Legal Vulnerabilities of EPA Power Plan’s Prerequisite Regulation

Washington is still abuzz about the D.C. Circuit Court of Appeals oral argument last week on the Environmental Protection Agency’s carbon dioxide (CO2) emission standards for existing fossil-fuel power plants, the so-called Clean Power Plan. Almost forgotten in the hubbub is the fact that the Power Plan depends upon a prerequisite rulemaking, the agency’s CO2 standards for new fossil-fuel power plants, which has legal vulnerabilities of its own.

The new source rule’s standard for coal power plants—1,400 lbs. CO2/MWh—is based on EPA’s determination that “partial” carbon capture and storage (CCS) is the “adequately demonstrated” “best system of emission reduction” (BSER). That is highly dubious. CCS is not economical and, in actual commercial practice, increases rather than reduces emissions. 

Despite billions in government R&D, there is still no utility-scale CCS power plant reliably delivering power anywhere in the world. CCS can dramatically increase the cost of new coal power plants. For example, Mississippi Power’s Kemper CCS Project, cited repeatedly in EPA's proposed new source rule as evidence CCS is adequately demonstrated, was originally supposed to cost $2.2 billion. Now more than two years behind schedule, Kemper is projected to cost $6.6 billion. Similarly, Canada’s flagship CCS power plant, Boundary Dam in Saskatchewan, has been plagued by delays, poor performance, and rising costs.

Another problem: No CCS power plant is being built and operated without taxpayer and/or ratepayer subsidies. How can a system of emission reduction be “adequately demonstrated”—commercially viable as well as technically feasible—if it depends on subsidies?

EPA assumes the need for subsidies will decline along with costs, especially if CCS plants offset expenses by selling the captured CO2 for use in enhanced oil recovery (EOR). Quick background: Injecting CO2 into an oil field both increases pressure within the field and reduces the oil’s viscosity, coaxing more black gold to the surface. Kemper, Boundary Dam, and most other CCS projects EPA cites are located near oil fields and include EOR in their business plans (80 FR 64551-64556).

But—and here’s the kicker—to the extent EOR makes CCS commercially viable, it also makes CCS unfit as a climate change mitigation technology (h/t William Yeatman). Simply put, EPA’s new source rule does not take into account the CO2 emitted when the recovered oil is combusted.

Based on EPA emission factors (tons of CO2 emitted per barrel of oil combusted) and Department of Energy EOR data (barrels of oil produced per ton of CO2 injected), I calculate CCS combined with EOR emits 1.41-2.6 tons of CO2 for every ton injected underground. That means the “life-cycle” CO2 emissions of a CCS power plant exceeds those of a conventional coal power plant by 40 percent or more. Far from being the “best system of emission reduction” required by the Clean Air Act, CCS in commercial practice—i.e., CCS combined with EOR—increases overall CO2 emissions.

And this just in. EPA gives the impression selling CO2 to EOR companies will make CCS profitable without subsidies. Turns out, the EOR side of business is also subsidized. Internal Revenue Service regulation 45Q awards a $10 tax credit for every metric ton of CO2 sold for use in EOR. According to the online news service Greenwire, “Advocates say it [the tax credit] is critical in funding CCS operations.”