The Long and Winding Rule: USEPA's Cross-State Air Pollution Rule the Latest to Address Interstate Air Pollution

This post was written by Steve Nolan.

In previous posts, we have reported the vacation of the Clean Air Interstate Rule (CAIR) in 2008, CAIR's subsequent, temporary resuscitation later that year, and the 2010 release of the draft Transport Rule which was proposed to replace CAIR. On July 7, 2011, the U.S. Environmental Protection Agency (USEPA) released the final version of this rule, now renamed the Cross-State Air Pollution Rule (Cross-State Rule).

The Cross-State Rule is specifically directed at emissions from electric generating units in classes 2211, 2212 and 2213 of the North American Industry Classification System. Like CAIR, the new rule is intended to help downwind states achieve USEPA's National Ambient Air Quality Standards (NAAQS) for fine particulate matter and ozone. Also like CAIR, the new Cross-State Rule actually regulates sulfur dioxide (a chemical precursor of fine particulate matter) and nitrogen oxides (a chemical precursor of both fine particulate matter and ozone) generated by upwind states.

By 2014, USEPA estimates that the Cross-State Rule will reduce emissions of sulfur dioxide by 6.4 million tons per year from covered states compared with emissions in 2005, the last year before CAIR came into effect. This represents a 73 percent reduction from 2005. The corresponding figures for nitrogen oxide are a reduction of 1.4 million tons, representing a 54% change. Less stringent reductions will be required by 2012.

The states are allocated initial emissions allowances, and the new rule, like CAIR, establishes a cap-and-trade marketing scheme. However, because of the circuit court's holding in which it vacated CAIR in 2008, out-of-state trading is only allowed to a limited extent.

Further details of the Cross-State Rule’s implementation will become apparent as USEPA issues federal implementation plans for each of the states impacted by the rule. It is intended that the federal implementation plans will ultimately be replaced by state implementation plans. Furthermore, the reductions required of electric generating units in the near future may be further increased by USEPA’s new fine particle NAAQS and reconsidered ozone NAAQS, both of which are proposed to be released later this summer.
 

Along with Other Emissions, USEPA's Proposed Standards for Coal- and Oil-Fired Electric Utility Boilers Target Mercury, Particulate Matter and Carbon Dioxide

This post was written by Mark Mustian.

On March 16, 2011, the U.S. Environmental Protection Agency (USEPA) proposed a new regulation in its decades-long attempt to regulate air toxics emissions and criteria air pollutants from large coal- and oil-fired boilers used in electricity generation. While this is USEPA’s first national standard to reduce mercury emissions from electric utility boilers, the proposal would also regulate other air toxics, especially particulate matter, and would reduce carbon dioxide emissions. In addition, the proposed regulation would modify New Source Performance Standards for electric utility boilers. This post provides some background information, a summary of the proposed regulation, a brief analysis of its costs and benefits, and the next steps.

 

How We Got Here

Back in December 2000, USEPA announced a finding that it was “appropriate and necessary” to regulate coal- and oil-fired electric utilities under Section 112 of the Clean Air Act. This finding, known as the Utility Air Toxics Determination, triggered a requirement for USEPA to propose regulations to control air toxics emissions. A few years later, on March 15, 2005, USEPA issued the final Clean Air Mercury Rule (CAMR). It established “standards of performance” limiting mercury emissions from new and existing utilities, and created a market-based cap-and-trade program to reduce nationwide utility emissions of mercury in two phases.

At the same time that USEPA issued CAMR, it issued a determination that regulation of electric-generating utilities was not “appropriate and necessary” under Section 112. CAMR instead regulated emissions under Section 111 of the Clean Air Act. The two regulatory actions were appealed by various parties, and CAMR was vacated February 9, 2008, by the United States Court of Appeals for the District of Columbia Circuit. The court also vacated USEPA’s determination that regulation under Section 112 of the Clean Air Act was not required. Last week’s proposed regulation is intended to replace the vacated CAMR, and has been proposed in compliance with the December 2000 “appropriate and necessary” determination.

In addition to replacing the 2005 CAMR, the proposed regulation replaces amendments to
the New Source Performance Standards (NSPS) for particulate matter (PM), sulfur dioxide (SO2), and nitrogen oxides (NOx) that were promulgated February 27, 2006. During the course of litigation over this regulation, USEPA requested, and was granted, voluntary remand without vacatur.

Summary of the Proposed Regulation

The proposed regulation would generally apply to existing and new coal- and oil-fired units that sell electricity equal to more than one-third of their potential electric output capacity, and greater than 25 MWe electrical output to any utility power distribution system. The regulation would also apply to units that burn solid oil-derived fuel (petroleum coke-fired) and units that burn processed coal refuse. In addition, the regulation would apply to integrated gasification combined cycle (IGCC) units that utilize coal or petroleum coke as their energy source.

The proposed regulation would set emission limitations on coal-fired units for total particulate matter (a surrogate for toxic non-mercury metals), hydrogen chloride (a surrogate for toxic acid gases) and mercury. For liquid-oil fired units, the regulated pollutants would be total hazardous air pollutant (HAP) metals (determined through fuel analysis), hydrogen chloride, and hydrogen fluoride. All subcategories would also have a work practice standard for organic HAPs, including emissions of dioxins and furans.

For the revised NSPS, USEPA has an unusual proposed plan. For facilities that begin construction between February 28, 2005 and one day after publication of the proposed new rule, the emission standards set in the 2006 final rule would apply. For new construction after that date, the proposed regulation would apply amended standards for PM, SO2 and NOx.

The regulation contains numerous other provisions, including alternate limitations for demonstrating compliance; new monitoring and testing requirements; new Startup, Shutdown and Malfunction requirements; and the ability to demonstrate compliance through emissions averaging.

The regulation would also require installation of a mixture of control systems. USEPA does not identify a specific set of controls to be installed, as this will be dependent upon the type of fuel being burned, the age of the boiler, the type of boiler, and other site-specific factors. USEPA has identified the types of technologies that are applicable, including wet and dry scrubbers, dry sorbent injection systems, activated carbon injection systems, and baghouses. Each facility will need to make an individual determination of the appropriate control technologies for its system.

Brief Analysis of the Real Costs and Benefits

The proposed regulation is somewhat misleading. The proposal is considered by many to simply be a regulation of mercury emissions by coal-fired power plants which is intended to replace the 2005 Clean Air Mercury Rule. However, an analysis of the facts behind the regulation make it clear that the expected benefits from mercury controls are minimal compared with the other claimed benefits from the regulation. In fact, analysis of the mercury control section of the regulation alone shows a very poor cost-to-benefit ratio. Depending upon the discount rate selected, the estimated benefits from mercury controls are in the range of $450,000 to $5.9 million per year. However, the annual costs for mercury controls are much higher. USEPA puts the annualized costs for Activated Carbon Injection (ACI) control at more than $2 billion per year. ACI technology would only be required for control of mercury emissions.

The main benefit from the new regulation comes from control of particulate matter, in particular, control of very small particles that are less than 2.5 microns in diameter (PM2.5). USEPA estimates that economic benefits from control of PM2.5 would range from $53 billion to $140 billion per year, dwarfing the costs of the new regulation. USEPA obtained these benefits by determining that the controls would prevent 6,800 to 17,000 premature deaths, 11,000 nonfatal heart attacks, 5,300 hospitalizations for respiratory and cardiovascular diseases, 850,000 lost work days and 5.1 million days when adults restrict normal activities because of respiratory symptoms exacerbated by PM2.5. It is interesting to note, however, that USEPA is not specifically regulating PM2.5, but particulate matter in general. The main reason for this is the difficulty in accurately sampling and analyzing particles of that size.

Another interesting and controversial finding (at least in today’s political atmosphere) by USEPA is that the proposed regulation would result in $570 million per year in carbon dioxide-related benefits. By benefits, USEPA of course means a reduction in carbon dioxide emissions. A reduction in carbon dioxide emissions means a reduction in the use of coal to generate electricity. Even though USEPA is projecting only a 2 percent reduction in coal usage as a result of this regulation, and even though it states that it does not expect a major change in the electricity generation mix, it is almost guaranteed that many people will characterize the regulation as a back-door attempt by USEPA to control greenhouse gases and reduce coal usage.

Next Steps

Following publication of this regulation in the Federal Register, the public comment period will run for 60 days. USEPA will also hold public meetings during the comment period. With respect to a final rule, USEPA is operating under a consent decree requiring it to publish a notice of final rulemaking by November 16, 2011. However, look for a very large number of comments and a possible extension of the deadline.

This regulation will have a significant cost impact, both upon the regulated industry and upon the general public. Interested parties are strongly urged to closely review this proposal and the associated documents (such as the Regulatory Impact Analysis), and provide input and comments to USEPA during the review period. Please contact us with any questions.
 

D.C. Circuit Remands the USEPA's Fine Particle Rule

This post was written by Larry Demase and Steve Nolan.

On Feb. 24, 2009, in American Farm Bureau v. Environmental Protection Agency, No. 06-1410, the District of Columbia Circuit Court of Appeals ruled that the most recent version of the National Ambient Air Quality Standards (NAAQS) for fine particulate matter promulgated by the Environmental Protection Agency (EPA) in 2006 were contrary to law and unsupported by reasoned decisionmaking. The court upheld the coarse particulate NAAQS that were promulgated as part of the same rulemaking. 

The 2006 NAAQS established a 24-hour primary standard for fine particulate matter based on short-term exposure studies, and an annual standard of 15 μg/m3 based exclusively on long-term exposure studies. However, the Clean Air Scientific Advisory Committee (CASAC), an independent scientific advisory committee established under the Clean Air Act, and EPA’s own staff, had recommended a more stringent annual standard because of short-term health effects of fine particulate matter. By statute, EPA was required to explain its rejection of CASAC’s recommendation, and the court found that it had failed to do so adequately.

The court also found that EPA had failed to adequately consider whether a lower limit was necessary to protect children the from adverse health effects of fine particulates, and that the secondary standard for fine particulates, which also went against CASAC’s recommendations, was inadequately justified. The distinction between primary and secondary standards is that the former addresses the health effects of a particular pollutant, while the latter addresses “welfare” effects. For particulate matter, the “welfare” aspect in question was visibility. Finally, the court upheld a separate challenge by farm industry groups to the coarse particulate matter standards. 

The immediate impact of the court’s decision will be negligible because the rule was remanded to EPA and the 2006 standards were left in place pending either the formulation of a new rule or an adequate justification by the agency of the original one. However, given the change in administration, a new rule likely will eventually emerge, and it will be more stringent than the 2006 version.