Environmental Permitting

Obama’s ‘All of the Above’ Not Coal-Friendly

It was hardly surprising, therefore, that two months after the president’s address, EPA proposed its GHG power plant rule, which proposes CO2 emission standards that would effectively block the construction of new coal-fired power plants based on conventional technology.

Under the proposal, new electric utility generating units would need to meet an output-based standard of 1,000 pounds of CO2 per megawatt-hour (lb CO2/MWh).  The proposed standard is based on the performance of natural gas combined cycle (NGCC) technology.  The only type of coal-fired power plant that could reasonably achieve the standard would need to install a carbon capture and storage (CCS) system that would apply to approximately 50 percent of the CO2 in the exhaust gas at startup.

EPA indicates that new coal plants could meet the standard through a 30-year average to provide time to employ CCS, which is still a non-commercial technology.  A new coal unit would need to immediately achieve a performance standard of 1,800 lb CO2/MWh on a 12-month annual average basis.  However, no later than the beginning of the 11th year, the facility would be required to meet a reduced CO2 emission limit of no more than 600 lb CO2/MWh on a 12-month annual average basis for the remaining 20 years of the 30-year period.

This would ensure that the weighted average CO2 emissions rate from the facility over the 30-year time period would be equivalent to the proposed standard of 1,000 lb CO2/MWh.  That’s an intimidating prospect for energy companies even if, as EPA says, there would be significant government funding available to assist in the construction of CCS systems.

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“Requiring coal-based power plants to meet an emissions standard based on natural gas technology is a policy overtly calculated to destroy a significant portion of America’s electricity supply,” said National Mining Association president and CEO Hal Quinn after the proposal was issued.

The proposal is evidence that the administration has put its weight behind natural gas.  Also, the claim by Quinn and others in the coal industry that the volatile cost of natural gas will increase utility bills and threaten reliability is countered by EPA’s assertion that “technological developments and discoveries of abundant natural gas reserves have caused natural gas prices to decline precipitously in recent years and have secured…relatively low prices for the near-future.”

Hydraulic fracturing, one such new technology, has received the administration’s endorsement despite objections from some environmentalists that federal regulations governing fracking are not sufficient to ensure protection of human health and the environment.  The administration will need to address these concerns carefully in regulations to ensure they do not discourage development of abundant domestic natural gas deposits becoming increasingly available through fracking and horizontal drilling.

A recent Bureau of Land Management proposal covering fracking on United States and Indian lands increases requirements, including disclosure of fracking chemicals, for industry but also contains solid concessions to well operators and overall is not likely to slow the spread of fracking or gas development.

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Since EPA’s CO2 proposal would not affect existing coal-fired power plants, coal remains a significant part of the nation’s current and future energy profile whether or not it gets called out in the president’s strategy.   Even though natural-gas fired power plants are less expensive to construct than coal-fired facilities, EPA acknowledges that some owners/operators may nevertheless seek to construct new coal-fired capacity.  The Agency concedes that “this may be beneficial from the standpoint of promoting energy diversity.” The Agency insists that its proposal does not interfere with construction of new coal-fired capacity.

EPA also says it expects the costs of CCS to decline in the future.  What’s more, should the proposed action survive public comment and congressional opposition, EPA expects a final rule will promote utilization and further development of CCS “by making it clear that CCS would be necessary for new coal-fired power plants to meet the performance standard.”

EPA’s Integrated Planning Model currently does not project construction of new coal-fired power plants over the next 10 years, but should the Agency’s optimistic assessment of CCS come to fruition, “coal” may eventually find its way into the all-of-the-above strategy.

EPA’s proposed new source performance standards for CO2 emissions for new fossil fuel-fired electric utility generating units were published in the April 13, 2012, FR.

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