Gina McCarthy’s Responses to Sen. Vitter’s Questions Part I: Bait-and-Fuel-Switch*

by Marlo Lewis on May 11, 2013

in Blog, Features

Post image for Gina McCarthy’s Responses to Sen. Vitter’s Questions Part I: Bait-and-Fuel-Switch*

Gina McCarthy — President Obama’s pick to succeed Lisa Jackson as EPA Administrator — is often described as a “straight shooter” and “honest broker.” As my colleague Anthony Ward and I explain in Forbes, McCarthy has a history of misleading Congress about the EPA’s greenhouse gas regulatory agenda.

Specifically, McCarthy and the Air Office over which she presides gave Congress and the electric power sector false assurances that the EPA’s greenhouse gas regulations would not require utilities planning to build new coal-fired power plants to “fuel switch” to natural gas. McCarthy also denied under oath that greenhouse gas motor vehicle standards are “related to” fuel economy standards, even though anyone with her expertise must know that the former implicitly and substantially regulate fuel economy.

McCarthy and the Air Office’s misleading statements about fuel switching discredited critics who claimed the EPA was waging a war on coal and would, if left to its own devices, ban new coal generation. The fiction that greenhouse gas emission standards are unrelated to fuel economy standards gave the EPA legal cover to gin up a regulatory nightmare for auto makers — the prospect of a market-balkanizing, state-by-state, fuel-economy ”patchwork“ – just so the White House, in hush-hush negotiations, could demand auto industry support for the administration’s motor vehicle mandates as the price for averting the dreaded patchwork. This is a complicated tale, which I will discuss in Part 2 of this series.

The bottom line is that if the EPA had not dissembled on fuel switching and not obfuscated on fuel economy, more Senators might have voted for legislative measures, sponsored by Sen. Lisa Murkowski (R-Alaska) in 2010 and Sen. James Inhofe (R-Okla.) in 2011, to rein in the agency. In addition to their well-publicized transparency concerns about the EPA under the leadership of Lisa Jackson and Gina McCarthy, Senators should also have separation of powers concerns.

Earlier this week, Sen. David Vitter (R-La.), Ranking Member of the Senate Environment & Public Works Committee, released a 123 page document containing McCarthy’s responses to hundreds of questions on a wide range of issues. In today’s post, I comment on McCarthy’s responses to Sen. Vitter’s questions about fuel switching. In Part 2 of this series, I will comment on McCarthy’s responses regarding the administration’s motor vehicle program.

The fuel switching issue is somewhat arcane, so it may be helpful if I provide a quick overview before commenting on McCarthy’s answers.

In April 2010, at an event hosted by the Johns Hopkins School of Advanced International Studies, McCarthy stated that best available control technology (BACT) standards for major greenhouse gas emitters would require only efficiency upgrades, not fuel switching from coal to gas. “We haven’t done it [fuel switching] in the past, and there’s been good reason why we haven’t done it in the past,” she reportedly said.

The Air Office’s permitting guidance for greenhouse gases, both as proposed in November 2010 and as adopted in March 2011, similarly states that the “initial list of control options for a BACT analysis does not need to include ‘clean fuel’ options that would fundamentally redefine the source.” In other words, coal power plants would not be lumped together with natural gas combined cycle (NGCC) power plants in the same industrial source category subject to the same emission standards. Accordingly, an applicant would not be required to “switch to a primary fuel type other than the type of fuel that an applicant proposes to use for its primary combustion process.”

Lest there be any confusion on this point, a Q&A document published along with the March 2011 guidance asks whether “fuel switching (coal to natural gas) should be selected as BACT for a power plant?” The document answers: “No.” It states that BACT for carbon dioxide (CO2) should “consider the most energy efficient design,” but “does not necessarily require a different type of fuel from the one proposed.”

In March 2012, however, the EPA proposed a ‘Carbon Pollution’ Rule that does exactly what McCarthy and the Air Office said the EPA would not do. The rule lumps coal power plants and NGCC plants into a single newly-minted industrial source category — “fossil fuel electric generating units.” Moreover, the rule requires fuel switching, proposing a new source performance standard (NSPS) — 1,000 lbs CO2/MWh — that nearly all new NGCC plants already meet (77 FR 22396) and exactly zero commercial coal power plants can meet.

What makes this volta face all the more unexpected is that BACT standards, which apply to individual facilities on a case-by-case basis, are generally more stringent than NSPS, which set minimum emission control standards for categories of industrial sources. In regulatory parlance, NSPS provide the ”floor” for BACT determinations. If the EPA would not use BACT to require fuel switching, then it would seem unreasonable – even paranoid – to suspect the EPA of planning to use NSPS for that purpose.

The timeline of these actions is critical. In June 2010, the Senate voted on Sen. Murkowski’s resolution (S.J.Res.26) to overturn the EPA’s Endangerment Rule, the prerequisite for all EPA global warming regulations. The resolution fell short by four votes (47-53). In April 2011, the Senate voted on Sen. Inhofe’s legislation to overturn all EPA global warming regulations except those auto companies had already made investments to comply with. The bill failed on a 50-50 tie vote. Had McCarthy and the EPA been candid about their anti-coal agenda in 2010 and 2011, more Senators might have voted for those measures.

In any case, agencies are not supposed to provide false or misleading information to influence how Members of Congress vote.

Let’s now see how McCarthy addresses these issues. Vitter’s questions are in bold type, McCarthy’s responses are indented, my comments are in blue.

BACT standards apply to individual sources on a case-by-case basis. They generally are more stringent – and by law may not be less stringent – than Clean Air Act new source performance standards (NSPS), which the EPA establishes for categories of industrial sources. In other words, NSPS are the “floor” or minimum emission control standards for BACT determinations. Is that correct?

Response: Yes. The Clean Air Act specifies that BACT for a source cannot be less stringent than an applicable NSPS. Thus, when EPA completes an NSPS for a source category, BACT determinations that follow for applicable sources would need to consider the levels of the pollutant standards and the supporting rationale of the NSPS.

Comment: The EPA’s ‘Carbon Pollution’ Rule proposes NSPS for CO2 from “fossil fuel electric generating units.” The standard is 1,000 lbs CO2/MWh. The EPA estimates that most NGCC power plants already meet that standard, whereas the most efficient commercial coal power plants emit 1,800 lbs CO2/MWh (77 FR 22417).  

If BACT does not require fuel-switching, we should have no reason to expect that NSPS would require fuel switching or “redefine the source” to impose identical CO2 control requirements on coal boilers and on gas turbines. Is that correct?

Response: EPA’s GHG Permitting Guidance (March 2011) says: “… a permitting authority retains the discretion to conduct a broader BACT analysis and to consider changes in the primary fuel in Step 1 of the analysis.” Thus, EPA never ruled out the possibility that a permitting agency could require that an applicant consider natural gas, or other cleaner fuels, when proposing a coal-fired EGU.

Comment: McCarthy omits the first word of the quoted sentence: “Ultimately.” The unexpurgated sentence reads: “Ultimately, a permitting authority retains the discretion to conduct a broader BACT analysis and to consider changes in the primary fuel in Step 1 of the analysis” (emphasis added). ”Ultimately” suggests something that might happen several years down the road, not the agency’s next move, and then only as a matter of “discretion” in individual cases, not as the industry-wide default position. The guidance document’s weasel words, which occur in only one sentence out of a 96-page text, do not obviate the fact that McCarthy and the EPA misled Congress and industry about the scope of the agency’s regulatory ambition.

[McCarthy continues:] However, it is important to note that under the proposed carbon pollution standard for new power plants, companies would not be required to build natural gas combined cycle units; they would be required to meet a standard of 1000 lbs/MWh, which can be met either through the use of natural gas or by burning coal along with carbon capture and storage [CCS].

Comment: This is a distinction without a difference. No commercial coal plants with carbon capture and storage exist, and none is being built without substantial taxpayer support. The levelized cost of new coal plants already exceeds that of new NGCC plants, and “today’s CCS technologies would add around 80% to the cost of electricity for a new pulverized coal (PC) plant, and around 35% to the cost of electricity for a new advanced gasification-based (IGCC) plant,” according to the EPA (77 FR 22415). Since building an NGCC plant is far cheaper than building a coal plant with CCS, the proposed 1,000 lbs CO2/MWh standard is a de-facto requirement to fuel switch from coal to gas. Offering an alternative no one will choose because it is prohibitively costly does not make fuel switching optional. 

[McCarthy concludes:] The agency is still actively considering a wide range of comments on this issue, and any final decision will reflect careful consideration of the issue.

Comment: In other words, the agency is still trying to figure out how to tweak the NSPS in light of detailed legal criticism so that the rule still puts the kibosh on new coal generation without being tossed out in court.

In their guidance establishing what could be considered Best Available Control Technology (BACT) for regulating GHGs in the permitting process, EPA stated that fuel-switching from coal to natural gas would not and could not be considered BACT: Since NSPS are traditionally interpreted to set the BACT “floor” for permitting purposes, how can a NSPS that eliminates the ability to construct new coal units without the implementation of commercially infeasible carbon capture and storage (CCS) be consistent with EPA’s previous guidance?

Response: As explained in responses to related questions, the statement that “EPA stated that fuel-switching from coal to natural gas would not and could not be considered BACT” is not entirely correct. While EPA did not propose that CCS represented BSER [best system of emission reduction], EPA stated in the preamble of the proposed NSPS rule that “CCS is technologically feasible for implementation at new coal-fired power plants and its core components (CO2 capture, compression, transportation and storage) have already been implemented at commercial scale.” [77 FR 22414].

Comment: This response does not address the criticism that even if one sentence of the guidance document anticipates that permitting agencies may “ultimately” exercise the “discretion” to require fuel switching in individual cases, the EPA gave no hint that next year it would require all new fossil fuel power plants to be either NGCC or non-economical coal with CCS. Note, too, that “implemented at commercial scale” is not the same as commercially viable, i.e., sustainable without taxpayer subsidies.

Would a straight shooter concoct anything as weirdly convoluted as this rule? The Clean Air Act defines “performance standard” as a “standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which . . . the Administrator determines has been adequately demonstrated.” The EPA picked 1,000 lbs CO2/MWh as the standard because that is a typical emissions rate of new NGCC power plants. But NGCC is a type of power plant, not a system of emission reduction. Gas turbines have been “adequately demonstrated” only as power sources – not as emission reduction systems for coal boilers. To my knowledge, the EPA has never before selected a performance standard such that one type of facility can comply only by being something other than what it is.

Why propose something so contorted? The EPA does not anticipate any quantifiable climate or health benefits from the NSPS (77 FR 22430). The rule’s only discernible purpose is to ban construction of new coal generation. The greenhouse gas permitting guidance document concealed that purpose.

The Air Office’s PSD and Title V Permitting Guidance for Greenhouse Gases, both as proposed in November 2010 and as adopted in March 2011, similarly states that the “initial list of control options for a BACT analysis does not need to include ‘clean fuel’ options that would fundamentally redefine the source.” In other words, an applicant would not be required to “switch to a primary fuel type other than the type of fuel that an applicant proposes to use for its primary combustion process.” In addition, a Q&A document published along with March 2011 guidance asks whether “fuel switching  (coal to natural gas) should be selected as BACT for a power plant?” The document answers: “No.” It goes on to state that BACT for CO2 should “consider the most energy efficient design,” but “does not necessarily require a different type of fuel from the one proposed.” These documents suggest that the EPA will not require fuel switching in BACT determinations. Was that a reasonable conclusion for Congress and electric utilities to draw at the time?

Response: That is a reasonable interpretation, and EPA continues to believe that its BACT guidance is reasonable for the specific purposes for which the guidance is intended.

Comment: Bingo! If the conclusion that the EPA would not require fuel switching is a reasonable interpretation of the BACT guidance, then Congress and electric utilities had no reason to expect the agency to require fuel switching only one year later, much less do so via a form of regulation — NSPS — that is generally less stringent than BACT. In hindsight, the BACT guidance was the setup for a bait-and-fuel-switch.

Some Senators wonder how they can trust Gina McCarthy to be a “straight shooter” as EPA administrator given the agency’s FOIA failures, reliance on secret data in rulemakings, and use of private email accounts to conduct official business. These issues are significant but so is the agency’s trickery on greenhouse gas regulation of stationary sources.

Note also that the proposed 1,000 lb CO2/MWh performance standard is substantially similar to the NSPS proposed in section 116 the Waxman-Markey cap-and-trade bill, which would require a 50% reduction in CO2 emissions from new coal plants permitted before Jan. 2020. The Waxman-Markey legislation narrowly passed in the House but companion legislation died in the Senate. The ‘Carbon Pollution’ Rule sure looks like an attempt to end-run the legislative process and enact a policy Congress has rejected.

Looking at this from a wider angle, Senators might ponder what would have happened if Reps. Waxman and Markey, instead of introducing a cap-and-trade bill, had introduced legislation authorizing the EPA to do exactly what it is doing now — regulate greenhouse gases through the Clean Air Act as it sees fit. Such a bill almost certainly would have been dead on arrival. Under the leadership of Lisa Jackson and Gina McCarthy, the EPA has morphed into a Super Legislature, ‘enacting’ climate and fuel economy policies Congress has not approved and would reject if introduced as legislation and put to a vote. The Senate cannot confirm McCarthy as EPA Administrator without rewarding the agency’s regulatory overreach.

Nor can it do so without encouraging the agency to fool and trick Congress, as it did during the Senate debates on the the Murkowski resolution and Inhofe legislation, when statements by McCarthy and the Air Office seemingly disavowed any ambition to “bankrupt” investors in new coal power plants. Whatever their party affiliation or views on climate change, Senators should dislike being hoodwinked.

(*This column has been edited lightly for clarity, May 22, 2013.)

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