and, therefore, are exempted from having to be reported under two federal laws: Superfund and the Emergency Planning and Community Right-to-Know Act, or EPCRA.

The final guidance reflects heavy industry input after EPA was sued to bar implementation of its original proposals.

The final guidance is expected to provide that releases of constituent hazardous substances that are subject to permit limits or federally-approved state rules – including those designed to limit VOCs, PM and NOx – are exempted from reporting. Emissions above the permit or rule limits are not exempted.

The final guidance is not expected to exempt “grandfathered” air emission sources from the Superfund reporting requirements, unless they have a federal permit or federally-approved regulatory standards in place that limit the plant’s hazardous air emissions. Many older grandfathered utilities do not meet this requirement and may have to report such emissions as “continuous releases” under section 103 of Superfund and section 304 of EPCRA.

Mercury

One announcement that EPA managed to make before the Bush freeze is word that the federal government plans to regulate mercury and other hazardous air pollutants from coal- and oil-fired steam generating plants. The announcement appeared in the December 20 Federal Register. Owners of such plants are bracing themselves for what are expected to be expensive new rules.

The EPA announcement sets the stage for new maximum achievable control technology standards – or what environmental experts call “MACT” – that will apply to all new and existing coal and oil-fired utility units. EPA estimates that the cost for industry to comply could be between $1.9 and $5 billion.

Control technologies that might form the basis of establishing new MACT standards include wet flue-gas desulfurization scrubbers, fuel switching – for example, from coal to gas – coal cleaning, and certain particulate control devices like electrostatic precipitators and baghouses. Newly-developing mercury removal technologies include activated carbon injection and spray cooling.

EPA is expected to issue a proposed rule by December 2003 and to have the final rule out by the end of 2004. Power companies should expect to have to comply by the 2007 to 2008 timeframe.

Congress

The Senate Environment and Public Works Committee hopes to report legislation this year that will impose new multi-pollutant emission limits on power plants. The targeted pollutants are NOx, SO2, mercury and carbon dioxide. Committee chairman Robert Smith (R.-N.H.) is expected to introduce a multi-pollutant bill that will include national emissions caps and emissions trading as two of its key components.

California

The California Energy Commission issued emergency regulations in mid-November that will accelerate licensing of new power plants that are larger than 50 megawatts in size. CEC review and licensing of such plants is now supposed to take only six months.

The main impediment to quick licensing is environmental review. Six months is probably the minimum time the CEC needs to do the review required by the California Environmental Quality Act, or CEQA.

The emergency regulations are full of pitfalls, and the CEC has, as of presstime, received no takers from the development community.

Meanwhile, the California EPA is making efforts to promote a more informal program called the “Green Team” to facilitate permitting and development of power plants that are smaller than 50 megawatts in size. Such projects are too small to be subject to review by the CEC. According to the California EPA, 26 such projects are slated for construction in 2001. Such projects rely upon local permitting authorities, with the assistance of California EPA, to complete the CEQA review process more efficiently than under the CEC program.

President George W. Bush said in mid-January that one way to address the power crisis in California may be to roll back environmental standards. Bush told CNN that “to the extent that we can help California maximize power production in its plants, we need to do so. If there [are] any environmental regulations, for example, that [are] preventing California from [maximizing output at power plants,] like I understand there may be, then we need to relax those regulations.”

Coal Ash

A federal appeals court in late January rejected efforts by environmental groups to force the US Environmental Protection Agency to regulate ash from burning fossil fuels as a hazardous waste.

EPA issued a determination in April 2000 that most categories of fossil fuel ash should be regulated only as a non-hazardous waste under the Resource Conservation and Recovery Act, or RCRA. The decision came after years of study. EPA said then that it would still issue non-hazardous waste regulations to establish standards for managing coal ash that is disposed in landfills or surface impoundments. These regulations are expected later this year. Regulations on such ash used to fill mines are not expected until 2003.

The federal appeals court in late January dismissed the environmental groups’ petitions on purely jurisdictional grounds. Therefore, this is unlikely to be the last word on the issue. The groups can simply refile in the appropriate court.

Migratory Birds

The US Supreme Court struck down a rule in January that the US Army Corps of Engineers has used to assert federal wetlands jurisdiction over non-navigable and isolated intrastate waters.

The Army Corps has used this “migratory bird rule” to claim jurisdiction over wetlands and water bodies, such as power plant cooling water ponds, that “are or would be used as habitat for migratory birds that cross state lines.” Federal jurisdiction under laws like the Clean Water Act requires the government show an effect on interstate commerce.

Justice Rehnquist, writing on behalf of a narrow 5-4 majority, did not go so far as to say that such a migratory bird rule was beyond the jurisdiction of Congress, but he did conclude that there had to be a clear statement of Congressional intent to establish jurisdiction that “invokes the outer limits of Congress’ power.”

The decision by the US Supreme Court means that federal wetlands restrictions and permits would not be required for isolated wetlands that are not at least adjacent to an interstate waterway.

Power Plant Upgrades

The US government reached an agreement in principle with midwestern utility Cinergy in late December on how to resolve an enforcement action that the government brought against Cinergy for allegedly modifying its coal-fired power plants in a way that increased air emissions. The government charged the utility with failure to go through the so-called new source review permitting requirements required by the Clean Air Act before making the improvements.

The agreement in principle covers 34 coal-fired generating units at 10 Cinergy sites. The utility agreed to install selective catalytic reduction on nine units, add four new flue-gas desulfurization systems or scrubbers, and repower nine units with natural gas.

The pollution controls are expected to cost Cinergy $1.4 billion over the 2001 to 2012 time period. In addition, Cinergy will pay a civil penalty of $8.5 million, fund $21.5 million in environmental projects, and surrender between 40,000 and 50,000 SO2 allowances.

The agreement in principle is similar to agreements between the US government and two other utilities –- a November 2000 agreement in principle to resolve an enforcement action against Virginia Power and one in February 2000 with Tampa Electric Company.

The US Environmental Protection Agency has stepped up its new source review enforcement activities. The US government filed a complaint against Duke Energy on December 22, 2000 targeting eight of its plants for alleged violations. Several other utilities across the country that burn coal have also received Clean Air Act section 114 information request letters recently and are under investigation for suspected new source review violations.

— contributed by Andrew Giaccia and Roy Belden in Washington.