Why the EPA might delay its carbon rules for power plants

March 18, 2013

Is the Obama administration planning to backtrack on its carbon rules for power plants? That's the big environmental question on everybody's mind lately.


(F. Carter Smith/BLOOMBERG)

The core of Obama's second-term agenda on climate change, recall, involves new regulations from the Environmental Protection Agency on greenhouse-gas emissions. Last year, the EPA took a major step forward by proposing carbon standards for all future power plants — a rule that would make it impossible to build new coal-fired facilities in the United States.

But now it looks like the EPA will miss its April 13 deadline for finalizing those rules, and my colleague Juliet Eilperin reported last week that the administration was even "leaning toward revising its landmark proposal to regulate greenhouse gas emissions from new power plants."

So what's going on? Experts say that it all comes down to how much legal risk the EPA wants to take on.

At issue here is a rule the EPA proposed last March that would set carbon emissions standards under the Clean Air Act for all new coal- and gas-fired power plants built in the United States. Going forward, any new plant would have to emit no more than 1,000 pounds of carbon-dioxide per megawatt-hour of electricity produced.

Most modern natural-gas plants can meet that standard, so they should be fine. Conventional coal plants, however, average upwards of 1,800 pounds per megawatt-hour. That means it would be impossible to build a new coal facility in the United States unless it could capture and bury its carbon-dioxide — a technology that's still very much unproven.

The problem with this proposed carbon rule, critics say, is that the EPA took a rather novel step by lumping both coal plants and gas plants together into one "source category" — essentially holding them to the same carbon standard. That's not how this section of the Clean Air Act is usually implemented.

"A lot of people, myself included, think this approach is almost certain to get struck down in court," says Jeffrey Holmstead, an energy-industry attorney at Bracewell & Giuliani LLP who headed up the EPA's air division during the Bush administration.

And if the EPA's rule for future power plants gets struck down in court, then the agency has to start all over. That could, in turn, delay its forthcoming rules for existing power plants. And, since existing coal and gas plants make up 40 percent of U.S. greenhouse-gas emissions, any delay there could have a major environmental impact.

So what would happen if the EPA did revamp its proposed rules for future power plants? One possibility, says William Bumpers, an attorney with Baker Botts LLP, is that the agency would simply set separate standards for coal and gas plants, requiring them to be as clean as the best commercially demonstrated technology allows. Such a rule, for instance, might allow new coal plants to be built so long as they were high-efficiency supercritical plants.

"The EPA would have a better chance of defending a rule like that in court,"  Bumpers says.

Revamping the new-source rules in this manner would take at least six months, legal experts estimate, since the EPA would likely need to allow yet another round of public comments if it made significant alterations.

In practice, a change in rules might not make much of a difference in the real world. After all, the EPA determined that virtually no new coal plants are likely to get built in the next decade regardless, in part because natural gas prices are so low. And, eight years from now, the EPA could always come back and revisit its standard to require carbon capture for coal plants if that technology ever became commercially viable.

Even so, some environmentalists are unconvinced that the EPA needs to revamp its rule. "The original proposal was quite sound," says David Doniger, a senior attorney at the Natural Resources Defense Council. "I'm not hearing anything to suggest that they'd abandon that proposal or change their approach."

Doniger explains that the EPA made its decision to group together coal and gas plants based on the changing landscape of the U.S. electricity sector. Nowadays, coal and natural gas both provide baseload power, so it makes sense to place them in the same category. What's more, since cheap natural gas has made new coal plants uneconomical anyway, EPA determined that the cost of holding them both to the same standard was low.

Some industry critics have expressed concern that EPA's proposed rule would place the United States at the mercy of historically volatile natural gas prices — if gas prices became more expensive, coal plants would still be impossible to build. Yet the EPA found that new coal plants were unlikely to be built even if gas prices quintupled from their current levels.

So that's the basic dilemma the EPA is now facing: Does it weaken its rule on new power plants in order to avoid getting bogged down by court challenges? The downside is that revising the rule now would create a delay. But getting struck down by the courts could create an even bigger delay.

So far, the administration isn't tipping its hand. The EPA has yet to send its rule to the Office of Management and Budget for review, and the agency says it's still reviewing more than a million comments from industry groups, environmentalists and other members of the public.

The real challenge, in any case, will be those forthcoming rules on existing power plants.* Those regulations really could make a huge difference on U.S. emissions, depending on how they're designed. If the EPA plays it safe and simply requires small efficiency tweaks at existing gas and coal-fired plants, that might lead to small cuts. By contrast, the Natural Resources Defense Council has proposed a plan to cut power-plant emissions 40 percent by 2020 through more aggressive state-level targets.

Update and correction: An earlier version of this piece had said that EPA couldn't propose rules for existing plants until it had finished its rules for new plants. That's wrong. The EPA could work on both rules at the same time if it wanted to — though there may be staffing and resource constraints. Apologies for the error.

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