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EPA Proposed CO2 Performance
Standards for New Coal Plants
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PRESENTED BY
Peter Glaser
Troutman Sanders LLP
401 9th Street, NW
Suite 1000
Washington, DC 20004
202.274.2950
www.troutmansanders.com
Washington Coal Club
September 24, 2013
Pres. Obama
6/25/13 Speech at Georgetown
“So the question is not whether we need to act. The
overwhelming judgment of science -- of chemistry and
physics and millions of measurements -- has put all that to
rest. Ninety-seven percent of scientists, including, by the
way, some who originally disputed the data, have now put
that to rest. They've acknowledged the planet is warming
and human activity is contributing to it.
“So the question now is whether we will have the courage to
act before it’s too late. And how we answer will have a
profound impact on the world that we leave behind not just to
you, but to your children and to your grandchildren.
“As a President, as a father, and as an American, I’m here to
say we need to act. ”
Gina McCarthy
9/18/13 Testimony Before E&P Subcom
“Climate change is one of the greatest challenges of
our time. Based on the evidence, more than 97% of
climate scientists are convinced that human caused
climate change is occurring. If our changing climate
goes unchecked, it will have devastating impacts on
the United States and the planet. Reducing carbon
pollution is critically important to the protection of
Americans’ health and the environment upon which our
economy depends.
“Responding to climate change is an urgent public
health, safety, national security, and environmental
imperative….”
Proposed Rules Are Step 1 for Coal in
6/25/13 Presidential Memorandum
• New source standards proposal by
9/20/13. No set date for final.
• Proposed standards for modified and
existing sources by 6/1/14 and final by
6/1/15.
• Proposed regulations and guidelines
requiring States to submit plans with
standards by 6/1/14; final by 6/1/15; States
to submit plans by 6/1/16.
Proposed New Source Standards
Coal Units
• Includes both coal boilers and integrated
gasification combined cycle units.
• 1,100 lb CO2/MWh over a 12-operating
month period, or
• 1,000-1,050 lb CO2/MWh over an 84operating month (7-year) period.
• Asks for comment on 1,000-1,200 lb.
Natural Gas Units
• 1,000 lb CO2/MWh for larger units (>
850 mmBtu/hr).
• Asks for comment on 9,500-1,100 lb.
• 1,100 lb CO2/MWh for smaller units
(≤ 850 mmBtu/hr).
• Asks for comment on 1,000-1,200.
Proposed New Source Standards
The Basics
• Applies to new sources only – not to modified or
reconstructed.
• Last year’s proposal revoked.
• Does not apply to biomass (can co-fire with up to
10% coal).
• Does not apply to non-CO2 GHGs, but EPA asks
for comment on whether it should.
Rationale for Coal Standard
• Partial CCS is the “best system of emission
reduction.”
• Technical feasibility.
• Amount of emissions reductions from standard.
• Reasonable cost.
• Promote development of technology.
• Claims broad EPA discretion.
Technical Feasibility
• Capture: literature, industrial plants, pilotscale EGUs, progress of Kemper and 3
others less far along than Kemper.
• Transportation: CO2 pipelines in
operation.
• Storage: EOR + field tests for non-EOR.
 But in the end, there are no commercial-scale
power-sector CCS plants operating anywhere in the
world.
Absence of Permitting System and
Legal Liability Rules for CCS
•
This absence is potentially a fatal flaw for the feasibility of CCS
where EOR is not available.
•
EPA addresses indirectly by making legal argument that EPA
can establish standards that allow plants to be built only in
certain sections of the country.
•
But claims only limited areas won’t be able to build new coal
plants with CCS because:
•
Can build very long CO2 pipelines or can transmit power
very long distances .
 And the cost of this would be?
Amount of Emission Reductions
• Supercritical is not enough, would
not represent progress.
• Full capture would not be costeffective.
 Yet EPA says existing technology for
gas plants is good enough.
EPA: Costs Are Reasonable
• Levelized cost of partial CCS is competitive
with nuclear and biomass – therefore CCS
is cost-effective baseload.
• Partial CCS adds $18/MWh to cost of
SCPC, for a total of $110/MWh, which is a
reasonable additional amount.
• These costs will come down in future.
Are EPA’s CCS Costs
Reasonable?
•
EPA uses projected costs, assumes reduced costs as more
plants built. But EPA also thinks no new plants will be built.
•
2013 EIA data: CCS increase cost of new plant up to $1
billion/60% increase in capital cost.
•
Administration’s CCS task force: CCS increases IGCC by $400
million (25%), SCPC by $900 million (80%).
•
EPA’s cost figures do not include build-out of pipelines or
storage.
•
Recognizes requirement for DOE support, but says other energy
sources also depend on government support (and apparently the
government is awash with cash for CCS).
Promote Technological
Development
“It is clear that identifying partial CCS as the BSER
promotes the utilization of CCS because any new
fossil fuel-fired utility boiler or IGCC will need to install
partial capture CCS in order to meet the emission
standard.”
Overall Cost-Benefit Analysis
•
No cost, because no one is building new coal.
•
Benefit:
•
Power sector is economy’s largest source of CO2 emissions.
•
Towards back of rule, concedes that since the rule only
applies to new sources that aren’t being built anyway, there
is a corresponding lack of benefit.
º but claims benefit from starting the process for
regulating existing sources.
– though doesn’t recognize the cost of such
regulations.
Natural Gas Standard
•
Utilities have real issues with feasibility of 1,000 lb. standard.
•
EPA concludes CCS is not BSER for IGCC:
•
Uncertain technical feasibility given limited precedent;
•
CCS may not work on gas units because of need for gas
units to cycle;
•
Lower CO2 in flue gas stream presents technical issues;
•
Experience with CCS for coal may not translate to gas.
Comments
• Due 60 days from publication in
Federal Register.
• EPA will not consider comments on
prior proposal.
Thoughts on Comments
• EPA will not change its mind on this rule.
• Still, comments needed:
• Trade associations must create record
for judicial review.
• Those interested in a future for coal
must keep making the case to EPA – at
least to influence the upcoming proposal
for existing coal plants
Implications of Proposed
Standards
• Even after all the coal retirements, EPA/EIA still
showing coal as 40% of power in 2040.
• Given 80% by 2050 goal, this rule is not enough.
 Rule is just the appetizer for the main course,
the existing plant standards.
•
And although rule is facially all-in on natural gas,
building new gas plants doesn’t get EPA to the goal.
 Beyond Gas replaces Beyond Coal.
Existing Source Standards
• EPA in pre-rulemaking process of trying to build
consensus around its preferred approach.
• BSER for existing coal units should be costeffective efficiency improvements, if any, at coal
plants.
• EPA wants to utilize a different approach, because
coal-plant efficiency improvements do not yield the
amount of GHG reductions it wants.
EPA’s Preferred Approach
• Examine BSER for the utility system in the state –
as opposed to just the coal plants.
• Define “cost-effective” as more renewables, gas,
and DSM – which means less coal.
• Offer “flexible,” “market-based” approaches as
incentives for utilities to agree to greater emission
reductions.
• And then pretty soon you have back-door cap-andtrade, negotiating off of NRDC’s targets and
timetables.
Going Forward
• New source rulemaking is important, but don’t lose
sight of activity going on beneath the surface on the
existing-source standards.
• States will have an important voice on the existing
source standards. Need to work with state leaders;
get them organized, educated, and active.
• Remember: (a) power sector has already
substantially reduced its GHG emissions and (b)
global GHG emissions are swamping any
reductions from EPA programs.