The question of whether the green energy industry can fight its own battles within the competitive energy market was answered Wednesday with the release of U.S. EPA’s Utility MACT rule. The unsurprising answer is no, it cannot. This rule, dressed with the façade of an earth-friendly health-protecting mandate, is a regulation intended to fade out the coal industry—one of the renewable industry’s strongest competitors.
The Utility MACT rule, announced by EPA Chief Lisa Jackson on December 21, 2011 at the choice location of the Children’s National Medical Center in D.C., has two rules for coal-fired power plants. The first rule curbs air pollution in states downwind from “dirty” coal-fired power plants. The second would set the first standards for mercury and other pollutants from power plant smokestacks, requiring plants to install “maximum achievable control technology” to reduce emissions of pollutants. EPA estimates this rule will cost $9.6 billion while the industry approximates the cost of $100 billion; between the two, this rule is one of the most expensive regulations to date. An analysis done by AP stated that these rules eliminate more than 8 percent of coal-fired energy nationwide. AP also found that more than 32 mostly coal-fired power plants in a dozen states will be forced to shut down and an additional 36 might have to close because of new federal air pollution regulations; together, those plants produce enough electricity for more than 22 million households.
Though President Obama issued a presidential memorandum intended to provide flexibility for the compliance of plants, North American Electricity Reliability Corporation and other power plant operators have pressed for more time to comply with the rules so as to avoid too many plants from retiring all at once. In addition to probable retirements, about 500 units will need to be idled temporarily to set up the new pollution controls. A number of of those units are at vital junctions on the grid and are critical to restarting the electrical network in case of blackouts. Though it has been stated that “the lights will stay on,” the cost of keeping them on will proliferate electricity rates considerably.
The options for coal-fired plant owners tend to be: switch to a lower sulfur coal, install additional pollution controls, or retire the boiler and perhaps build a new source of generation. For many plants, retirement is the cheapest option. It is much more costly to retrofit these plants than retire them and build new generation. With retirement being the cheapest option under EPA’s new rule, it is clear that the EPA wishes to handicap this industry rather than reduce pollution emissions. The impact will be heaviest among the towns that speckle of the coal belt states — Kentucky, West Virginia and Virginia — where numerous units will most likely be retired and entire towns could be wiped out due to the overwhelming drop in tax revenues.
The Wall Street Journal stated, “The EPA also took the extraordinary step of issuing a pre-emptive ‘enforcement memorandum,’ which is typically issued only after the EPA determines its rules are being broken. The memo tells utilities that they must admit to violating clean air laws if they can’t retrofit their plants within the EPA’s timeframe at any cost or if shutting down a plant will lead to regional blackouts. Such legal admissions force companies into a de facto EPA receivership and expose them to lawsuits and other liabilities.”
Jackson contends that the return on this rule is worthwhile, saving billions of dollars in health benefits. The Wall Street Journal points out, however, that these skewed “purported benefits—to be precise, 99.99%—come by double-counting pollution reductions like soot that the EPA regulates through separate programs and therefore most will happen anyway. Using such “co-benefits” is an abuse of the cost-benefit process and shows that Cass Sunstein’s team at the White House regulatory office—many of whom opposed the rule—got steamrolled.” The coal industry, demonized as the “dirtiest” source of energy by the green-eyed environmentalist, could be the first of many victims to be assaulted in the energy market.