Reply Brief — Midwest Ozone Group, Applicant v. Environmental Protection Agency, et al.
Supreme Court briefSep 18, 2024
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No. 24A186
In the Supreme Court of the United States
M IDWEST O ZONE G ROUP ,
Applicant,
v.
E NVIRONMENTAL P ROTECTION A GENCY , ET AL .,
Respondents.
APPLICANT’S REPLY IN SUPPORT OF EMERGENCY
APPLICATION FOR IMMEDIATE STAY OF FINAL AGENCY
ACTION PENDING DISPOSITION OF PETITION FOR REVIEW
To the Honorable John G. Roberts, Jr.,
Chief Justice of the Supreme Court of the United States and Circuit Justice
for the District of Columbia Circuit
Ancil C. Ramey (Counsel of Record)
David M. Flannery
Kathy G. Beckett
Keeleigh S. Huffman
STEPTOE & JOHNSON PLLC
Post Office Box 1588
Charleston, WV 25326
(304) 353-8000
Ancil.Ramey@Steptoe-Johnson.com
Edward L. Kropp
STEPTOE & JOHNSON PLLC
Post Office Box 36425
Indianapolis, IN 46236
Counsel for Midwest Ozone Group
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES .......................................................................................... ii
INTRODUCTION .......................................................................................................... 1
ARGUMENT .................................................................................................................. 2
I.
EPA Ignores CEMS Arguments Raised By Applicants To
Confuse The Court And Justify A Rule That Is Unnecessary
By The Standards Of The Clean Air Act ................................................. 2
II.
EPA Ignores Findings By Numerous Stakeholders That The
Rule Presents A Significant And Immediate Threat To Grid
Reliability ................................................................................................. 3
III.
EPA Ignores Valid Critiques Of Its IPM Modeling, Rebutting
The Agency’s Assertions That No Coal-Fired Generation Will
Retire As A Result Of This Rule .............................................................. 5
IV.
The Balance of the Equities and the Public Interest Favor an
Immediate Stay ........................................................................................ 7
CONCLUSION............................................................................................................... 8
i
TABLE OF AUTHORITIES
Page(s)
Cases:
Del. Dep’t of Natural Res. & Envtl. Control v.
Envtl. Prot. Agency Del. Dep’t of Nat. Res.,
785 F.3d 1 ................................................................................................................. 5
Motor Vehicle Mfrs. Ass’n v. State Farm Mutual Automobile Ins. Co.,
463 U.S. 29 (1983) .................................................................................................... 5
Sierra Club v. Ga. Power Co.,
180 F.3d 1309 (11th Cir. 1999) ................................................................................ 7
Texas v. EPA,
829 F.3d 405 (5th Cir. 2016) .................................................................................. 5, 7
West Virginia v. EPA,
90 F.4th 323 (4th Cir. 2024) ..................................................................................... 7
Statutes & Other Authorities:
77 Fed. Reg. 9407 ............................................................................................................. 6
89 Fed. Reg. 38526 ....................................................................................................... 3, 5
89 Fed. Reg. 38542 ........................................................................................................... 5
Clean Air Act § 112(d)(6) ............................................................................................. 3, 7
Environmental Respondent-Intervenors Resp. .............................................................. 2
Midwest Ozone Group Appl. ................................................................................ 2, 3, 4, 5
Midwest Ozone Group Non-Binding Statement of Issues,
Doc. #2067071, (D.C. Cir. July 29, 2024)................................................................... 3
ii
INTRODUCTION
An immediate stay is necessary to preserve the status quo pending litigation
of the merits of the Rule which would otherwise impose immeasurable damage,
economic harm and irreparable injury to many, including Applicant’s membership.
Contrary to the assertions of Respondents, there will be little to no harm to EPA,
Intervenors, or the public from an immediate stay pending judicial review since
current state and federal programs regulate these sources and related emissions.
EPA continues to reject comments from stakeholders and arguments made
therein, especially those related to grid reliability issues due to an increase in
economic pressure on coal and oil-fired electricity generating units (“EGUs”).
However, any risk to the grid creates a ripple effect: high costs of compliance to EGUs,
higher cost of power to consumers already struggling to afford it, a reduced generation
fleet due to early retirements, decreased availability of energy to a population with
an ever-growing demand for it, and an unreliable energy grid where outages and
shutdowns are all too common.
It is essential to grant an immediate stay in order to protect all consumers of
electricity, including Applicant and its membership, from the irreparable and
immeasurable harm that will surely follow an unreliable energy grid. Without a stay,
an unjustifiable risk is presented that will have immeasurable negative impacts
across the entire country.
Applicant Midwest Ozone Group supports and incorporates herein the replies
filed by Applicants who support an immediate stay of the entire Rule.
1
ARGUMENT
I.
EPA Ignores CEMS Arguments Raised By Applicants To Confuse The
Court And Justify A Rule That Is Unnecessary By The Standards Of The
Clean Air Act.
Continuing its trend of ignoring comments, concerns, and arguments raised by
Applicants, EPA disregards the administrative record and related arguments made
over the course of the litigation thus far. EPA and the Respondent-Intervenors
specifically point to issues related to continuous emission monitoring systems
(“CEMS”). See EPA Resp. at 12; see also, Environmental Respondent-Intervenors
Resp. at 39-40. Their respective Responses In Oppositions claim stay of the entire
Rule is not justified as no Application has raised arguments associated with CEMS.
Id. This is not so.
Applicant raised concerns and arguments relating to CEMS in its initial
application in two different sections. See Midwest Ozone Group Appl. at 6-7, 11.
Applicant specifically argues that EPA has “underestimated the cost to EGUs for the
installation and operation” of CEMS, that “the Rule unjustifiability moves the
goalposts for compliance,” and the changes including the “compliance determination
technique” has created breeding grounds for “compliance uncertainty.” Id.
Not only were these points raised in Applicant’s Application for Stay, but
challenges to the Rule’s requirements also relate to CEMS were raised in three
distinct issues included in the Applicant’s Non-Binding Statement of Issues filed
before the U.S. Court of Appeals for the D.C. Circuit on July 29, 2024. App. at 0001a.
Primary concern was expressed that the emission standard set forth in the Rule was
2
deemed by EPA to be achievable based on stack testing accomplished at three year
intervals and has not been shown to be achievable by CEMS. See Midwest Ozone
Group Non-Binding Statement of Issues, Doc. #2067071, (D.C. Cir. July 29, 2024) at
¶ 1; App. at 0001a. Other issues related to CEMS included the requirement that
CEMS be installed on EGUS with binding schedules for requirement and that EPA
grossly underestimated the costs of both the installation and operation of CEMS. Id.
at ¶ 3-4; App. at 0002a.
Where the Oppositions flagrantly mischaracterize the arguments made by
Applicant, it also attempts to mischaracterize the record. Contrary to what is argued
by the Environmental Respondent-Intervenors, ninety-three percent have met the
Rule’s standard for non-mercury metals with prior monitoring – not CEMS. See
Environmental Respondent-Intervenors Resp. at 12. This point supports the
arguments made by Applicants that the Rule is unjustified. EPA continues to fail to
show sufficient public health or environmental benefits to justify the Section 112(d)(6)
revision on the basis of development in emissions control technologies.
II.
EPA Ignores Findings By Numerous Stakeholders That The Rule
Presents A Significant And Immediate Threat To Grid Reliability.
EPA finalized several EGU-focused rules the week of May 6, 2024, including the
Rule challenged here. EPA asserts in the Rule that it collaborated with grid operators
to ensure the proposed rule would not threaten grid reliability. See 89 Fed. Reg.
38526. However, grid operators have repeatedly warned EPA about the repercussions
this Rule will have on the domestic electric grid, to no avail. See Midwest Ozone
Group Appl. at App. 0453a (noting EPA’s “pattern of ignoring the alarms raised by
3
grid experts concerning the threats to grid reliability resulting from rapid early
retirement of dispatchable resources.”), see also, id. at App. 0462a (warning of
“concrete damages” that will occur as a result of this Rule including “business
shutdowns, food spoilage, property damage, and lost labor productivity.”); id. at App.
0312a.; ERCOT Comments, EPA-HQ-OAR-2018-0794-5976, App. 0006a-0007a (“due
to the required cost of improvements, some portion of the affected units could simply
retire instead of coming to compliance with new requirements” perhaps even before
new generation comes online to replace them.). It is clear that grid operators are of
the opinion that this Rule will force EGUs to close because they will be unable to
finance the retrofitting of emissions controls, in turn, reducing the generation fleet
where demands for energy continue to grow. See Midwest Ozone Group Appl. at App.
0482a.
EPA is not just changing the numerical standard. It changes both the
compliance determination technique and the averaging period. EPA punishes the
sources that have met the low emitting EGU limit of the MATS rule (0.015
lbs/MMBtu) by eliminating the ability to demonstrate compliance through testing
once every three years after a lengthy demonstration of the ability to meet the limit.
From a technical standpoint, changing the numerical limit, averaging period and the
compliance demonstration techniques results in a massive increase in stringency of
the standard. The result is to add costs that will force merchant coal-fired generators
out of business and put rate based coal-fired generators at risk.
4
Noteworthy, EPA has been historically encouraged by the courts to solicit input
from FERC and others that could have adequately advised on issues related to grid
reliability. See Motor Vehicle Mfrs. Ass'n v. State Farm Mutual Automobile Ins. Co.,
463 U.S. 29, 43 (1983); see also, Del. Dep't of Natural Res. & Envtl. Control v. Envtl.
Prot. Agency Del. Dep’t of Nat. Res., 785 F.3d 1, 18 (“On remand, we encourage EPA
to solicit input from FERC, as necessary”); Texas v. EPA, 829 F.3d 405, 432 (5th Cir.
2016) (finding that “EPA has no expertise on grid reliability.”). A serious likelihood
of multiple fossil fuel EGU retirements directly resulting from this Rule, properly
casts doubt on EPA’s interpretation of its own statutory authority.
III.
EPA Ignores Valid Critiques Of Its IPM Modeling, Rebutting The
Agency’s Assertions That No Coal-Fired Generation Will Retire As A
Result Of This Rule.
EPA asserts that it utilizes “a state of the art, peer review model” that projects
that the Rule will not lead to retirement of any coal-fired capacity. Midwest Ozone
Group Appl. at App. 0102a. EPA’s conclusion based on that model is there would be
no effect on grid reliability. 89 Fed. Reg. at 38526. Applicant and other stakeholders
have provided EPA with data and comments indicating that this simply is not true.
EPA has been informed of the negative impacts that this Rule will have on all
stakeholders, the economy, and the domestic energy grid.
EPA concedes numerous times that IPM only provides one estimate of future
generating capacity. For example, EPA states that it “…assumed Hg inlet
levels...consistent with IPM assumptions… and then adjusted accordingly….” 89 Fed
Reg 38,542. EPA adds that “IPM’s least-cost dispatch solution is designed to ensure
5
generation resource adequacy, either by using existing resources or through the
construction of new resources.” RIA at ES-6 (emphasis supplied). It then acknowledges
stacking estimates upon estimates, noting that “[t]he estimates on non-mercury HAP
metals reductions were obtained by multiplying the ratio of non-mercury HAP metals
to fPM by estimates of PM10 reductions under the rule, as we do not have estimates
of fPM reductions using IPM, only PM10.” RIA ES-8, FN 7. EPA finally concedes that
“[w]e note that IPM provides EPA’s best estimate of the costs of the rules to the
electricity sector. These compliance cost estimates are used as a proxy for the social
cost of the rule.” RIA page ES-10. Put simply, IPM provides an estimate. EPA notes
that it has used IPM for decades and it is revised periodically. EPA does not reveal
that its past IPM projections have been grossly inaccurate. The last time the MATS
Rule was litigated, EPA underestimated the reduction of coal-fired generation by
55,000 megawatts. See 77 Fed. Reg. 9407 (stating that the “expected retirements of
coal-fueled units” would be 4.7 gigawatts and would be “fewer than was estimated at
proposal and much fewer than some have predicted”); see also, National Mining
Association Comments, EPA-HQ-OAR-2009-0234-20531 at 2, App. 0125a. (“Between
2012 when the rule went into effect and 2016 when the rule’s compliance period ends,
almost 60 GW of coal capacity will have retired, including units that have already
retired or, for 2016, have announced their retirement.”). EPA was wrong then and is
now. In the Rule, EPA notes that the compliance costs for the Rule are higher than
the estimates in the RIA for the proposal of this action, largely due to changes in fPM
control assumptions, and adds that “[i]t is also important to note that EPA also
6
updated the IPM baseline power sector modeling.” RIA at ES-11. In other words, EPA
has manipulated with IPM results throughout this rulemaking to manage its results,
hardly a basis for imposing the cost of compliance on the regulated community.
IV.
The Balance of the Equities and the Public Interest Favor an
Immediate Stay.
EPA misuses its authority under the Clean Air Act to advance its agenda this
Rule. The Rule was promulgated based on an evaluation of the residual risk and
technology review that reflects developments in control technologies. Yet, EPA has
not demonstrated that the Rule is necessary per the requirements of Section 112(d)(6)
of the Clean Air Act. What has been demonstrated is the economic harm to the
regulated community and the immediate, irreparable harm to all users of electricity
due to negative impacts on grid reliability resulting from this Rule. Access to reliable,
affordable electricity is a national interest that the public and the regulated
community share, and it certainly weighs in favor of a stay. Texas v. EPA, 829 F.3d
405, 435 (5th Cir. 2016); Sierra Club v. Ga. Power Co., 180 F.3d 1309, 1311 (11th Cir.
1999); West Virginia v. EPA, 90 F.4th 323, 332 (4th Cir. 2024). EPA continues to
ignore real world data and input from stakeholders in favor of an ill-conceived and
illegal effort direct energy choices through rigorous and unjustified regulation. As
such, the balance of the equities and the public interest favor an immediate stay of
this rule, pending review of the merits.
7
CONCLUSION
For the foregoing reasons, Applicant respectfully requests an immediate stay
of the Rule to prevent irreparable harm to its membership and the domestic
electricity grid.
/s/ Ancil G. Ramey_____
Ancil G. Ramey
Ancil G. Ramey
Counsel of Record
David M. Flannery
Kathy G. Beckett
Keeleigh S. Huffman
STEPTOE & JOHNSON PLLC
707 Virginia Street, East
Post Office Box 1588
Charleston, WV 25326
(304) 353-8000
Ancil.Ramey@steptoe-johnson.com
Edward L. Kropp
STEPTOE & JOHNSON PLLC
PO Box 36425
Indianapolis, Indiana 46236
Counsel for Midwest Ozone Group
8
APPENDIX
i
TABLE OF APPENDICES
Page
N O N B I N D I N G S TAT E M E N T O F I S S U E S I N
T H E U N I T E D S TAT E S C O U RT O F A P P E A L S
F O R T H E D I S T R I C T O F C O LU M B I A C I R C U I T,
FILED JULY 29, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0001a
L E T T E R F R O M D WAY N E W. R I C K E R S O N O F T H E
ELECTRIC RELIABILITY COUNCIL OF TEXAS, INC.
TO MICHAEL S. REGAN OF THE UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY, DATED
JUNE 23, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0006a
THE NATIONAL MINING ASSOCIATION’S COMMENTS
O N E PA’ S P R O P O S E D N A T I O N A L E M I S S I O N S
S TA N D A R D S , 7 6 F E D E R A L R E G I S T E R 2 4 , 9 7 6 ,
DATED MAY 3, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0018a
USCA Case #24-1223
Document #2067071
Filed: 07/29/2024
Page 1 of 5
ORAL ARGUMENT NOT YET SCHEDULED
IN THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
MIDWEST OZONE GROUP,
Petitioner,
Case No. 24-1223
(consolidated with 24-1119)
v.
UNITED STATES ENVIRONMENTAL
PROTECTION AGENCY, and
MICHAEL S. REGAN, Administrator,
United States Environmental Protection
Agency,
Respondents.
NONBINDING STATEMENT OF ISSUES OF
PETITIONER MIDWEST OZONE GROUP
Pursuant to this Court's Order dated June 27, 2024, Petitioner Midwest Ozone
Group submits this preliminary and nonbinding statement of issues in this
proceeding to review the final action of the United States Environmental Protection
Agency ("EPA") published in the Federal Register at 89 Fed. Reg. 39,508 (May 7,
2024) entitled "National Emission Standardsfor Haardous Air Pollutants: Coal - and OilFired Electric Utility Steam Generating Units Review of the Residual Risk and Technology
Review" (Docket ID No. EPA-HQ-OAR-2018-0794) ("Rule"):
0001a
USCA Case #24-1223
1.
Document #2067071
Filed: 07/29/2024
Page 2 of 5
Whether the proposed standard of 0.010 lb/MMBtu, measured using
continuous emissions monitoring, is unlawful because the vast majority of
emissions data used to propose that standard were based upon EPA required
stack testing, much of it accomplished at a 3 year interval as part of the low
emitting electric generating unit (LEE) provisions of 40 CFR Part 63, Subpart
UUUUU, appropriately balances CAA Section 112(d)(2)'s direction to achieve
the maximum degree of emissions reductions while "taking into consideration
the cost of achieving such emission reduction, and any non-air quality health
and environmental impacts and energy requirements."
2.
Whether the Rule is unlawful and therefore unnecessary because Section
112(d) (6) of the Clean Air Act only directs EPA to review and revise standards
as necessary no less often than every 8 years.
3.
Whether the Rule is unlawful because it requires installation of CEMs on
EGUs with binding schedules for retirement.
4.
Whether the Rule is unlawful because EPA has grossly underestimated the
cost of installing and operating Continuous Emissions Monitoring Systems
for particulate matter, grossly overestimated the cost of stack testing, and has
failed to provide the true additional costs of the Rule.
5.
Whether the Rule is unlawful because it revises not only the numerical value,
2
0002a
USCA Case #24-1223
Document #2067071
Filed: 07/29/2024
Page 3 of 5
but both the compliance determination technique and the averaging period as
well, punishing the sources that have met the low emitting EGU limit of the
MATS Rule (0.015 lb/MMBtu) by eliminating the reward of testing once every
three years after a lengthy demonstration of the ability to meet that limit.
6.
Whether the Rule is unlawful because EPA assumed an unrealistic
implementation of the Inflation Reduction Act and the implementation of
renewable assets.
7.
Whether the Rule is unlawful because it will result in significant risk to grid
reliability despite the evidence presented by EPA that the Rule will not result
in any meaningful environmental benefits achieved by reduction in mercury
and non-mercury metals.
8.
Whether the Rule is unlawful because the cost of compliance grossly exceeds
the monetized value of benefits.
9.
Whether the Rule is unlawful because EPA included in its benefit calculation
the value of benefits in areas that are attaining the PM and ozone NAAQS
which, by definition, are levels adequate to protect human health with an
adequate margin of safety.
10.
Whether the Rule is outside the scope of EPA's authority as defined by the
Clean Air Act and set forth in West Virginia v. EPA, 597 U.S. 697 (2022).
Petitioner Midwest Ozone Group reserves the right to raise any additional
3
0003a
USCA Case #24-1223
Document #2067071
Filed: 07/29/2024
Page 4 of 5
issues in briefs to be filed in these consolidated cases.
Respectfully submitted,
G;;=-4A ot_ yy\c4-atA..".....4
David M. Flannery
1r
David M. Flannery
Kathy G. Beckett
Keeleigh S. Huffman
Steptoe & Johnson PLLC
707 Virginia Street, East
Post Office Box 1588
Charleston, WV 25326
(304) 353-8000
Dave.Flannery@steptoe-johnson.com
Kathy.beckettsteptoe-johnson.com
Keeleigh.Huffman@steptoe-johnson.com
Edward L. Kropp
Steptoe & Johnson PLLC
PO Box 36425
Indianapolis, Indiana 46236
317-946-9882
Skipp.kropp@steptoe-johnson.corn
Counselfor Petitioner Midwest Ozone Group
Dated: July 29, 2024
4
0004a
USCA Case #24-1223
Document #2067071
Filed: 07/29/2024
Page 5 of 5
CERTIFICATE OF SERVICE
Pursuant to Fed. R. App. P. 15(c), Circuit Rule 15(a), Fed. R. App. P. 25, and
40 CFR 23.12(a), on this date, I hereby certify that a copy of the foregoing
Nonbinding Statement of Issues of Petitioner Midwest Ozone Group was filed with
the Clerk of the Court using the CM/ECF System, which will send notice of such
filing to all registered CM/ECF users.
rl•->
David M. Flannery
Dated: July 29, 2024
5
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ercot.com
June 23, 2023
SUBMITTED VIA REGULATIONS.GOV
Michael S. Regan, Administrator
U.S. Environmental Protection Agency
1200 Pennsylvania Avenue NW
Washington, DC 20460
RE: EPA Docket ID No. EPA-HQ-OAR-2018-0794; FRL-6716.3-01-OAR; National
Emission Standards for Hazardous Air Pollutants for Coal- and Oil-Fired Electric Utility
Steam Generating Units (EGUs)
Dear Mr. Regan:
Electric Reliability Council of Texas, Inc. (ERCOT) respectfully submits these comments
regarding the Environmental Protection Agency’s (EPA) proposed amendments to the National
Emission Standards for Hazardous Air Pollutants (NESHAP) for Coal- and Oil-Fired Electric
Utility Steam Generating Units (EGUs), commonly known as the Mercury and Air Toxics
Standards (MATS), which was published in the Federal Register on April 24, 2023.
Background
ERCOT is the independent system operator (ISO) designated by the Public Utility
Commission of Texas (PUCT) for the purpose of managing the flow of power on the ERCOT
transmission grid, which serves the majority of customers in the State of Texas. Texas law assigns
ERCOT a number of critical functions, including the responsibility to “ensure the reliability and
adequacy of the regional electrical network.” Tex. Util. Code § 39.151(a)(2). ERCOT’s most basic
function in ensuring system reliability is to individually dispatch hundreds of generators located
across the system to match the system demand (or “load”) at every moment of every day while
observing both the physical and stability limits of the transmission network that transports power
between generation and load. ERCOT is also registered with the North American Electric
Reliability Corporation (NERC) as the sole Reliability Coordinator (RC) and Balancing Authority
(BA) for the ERCOT region under the reliability framework in section 215 of the Federal Power
Act. In these roles, ERCOT has the ultimate responsibility to direct the operation of the ERCOT
power grid to ensure generation and load are balanced and to take all appropriate actions needed
to ensure the security of the grid during emergency conditions.
Reliability Concerns with the Proposed Amendments to the MATS
ERCOT is concerned that the proposed amendments to the MATS could impact grid
reliability in the ERCOT region of Texas in several possible ways. Primarily, due to the required
cost of improvements, some portion of the affected units could simply retire instead of coming
into compliance with the new requirements. These retirements could occur before new generation
0006a
Hon. Michael S. Regan
June 23, 2023
Page 2
could be built to replace them. During this potential interim period, a lack of dispatchable
generation could significantly increase the likelihood of rotating outages during periods of severe
weather, unnecessarily jeopardizing the safety of Texans and causing economic harm. 1
For EGUs that do elect to make the changes necessary to come into compliance, ERCOT
understands, based on communications with owners of affected EGUs, that the proposed standard
would increase the occurrence of forced outages and derates required to allow for the installation,
tuning, and maintenance of electrostatic precipitators, baghouses, and other equipment required by
the proposed standard. The increased outage rate presents a reliability risk for the ERCOT system
that is already forced to tightly coordinate the current level of generation outages while maintaining
system reliability. The additional outages resulting from the implementation of the standard will
also increase the complexity of coordinating maintenance outages for the remaining generation
fleet.
ERCOT also understands that the standard could create new compliance issues for certain
EGUs that may require extended cold starts, jeopardizing their continued availability to ERCOT.
ERCOT has a number of plants that require extended startups. Potentially including allowances
for startup conditions could enable some of these EGUs to continue operation until more compliant
generation is built. This would help facilitate a smooth transition to newer plants that meet the
requirements without risking the reliability of the electric grid.
ERCOT is also concerned that the emissions limits that EPA has proposed for oil-fired
units could impede ERCOT’s ability to rely on fuel-oil-fired generation in cases where the natural
gas delivery system may not be capable of serving ERCOT’s gas-fired generation fleet. As a result
of the significant grid outages during Winter Storm Uri in 2021, the Public Utility Commission of
Texas directed ERCOT to develop a firm fuel product—now called “Firm Fuel Supply Service”—
which incentivizes the addition and maintenance of alternative fuel capability at EGU facilities
primarily fueled by natural gas. 2 ERCOT last year secured 2,940 MW of alternative fuel capability
from EGUs as part of its initial procurement of this service. 3 As a general rule, these EGUs rely
on fuel oil as an alternative fuel source. Impeding these EGUs’ ability to utilize fuel oil in the
infrequent event of a natural gas supply disruption—such as occurred during Winter Storm Uri—
would decrease the resiliency of the system during severe cold weather.
With regard to EPA’s request for comments on lowering the level of allowable non-Hg
metal filterable particulate matter emissions from the proposed level of 0.01 lb/MMBtu to an even
lower standard of 0.006 lb/MMBtu, ERCOT understands from discussions with some owners of
affected EGUs that the upgrades necessary to meet this lower standard could be cost-prohibitive
to install. Assuming that is correct, adopting such a standard could result in additional unplanned
retirements of EGUs, which will present an additional reliability concern for ERCOT—especially
given the proposed implementation timeframe.
See Winter Storm Uri 2021 (texas.gov) and Texas winter storm official death toll now put at 246 | The Texas
Tribune
2
The PUCT’s order directing ERCOT to develop a “firm fuel product” as part of a suite of market design changes is
available at https://interchange.puc.texas.gov/Documents/52373_336_1180125.PDF.
3
See ERCOT letter of September 27, 2022 to PUCT Commissioners, available at
https://interchange.puc.texas.gov/Documents/52373_379_1241977.PDF.
1
0007a
Hon. Michael S. Regan
June 23, 2023
Page 3
ERCOT urges the EPA to consider these important reliability concerns in deciding whether
to adopt the proposed amendments to the MATS rule.
Reliability Safety Valve
Additionally, ERCOT requests that EPA adopt a comprehensive “reliability safety valve”
(RSV) that would allow grid operators like ERCOT to rely upon EGUs subject to EPA emissions
restrictions, including restrictions imposed by the MATS rule, when necessary to serve system
demand in the unusual event of an actual or anticipated grid emergency. EPA has previously
approved an RSV in the context of the Clean Power Plan. ERCOT believes a similar measure that
applies more broadly across all EPA-regulated emissions would be appropriate because there are
multiple EPA requirements that restrict operations of coal- and gas-fired units limiting the
availability of those plants to the grid.
ERCOT recommends that an RSV should be available when the grid operator has declared
or reasonably expects to declare an emergency under the grid operator’s rules. In ERCOT, an
emergency can be declared when total system capacity reaches a very low threshold relative to
load and the required level of reserves 4 or when ERCOT is not able to operate the transmission
system within defined limits using its normal operational tools. 5 Limiting the availability of an
RSV to an emergency or reasonably anticipated emergency condition would ensure that the
exceedance of any allowance is narrowly tailored to the most exigent of operating circumstances.
ERCOT submits that, in the case of a grid emergency, the incremental value of the additional
generation supply to the health and safety of the public is far greater than any detrimental public
health impact attributable to the exceedance of a permitted allowance.
If desired, ERCOT would be happy to work with the EPA to help design an RSV that would
appropriately optimize EPA’s environmental aims while ensuring ERCOT can maintain the
reliability of the Texas electric grid.
ERCOT greatly appreciates the EPA’s consideration of these comments and would be
happy to discuss these matters with the EPA in further detail.
Respectfully Submitted,
/s/ Woody Rickerson
Dwayne W. Rickerson, P.E.
Vice President, System
Weatherization
Planning
ERCOT Protocols § 6.5.9.4.2, available
at:https://www.ercot.com/files/docs/2022/05/31/June%201,%202022%20Nodal%20Protocols.pdf
5
ERCOT Nodal Operating Guide § 4.3, available at:
https://www.ercot.com/files/docs/2022/06/10/June%201,%202022%20Nodal%20Operating%20Guide.pdf
4
0008a
and
January 15, 2016
VIA ELECTRONIC MAIL TO: a-and-r-docket@epa.gov
Dr. Nick Hudson
Energy Strategies Group, Sector Policies &
Programs Division (D243-01)
U.S. Environmental Protection Agency
Research Triangle Park, NC 27711
Attention: Docket ID No. EPA–HQ–OAR–2009–0234
Re:
Comments of the National Mining Association on Supplemental Finding That It Is
Appropriate and Necessary To Regulate Hazardous Air Pollutants From Coaland Oil-Fired Electric Utility Steam Generating Units, 80 Fed. Reg. 75,025 (Dec.
1, 2015)
Dear Dr. Hudson:
The National Mining Association (NMA)1 submits these comments in response to
the proposed supplemental finding that it is appropriate and necessary to regulate
hazardous air pollutants (HAPs) from coal and oil-fired electric utility steam generating
units (EGUs), 80 Fed. Reg. 75,025 (Dec. 1, 2015). In addition to submitting these
comments NMA incorporates by reference the comments of the Utility Air Regulatory
Group of which NMA is a member.
NMA urges EPA to rescind and re-propose its “appropriate and necessary”
finding for electric generating units. EPA’s proposed finding is based on an arbitrarily
limited view of the information the agency should examine in assessing the costs and
benefits of regulation. EPA seems more interested in quickly reaffirming the flawed
appropriate and necessary finding it made when it issued the MATS rule rather than
conducting the type of searching analysis the Supreme Court called for in Michigan v.
EPA, 135 S. Ct. 2699 (2015), where the Court directed the agency to “consider costincluding, and most importantly, cost of compliance before deciding whether regulation
is appropriate and necessary.” (Emphasis added.) Despite this rebuke from the Court,
1
NMA’s membership includes the producers, transporters and consumers of coal. Our member
companies mines over 75 percent of the coal produced annually from operations located in 26 states.
Most of the coal produced by NMA members is used by coal-fired EGUs subject to this rulemaking.
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our analysis of the Supplemental Finding demonstrates that it, like the agency’s prior
determination, is wrong in reaching the conclusion that it is appropriate and necessary
to regulate HAP emissions from EGUs.2
1.
EPA has completely failed to consider the effect of its rule on coal.
Four years after MATS was issued, with the damage the rule caused in the coal
industry all but complete, EPA maintains its preposterous view reached in the MATS
Regulatory Impact Analysis (RIA) that the rule will have little effect on coal. EPA has no
new analysis to support this assertion as no such analysis can be constructed. It simply
proposes to limit its consideration of costs to the information it included in the RIA,
including the RIA forecast that the rule would result in the retirement of less than 5 GW
of coal capacity.3 By limiting its cost consideration in this fashion, the agency believes it
can erase the actual experience of the last four years and the hardship the agency has
wrought on our nation’s coal communities and ratepayers who were previously the
beneficiaries of affordable, reliable coal-based electricity.
As numerous commenters, including NMA, told EPA during the MATS
rulemaking, the rule would cause a wave of coal unit retirements. Unfortunately, events
have confirmed the accuracy of these forecasts and disproved EPA’s. Between 2012
when the rule went into effect and 2016 when the rule’s compliance period ends, almost
60 GW of coal capacity will have retired, including units that have already retired or, for
2016, have announced their retirement.
Coal-Fired Generating Unit Retirements by Year – Actual and Announced (MW)
Year
2012
2013
2014
2015
2016
Annual
12,601
8,220
5,568
20,728
12,065
Cumulative
12,601
20,821
26,389
47,116
59,181
Source: Energy Ventures Analysis
According to statements made by the utilities announcing the retirements,
virtually all of these closures are either fully or partially attributable to MATS and other
EPA regulations.4
2
To ensure a complete record here, NMA attaches and resubmits its MATS comments.
EPA Regulatory Impact Analysis for the Final Mercury and Air Toxics Standards, page 3-17.
4
See attached compilation from the American Coalition of Clean Coal Electricity.
3
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Prior to the final MATS rule, total retirements of coal-fired capacity for the
previous 11 years were just 9,745 MW, 3.1 percent of the nation’s existing coal-fired
capacity. Because of MATS, power companies retired more capacity than in all of those
years combined—10,308 MW—in 2012 alone.
Shortly after MATS was published, the Energy Information Administration (“EIA”)
recognized that this rule would contribute to a wave of retirements of coal-fired power
plants. EIA published an article in July 2012 reporting the surge of planned retirements,
which would peak in 2015, the year the initial MATS compliance period ended. This is
described graphically in the chart shown below.
Planned Retirement of Coal-Fired Generators, 2012 (MW)5
In public statements and in litigation EPA has blamed the decline in natural gas
prices for the coal unit retirements. Natural gas prices have certainly affected the
amount of actual coal generation, but low natural gas prices did not lead to the plant
retirements. While natural gas prices did fall in 2012 from 2011, the decline was not to
unusually low levels. Gas prices in 2012 were still higher than the average price of
natural gas throughout the 1990’s, as shown below. However, coal plants did not retire
in any significant quantities throughout that decade of low gas prices. The coal industry
is familiar with and has previously experienced the impact of cyclical, non-sustainable
low natural gas prices. The massive retirement of coal plants began in 2012, coinciding
with the MATS rule, not the decline in gas prices. Natural gas prices recovered in 2013
and 2014, yet coal plants continued to retire in these years also.
5
Sources: EIA, “27 gigawatts of coal-fired capacity to retire over next five years”, July 27, 2012 at
http://www.eia.gov/todayinenergy/detail.cfm?id=7290#.
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Henry Hub Weekly Spot Natural Gas Price ($/mmBtu)6
EPA’s reliance on its stark under-prediction of the number of retirements as a
result of MATS taints every aspect of EPA’s new appropriate and necessary finding.
Having understated the retirements in the RIA, that document also understates the
overall compliance costs of the rule, the resulting impact to electric ratepayers, the
amount of coal production that would be lost, the number of miners that would be laid
off, and the impacts to coal communities and coal states that would ensue. Forty
thousand coal miners have lost their jobs since 2012. These layoffs have occurred in
some of the poorest areas of the country, where coal-mining provides some of the
highest-paying jobs. Whole communities and a number of states are dependent on the
revenue the coal industry brings.
NMA and others warned EPA, in comments on the MATS rulemaking, of the chain
of devastation the rule would create, but EPA chose to discount those warnings. In light
of subsequent events, it is completely arbitrary for EPA to continue to pretend that the
rule has had little impact on coal.
2.
EPA Has Not Explained Why It Ignores the Actual Retirements Caused by
the Rule.
EPA offers no explanation for ignoring the actual number of retirements the rule
caused. Instead, EPA simply says, without elaboration, that it has chosen to restrict its
examination of cost impacts to the information in the RIA because doing so is
6
Source: EIA at http://www.eia.gov/dnav/ng/ng_pri_fut_s1_w.htm.
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“reasonable.”7 It cannot be reasonable, however, to continue relying on cost information
that has demonstrably been proven wrong time-and-time again.
The closest EPA comes to an explanation for relying on incorrect data in the RIA
is the assertion that the public had an opportunity to comment on that information and
EPA responded to those comments.8 In the first place, it is not true that EPA conducted
notice-and-comment rulemaking on whether regulation of EGU HAP emissions is
justified in light of the regulatory costs. During the rulemaking and throughout the
litigation, EPA’s firm position was that cost information played no role in its appropriate
and necessary finding. As a consequence of this view, the agency’s main response to
the cost information proffered by NMA and others was that such information was
irrelevant.9 At no point did EPA ever examine the cost information submitted by
commenters in light of the ultimate question of whether it was appropriate and
necessary to regulate.
More fundamentally, even if EPA had fully considered the cost information
submitted in the record that would not justify EPA’s failure to rely on information from
the RIA that has proved to be faulty. The Supreme Court required EPA to make a de
novo appropriate and necessary determination that, for the first time, considers costs
and benefits. That determination must be based on cost information that is reliable and
accurate. EPA has no excuse for not considering costs associated with the large
number of retirements that the rule caused. It must redo its entire RIA cost analysis in
light of that information.
3.
EPA must accept new evidence on the purported benefits of the rule and
reconsider the evidence already submitted as to the lack of benefits
EPA states that it is not accepting comments on its finding that “mercury and
other HAP emissions are hazardous to public health and the environment.” EPA says
the public has already commented on this finding and that the agency has already
responded to all significant comments.10
As discussed above, however, because EPA is making a de novo appropriate
and necessary finding, EPA cannot exclude relevant evidence. EPA must at least
reconsider the evidence it relied on in its previous finding in determining now whether
the cost of regulation is justified by the benefits. Because EPA did not weigh costs and
benefits in its prior appropriate and necessary finding, it was of the opinion that virtually
any evidence of a risk to health or the environment would justify a decision that
7
Legal Memorandum Accompanying the Proposed Supplemental Finding that it is Appropriate and
Necessary to Regulate Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility Steam
Generating Units (“Legal Memorandum”) at 18.
8
80 Fed. Reg. at 75,031.
9
Id. at 9327.
10
Id. at 75,028.
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regulation was appropriate and necessary. It is now EPA’s task to judge for the first time
whether the benefits it relies on are significant enough to justify the costs. This applies
to asserted impacts of all HAP emissions, but applies most critically to the asserted
impacts of acid gas emissions, as more fully discussed below.
4.
EPA Cannot Mask the Impacts of the Rule by Spreading those Impacts
Over the Entire Power Sector.
In an attempt to make the $9.6 billion annual cost of the rule seem small, EPA
compares the MATS costs with total utility industry costs.11 In EPA’s view:
The $9.6 billion annual cost of the rule is only a small fraction of the total annual
industry-wide dollar value of electricity sales;
The annual capital expenditures to comply with MATS are again only a small
fraction of all utility industry annual capital expenditures;
The impact of the rule on the average national electricity rate are small;
EPA’s estimate of 4.7 GW of retirements represents only a minimal amount of
total electric generating capacity: “This analysis indicates that the vast majority of
the generation capacity in the power sector directly affected by the requirements
of MATS would be able to absorb the anticipated compliance costs and remain
operational.”
These comparisons of MATS costs with national-level costs are meaningless.
First, as noted, they are based on EPA’s fundamentally flawed RIA that far understated
the number of coal unit retirements and thus underestimates the cost of the rule.
Additionally, national level figures are of little use in assessing the cost of MATS
in the real world. For instance, no one pays an average national electricity rate; electric
consumers pay the rate charged by their local utility which in turn reflects that utility’s
costs.
As EPA is aware, coal-fired generation is predominately confined to the middle
and southeastern parts of the country. The major population centers of California, the
Pacific Northwest, New York, New Jersey, New England and peninsular Florida use
very little or no coal generation. Obviously, the rule would not be expected to have and
has not had much impact in those areas. Spreading the cost of the rule over the large
populations served by utilities in these states therefore masks the impact the rule has
on other states.
11
Id. at 75,032-36.
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Equally as obvious, the rule can be expected to have major impacts in coaldependent states. Information submitted to EPA during the MATS rulemaking showed
the possibility of more than 20 percent rate impacts regionally. For instance, heavy
manufacturing and coal-dependent states like Ohio can expect prices to rise by
approximately 23 percent.12 Moreover, as the economy recovers and electricity demand
increases the tightening of electric generation supplies resulting from the rule will
inevitably force electric rates to rise.
EPA seems to recognize that the rule will have disproportionately high effects in
coal-dependent regions, but dismisses those impacts with the statement that rates in
these areas are lower than the national average.13 The implication seems to be that
EPA is justified in pursuing policies that raise electric rates in these areas because
people can afford the increases. It is not EPA’s job, however, to impose the energy
policies of the coastal states—and the resulting high energy prices—on the rest of the
country. In any event, the middle of the country on average has lower incomes than the
coastal states and is therefore not in a position to absorb the higher costs. As NMA has
repeatedly told EPA in comments, high energy prices produce their own set of negative
health and welfare impacts, none of which are accounted for in EPA’s new appropriate
and necessary finding.
EPA’s focus on the rule’s national-level utility industry impacts also fails to
address the specific impacts the rule will have on coal production, coal employment and
coal communities. These impacts are clearly relevant to an analysis of the rule’s costs.
5.
EPA Must Separately Address Whether the Cost of Acid Gas Regulation Is
Justified by the Benefit.
Another topic EPA tries to declare off limits is whether EPA could decide it is not
appropriate and necessary to regulate one HAP if it is appropriate and necessary to
regulate any other HAP. EPA’s view is that this outcome is foreclosed by the court of
appeals’ decision in White Stallion Energy Ctr., LLC v. EPA, 748 F.3d 1222, 1233 (D.C.
Cir. 2014) and by the terms of the issue the Supreme Court accepted for review in
Michigan v. EPA, 135 S. Ct. 2699 (2015).
EPA is incorrect. White Stallion determined only that, as a matter of Chevron
step two deference, “EPA's conclusion that it may regulate all HAP emissions from
EGUs must be upheld,” even if it is not appropriate and necessary to regulate one
particular EGU HAP emissions. White Stallion, 748 F. 3d at 1245 (bold added, italics in
original). This EPA exercise of discretion may have been, as the White Stallion court
found; reasonable in light of the court’s finding that costs are irrelevant in the
appropriate and necessary finding. However, given the Supreme Court’s ruling that
costs are relevant, it is now unreasonable for EPA to neglect, on a pollutant-by-pollutant
12
13
See NMA comments at 3.
80 Fed. Reg. at 75,035.
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basis, whether regulation may be inappropriate and unnecessary given an extreme
mismatch of costs and benefits.
Moreover, the relative costs and benefits of regulating each particular EGU HAP
emission remains relevant even if EPA is required to regulate all EGU HAP emissions
on a finding that it is appropriate and necessary to regulate one particular such
emission. In considering whether it is appropriate and necessary to regulate all EGU
HAP emissions, certainly one relevant factor would be that regulating one HAP would
impose extraordinarily high costs for almost no benefit. Accordingly, EPA could decide
that the costs and benefits of regulating one HAP is so out of balance that regulation of
any HAPs is not warranted.
In this regard, it is worth reiterating the severe lack of balance between the costs
and benefits of regulating acid gas emissions. On the cost side, acid gas regulation
comprises about half of the $9.6 billion annual cost of the rule.14 On the benefits side,
EPA produced no evidence that acid gas emissions from EGUs endanger human
health. Neither the 1998 Utility Study nor the only study that EPA subsequently
performed of the health risks of electric generator acid gas emissions,15 found any such
risks.
The best EPA could do in the regulatory preamble as to health impacts was to
express “concern” that acid gases in general are known to “contribute to chronic noncancer toxicity,” without making any finding that acid gases in the quantities emitted by
electric generators pose a meaningful risk of doing so.16 The only actual analysis EPA
performed to determine whether acid gas emissions from electric generators create a
health concern concluded that “individuals are not exposed to acid gas emissions from
Utility Units at concentrations which pose hazards to public health.”17
Even EPA’s findings as to possible environmental impacts of electric generator
acid gas emissions lacked a substantive foundation. EPA’s “evidence” of the
environmental impacts of these emissions consists of EPA’s general claim that “[i]n
areas where the deposition of acids derived from emissions of sulfur and NOx are
causing aquatic and/or terrestrial acidification, with accompanying ecological impacts,
the deposition of hydrochloric acid could exacerbate these impacts.”18 That may be true,
but it does not prove – or even lead to an inference – that electric generators emit acid
gases in sufficient amounts, given EPA’s other regulations, to create a material
environmental concern. The Utility Study did not conclude that electric generator acid
gas emissions resulted in environmental harm, and EPA did not conduct any further
study of possible environmental impacts of electric generator acid gas emissions.
14
See Comments of the Utility Air Regulatory Group, Aug. 4, 2011.
70 Fed. Reg. at 16,007,
16
Id.
17
Id. at 16,007.
18
Id. at 25,050 (emphasis added).
15
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The only acid gas study that EPA relied on was one study of hydrochloric acid
deposition in the United Kingdom, which EPA cites for the proposition that (a)
hydrochloric acid is highly mobile in the environment, (b) hydrochloric acid can transport
longer distances than previously thought, and (c) hydrochloric acid can be a larger
driver of acidification than previously thought.19 EPA, however, did not even try to
analyze the impact, if any, of electric generator emissions of hydrochloric acid in the
United States and, as a result, could not point to even a single instance in which
domestic electric generator hydrochloric acid emissions have affected acid deposition
anywhere or otherwise created an environmental impact.20
In fact, the “evidence” on which EPA most relied in concluding that acid gases
are worthy of regulation is that acid gases are listed under CAA Section 7412(b) and
that electric generators emit more hydrogen chloride and hydrogen fluoride than other
source categories21. But those facts, in and of themselves, are not significant given that
those emissions, even when combined with directly emitted acid gas emissions from all
other sources, do not represent more than a nominal percentage of emissions that have
the potential to result in acidification.22
Given the high costs and negligible benefits of regulating EGU acid gas
emissions, EPA has two choices. It may choose to regulate other HAP emissions while
not regulating acid gases, or it may choose not to regulate EGU HAP emissions at all.
What it cannot do, however, is simply ignore the stark mismatch of the costs and
benefits of regulating acid gases.
For the above reasons, NMA urges EPA to rescind and re-propose its
appropriate and necessary finding based on a more complete analysis of costs and
benefits.
Regards,
Bruce Watzman
Enclosures
19
77 Fed. Reg. at 9,362.
See EPRI Comments on Proposed HAPs MACT Rule, 4 August 2011, at § 3.16.
21
76 Fed. Reg. at 25,005.
22
See EPRI Comments on Proposed HAPs MACT Rule, 4 August 2011, at § 3.16.
20
National Mining Association 101 Constitution Avenue, NW | Suite 500 East | Washington, DC 20001 | (202) 463-2600
0017a
THE NATIONAL MINING ASSOCIATION’S COMMENTS ON EPA’S PROPOSED
NATIONAL EMISSIONS STANDARDS FOR HAZARDOUS AIR POLLUTANTS
FROM COAL- AND OIL-FIRED ELECTRIC UTILITY STEAM GENERATING
UNITS AND STANDARDS OF PERFORMANCE FOR FOSSIL-FUEL-FIRED
ELECTRIC UTILITY, INDUSTRIAL-COMMERCIAL-INSTITUTIONAL, AND
SMALL INDUSTRIAL-COMMERCIAL-INSTITUTIONAL STEAM GENERATING
UNITS
76 Federal Register 24,976 (May 3, 2011)
Docket ID Numbers: EPA-HQ-OAR-2009-0234 (NESHAP action) and EPAHQ-OAR-2011-0044 (NSPS)
0018a
August 4, 2011
VIA ELECTRONIC MAIL TO: a-and-r-docket@epa.gov
U.S. Environmental Protection Agency
1200 Pennsylvania Avenue, N.W.
Washington, D.C. 20460
Re:
Comments of the National Mining Association on the above-docketed
proposed rules; 76 Fed. Reg. 24976 et seq., May 3, 2011.
Dear Ladies and Gentlemen:
The National Mining Association (“NMA”) takes this opportunity to submit the
following comments on the Environmental Protection Agency‟s (“EPA”) proposed
rules, as titled above, published in the Federal Register on May 3, 2011.
NMA‟s membership includes the producers, transporters and consumers of
coal. Our member companies mine over 75 percent of the coal produced annually
from operations located in 26 states. Most of the coal produced by NMA members
is used by coal-fired utilities subject to this proposed rulemaking.
NMA‟s members also include the transporters of coal. For example, railroads
deliver about two-thirds of all coal to coal-fired units. NMA‟s members include the
producers of metals, and industrial and agricultural minerals. Their operations are
major consumers of electricity as a raw material or feedstock. Because energy
costs comprise a substantial part of their operating costs, this rulemaking will also
have a material impact upon on their global competitive position. NMA‟s
membership also includes the manufacturers of mining and mineral processing
machinery and supplies. This rulemaking will affect both their markets as the
suppliers of machinery and equipment for coal mines and their competitive position
as manufacturers bearing the brunt of higher energy prices. In sum, this
rulemaking is of utmost importance to NMA.
Please let me know if you have any questions regarding NMA‟s comments. I
can be reached directly at (202) 463-2608 or via email at tperry@nma.org.
Sincerely,
Thomas C. Perry
Director of Air Quality
0019a
TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY ................................................................................. 1
I.
THE PROPOSED RULE REPRESENTS A HUGE REGULATORY BURDEN
FOR LITTLE ENVIRONMENTAL GAIN ........................................................ 1
A. The Essential Role of Coal in the U.S. Economy. .................................... 1
B. EPA‟s Cost Estimate is Significantly Understated .................................... 2
C. EPA‟s Benefits Analysis is Equally Flawed .............................................. 3
II.
EPA‟S RULEMAKING PROCESS IS LEGALLY DEFICIENT UNDER THE
CLEAN AIR ACT..................................................................................... 4
III.
EPA‟S APPROPRIATE AND NECESSARY DETERMINATIONS ARE
INCONSISTENT WITH THE CLEAN AIR ACT ............................................... 5
IV.
EPA‟S HAP-BY-HAP APPROACH FOR DETERMINING THE MACT FLOOR
IS UNLAWFUL UNDER THE CAA............................................................... 6
V.
EPA‟S NEW SOURCE STANDARDS VIRTUALLY ELIMINATE NEW COAL
PLANTS ............................................................................................... 7
VI.
EPA‟S PERFORMANCE STANDARDS RUN COUNTER TO THE CAA .................. 8
VII.
EPA SHOULD EXERCISE ITS DISCRETION TO PROPERLY TAILOR THIS
RULE ................................................................................................... 8
VIII. EPA SHOULD PROVIDE THE MAXIMUM AMOUNT OF TIME TO COMPLY
WITH THIS RULE .................................................................................. 9
DISCUSSION ............................................................................................... 9
I.
THE PROPOSED RULE REPRESENTS A HUGE REGULATORY BURDEN
FOR LITTLE ENVIRONMENTAL GAIN ........................................................ 9
A.
The Utility MACT Rule Provides Little to No Incremental Health
Benefit ....................................................................................... 9
1.
Mercury emissions from EGUs pose little or no risk to
public health .................................................................... 10
2.
EPA has never provided an initial finding of public health
concern to regulate non-mercury HAPs under section
112(n)(1)(A) .................................................................... 15
0020a
3.
B.
The entire rulemaking is predicated upon questionable
health benefits from an already regulated pollutant ............... 17
EPA Has Underestimated the Costs of this Rulemaking ................... 19
1.
EPA must produce a cumulative cost analysis of its
regulatory program affecting the use of coal ........................ 20
2.
EPA‟s DSI assumption is misguided ..................................... 22
3.
Many analysts have predicted higher amounts of early
coal retirements ............................................................... 26
4.
EPA‟s mistaken belief about the current fleet will also
increase the amount of projected retirements ...................... 27
5.
EPA‟s assessment of impacts on electricity prices and job
losses is premised on questionable assumptions and an
inadequate rulemaking record ............................................ 29
II.
EPA‟S RULEMAKING PROCESS IS LEGALLY DEFICIENT UNDER THE
CLEAN AIR ACT................................................................................... 34
III.
EPA‟S APPROPRIATE AND NECESSARY DETERMINATIONS ARE
INCONSISTENT WITH THE CLEAN AIR ACT ............................................. 36
A.
EPA‟s Definition of “Appropriate” is Impermissibly Broad ................. 38
B.
EPA‟s “Necessary” Finding is Overly Narrow and Does Not
Comport with Congressional Intent .............................................. 40
C.
EPA is Not Compelled to Regulate EGUs under a MACT
Standard .................................................................................. 43
IV.
EPA‟S HAP-BY-HAP APPROACH TO DETERMINING THE MACT FLOOR
IS NOT PERMITTED BY THE CLEAN AIR ACT ........................................... 45
V.
EPA'S NEW SOURCE STANDARDS VIRTUALLY ELIMINATE NEW COAL
PLANTS ............................................................................................. 48
VI.
EPA‟S PERFORMANCE STANDARDS RUN COUNTER TO THE CAA ................ 54
VII.
EPA SHOULD EXERCISE ITS DISCRETION TO PROPERLY TAILOR THIS
RULE ................................................................................................. 55
A.
EPA Should Develop Health Based Emissions Standards for Acid
Gases ....................................................................................... 55
0021a
B.
EPA Should Subcategorize to Ensure all Coals Meet the
Proposed NESHAPs..................................................................... 57
C.
EPA Should Promulgate GACT Standards for Area Sources .............. 58
VIII. EPA SHOULD PROVIDE THE MAXIMUM AMOUNT OF TIME TO COMPLY
WITH THIS RULE ................................................................................ 59
CONCLUSION ............................................................................................ 61
ATTACHMENTS
Attachment 1—Senator Lisa Murkowski, “FERC Responses Raise New Concerns
About Reliability,” Press Release (Aug. 3, 2011).
Attachment 2—FERC Response to Senator Murkowski, Chairman Wellinghoff (Aug.
1, 2011).
Attachment 3—FERC Response to Senator Murkowski, Commissioner Moeller (Aug.
1, 2011).
Attachment 4—FERC Response to Senator Murkowski, Commissioner Spitzer (Aug.
1, 2011).
Attachment 5—Comments of the National Mining Association on the Industrial Boiler
MACT rule, Docket Nos. EPA-HQ-OAR-2002-0058 and EPA-HQ-OAR-2006-0790
(Aug. 23, 2010).
Attachment 6—Comments of the National Mining Association on Federal
Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter and
Ozone, Docket ID Nos. EPA-HQ-OAR-2009-0491 (Aug. 2, 2010).
Attachment 7—Individually-listed Analyses in Table 3: Summary of Coal-Fired
Retirement Projections.
0022a
EXECUTIVE SUMMARY
I.
THE PROPOSED RULE REPRESENTS A HUGE REGULATORY BURDEN
FOR LITTLE ENVIRONMENTAL GAIN
The Environmental Protection Agency (“EPA”) has now either planned,
proposed or finalized several interrelated and costly regulations under the Clean Air
Act (“CAA”) aimed at substantially reducing the usage of coal as a fuel source in
this country. The proposed rule is no exception with its EPA-estimated $10.9 billion
in annual compliance costs. Further exacerbating the situation is EPA‟s new source
emissions standards that make it virtually impossible for advanced coal-based
generating capacity to be built in this country. The reality is that as EPA continues
on its course of “leveling the playing field”1 for electric power generation in the
United States, the agency appears unwilling to grapple with the fundamental fact
that coal is the only sustainable fuel, at scale, that can reliably meet our growing
electricity needs. In a world of increasing global scarcity, the United States cannot
afford to disregard the importance of its abundant coal resources.
A. The Essential Role of Coal in the U.S. Economy
Energy is as basic to human life as food, water, clothing or oxygen.2 Access
to secure, affordable, abundant and sustainable energy from coal is the engine that
has driven American economic might for more than a century. These energy
attributes are essential to American economic success. Expensive energy chokes
off economic recovery, punishes family budgets, sends factories overseas and
determines winners and losers in global competition.
Coal is fundamental to how the nation produces electricity. Approximately
46 percent of electricity is derived from combusting coal. Coal is also by far the
nation‟s most abundant source of energy, constituting 94 percent of the nation‟s
fossil fuel resources. The United States has nearly 261 billion tons of recoverable
coal reserves, according to the Energy Information Administration, which is a 240year supply at current rates of use.
The correlation between coal-fueled electricity and economic growth is nearperfect.3 For example, states that rely predominantly on coal generation are
1
76 Fed. Reg. 24976, 24979 (May 3, 2011).
2
International Energy Agency, World Energy Outlook, 2009; World Coal Institute, “Coal Tackling Poverty,”
2007; “Mortality Reductions from Use of Low-Cost Coal-Fueled Power: An Analytical Framework,” Analysis by
Daniel E. Klien, Twenty-First Strategies, LLC, McLean, Va., and Ralph L. Keeney, Research Professor, Fuqua School of
Business, Duke University, 2002; World Health Organization, 2007 data.
3
Based on analysis of electricity from coal in terawatt hours and global GDP from 1970 to 2010, reported
by International Energy Agency, World Energy Outlook, 2009, and Energy Information Administration,
International Energy Outlook, 2010.
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generally the states with the lowest electricity rates. Twenty of the twenty-five
states with the lowest electricity costs rely upon coal generation for at least 40
percent of their electricity generation—and all have rates below the national
average. It is no coincidence that these states also have the highest concentrations
of manufacturing.
Moreover, advanced coal technologies provide a path forward for both
retaining the country‟s competitive edge and being environmentally conscious.
Supercritical coal technologies deployed in new coal-based power plants increase
efficiencies and reduce emissions by 20 percent as compared to the national
average of the existing coal-based plants. The next generation of ultra-supercritical
technologies will produce even higher efficiencies and a corresponding reduction in
emissions of 35 percent below the existing fleet of coal-based power plants.4
B. EPA’s Cost Estimate is Significantly Understated
EPA‟s proposed rule disregards these important and fundamental
contributions. Moreover, even in the face of widespread retirements and sharply
increasing electric rates, EPA still continues to claim that these rules are flexible
and common-sense without any sort of credible cumulative cost analysis to support
this claim. NMA has repeatedly demonstrated the need for such an assessment,
along with providing an analytical framework for completing this important task.
Without such an assessment, EPA‟s cost estimates are essentially meaningless.
EPA requires cumulative assessment under the National Environmental Policy Act
because assessing individual actions masks the overall effects that a series of
related actions will produce. For the same reason, EPA utilized cumulative analysis
to examine the effects of power plant emissions of hazardous air pollutants
(“HAPs”) in this rulemaking. EPA‟s rule-by-rule cost-benefit analysis, including the
one here, similarly hides the true impacts of the agency‟s overall program of power
sector regulations.
EPA‟s estimated cost of this regulation is $10.9 billion per year, a cost that
this economy can ill-afford to bear. But even that number is understated given that
EPA‟s underlying cost analysis suffers from a number of glaring deficiencies in
addition to the agency‟s failure to assess the cumulative costs of the rule. First, the
agency‟s assumption that many units will—56 GWs worth—be able to meet the
stringent acid gas standard by using dry sorbent injection (“DSI”) as an alternative
to installing costly scrubbing technology at over ten times the cost is misguided.
There is a paucity of evidence in the rulemaking demonstrating that DSI will be
effective at removing SO2 emissions at nearly as many units anticipated by EPA.
Second, EPA fails to account for the age of existing scrubbing technology in
erroneously assuming that approximately half of the fleet will meet all of the
NESHAPs without further need of retrofitting. Third, overlapping compliance
4
Janos M. Beer, Massachusetts Institute of Technology, Higher Efficiency Power Generation Reduces
Emissions, National Coal Council Issues Paper 2009.
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obligations like the Cross-State Air Pollution Rule (“CSAPR”) will effectively
foreclose the option of using DSI as those units will need to install costly scrubbing
technology in order to comply with that regulation. Taken together, these mistaken
assumptions demonstrate that EPA‟s cost estimate is biased low and the projected
9.9 GW of early coal retirements is clearly understated.
Thus, as the National Economic Research Associates (“NERA”) recently
projected, based on the impact of this rule and the recently finalized CSAPR,5
compliance costs for the electric sector are a staggering $18 billion per year. The
study also estimates that nationwide average retail electricity prices rise by 11.5
percent, and heavy manufacturing states such as Ohio can expect prices to rise by
approximately 23 percent. These rules will force Americans to pay more for
electricity, including the cost of natural gas, and precipitate significant job losses
not only in coal production and transportation but also in the manufacturing sector.
C. EPA’s Benefits Analysis is Equally Flawed
EPA attempts to justify the proposed rule based on an exaggerated claim
that the proposed rule will result in $52 to 139.4 billion in health benefits.
However, the facts paint a different story as only a de minimus amount—or less
than 0.01 percent of this total benefits estimate—are expected to result from
regulating the hazardous air pollutants (“HAPs”) that are ostensibly the subject of
this rulemaking. EPA readily admits virtually all of its claimed benefits result from
the incidental collateral reduction of SO2 emissions, which in turn, reduces the
atmospheric concentrations of PM2.5, thus (according to EPA) saving lives and
improving health. However, PM2.5 is already subject to stringent regulation under
the National Ambient Air Quality Standards (“NAAQS”) program and will be further
regulated by the recently finalized CSAPR. Thus, EPA appears to be double-, and
perhaps triple-counting health benefits—or relying on benefits that would have
otherwise occurred through implementation of the NAAQS program to enhance the
appearance of justification for this rule and CSAPR.
Even more telling is the fact, as demonstrated by Figure 6-15 of the
Regulatory Impact Analysis (“RIA”), almost the entire alleged PM2.5 benefits stem
from exposures that occur below the level of the PM2.5 NAAQS. Yet EPA set that
NAAQS at a level that, as required by the CAA, the agency deems protective of
human health with an “adequate margin of safety.” Thus, despite its statements in
the preamble, in reality, even the agency does not believe the proposed rule will
produce benefits from reducing PM2.5.
The agency is preparing to propose a new PM2.5 NAAQS, and that standard
may be lower than the current NAAQS. Until it does so, however, it is inappropriate
for EPA to adopt rules based on claimed benefits below the current NAAQS level.
5
See http://www.americaspower.org/NERA_CATR_MACT_29.pdf for study results *hereinafter “NERA
Study”+.
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Until changed, the current 15 µg/m3 NAAQS represents EPA‟s judgment of the
standard necessary to protect human health with a margin of safety. In any event,
the lowest standard contemplated by EPA is 11µg/m3. Even at this level, Figure 615 demonstrates that 80 percent of the asserted benefits would still be occurring at
levels below the NAAQS.
In sum, both EPA‟s cost and benefits calculations are fundamentally flawed.
The proposed rule will be far more costly than beneficial, and EPA‟s imposition of
large costs on the economy by forcing a reduction of the use of coal for electricity is
completely unjustified by any corresponding health benefit.
II.
EPA’S RULEMAKING PROCESS IS LEGALLY DEFICIENT UNDER THE
CLEAN AIR ACT
EPA has made it extremely difficult, indeed impossible, for the public to have
a meaningful opportunity to provide comments on the proposed rule. EPA‟s haste
in finalizing the proposed rule by November 2011 has resulted in insufficient time
for comments, only ninety days despite the extraordinarily complex nature of the
regulation.
The rushed schedule has resulted in at least one significant error in setting
the “maximum achievable control technology” (“MACT”) standards. On May 5,
2011, the Utility Air Regulatory Group (“UARG”)6 sent a letter to EPA identifying a
critical conversion error in the agency‟s calculation of mercury emissions resulting
from errors in half the mercury data used in new and existing MACT floors that
were 1000 times lower than actually measured. EPA admitted the error, but
without proper correction, the public is left to sift through the docket and discern
whether to comment on the standard in the supplemental document or the one
proposed in the Federal Register.
Another fundamental error in EPA‟s rulemaking process is the agency‟s
undocumented and unsupported claims of key stakeholder collaboration to
“safeguard[ing] completely against any risk of adverse impacts on electricity
system reliability.”7 NMA can find no evidence of these consultations in the
rulemaking docket. Indeed Senator Lisa Murkowski (R-Alaska) on May 17 sent a
letter to the Federal Energy Regulatory Commission (“FERC”) seeking clarification
on its collaboration with EPA.
It is inappropriate for EPA to claim that its rule will not create reliability
problems based on discussions the agency claims it is having with government and
non-government entities with direct authority over electric reliability, and yet not
include a record of those discussions in the rulemaking docket, at the time of
6
NMA is a member of UARG.
7
76 Fed. Reg. at 25054.
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publication, thus affording the public an opportunity to review and comment on
these discussions.
Notwithstanding these deficiencies, on August 3—exactly one day before the
close of the comment period—Senator Murkowski announced that she has received
responses from FERC outlining the extent of its consultations with EPA.8
Preliminary review of FERC‟s responses belies EPA‟s exaggerated assurances of
electric system reliability. EPA must include FERC‟s responses, including a record of
all the meetings between EPA, CEQ and FERC, data, and files as described in
Appendix A and B of Chairman Wellinghoff‟s responsive,9 in the rulemaking docket,
extend the comment period, and provide an opportunity for public inspection and
comment.
These critical errors, in addition to several others, are directly at odds with
the rulemaking requirements under section 307(d). Under paragraph (d)(3), a
“notice of proposed rulemaking…shall be accompanied by a statement of its basis
and purpose,” and this statement “shall include a summary” of the “factual data on
which the proposed rule is based,” and the “methodology used in obtaining the data
and in analyzing the data.” In addition, “[a]ll data, information, and documents
referred to in this paragraph on which the proposed rule relies shall be included in
the docket on the date of publication of the proposed rule.” EPA has not followed
these statutory commands, as “all data” on which the proposal is based were not
included in the docket at the time the proposed rule was published in the Federal
Register.10
This type of rulemaking does little to instill confidence that the agency is
conducting an open and transparent process consistent with President Obama‟s
Executive Order 13563. EPA must immediately seek an extension of the November
deadline from the Court in order to conduct a legitimate rulemaking process.
III.
EPA’S APPROPRIATE AND NECESSARY DETERMINATIONS ARE
INCONSISTENT WITH THE CLEAN AIR ACT
Congress specifically carved out electric utility steam generating units
(“EGUs”) from section 112 compliance unless and until the Administrator
determined that it is “appropriate and necessary after considering the results of”
8
Senator Murkowski’s August 3, 2011 Press Release is filed contemporaneously with these comments as
(Attachment 1).
9
Chairman Wellinghoff’s (Attachment 2), Commissioner Moeller’s (Attachment 3), and Commissioner
Spitzer’s (Attachment 4) responses have all been filed contemporaneously with these comments.
10
See also Kennecott Corp. v. EPA, 684 F.2d 1007, 1118 (D.C. Cir. 1982) (“In all circumstances, EPA’s failure
to include” documents that serve to explain the agency’s “data” and “methodology” constitutes “reversible error,”
insofar as their absence “makes impossible any meaningful comment on the merits of EPA’s assertions.”).
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the public health hazards study required by that section. See § 112(n)(1)(A). In
2000, EPA inappropriately determined that it was both appropriate and necessary to
list EGUs as a source category and promulgate MACT standards under section 112.
To date, the validity of EPA‟s 2000 determination has never been fully
ventilated in front of the D.C. Circuit Court. Accordingly, since EPA is reaffirming
the 2000 determination as its basis for proposing the instant rule, the legality of
that decision is squarely at issue.
EPA‟s appropriate and necessary findings are contrary to the CAA and do not
comport with congressional intent. The agency‟s determination that it is
“appropriate” to regulate EGU HAP emissions is based on a set of criteria outside of
the congressionally-directed public health effects inquiry, including environmental
impacts, emissions from other sources, and international cooperation. Injecting
these factors makes the “appropriate” determination so broad that it renders the
statutorily defined prerequisite for regulation meaningless. Congress clearly
wanted EPA to focus and base its inquiry on “hazards to public health” posed by
EGUs, not on a broad set of other factors. Otherwise, Congress would have simply
listed EGUs from the outset. EPA conducted a proper inquiry into whether
regulation of EGU HAP emissions was “appropriate” in 2005, but EPA has now
abandoned that inquiry and replaced it with a flawed analytical approach to mask
an insufficient factual basis for regulating. This is evidenced by the lack of benefit
derived from aggressive mercury control.
Similarly, EPA‟s “necessary” finding is overly narrow and contravenes the
purpose of the subsection. EPA believes that only those requirements that
Congress directly imposed on EGUs through the CAA as amended in 1990—namely,
the acid rain program—qualifies under the necessary analysis. This legal conclusion
has no basis in the statutory language. Congress obviously knew that the 1990
amendments would result in numerous regulations potentially eliminating the need
to regulate EGUs under section 112. Even though those regulations may have been
promulgated later in time, the Clean Air Interstate Rule (“CAIR”) and CSAPR for
example, those measures qualify under the necessary analysis. Both of those
programs stem from statutory authority in place as of or before adoption of the
1990 amendments. Thus, EPA has not provided a rational basis for its illogically
narrow statutory construction. Additionally, doubts about the implementation of
the NAAQS program is an unpersuasive basis for not including the results of these
measures; compliance with the NAAQS is a legal obligation—that is why EPA
promulgated first CAIR and then CSAPR. EPA‟s appropriate and necessary
determination in 2000 as well as in the instant rulemaking is arbitrary, capricious
and contrary to law.
IV.
EPA’S HAP-BY-HAP APPROACH FOR DETERMINING THE MACT FLOOR
IS UNLAWFUL UNDER THE CAA
EPA continues to set MACT floors based on an impermissible interpretation of
the CAA. The proposed MACT standards are based on a pollutant-by-pollutant
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approach—or “Franken-plant” approach—relying on a different set of best
performing sources for each HAP standard.
Justice Ginsburg during the medical waste incinerator litigation offered the
following baseball analogy to highlight the apparent lack of logic in EPA‟s approach.
He reasoned based on the HAP-by-HAP approach, the “best” baseball player on the
team would have the league‟s highest batting average, most home runs and would
have the lowest earned run average every time he pitched. No such player exists.
Likewise, no such unit can meet all of the proposed NESHAPs on a continuous basis
without any operational or equipment upgrades.
Section 112 does not permit the agency to base MACT standards on a
hypothetical amalgamation of ideal units nor does the statue permit the “emissions
control” achieved by the best sources to be determined on a group of best
performing units. If this was the intent of Congress, it would have added specific
language so directing the agency.
The HAP-by-HAP approach violates the CAA because less than 12 percent of
existing units can actually meet all of the proposed standards. In fact, NMA‟s
review of the ICR data reveals that only 3 percent of the total population of units
can meet all of the proposed standards. Moreover, this is a conservative approach
as it likely overestimates the number of compliant units because measuring below
the level once does not guarantee compliance on a continuous basis.
V.
EPA’S NEW SOURCE STANDARDS VIRTUALLY ELIMINATE NEW COAL
PLANTS
EPA‟s proposed standards for new coal units are so stringent that they will
preclude construction of new coal plants that are subject to them. As reflected in
the comments of the Union for Jobs and the Environment (“UJAE”), EPA provided
UJAE with data as to which existing units comply with EPA‟s proposed standards.
As set forth in that data, no existing units can comply with all of the new-unit
standards. Since no single existing unit complies with all the standards, there is no
basis to conclude that a new unit can likewise comply. EPA is required to set the
new-unit standard based on the top performing similar unit in order to ensure that
the proposed standard can actually be achieved under real world conditions. Since
no existing unit, in fact, can meet all of EPA‟s new-unit standards, there is no basis
to conclude that a new unit can do so.
Again, at the heart of this issue lies EPA‟s impermissible HAP-by-HAP
approach for determining the MACT floor for new sources. One or more existing
unit can meet each of the standards. But that does not mean that any existing unit
can meet all of the standards. None can.
Adopting standards effectively banning new coal units amounts to a
momentous change in national energy policy without discussion or analysis and far
exceeds EPA‟s authority. Such a policy would be disastrous for the U.S. and would
undermine the most effective strategy the U.S. can implement to reduce emissions
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of all kinds while preserving stable and low electric rates. That strategy is to
steadily over-time replace less efficient and older units with modern, efficient coalbased units. By a stroke of its pen, however, unless the new-unit standards have
some basis in reality, EPA will impose a de facto moratorium on the use of coal for
new electric generation.
VI.
EPA’S PERFORMANCE STANDARDS RUN COUNTER TO THE CAA
EPA‟s performance standards are legally deficient in many respects. Under
section 111, the agency must consider the cost of achieving such reduction. EPA
has failed to adhere to this statutory command in setting standards of performance
for SO2 and PM2.5. Moreover, this failure is even more disconcerting considering
that EPA‟s own benefits analysis clearly states that the proposed rule has little to do
with the HAPs at issue, but rather was adopted to create a regulatory backstop for
reducing ambient concentrations of particulate matter. The agency must rescind
the revisions to the standard of performance for subpart Da.
VII.
EPA SHOULD EXERCISE ITS DISCRETION TO PROPERLY TAILOR THIS
RULE
Assuming arguendo that EPA is correct in its assertion that the agency is
legally compelled to regulate non-mercury HAPs absent an affirmative health-based
finding, NMA urges the agency to exercise its discretion to properly tailor this
rulemaking consistent with the underlying record. There are two specific instances
where Congress has expressly provided EPA the tools to accomplish this objective.
Under section 112(d)(4), EPA should set a health-based standard for acid
gases. Notwithstanding EPA‟s claims to the contrary, the agency has the data and
regulatory experience to set these standards. Specifically, the agency reports that
the hazard quotient for HCl never exceeded 0.05 in any of its risk assessments—or
values that are 20 to 200 times lower than the reference concentration (“RfC”) for
HCl. Failure to exercise this discretion, therefore, cannot be based on a lack of
information nor can the agency decline to exercise its discretion to preserve the
alleged “co-benefits” from SO2 and PM2.5 removal.
Additionally, EPA should further subcategorize. In the Clean Air Mercury Rule
(“CAMR”), the agency explicitly recognized the differences in emissions based on
coal types. NMA is supportive of subcategorization for lignite—notwithstanding the
beyond-the-floor measure—but the agency should further subcategorize based on
the stringent acid gas standard. According to the data EPA provided to UJAE, the
higher-sulfur coals supplied to plants in the eastern United States may not be able
to achieve the proposed emissions rate even with scrubbing technology. As such,
and without further subcategorization, the impacts on Midwestern coal suppliers will
be particularly acute. NMA urges the agency to exercise its discretion to develop a
properly tailored rule.
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VIII. EPA SHOULD PROVIDE THE MAXIMUM AMOUNT OF TIME TO COMPLY
WITH THIS RULE
Requiring virtually the entire existing fleet to retrofit within a three-year
window will have serious ramifications on the amount of early retirements,
affordability and reliability of electricity, and job losses. The CAA permits the EPA
to provide an additional one-year for sources to comply with the new standards,
and the agency has used this authority before. EPA should extend this fourth year
to EGUs without exception.
Moreover, because the agency has failed to properly calibrate both the type
of needed technology and the process utilities employ in developing and
implementing a compliance program, EPA needs to investigate the flexibility
afforded by the Presidential Exception under section 112(i)(4) of the CAA. Without
the additional time afforded by this exception, the ability of utilities to comply even
with a fourth year is in doubt.
In sum, based on the numerous legal and technical flaws pervading this
proposed rule, including but not limited to the agency‟s fatally flawed section
112(n)(1)(A) analysis, NMA urges EPA to withdraw the proposed rule, correct and
revise its analysis, and then re-propose based on a reasonable rulemaking
schedule. Upon reissuing the rule, EPA must take a more holistic approach that
properly tailors the regulation of EGUs under the CAA. Fundamental to this
approach is conducting a much needed cumulative cost analysis.
DISCUSSION
I.
THE PROPOSED RULE REPRESENTS A HUGE REGULATORY BURDEN
FOR LITTLE ENVIRONMENTAL GAIN
Contrary to EPA‟s assertion that the proposed rule will create benefits far
higher than its cost, the opposite is the case. The benefits are exaggerated and, in
any event, will largely be achieved by other CAA programs. In contrast, the costs
will be far higher than EPA supposes because the agency‟s cost projections are
based on a number of overly optimistic assumptions as to compliance strategies.
A.
The Utility MACT Rule Provides Little to No Incremental Health
Benefit
The nation‟s air quality has improved dramatically since the enactment of the
CAA and its subsequent amendments. As documented in the EPA‟s most recent air
quality trends report, those improvements have occurred despite the major
increase in economic and population growth:
Between 1980 and 2009, gross domestic product increased 122 percent,
vehicle miles traveled increased to 95 percent, energy consumption
increased 22 percent, and U.S. population grew by 35 percent. During the
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same time period, total emissions of the six principal air pollutants dropped
by 57 percent.11
Mercury is no exception to this trend. The steps States and EGUs have taken to
reduce criteria pollutant emissions have successfully curtailed those mercury
emissions by approximately 58 percent during this period.12
Despite these facts, EPA spends much of the RIA attempting to convince the
public that the enormous costs to comply with this rule will easily be offset by the
health benefits derived from aggressive command-and-control regulation. In fact,
there is little evidence suggesting that any meaningful independent and incremental
health benefits will result from the reduction of the HAPs at issue in the proposed
rule. Of the purported $53 to 140 billion in total health benefits, the agency
estimates that the direct health benefits stemming from the regulation of the
relevant HAPs range from only $0.000005 billion to $0.006 billion per year—or less
than 0.01 percent of EPA’s total benefits estimate.13
1. Mercury emissions from EGUs pose little or no risk to public health
Beginning with EPA‟s 2000 determination, the focus of regulation has been
tied to the reduction of mercury emissions from EGUs; and accordingly, the agency
declares that the proposed standards will curtail the small remaining mercury
emissions “by over 90 percent.”14 As the “HAP of greatest concern,” it would
logically follow that a significant portion of the purported health benefits would
emanate from aggressive mercury control. This is not the case as only $450,000 to
5.9 million in estimated health benefits are attributable to mercury control.15
Additionally, costly mercury curtailment options will only improve, based on
questionable assumptions, the average IQ of the most sensitive population—
children exposed in utero to high methylmercury (“MeHg”) concentrations—by only
0.00209 IQ points, which is not even meaningful in an actual IQ setting.16 Thus,
11
U.S. EPA, http://www.epa.gov/airtrends/aqtrends.html
12
Willie Soon, PhD, “A Scientific Critique of the Environmental Protection Agency’s National Emission
Standards for Hazardous Air Pollutants [NESHAP] from Coal- and Oil-Fired Electric Utility Steam Generating Units
and Standards of Performance for Fossil-Fuel-Fired Electric Utility, Industrial-Commercial-Institutional Steam
Generating Units,” *hereinafter “Dr. Soon Critique”+ June 2011, available at:
http://yosemite.epa.gov/sab/SABPRODUCT.NSF/432EEBD19DE16B2B852578AB0076B922/$File/Soon11_June10_c
omments_EPA_new+rules.pdf. quoting United Nations Environment Programme Report).
13
RIA at 4-5.
14
EPA letter to UARG, May 22, 2011.
15
RIA, Executive Summary at 1.
16
RIA at 5-2.
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electric ratepayers in this country are going to be forced to incur billions of dollars
in annual costs without any material benefit from reducing HAPs, which is the
reason EPA ostensibly is adopting this rule.
It is unsurprising that so little health benefit would result from aggressive
mercury regulation. EPA even admitted as much when it conducted a proper
rulemaking on HAP emissions from coal-fired EGUs.17 The agency conducted
extensive modeling in preparation for CAMR to analyze how changes in mercury
emissions from coal-fired EGUs would affect mercury deposition and MeHg levels in
fish for a range of cases.18 The results of the modeling revealed that total mercury
deposition in the U.S. is not significantly impacted by mercury deposition from
EGUs, and that EGUs contribute a “relatively small percentage” to fish tissue MeHg
levels in the U.S.19 More importantly, the agency concluded “[t]hat modeling
reveals the implementation of section 110(a)(2)(D), through CAIR, would result in
a level of [mercury] emissions that would not cause hazards to public health.”20
In fact, those trends continue further bolstering the agency‟s conclusion in
the 2005 Revision. Dr. Willie Soon states in his comments that power plants emit
an estimated 41-48 tons of mercury per year. But U.S. forest fires emit at least 44
tons per year; cremation of human remains discharges 26 tons; Chinese power
plants eject 400 tons; and volcanoes, subsea vents, geysers and other sources
spew out 9,000-10,000 additional tons per year.21 In short, the United States
releases less than 5 percent of the 2,400 tons of mercury emitted per year due to
human activities. U.S. coal-based power plants emit less than 2 percent of the
global total of human-caused mercury emissions. Taking into account natural
emissions, U.S. power plants contribute less than one percent of total mercury
emissions to the global pool.22
17
70 Fed. Reg. 15,994, 16,002 (Mar. 29, 2005) (emphasis added). Revision of December 2000 Regulatory
Finding on the Emissions of Hazardous Air Pollutants From Electric Utility Steam Generating Units and the Removal
of Coal- and Oil-Fired Electric Utility Steam Generating Units From the Section 112(C) List; Final Rule [hereinafter
“2005 Revision”+.
18
70 Fed. Reg. at 16,011-25.
19
Id. at 16019-20; see also Dr. Soon critique at 3 (stating that EPA has ignored a distinguished group of
scientists who concluded that a simple change in bacterial activity alone could “cause an increase in fish mercury
concentrations, even as atmospheric deposition [from industrial mercury emissions sources] decreases”).
20
Id. at 16,004 (emphasis added).
21
Dr. Soon critique at 2-3 (citing National Center for Atmospheric Research study, Wiedinmeyer & Friiedli
(2007) Environmental Science & Technology, vol. 41, 8092-8098).
22
Edison Electric Institute, “Straight Answers About Electric Utilities and Mercury,” March 2008; available at:
http://www.eei.org/ourissues/TheEnvironment/Documents/straight_answers_mercury.pdf.
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EPA disregards these findings and reverts back to its legally and factually
deficient 2000 determination in order to regulate mercury emissions from EGUs.
Specifically, EPA‟s brings forward that flawed analysis by and through its current
and single analysis of mercury risk.23 The Mercury TSD, which EPA heavily relies
on, is still based on several unsupported general concerns about mercury levels in
the environment ostensibly designed to unearth some demonstrable evidence of
“risk to public health.” Like the 2000 determination, EPA has not adequately
justified its “appropriate and necessary” determination.
The agency concedes as much stating, “[t]he Mercury Study also found that
fish consumption dominates the pathway for human and wildlife exposure to MeHg
and that there was a plausible link between anthropogenic releases of Hg from
sources in the U.S. and MeHg in fish.”24 This “plausible link” was the foundation for
the 2000 determination, which is interesting, given that this same finding was
insufficient to support a regulatory determination in the Utility Study in 1998.25 In
this case “plausible” is very much a euphemism for unproven as the agency further
admits that, “…it was not possible to quantify how much of the MeHg in fish
consumed by the U.S. population results from U.S. anthropogenic emissions, as
compared to other sources of Hg.”26
To date, the agency has not provided any demonstrable evidence in the
rulemaking record to show that anyone in the country has suffered adverse health
problems as a result of mercury emissions from coal-fired EGUs. Rather, EPA is
asking the public to accept a higher cost of electricity and job losses based on an
attenuated line of reasoning—EGUs emit mercury; some of that mercury is bound
to deposit on the land or in water bodies; some of that deposited mercury in the
waterbodies can possibly be transformed into MeHg; and some of the MeHg
produced in the sediments of those waterbodies is consumed by fish where it
23
Technical Support Document: National-Scale Mercury TSD Supporting the Appropriate and Necessary
Finding for Coal- and Oil-Fired Electric Generating Units, EPA-452/D-11-002, Mar. 2011 (“Mercury TSD”). NMA
adopts and incorporates by reference UARG’s comments and critique of EPA’s Mercury TSD.
24
76 Fed. Reg. at 24983 (emphasis added).
25
EPA dismisses the need to reconcile these dissimilar positions explaining that “it is not necessary to
quantify the amount of mercury in fish due to electric utility steam generating unit emissions relative to other
sources for purposes of this finding.” 65 Fed. Reg. at 79827; see also 76 Fed. Reg. at 24996 (noting that “*n+owhere
in section 112(n)(1) or in its direction concerning the NAS study did Congress require EPA to quantify the amount
of MeHg in fish tissue that was directly attributable to EGUs.”). NMA disagrees with this conclusion.
26
76 Fed. Reg. at 24983; see also RIA § 5.1 at 5-1 (stating “…for commercially purchased ocean fish, it is
nearly impossible to determine the source of the methylmercury in those fish…”).
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ultimately enters the food chain.27 In fact, valid, peer-reviewed scientific research
concluded that the level of MeHg in the world‟s oceans is not controlled by
deposition of atmospheric mercury to the oceans of the world.28 Thus, regardless of
the stringency of the mercury controls required of coal-fired EGUs, the levels of
MeHg in ocean fish will not be influenced by this proposed rule.
Like the 2000 determination, the primary driver in EPA‟s decision to regulate
mercury from EGUs is premised on the Mercury TSD‟s highly conservative reference
dose-based hazard quotients (“HQs”) for MeHg.29 This measure compares the
potential exposure of subsistence anglers fishing in a specific water body to the
MeHg reference dose (“RfD”). UARG states in its comments that the scientific
validity of EPA‟s methylmercury RfD is an important question because of its
significance as the divisor in computing the HQ value.
EPA‟s RfD served as the lynchpin for two key agency “findings” to justify its
2000 determination—the existence of fish advisories in many states; and, the
number of women of child bearing age who are predicted to have MeHg exposure
above the RfD. By treating the RfD for MeHg in the December 2000 finding as an
absolute threshold for health risk, EPA avoided having to demonstrate some
discernable health risk to a segment of the population at some defined level of
predicted exposure.30
A review of the rulemaking docket reveals that EPA‟s RfD is derived solely
from the results of a study involving young children in the Faroe Islands. EPA
chose to use the Faroe Islands study because it concluded that there were adverse
developmental effects as a result of MeHg exposure. Sole reliance on the study is
fundamentally flawed. First, the data underlying the analysis has never been made
27
See Dr. Soon Critique at 2 (affirming this sentiment by stating, “the EPA proposal neglects key scientific
knowledge and many peer-reviewed papers that suggest there is no straightforward connection between mercury
(Hg) emissions from power plants or other man-made sources to the mercury level in fish”).
28
See Environmental Science & Technology, based on Citation Abstracts, see “Sources and Variations of
Mercury in Tuna,” Kraepiel, A.M.L.; Keller, K.; Chin, H.B.; Malcolm, E.G.; Morel, F.M.M.; Environmental Science
Technology; 2003; 37(24); 5551-5558 (DOI: 10.1021/es0340679); see also “Response to Comment on Sources and
Variations of Mercury in Tuna” Kraepiel, A.M.L., Keller, K; Chin, H.B.; Malcolm, E.G.; Morel, F.M.M.; Environmental
Science Technology; 2004; 38(14); 4048-4048 (DOI: 10.1021/es0404217).
29
Mercury TSD at 50.
30
See id. (noting that EPA’s mercury RfD “safe” dose of 5.8 ppb when measured in human blood is
equivalent to an intake of 0.1 (micrograms/kg/day) or about 1.0 ppm when measured in human hair. For context,
EPA’s mercury reference dose of 0.1 (micrograms/kg/day) is a factor of 2 to 4 more stringent than other estimates
from human health organizations. The FDA dose was established at 0.4, the Agency for Toxic Substances and
Disease Registry (ATSDR) at 0.3, and the newly revised World Health Organization level at 0.21). Thus, making
EPA’s the most stringent in the world.
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available for public inspection—raising doubts as to whether EPA has adhered to
Executive Order 13563 and the Information Quality Act.31 Second, the Electric
Power Research Institute (“EPRI”) pointed out that the polychlorinated biphenyl
(“PCB”) and lead exposures of pregnant women in the Faroe Islands are among the
highest ever measured in humans—not representative of the United States.32
Moreover, the Faroe Islands study got its MeHg dosage through consumption of
highly contaminated pilot whale meats and blubbers, as admitted by Dr. Pal Weihe,
Chief Physician of the Department of Occupational and Public Health of the Faroese
Hospital System.33 EPA ignored these critical facts in relying on this study.
By contrast, EPA largely ignored the results of the Seychelles Islands study.34
The Seychelles study could not confirm any harmful effects on children through
MeHg exposure from eating a variety of ocean-caught fish, especially at levels that
are more representative for American public health. Furthermore, the underlying
data for this study has been made available to other independent scientists. By
solely relying on the Faroe Islands study, EPA‟s RfD for MeHg exposure is
excessively exaggerated by at least a factor of 10 or more.
EPA also cites the existence of fish advisories to demonstrate that mercury
poses a human health concern. These advisories are tied to the RfD set for a given
compound. Accordingly, states that rely on EPA‟s much higher RfD for mercury will
inevitably record a higher number of fish advisories. Fish advisories do not
distinguish among the sources of the mercury entering the waterbody at issue or
how much of the mercury came from historical sources. Moreover, the primary
purpose for fish advisories is to warn the public about undue consumption of fish
from a particular source to avoid health issues. Simply put, the number of fish
advisories does not support a legal conclusion that mercury emissions from coalfired EGUs pose risks to public health.35
31
44 U.S.C. § 3516.
32
Comments of EPRI Re: RfD for Methylmercury, at 7-8 (Nov. 28, 2008).
33
Dr. Soon Critique at 4.
34
As noted in UARG’s June 29, 2004 comments, Docket ID No. OAR-2002-0056, EPA’s elevation of the Faroe
Islands study over the Seychelles Island may, in part, have resulted from recommendations in the 2000 report of
the National Research Council (“NRC”), entitled Toxicological Effects of Methylmercury. That report found that
there were no serious flaws in the MeHg studies conducted in the Seychelles and Faroe Islands. The panel
recommended the use of the Faroe Islands study in deriving an RfD because it resulted in the finding of a positive
relationship between MeHg exposure and poor neurodevelopmental outcomes while the Seychelles study did not.
See IRIS Database, Methylmercury, § I.A.2, at 4-5 (2001). EPA’s reliance on the NRC report is misplaced because
the panel’s conclusion is, at bottom, a policy judgment and not a reflection of the science. Thus, the NRC strayed
beyond its initial charge. EPA needs to make its own policy judgment in setting the RfD.
35
th
See UARG’s comments at 54 (stating that Tetra Tech showed that a 99 percentile waterway would result
in an HQ of 0.67—a level that is protective of human health without any further mercury reductions from EGUs).
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EPA also ignores the fact that over 75 percent of the mercury that deposits in
the U.S. comes from sources outside the country.36 Once mercury is released, it
accumulates in the atmosphere resulting in deposition long distances from the
actual source exacerbating the lack of causal relationship between the need for
regulation and the risk posed by mercury emissions from EGUs. EPRI has
documented in recent studies the critical role that intercontinental mercury
transport from Asia and other nations play in determining U.S. mercury deposition.
Direct measurements have revealed significant levels of mercury exiting
mainland Asia and crossing the Pacific to the U.S. In 2001 and 2002, EPRI,
in cooperation with the National Center for Atmospheric Research, the
National Aeronautics and Space Administration, the National Oceanographic
and Atmospheric Administration, and other agencies used aircrafts to
measure mercury in air plumes exiting China near the city of Shanghai,
following them over the Pacific for 400 miles. A later set of flights over the
Pacific between southern California and Oregon found evidence of the same
plume crossing the California coast.37
Because mercury is emitted and transported globally, reductions of U.S. mercury
emissions from EGUs would have a negligible impact on mercury deposition in the
United States. For all of these reasons, the factual record does not support a
finding that mercury emissions from EGUs pose a meaningful health risk. It is
therefore not “appropriate” to regulate EGU mercury emissions under section
112(n)(1)(A).
2. EPA has never provided an initial finding of public health concern to
regulate non-mercury HAPs under section 112(n)(1)(A)
Nowhere in the RIA does EPA even attempt to quantify any direct benefits
associated with the regulation of acid gases, or the metallic or organic HAPs
reductions. Interestingly, of the 469 pages of the RIA only 6.5 are dedicated to
discussing the risks posed by non-mercury HAPs.38
36
EPA uses the CMAQ model in the Mercury TSD to predict mercury deposition from EGUs. UARG outlines
in its comments the serious limitations of this model when applied to small areas of localized deposition (citing to
EPRI Comments, § 3.2). The manner in which EPA choose to use the CMAQ model in the Mercury TSD overstates
the mercury deposition attributable to EGUs.
37
“Research Shows Most Mercury Deposited in U.S. Originates Outside the Country,” EPRI Journal Online,
Dec. 22, 2003.
38
NMA adopts and incorporates by reference UARG’s criticism of EPA’s decision to regulate trace metals
based on a single case study of the inhalation risk from 15 coal-fired facilities. See 76 Fed. Reg. 25,013; Strum,
Thurman, and Morris, “Non-Hg Case Study Chronic Inhalation Risk Assessment for the Utility MACT Appropriate
and Necessary Analysis” (Mar. 16, 2011) (“16-Unit Study”). Specifically, UARG states that EPA’s 2010 estimate of
coal usage was overstated and its prediction about the amount of pollution control equipment was grossly
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As with the lack of health benefits derived from mercury control, it is also
unsurprising that no incremental health benefits accrue from regulating nonmercury HAPs. Even in 2000, the agency concluded that the existing evidence did
not demonstrate that public health concerns exist from the other HAPs. The 2000
determination stated, “arsenic and a few other metals (e.g., chromium, nickel,
cadmium) are of potential concern for carcinogenic effects and that dioxins,
hydrogen chloride, and hydrogen fluoride are of potential concern.”39 The agency
goes on the further note, “[t]he other HAP[s] studied in the risk assessment do not
appear to be a concern for public health based on available information.”40
EPA likewise did not alter this conclusion in its 2005 Revision. In fact, the
agency in 2005 bolstered the notion that it lacked the information necessary to
make this determination. “Based on the information before it at the time [of the
2000 determination], EPA could not have reasonably concluded that coal-fired
Utility Unit non-mercury HAP emissions presented a hazard to public health.”41
EPA has no better evidence now than it had in 2000. For example, none of
the acid gases are listed as carcinogenic, which is important as EPA rests its
decision to regulate acid gases based on EGU emissions of HCl. In its inhalation
risk analysis, EPA estimated HQ for HAPs that pose non-cancer health risks from
chronic exposure. If an HQ is 1.0, EPA states that estimated exposures are at a
level that is likely to be without an appreciable risk of deleterious effects during a
lifetime, but above that point, EPA considers the margin of safety against toxic
effects to be too uncertain to regulate.
EPA reports that the HQ for HCl never exceeded 0.05 in any of its risk
inhalation estimates,42 meaning that for EGUs, the predominant HAP in the acid gas
group has a maximum risk that is only 5 percent of the level that is considered
protective of health with a safety factor included. Thus, the agency itself concludes
understated. EPA needs to square its perception with reality. Indeed, EPRI modeling of every coal-fired EGU
demonstrated that the inhalation risk for every facility was below one-in-one million for carcinogens and a hazard
index of 1 for chronic (long-term) and acute (short-term) exposures to non-carcinogen HAPs.
39
65 Fed. Reg. at 79,380. In the 2005 Revision, EPA acknowledged that § 112(n)(1)(A) only allows EPA to
regulate if the agency identifies a human health concern. A finding that a HAP may pose an environmental
concern is inappropriate for regulation under § 112(n)(1)(A).
40
Id.
41
70 Fed. Reg. at 16,006 (emphasis added).
42
See 76 Fed. Reg. at 25,051 n. 170. Although EPA notes that other acid gases (Cl2, HF and HCN) were not
included in the risk calculation “because of uncertainties in their emissions rates,” it is hardly likely that any of
these other gases would involve an HQ so much closer to 1.0 than HCl, especially given that their total EGU
emissions are less than 15 percent of total EGU HCl emissions.
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that HCl emissions pose no significant potential for exceeding the chronic RfC
value.43
Moreover, EPA does not provide any evidence that more stringent control of
acid gases would benefit ecosystems other than some vague referencing of the
possibility.
In areas where the deposition of acids derived from emissions of sulfur and
NOx are causing aquatic and/or terrestrial acidification, with accompanying
ecological impacts, the deposition of hydrochloric acid could exacerbate these
impacts. Recent research has suggested that deposition of airborn HCl has a
greater impact on ecosystem than previously thought, although direct
quantification of these impacts remains an uncertain process.44
In fact, HCl is a very minor contributor (about 1percent) of all acidification to water
bodies—making EPA‟s need for regulating appear rather insignificant. EPA simply
has not provided an adequate basis to regulate acid gases from EGUs.
3. The entire rulemaking is predicated upon questionable health
benefits from an already regulated pollutant
Virtually all of EPA‟s claimed benefits are derived from the incidental
collateral reduction of SO2 emissions that will occur as a “co-benefit” of reducing
acid gas emissions. To date, EPA has not been able to document any evidence of
acute or chronic health risk from exposure to the minuscule amounts of amounts of
acid gases emitted by EGUs. In other words, EPA appears to be regulating EGU
acid gas emissions under section 112(n) not because such emissions represent a
health risk—they do not—but because EPA wants to regulate SO2, which is not a
HAP. This is clearly a misuse of the agency‟s authority under section 112(n).
EPA concludes that the control technology utilities will install to control acid
gas emissions will also control SO2 emissions, that reducing SO2 emissions will
reduce atmospheric concentrations of fine particles, termed PM2.5, and that
reducing atmospheric concentrations of PM2.5 will save lives and improve health.
Indeed page one of the RIA states, “[t]he great majority of the estimates [health]
are attributable to co-benefits from reductions in PM2.5-related mortality.” This is
based largely on the assertion that the proposed rule will avoid 6,800-17,000
premature deaths per year from PM2.5 exposure.
But, PM2.5 is already comprehensively regulated under other CAA programs,
in particular the NAAQS program, with EPA having set the NAAQS for that pollutant.
EPA, sources, and states under the NAAQS program are required to undertake a
43
76 Fed. Reg. at 25,051.
44
76 Fed. Reg. at 25,050 (emphasis added).
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series of actions to ensure that atmospheric PM2.5 concentrations do not exceed
the standard. Thus, any “co-benefits” the rule might achieve in reducing
concentrations of PM2.5 are duplicative of what other regulations will achieve.
Even more telling is the fact that almost the entire alleged PM2.5 benefits
($52 to 139.4 billion) stem from exposures that are occurring at levels below the
NAAQS. But EPA is required to set the NAAQS at levels protective of human health
with an “adequate margin of safety.”45 Thus, despite EPA‟s claim that the proposed
rule will produce large benefits, the fact that the agency set the NAAQS at 15 µg/m3
means that, in reality, even the agency does not believe the proposed rule will
produce benefits anywhere close to those projected in the RIA.
The agency is preparing to propose a new PM2.5 NAAQS, and that proposed
standard may be lower than the current NAAQS. Until it does so, however, it is
inappropriate for EPA to adopt rules based on claimed benefits below the current
NAAQS level. Until changed, the 15 µg/m3 NAAQS represents EPA‟s judgment of
the standard necessary to protect human health with a margin of safety. In any
event, the lowest standard contemplated by EPA is 11µg/m3. Even at this level,
Figure 6-15 of the RIA demonstrates that 80 percent of the asserted benefits would
still be occurring at levels below the NAAQS.
Yet EPA goes even further. In 2009, EPA made a significant change in how it
estimates deaths from PM2.5 exposure that substantially puffs up its benefits
analysis. EPA started to count mortality estimates for PM2.5 exposures below the
lowest measured level (“LML”) in any of the statistical studies on which EPA relies.
Although EPA has never set a NAAQS at a level as low as the LML, because the
agency has never believed that protecting public health required such a standard,
measuring benefits below that level lacks any basis in reality. Worse still, EPA
assumes that there is no tapering off of mortality as PM2.5 exposures approach
zero, as if the same risk exists at very low concentrations of PM2.5 as it does at
high concentrations.
This seemingly innocuous change made in 2009 had the huge impact of
assuming that people were being killed by PM2.5 exposures in the vast swath of the
United States where PM2.5 levels are less than 10 µg/m3. Whereas these areas
used to contribute nothing to estimates of PM2.5 mortality, under EPA‟s new
approach, they contribute fully 70 percent of the mortality in EPA‟s upper-end
estimate.
EPA‟s drastic damage estimates are facially absurd. Figure C-2 from
Appendix C of the RIA shows the percentage of total U.S. deaths that EPA believes
45
See RIA at Figure 6-15 (demonstrating that almost all of the $53-140 billion in PM2.5 co-benefits are due
3
to reductions in exposures to PM2.5 already below the level of the current 15 µg/m NAAQS). Figure 6.5 shows
health impacts occurring under the annual PM2.5 standard. EPA also has a daily PM2.5 standard, which the RIA
does not display similar information.
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are caused by PM2.5 exposure. However, EPA‟s figure only shows the lower-end of
the agency‟s estimated range, perhaps because revealing the upper-end would
conceivably demonstrate how incredibly faulty the agency‟s estimates are. Using
EPA‟s upper-end estimates, in the areas of the country with the highest PM2.5
concentrations, 15-23 percent of all deaths are presumed to be caused by PM2.5
exposures! 13 percent of all deaths in almost all of the eastern U.S. are
attributable to PM2.5 exposures! Yet according to CDC, only 20 percent of deaths
annually are cause by tobacco.46
Indeed, the notion that PM2.5 exposures are killing people is itself a product
of a string of uncertain conclusions based on a statistical analysis. There has never
been a diagnosed death from PM2.5 exposure at ambient concentrations. The
uncertainties include: (1) the statistical detectability of thresholds and other forms
of non-linearity in true concentration-response relationships; (2) whether all
particles are equally potent, which is critical because there vast differences in
chemical composition of different forms of PM2.5; and (3) confounding and whether
observed associations are due to some other cause.
In sum, the proposed rule does not produce any meaningful monetized
benefits from reducing HAPs, which is what the rule ostensibly is supposed to do.
And the supposedly tens and even hundreds of billions of annual benefits that the
proposed rule will incidentally produce by lowering the atmospheric PM2.5
concentrations are so exaggerated as to be of no use in judging the wisdom of
promulgating this rule. On the other hand, the $10.9 billion in compliance costs
that EPA estimates, which are significantly understated, are real costs and will have
real impacts on the electric consumers that will have to foot the bill. President
Obama promised that his Administration will be diligent in eliminating unneeded
regulation and regulatory overlap. The proposed rule is a perfect example of the
type of duplicative and unnecessary regulation the President has promised not to
adopt. Yet EPA does not seem to understand the import of the President‟s concern.
B.
EPA Has Underestimated the Costs of this Rulemaking
EPA likewise errs in projecting the total cost of compliance. In order to softpeddle the overall impacts to the economy, EPA relies on a series of unverified
assumptions about the type, efficacy, and quantity of needed control technology.
Chief among those speculative suppositions is EPA‟s belief that dry sorbent injection
(“DSI”) technology can effectively displace the need for 56 GW of the existing fleet
to install costly scrubbers to meet the stringent acid gas emissions standards.47
Should EPA‟s DSI projection not materialize to this anticipated degree, the units
46
EPA’s 2009 change in methodology accounts for some of this exaggeration. For instance, it changed the
3
estimate of premature mortality among people exposed to at least 12 µg/m from 3 percent of all deaths to 19
percent.
47
RIA, “8.4 Projected Compliance Actions for Emissions Reductions,” at 231.
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that fall within the estimated 56 GW will either have to install scrubbers at over ten
times the capital cost or retire. Either option will greatly increase the cost to
comply with the proposed rule. Unfortunately, there is little data to support EPA‟s
“bullish assumptions” regarding a technology not widely tested or used by EGUs for
this purpose.48
1.
EPA must produce a cumulative cost analysis of its regulatory
program affecting the use of coal
NMA and now many other voices have repeatedly requested EPA perform an
assessment of the cumulative costs associated with its now-numerous completed,
pending and expected rulemakings that are intended to, and will, have the effect of
substantially reducing the usage of coal as an electric power and industrial boiler
fuel in the United States.49 As this rulemaking is part-and-parcel of EPA‟s overall
regulatory program to develop, in its words, a “clean, efficient, and completely
modern power sector,” the agency must assess the costs and benefits of all of its
current and expected power sector regulations affecting coal-fired EGUs.
To date, EPA has provided no indication it will seriously entertain this
important request. Consequently, Congress is now considering potential legislation
to require such an assessment. EPA should not have to be compelled through
legislation to act on this repeated request. A cumulative cost assessment is logical
and would help the public and regulated entities understand the risks and rewards
of EPA‟s power sector regulatory program.
Analyzing the cumulative impacts associated with these integrated
rulemakings is not only good public policy, it is also required by Executive Order
12866 and the notice and comment rulemaking provisions of the CAA. The import
of this executive order to, “tak[e] into account, among other things, and to the
extent practicable, the costs of cumulative regulations,” was recently reiterated in
President Obama‟s Executive Order 135653 to improve regulations and regulatory
review.
EPA seems to recognize the interrelated nature of its rulemakings on the
power sector. In the preamble, the agency states that:
48
Nelson, Gabriel, “Air Pollution: Fate of Old Coal Plants May Hinge on New Toxic-Cutting Technology,”
Greenwire, Apr. 13, 2011. Available at: http://www.eenews.net/public/Greenwire/2011/04/13/2
49
See NMA’s Comments on the Industrial Boiler MACT rule, Docket Nos. EPA-HQ-OAR-2002-0058 and EPAHQ-OAR-2006-0790 (Attachment 5), where the association proposed a reasonable approach for completing such
an assessment. To date, EPA or the Administration has done nothing in response to NMA’s continued inquiries. To
complete the record here, NMA is submitting its comments on cumulative impact assessment from the Industrial
Boiler MACT and CSAPR (Attachment 6) rulemaking dockets here.
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EGUs are the subject of several rulemaking efforts that are either are
or will soon be underway. In addition to this rulemaking proposal,
concerning both hazardous air pollutants under section 112 and
criteria pollutant NSPS standards under section 111, EGUs are the
subject of other rulemakings, including ones under section
110(a)(2)(D) addressing the interstate transport of emissions
contributing to ozone and PM air quality problems, coal combustion
wastes, and the implementation of section 316(b) of the Clean Water
Act (CWA). They will also soon be the subject of a rulemaking under
CAA section 111 concerning emissions of greenhouse gases. EPA
recognizes that it is important that each and all of these efforts
achieve their intended environmental objectives in a common-sense
manner that allows the industry to comply with its obligations under
these rules as efficiently as possible and to do so by making
coordinated investment decisions and, to the greatest extent possible,
by adopting integrated compliance strategies.
In addition, EO 13563 states that “[i]n developing regulatory actions
and identifying appropriate approaches, each agency shall attempt to
promote such coordination, simplification, and harmonization. Each
agency shall also seek to identify, as appropriate, means to achieve
regulatory goals that are designed to promote innovation.” Thus, EPA
recognizes that it needs to approach these rulemakings, to the extent
that its legal obligations permit, in ways that allow the industry to
make practical investment decisions that minimize costs in complying
with all of the final rules, while still achieving the fundamentally
important environmental and public health benefits that the
rulemakings must achieve.50
Unfortunately, despite recognizing the fact that utilities need to adopt an
integrated strategy for addressing all of EPA‟s rules, and even with the very nearterm compliance deadlines in at least CSAPR and the instant rulemaking, EPA states
that it will not begin to consider coordinated control strategies until the New Source
Performance Standard (“NSPS”) for greenhouse gas emissions rulemaking. At that
time, EPA says it will “facilitate the industry‟s undertaking integrated compliance
strategies in meeting the requirements of these rulemakings.”51 While NMA is
mindful of EPA‟s recognition that the power sector needs to have the full benefit of
understanding all of the relevant regulations before determining a compliance plan,
EPA‟s undertaking to address coordinated strategies at the NSPS rulemaking stage
is too little, too late. Eastern utilities must begin to complying with CSAPR in
January. When EPA finalizes the instant rule in November, utilities will have only
three years to comply. It would have been far better had EPA undertaken the
50
76 Fed. Reg. at 25,057.
51
Id.
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process it now plans when it initiated its first rulemaking impacting the power
sector.
The agency‟s planned process also does not go far enough. EPA has an
obligation not just to help the regulated community plan for all of these interrelated
regulations; it must also cumulatively assess the societal impacts of these
regulations. A key purpose of Executive Order 12866 and 13563 is to inform the
public of the costs and benefits of regulation, including on a cumulative basis.
Notwithstanding the statements of integrated planning in the proposed rule, it does
not appear that EPA intends to provide such an analysis. It should.
Taken together, this regulatory program will undoubtedly produce a dramatic
and cascading series of impacts not only within the coal industry but across the
entire economy. There will be direct effects on coal employment and indirect
effects on employment generally in the economy as a result of higher energy
prices. Higher energy prices will also affect GDP and economic activity generally.
American competitiveness will also be affected, as higher prices undermine the
ability of American businesses to compete, with resulting offshoring of American
business and jobs. The public has a right to fully understand these impacts.
2.
EPA‟s DSI assumption is misguided
The implications of the DSI issue cannot be overstated. For such a crucial
piece of the compliance puzzle there is a paucity of evidence demonstrating that an
actual unit can comply with all of the proposed NESHAPs using DSI without a
scrubber. NMA‟s review of the rulemaking docket reveals only two source materials
attempting to support EPA‟s DSI theory. Based on the first source, EPA claims that
“HCl removal effect is assumed to be 90% based on information from Solvay
Chemicals.”52 The only support for this conclusory statement is a reference to a 12page slide presentation; hardly persuasive in light of the import the agency places
on this assumption. Moreover, this presentation was predicated on sodium
bicarbonate injection—not Trona—therefore, the agency‟s predicted feed rates are
inaccurate.
Second, the agency relies on “assessments” between engineering staff and
the consulting firm of Sargent & Lundy. These “assessments” only contain a
general statement that “demonstrations and recent utility testing have shown SO2
removals greater than 80% for systems using sodium based sorbents.”
Importantly, the report does not analyze the technology for its proposed
application—namely, compliance with the full suite of NESHAPs and the impact the
technology may have on particulate matter and mercury emissions.
52
“Documentation Supplement for EPA Base Case v4.10_PTox: Updates for Proposed Toxics Rule,” EPA,
March 2011 (“IPM Supplement”), at 92. The other source is the so-called “assessments” by EPA engineering staff
in consultation with Sargent & Lundy.
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None of the numerous recent reports regarding the impact of CAA regulations
on EGUs considered DSI a viable acid gas control option without a scrubber.53 The
U.S. Energy Information Administration (“EIA”) in its 2011 Annual Energy Outlook
likewise doubts EPA‟s DSI assumption noting that, “other analyses are not as
optimistic on the prospect of DSI,” leading the agency to conclude that scrubbers
will be needed to comply with the proposed rule. Yet EPA does not seem inclined to
engage in a realistic analysis of the issue.
There are at least three primary reasons for the lack of enthusiasm around
the efficacy of the DSI technology. First, there is limited industry experience
employing the technology to control acid gases without a scrubber. The ICR data
base indicates that there are only 28 units or 9 GWs of DSI capacity in the Base
Case of the model primarily to deal with SO3 reduction—only eleven are used for
SO2 control. According to our review of the information, among the top 12 percent
of the units that set the MACT floor for acid gases, only 15 use DSI technology. Of
those 15 units, only 5 use DSI without a scrubber and only one of those units burns
bituminous coal.54
It is also difficult to precisely calibrate the overall effectiveness of DSI
because the EPA database is missing fuel chlorine data for at least eight of the
listed DSI-only units. Removing these units from the evaluation, leaves only 2
units from the smaller group of eleven—those with proper emissions data—using
DSI without a scrubber, but both of these units are burning low chlorine content
coal. Thus, it is impossible to discern whether any actual unit can effectively and
consistently meet the proposed acid gas standards as a direct result of having
employed DSI technology.
NMA finds it difficult to believe a utility would consider investing in a
technology with such limited industry testing and experience, high variable costs
and other ancillary issues including negative impacts on ash impoundments and
potential leaching. The agency‟s aggressive rulemaking schedule makes it
challenging for a utility to obtain the essential on-the-ground testing information to
validate performance and conduct necessary feasibility studies. Moreover, the lack
of experience with the technology also highlights the problem with setting
emissions standards pollutant-by-pollutant as there is also insufficient data to
confirm whether a unit using DSI with or without a scrubber can meet all three
standards on a continuous basis without creating antagonistic impacts to the overall
effectiveness of other control technologies.
53
See generally Celebi, Metin, et al., “Potential Coal Plant Retirements Under Emerging Environmental
Regulations,” The Brattle Group, Dec. 8,, 2010; “2010 Special Reliability Assessment: Resource Adequacy Impacts
of Potential U.S. Environmental Regulations,” North American Electric Reliability Corporation (NERC), Oct. 2010;
and Eggers, Dan, et al., “Growth From Subtraction,” Credit Suisse, Sept. 23, 2010).
54
See also Salisbury, Benjamin, et al., “Coal Retirements—25 GW to 50 GW Remain at Risk,” FBR Capital
Markets, March 25, 2011.
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EPA is also making this DSI prediction in a regulatory vacuum. Many of the
units within the scope of the 56 GW will not have the option to choose this
compliance route because overlapping CAA rules will render that decision moot.
The recently finalized CSAPR is designed to reduce the interstate transport of SO2
and NOx from EGUs in 27 eastern states. Importantly, 464 of the 521 units without
scrubbers are located within the geographic reach of CSAPR. Even though a
modest trading program is part of the regulation, a significant portion of these units
will need to install scrubbing technology to comply with the rule beginning in 2012.
The issue of overlapping technology demands is not directly addressed in the
RIA other than some vague referencing to integrated planning in the preamble after
the proposed NSPS for GHGs from EGUs are issued. This lack of analysis further
reinforces the need for a cumulative cost analysis by the agency. Neither a utility
nor a public utility commission would permit the investment in DSI technology and
sorbent storage facilities only to have to install a scrubber two years down the road.
EPA must examine what portion of the estimated 56 GW will actually choose DSI
given EPA‟s other regulations in order to provide a realistic estimate of the costs of
this rule.
Third, not every coal type within the projected 56 GW will be able to meet
the stringent acid gas standard using only DSI. The DSI consultant EPA relies on,
Sargent & Lundy, states that “[t]he DSI technology should not be applied to fuels
with a sulfur content of greater than 2 lb SO2/MMBtu.”55 This statement buttresses
the conclusion advanced by the above paragraph—which is, DSI is rarely employed
without a scrubber and is almost never used with units burning coal with high sulfur
content.
Despite the consultant‟s assessment, EPA projects the exact opposite stating
“[m]any available pollution controls achieve emissions removal rates up to 99
percent (e.g. HCl removal by new scrubbers), which allows industry to rely more
heavily on local bituminous coal in the eastern and central parts of the country that
has higher contents of HCl and sulfur, and is less expensive to transport than
western bituminous coal.”56 Part of this oversight is attributed to the various
assumptions and biases built into the Integrated Planning Model that result in
biased low projections of compliance costs. The model is designed to determine the
most cost effective means of meeting electric generation capacity requirements
given certain constraints. Thus, the model permits a unit to both select the lowercost DSI technology and take advantage of lower cost local bituminous coals. This
is not a realistic choice for a utility. EPA needs to reexamine the interplay between
the use of DSI without a scrubber using local bituminous coal in order to provide an
accurate assessment of the compliance costs.
55
IPM Supplement, Appendix 5-4, at 2.
56
RIA at 237.
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Clearly, without a realistic assessment of the market penetration for DSI,
EPA cannot provide a reasonable cost estimate of the proposed rule. NMA projects
that based on a more grounded assessment of DSI, the cost of complying with just
the acid gas standard could be over three times EPA’s projection, totaling almost
$12 billion/year casting further doubt on EPA‟s overall projection of $10.9 billion per
year for the entire proposed rule.57
Table 1
Coal-Fired EGUs with Scrubbers
Type of Scrubber
No. of Units
Wet
Dry
Unspecified
TOTAL Scrubbers
272
83
94
449
Fluidized Bed
70
Combustion
No Scrubber
521
TOTAL EGUs
1,040
Source: NEEDs Version 4.10 PTox Database
Capacity
(MW)
126,907
20,068
39,516
186,491
7,905
119,606
314,003
57
For purposes of this projection, NMA revised EPA’s cost estimates with a more realistic assessment of the
market penetration for DSI. We assumed an additional 119 MW of scrubber installations, thus Tables 1 and 2
reflect the cost of acid gas compliance for the 521 units without scrubbers. Methodology: As a preliminary matter,
it is not clear what EPA’s total projected compliance costs are. EPA claims that it uses an 11.3 percent capital
charge rate, or roughly a nine year payback period for economic analyses in the model (“Documentation for EPA
Base Case v4.10 Using the Integrated Planning Model,” at 8-14). The Agency also refers to a 20-year depreciation
schedule for environmental retrofits (IPM Background Document at 8-11). Based on our calculations, it appears
that EPA has multiplied total compliance cost estimates by 11.3 percent to arrive at annual costs. So, for example,
an annual capital cost of $1,421 million/year for “Dry FGD and Fabric Filters” corresponds to a total cost (excluding
consideration of the time value of money) of $12,565 million, spread over an approximately nine year period. We
will apply the 11.3 percent capital charge rate to our total cost estimates to compare them with EPA’s annual
projections.
For calculating scrubber capital and fixed operating and maintenance (“FOM”) costs, NMA used Table 5-4 of the
IPM Background Document, along with heat rate and capacity information from the NEEDs database, for the 521
units that do not have a scrubber. Based on the primary fuel listed in the NEEDs database, we assume units
burning bituminous coal would install wet FGD systems and those burning subbituminous or
bituminous/subbituminous blends would install dry FGD systems. Of those 521 units, 439 do not have fabric
filters. For calculating fabric filter capital and FOM costs, we used Table 5-24 of the IPM Background Document,
along with the NEEDs database. For variable operating and maintenance (VOM) costs, which are based on kilowatt
hour (kWh) assumptions, NMA used the ratio of EPA’s variable to fixed O&M cost projections.
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Table 2
Projected Retrofit Costs
to Comply with Proposed Acid Gas Standards
(Annual Costs, Million $)
Cost
Component
Commenter’s Costs
(FGD + FF)
Scrubbers
Fabric Filters
Capital Cost
$ 6,579
$ 1,908
FOM
1,250
71
VOM
1,875
106
TOTAL
$ 9,704
$ 2,085
1
Source: 76 FR 25,075 (May 3, 2011).
TOTAL
$ 8,487
1,321
1,981
$11,789
EPA’s Costs1
(DSI or
Dry FGD +
FF)
$ 1,849
323
1,618
$ 3,790
EPA needs to reexamine this critical assumption with actual on-the-ground testing
to determine if both the efficacy and unwanted environmental side effects of DSI
makes it a viable control technology.
3.
Many analysts have predicted higher amounts of early coal
retirements
EPA‟s claim of “common-sense” rulemaking is, in large part, intertwined with
its DSI assumption. If EPA‟s unsupported assumption as to the number of units
that can install DSI as a compliance strategy is wrong, the costs of complying with
the acid gas standard could potentially triple, as many more units will have to
install or upgrade costly scrubbing technology. This increased cost will
correspondingly result in more retirements and higher electricity prices as many
units will not be able to absorb the additional cost. This fact invites legitimate
criticism of the agency‟s 10 GW retirement figure. For example, and in addition to
the below chart,58 FBR Capital Markets states that “…the practical applicability of
DSI remains a debatable point due to the additional ash produced, reliability of the
reagent supply chain, lack of utility sector experience with this technology, and the
potential impact of dispatch. More limited adoption of this technology could lift the
retirement number above 50 GW.”59
58
It is important to note that each projection employed a different set of assumptions to arrive at the
retirement projection—i.e. some studies analyzed the proposed rule in isolation, while others like NERA analyzed
the instant rule in conjunction with other related CAA rules. The chart highlights EPA’s glaring need to provide a
cumulative cost estimate of all of these rules.
59
FBR Capital Markets, Mar. 25, 2011; see also Dan Eggers, “Implications of EPA Policy,” Credit Suisse, April
26, 2011(estimating that retirements could be as high as 100 GW) (emphasis added).
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Table 3
Summary of Coal-Fired Retirement Projections60
Analyst
Date of
Publication
U.S. Energy Information
Administration (EIA)
NERA Economic Consulting
FBR Capital Markets
McIlvaine Company
Edison Electric Institute (EEI)
The Brattle Group
April 2011
North American Electric Reliability
Corporation (NERC)
ICF International
Credit Suisse
May 2011
March 2011
March 2011
January 2011
November
2010
October 2010
October 2010
September
2010
Retirement
Projection
(GW)
45-73
48
35-45
31-68
50
50-66
33 -77
75
69
Even using EPA‟s own data it is entirely plausible that 50 GW will be forced to
retire based on this suite of rules. The agency‟s 9.9 GW retirement figure is based
on forecasting the Utility MACT rule in isolation, rather than examining the agency‟s
own base case of 25 GW gross retirements. EPA‟s base case estimates 299 GW of
coal generation in 2015, which is an 18 GW decline in coal capacity from 2010
based on the implementation of CSAPR and Utility MACT. The base case also
assumes, albeit optimistically given the inability to construct new coal plants with
the stringent new source standards, an additional 7 GW in coal additions during this
time.
However, this entire projection is built upon full market penetration of DSI or
56 GW. Even assuming optimistically that the deployment of DSI is even half the
forecasted rate, which is reasonable given that half of the units targeted for DSI
deployment operate without scrubbers and burn medium or high sulfur coal, the
retirement number could easily jump to 50 GW. Nowhere in the record does EPA
engage in this sort of analytical rigor. Rather, the agency simply assumes the best
without any factual support resulting in a flawed rule with an inaccurate assessment
of the true impacts.
4.
EPA‟s mistaken beliefs about the current fleet will also increase
the amount of projected retirements
The issue of flawed retirement projections is not confined to the DSI
assumption. Another aspect of this issue stems from Administrator Jackson‟s faulty
statements regarding the state of the current fleet. In the proposed rule, EPA
60
Each individual analysis is filed contemporaneously with these comments (Attachment 7).
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notes that “[t]oday over 50 percent of the power generation fleet has scrubbing
technology installed and the industry is already working on installations to bring
that number to nearly two-thirds of the fleet by 2015.”61 This statement is
seriously misguided and suggests that existing units with scrubbers will not have
any compliance costs associated with this proposed rule. NMA seriously doubts EPA
would be willing to offer this type of safe harbor treatment to existing coal-fired
EGUs.62
This statement also does not seem to comport with other portions of the
preamble where the agency predicts that “…the proposed rule will require
companies to make a decision—control HAP emissions from virtually uncontrolled
sources or retire these sometimes 60 year old units and shift their emphasis to
more efficient, cleaner modern methods of generation, including modern coal-fired
generation.”63 Notwithstanding this apparent contradiction, Administrator Jackson
further reinforces this unsupported conclusion by noting one of the principal
objectives of this rule:
Utilities that have already put pollution control technology in place will no
longer have to compete with those who have delayed those investments—a
group that includes almost half the nation‟s coal-fired plants, which lacked
advanced pollution control equipment. In fact, facilities that have already
taken responsible steps to reduce the release of toxins into our air will be at
a competitive advantage over their heavy-polluting counterparts. And to
ensure cost-effectiveness, we have proposed flexibility in meeting the
standards.64
These statements are fundamentally flawed. Over half of the scrubber in the
referenced 50 percent of units will be at least 20 years old and at the end of their
useful life by 2015. Thus, significant costs will be associated with upgrading
existing scrubbers to achieve compliance with the proposed standards. Typical
scrubber modifications to improve SO2 absorption include improving gas flow
distribution, reconfiguring spray headers, adding frothing trays and increasing
recycle flow. Furthermore, many existing scrubbers were built when the CAA only
61
76 Fed. Reg. at 25,054.
62
Furthermore, EPA should recognize that the MACT process sets the standard at the average of the top 12
percent, essentially at the 94th percentile, thus only 6 percent of units ostensibly should meet the standard
without modification. Because about half of the units in the U.S. are unscrubbed, that 6 percent can only
accommodate about 1/8th of the scrubbed units. That is, seven out of eight scrubbed units will have undertake
some level of modification.
63
76 Fed. Reg. at 24,979.
64
EPA Administrator Lisa P. Jackson, Remarks on the Mercury and Air Toxics Standards Proposal, As
Prepared, Mar. 16, 2011, available at: http://yosemite.epa.gov/opa/admpress.nsf; see also 76 Fed. Reg. at 24,979.
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required 70 percent SO2 removal. Based on this standard, scrubbers typically
included partial FGD bypass and only modest SO2 removal in the absorber.
Bringing these units up to the proposed emissions standards will likely require more
than simply modifying spray headers and adding absorber trays. A more accurate
analysis of this particular issue could double the projected upgrade costs for older
units built before 1995 thereby increasing the number of retirements.
Utilities cannot make important investment decisions based on unverified
assumptions and without considering the implications of the cost of recovery of
these retrofits. Especially for older, less efficient plants the capital break-even
point between installing, retiring or fuel switching when assessed in light of these
multiple regulations makes it highly unlikely that EPA‟s view of the utility industry is
accurate. This is evident in American Electric Power‟s assessment that these
interrelated air rules will force the utility to prematurely shutter about 25 percent of
its current coal-fueled generating capacity, or 6,000 megawatts.65
5.
EPA‟s assessment of impacts on electricity prices and job losses is
premised on questionable assumptions and an inadequate
rulemaking record
Taken together, because EPA has missed the mark in projecting early
retirements based on a series of questionable assumptions, the affordability and
reliability of electricity will accordingly be uncertain. EPA attempts to blunt this
criticism by claiming that “[t]he energy savings driven by these energy efficiency
policies mean that consumers will pay less for electricity as well. EPA has modeled
national average retail electricity prices, including the energy efficiency costs that
are paid by the ratepayer. The Toxics Rule increases retail prices by 3.7 percent,
2.6 percent and 1.9 percent in 2015, 2020, and 2030 respectively relative to the
base case.”66 This statement has limited heuristic value when factoring in the
aforementioned assumptions coupled with the overreliance on modeling that fails to
appropriately examine the issues on a regional basis, like the Midwest or Southeast
where coal is the dominant fuel for electricity.
Part of EPA‟s problem in assessing the increase in electricity prices lies in the
implicit biases of its model. The overriding principle of the model is to maintain
adequate generating capacity and target reserve margins in each of the 32
modeling regions.67 In order to maintain adequate resources in each region, the
65
Julie Johnson, “AEP Says New Air Rules May Cost Up to $8 Billion, 600 Jobs,” June 9, 2011 available at:
http://www.bloomberg.com/news/2011-06-09/aep-says-new-air-rules-may-cost-up-to-8-billion-600-jobs.html
66
76 Fed. Reg. at 25,056.
67
Regulatory Impact Analysis at 8-17. See also ICF International’s description of the IPM product, available
at: http://www.icfi.com/insights/products-and-tools/ipm; and “Resource Adequacy and Reliability in the IPM
projections for the Toxics Rule,” available at: http://www.epa.gov/ttn/atw/utility/pro/resource_adequacy_rel.pdf.
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model assumes that regions with excess supply will absorb the capacity lost by
retirements. Stated differently, according to the model, retirement decisions are
first a product of geography rather than on a realistic business decision. The
following illustrates the problems with the model:
The model projects retirements of three 750 MW units or 2,250 MW at
the Navajo power plant in Arizona. The units were built in 1974-76
and have wet scrubbers operating at 92 percent efficiency. On the
other hand, seven units in Northern Illinois totaling 2,017 MW built in
1952-59 without scrubbers, SCRs or fabric filters would continue to
operate. The difference is the location. The AZNM modeling region
has more excess capacity than the COMD region of northern Illinois.
Unfortunately, the model may have placed too much faith in
maintaining resource adequacy, particularly given the number of
investor owned utilities. As a result, the projected number of
retirements is unrealistically low. Alternatively, if the model‟s
complete faith in resource adequacy proves correct, electricity costs
will increase dramatically in certain regions such as the COMD
modeling source.
EPA cannot wholly rely on this model to accurately analyze this important issue.
EPA also attempts to fall-back on early collaboration with key stakeholders to
prevent the potential for skyrocketing electricity prices and job losses. The agency
states that, “[i]n addition, EPA itself has already begun reaching out to key
stakeholders including not only sources with direct compliance obligations, but also
groups with responsibility to assure an affordable and reliable supply of electricity
including state Public Utility Commissions (PUC), Regional Transmission
Organizations (RTOs), the National Electric Reliability Council (NERC), the Federal
Energy Regulatory Commission (FERC), and DOE.”68 EPA further states, “[i]t is
EPA‟s understanding that FERC and DOE will work with entities to ensure an
affordable, reliable supply of electricity….”69 As mentioned in the Executive
Summary, NMA can find no evidence of these consultations in the rulemaking
docket.
More specifically, the public has no ability to discern whether EPA is
presenting the implications of this rule with its overly optimistic DSI assumption
thereby coloring the perceptions of the stakeholder.70 Interestingly, as of October
68
76 Fed. Reg. at 25,054.
69
Id.
70
The public will only be able to confirm if EPA includes all of the relevant documents regarding this
particular issue. Moreover, the public is entitled to an opportunity to inspect these documents and provide
comment.
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2010, NERC as one of the identified stakeholders did not share EPA‟s view of de
minimus impacts to electric power generating sector.
Overlapping compliance schedules for the air and solid waste regulations,
along with the required compliance for rule 316(b) following shortly
thereafter, may trigger a large influx of environmental construction projects
at the same time as new replacement generating capacity is needed. Such a
large construction increase could cause potential bottlenecks and delays in
engineering, permitting and construction. 71
Based on this assessment, either NERC has changed its position since this time to
align with EPA based on information not included in the rulemaking docket, or EPA
is not being forthcoming about the reality of these “collaborations” to deal with this
important issue. In any event, and unsurprisingly, the foregoing demonstrates that
FERC—responsible for delivering reliable electricity to the country—is not as
confident in EPA‟s assessment of the situation as EPA portrays it to be.
Following FERC‟s responses to Senator Murkowski, NMA joins the Senator‟s
extreme concern with the impending situation, as described in her August 3 press
release, “[h]aving received FERC‟s responses this week, I must say that I am now
less confident [after initially hearing the Chairman‟s plans for an interagency task
force] of that being the case.” Preliminary review of FERC‟s responses completely
validates her position.
In response to EPA‟s exaggerated representations in the preamble, Chairman
Wellinghoff stated in his letter, “…this information assessment offered only a
preliminary look at how coal-fired generating units could be impacted by EPA rules,
and is inadequate to use as a basis for decision-making, given that it used
information and assumptions that have changed.” (emphasis added). This
sentiment is further confirmed in Commissioner Moeller‟s response, “[a]ccording to
OER staff, EPA‟s reliability analysis has been limited,” and that staff have, “pointed
out to EPA that a reliability analysis should explore transmission flows on the grid,
reactive power deficiencies related to closures, loss of frequency response, black
start capability, local area constraints, and transmission delivery.” (emphasis
added). In sum, EPA‟s “trust us” mentality has far underestimated the complexity
underlying the delivery of affordable and reliable electricity.
This is further evidenced by the fact that neither FERC nor EPA has
conducted a cumulative impacts analysis. Furthermore, FERC‟s assessment that 81
GW of “likely or very likely” retirements may result from the implementation of this
suite of rules, further highlights the need—as expressed by NMA—for a more
transparent and open process to deal with these important issues. Recognizing the
Chairman‟s reservations about the results of this preliminary study, it nevertheless
71
NERC, 2010 Special Reliability Scenario Assessment: Resource Adequacy Impacts of Potential U.S.
Environmental Regulations, October 2010.
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highlights EPA‟s failure to disclose this critical study and any other material that
may exist regarding the EPA-FERC consultation process.
NMA joins Commissioner Moeller‟s recommendations to have FERC: (1) use
its expertise to perform an analysis of EPA‟s rules that could impact reliability of
electricity—and disclose that analysis for public comment—and then hold a technical
conference for public input; and (2) have EPA extend the timing of these
regulations as the agency‟s schedule “does not conform to the relevant planning
horizons in the electric sector of our economy, one of the most capital-intensive
sectors of industry.”
Furthermore, the understatement of potential coal-fired EGU retirements and
electricity prices will be especially acute if EPA holds the line with its new source
emissions limits. As will be discussed below, the new source emissions standards
based on the impermissible HAP-by-HAP approach makes it difficult to foresee
investment in new coal. Credit Suisse projects that at a 60 GW retirement figure,
there would need to be an additional 24 GW just to maintain reserve margins at 15
percent begging the important question of where will coal-dependent regions of the
county replace these important sources of energy.72 Despite EPA‟s effort to “level
the playing field,” the agency has done an inadequate job of informing the public as
to the consequences of such a policy.
Unfortunately, where EPA‟s miscalculations will be most felt is the additional
burden to rate paying customers. Public Utilities Commissions can hardly ask for
the type of rate increase needed to offset these capital costs during times of
economic prosperity let alone in the current economic condition. These consumer
energy costs represent the most regressive de facto tax regimes as areas of the
country reliant on coal-derived energy will rapidly become the most expensive.
This is especially true for the “rust belt” region and states in the southeast that will
be heavily impacted by EPA‟s faulty assumption that EGUs will shift to local
bituminous coal based on DSI use, thus masking the overall jobs impact on these
economically challenged areas.
In fact, the market—contrary to EPA‟s overly optimistic prediction—has
already responded to the added pressure of these numerous CAA rulemakings. On
May 26, 2011, Louisville Gas and Electric announced its plans to request a raise in
residential electric bills by about 19 percent by 2016 in order to pay for upgrading
its coal-fired power plants to meet rules promulgated pursuant to the CAA.73 This
dramatic increase is also reflected in the NERA study concluding that average
electricity prices will increase by around 12 percent nationwide, with regional
72
Credit Suisse, April 26, 2011.
73
Available at: http://www.courier-journal.com/article/20110525/BUSINESS/305250080/LG-E-seek-19-rateincrease.
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increases as much as 24 percent.74 If EPA is unwilling to modify the proposed rule
and properly tailor its provisions to address environmental concerns and ensure
reliable and affordable energy, the U.S. economy will undoubtedly suffer as a
result.
Lastly, Administrator Jackson in her remarks at the signing ceremony for the
proposed rule noted the uptick in so-called “green jobs” that would result from
implementation of this rule. 75 While it may be true that some jobs will be created in
order to install the requisite control technology, the overall economic impact of
plants being forced to retire, no foreseeable construction of new coal-fired plants,
the “multiplier” effect of job losses in sectors such as coal mining, and the expected
increase in electricity prices of more costly energy sources cannot even begin to be
offset by these so-called “government-created” jobs. The recent NERA study
projects that the combination of CSAPR and the present rulemaking will result in
nationwide net employment losses totaling 1.44 million job-years by 2020. These
net losses take into account these “green jobs” as well as the jobs lost by these
regulations. In other words, employment losses under only these two EPA
regulations will outnumber gains by more than four to one through 2020.
David Montgomery of Charles River Associates, an economist with 40 years
of work in energy and environmental policy recently testified before Congress and
shed further light on the “green jobs” claim:
The serious debate in environmental policy is about how the costs of new
regulations compare to their benefits, and how to design the regulations to
minimize costs, uncertainty and disruption. Claims that regulations that
raise the cost of doing business will create new jobs are, at best, a sideshow.
Such claims only distract attention from the difficult tradeoffs that must be
made between costs and benefits. „Green jobs‟ is not a subject that leading
economists have usually taken seriously enough in professional journals.76
Based on the foregoing, it is difficult for EPA to legitimately claim that the proposed
rule‟s benefits analysis is accurate.
74
“Proposed CATR + MACT,” NERA Economic Consulting, Draft May 2011.
75
EPA Administrator Lisa P. Jackson, Remarks on the Mercury and Air Toxics Standards Proposal, As
Prepared, Mar. 16, 2011, available at: http://yosemite.epa.gov/opa/admpress.nsf
76
Senate Committee on Environment and Public Works, Subcommittee on Green Jobs and the New
Economy Hearing entitled, “Green Jobs and Trade,” Feb. 15, 2011.
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II.
EPA’S RULEMAKING PROCESS IS LEGALLY DEFICIENT UNDER THE
CLEAN AIR ACT
EPA has made it extremely difficult, indeed impossible, for the public to have
a meaningful opportunity to provide comments on the proposed rule. EPA‟s haste
in finalizing the proposed rule by November 2011 has resulted in insufficient time
for comments, only ninety days despite the extraordinarily complex nature of the
proposed rule. As the agency is fully aware, the proposal published in the Federal
Register is 171 pages long and includes new MACT and new performance standard
limits and compliance requirements for coal-fired EGUs as well as a new section
112(n)(1)(A) analysis. Moreover, there are over 19 technical support documents
and a more than 500-page RIA in the rulemaking docket.
Furthermore, EPA has provided more time for public comment on other
rulemakings that were both narrower in scope and less costly to the overall
economy than the current proposal. For example, EPA augmented the original 60
day comment period for the Portland Cement MACT rule with an additional 60 days
to ensure sound public participation on the 163 existing facilities (as compared to
this rule‟s 1,200 existing units) at issue in the proposed rule.77 While NMA is
mindful of the 30-day extension, there is no reasonable explanation for why the
agency insists on adhering to an unreasonable final deadline to deal with a
rulemaking of this magnitude and significance. Given the agency‟s recent
experience with the Industrial Boiler MACT consent decree and self-initiated
reconsideration period, the agency should immediately recognize the undesirable
results of a truncated rulemaking schedule.
The rushed schedule has already resulted in at least one significant error in
setting the MACT standards. On May 5, 2011, UARG sent a letter to EPA identifying
a critical conversion error that an NMA member company found in the agency‟s
calculation of mercury emissions resulting in new and existing MACT floors that
were 1000 times higher than the emissions identified in the dataset for those units.
UARG requested the agency re-propose the rule to properly correct the mistake.
EPA refused this request thereby failing to comport with the notice requirements of
CAA § 307(d)(3).
Instead, EPA admitted the error and proposed to correct it by inserting the
correction into a technical support document adding to an already cumbersome
rulemaking docket. Rather than provide a Notice of Data Availability, the public is
left to sift through the docket and discern whether to comment on the standard in
the supplemental document or the one proposed in the Federal Register. Despite
this and other important errors groups like UARG continue to discover with the
proposed rule, EPA refuses to accommodate an adequate rulemaking period,
undermining confidence that the agency is conducting an open and transparent
r
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