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CEI Supports EPA's Proposed Revision of Power Plant Rule

Yesterday I submitted comments on behalf of the Competitive Enterprise Institute supporting the Environmental Protection Agency’s proposal to dramatically scale back the agency’s 2015 rule establishing “carbon pollution” standards for new coal power plants. This post provides some quick background on EPA’s proposal and then summarizes the key points of my comment letter.

EPA’s Proposed Rule: Background

EPA sets emission performance standards for new (future) sources in numerous industrial categories under Section 111 of the Clean Air Act. Such standards are to reflect “the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.”

Under the Obama administration, the EPA determined that partial carbon capture and storage (CCS) is the best system of emission reduction for CO2 emitted by new coal power plants. Based on that determination, EPA required new units to meet an emission performance standard of 1,400 lbs. CO2/MWh. In other words, new coal power plants would have to be built with CCS technology, capture about 22 percent of their CO2 emissions, and ensure those emissions are transported and injected into deep saline formations, oil and gas reservoirs, un-mineable coal seams, or active, enhanced oil recovery (EOR) operations.

In the present rulemaking, the EPA proposes to revise its best system of emission reduction (BSER) determination and the associated performance standards. EPA finds that partial CCS is too costly and geographically limited to be the adequately demonstrated BSER. Instead, the EPA proposes to determine that the best system is “the most efficient demonstrated steam cycle (e.g., supercritical steam conditions for large units and subcritical steam conditions for small units) in combination with the best operating practices.” Based on that determination, the EPA proposes to set performance standards of 1,900 lbs. CO2/MWh for new large coal power plants, 2,000 lbs. CO2/MWh for new small units, and 2,200 lbs. CO2/MWh for new coal refuse-fired units.

The Obama-era EPA projected that its CO2 standards for new coal power plants would have no economic costs and no climate benefits, because it expected that “few if any” new coal power plants would be built in an era of cheap gas. So, what was the point? The EPA wanted to set CO2 standards for existing (already built) coal power plants. That was the function of the EPA’s so-called Clean Power Plan, the Obama administration’s marquee domestic climate policy. However, under Section 111, the EPA may not promulgate existing source standards unless it first, or concurrently, promulgates new source standards. So, no new source rule, no Clean Power Plan.

In addition, the new source rule’s de facto CCS mandate seems designed to ensure that “few if any” new coal power plants will ever be built. As the EPA’s proposed rule argues, carbon capture systems increase power plant operating costs. In deregulated markets, where units with the lowest operating costs are the first to be “dispatched,” CCS power plants would often go to the back of the queue, rendering them uncompetitive or even unable to recover their capital costs.

CEI’s Comment Letter: Key Points

  1. The EPA is correct: Partial carbon capture and storage is too costly and geographically limited to provide uniform (industry-wide) performance standards for new coal power plants.
  2. The EPA’s October 2015 final rule is a de facto ban on investment in new coal generation—a policy Congress never authorized and would reject if put to a vote. The EPA’s proposed revisions will both repair a breech in the separation of powers and help keep electricity prices affordable for consumers.
  3. Although the EPA’s 2014 and 2012 proposed rules are not the focus of the current rulemaking, those actions are relevant to the larger policy discussion. The 2015 standard evolved from more aggressive proposals that are inexplicable apart from an unlawful ambition to kill the future of coal-based power.
  4. The EPA’s review of D.C. Circuit Court of Appeals case law should include additional discussion of National Lime Association v. EPA. Lime’s ruling that new source standards must be “achievable” in all parts of the country strengthens EPA’s argument that CCS is not an appropriate BSER because its water-intensity makes it prohibitively expensive in arid regions.
  5. Another geographic constraint, although not discussed by the EPA, may be even more critical. Only two utility-scale commercial CCS power plants exist in the entire world. Selling CO2 to nearby enhanced oil recovery (EOR) projects is central to their business plans. Only twelve states have EOR projects.
  6. The EPA should review whether CCS in commercial practice—that is, in partnership with EOR—is a bona fide system of emission reduction. National Energy Technology Laboratory (NETL) estimates indicate that the combination of CCS and EOR emits 1.4-2.6 times more CO2 than a conventional coal power plant.

Click here to read the full comment letter.