Posted on April 13, 2012 by Daniel Riesel
By Daniel Riesel and Vicki Shiah, Sive Paget & Riesel, PCOn March 27, the U.S. Environmental Protection Agency proposed a rule limiting carbon dioxide (“CO2”) emissions from new power plants fired by fossil fuels such as coal or natural gas. The rule applies to new fossil fuel-fired electric utility generating units in the continental United States; they do not apply to existing units or new “transitional” units that already have received preconstruction air emission permits and that start construction within 12 months of the proposed rule’s publication in the Federal Register.
Covered power plants would be required to meet an output-based standard of 1,000 pounds of CO2 per megawatt-hour. This standard favors natural gas over coal. EPA states that “[n]ew natural gas combined cycle power plant units should be able to meet the proposed standard without add-on controls.” By contrast, coal-fired power plants would not be able to meet this standard without carbon capture and storage technology, which is still under development and is expected to be quite costly – though EPA expects that the cost of such technology will decrease over time.
It is not clear whether the proposed regulation will have a significant effect on the energy industry, as the standard appears to reinforce current trends rather than require radical changes. In the preamble to the proposed rule, EPA notes that, at present, “the industry generally is not building” coal-fired power plants and is not expected to do so “for the foreseeable future,” while natural gas is becoming more common as an energy source. According to EPA, the 1,000 lb/MWh standard is already being met by 95% of natural gas-fired combined cycle power plants that commenced operation between 2006 and 2010.
The proposed rule (a New Source Performance Standard under Section 111 of the Clean Air Act) results from a settlement between EPA and a group of states and environmental groups. These plaintiffs sued EPA in opposition to the agency’s refusal, in 2006, to establish greenhouse gas emission standards for new and modified power plants. EPA was required to revisit this decision in the aftermath of the U.S. Supreme Court’s landmark decision in Massachusetts v. EPA, which affirmed EPA’s statutory authority under the Clean Air Act to regulate greenhouse gas emissions.
Under the settlement giving rise to the standard proposed last week, EPA had also agreed to establish CO2 emissions guidelines for existing fossil fuel power plants. EPA has yet to propose such standards, and the time frame for its doing so is uncertain; EPA Administrator Lisa Jackson recently stated, “[w]e don’t have plans to address existing plants.”
The full text of the proposed rule is available here. Public comments are being accepted under Docket ID No. EPA‐HQ‐OAR‐2011‐0660 at www.regulations.gov for 60 days after the proposed rule’s publication in the Federal Register.