Breaking News: UBS Downgrades Southern (more evidence that EPA’s Carbon Pollution Standard is illegal)

Per SNL,

UBS Securities LLC has downgraded Southern Co. shares to “sell”from “neutral” after the company disclosed cost overruns have pushed the in-service date for the Plant Ratcliffe project in Mississippi to mid-2015.

The news provides further evidence that one of the Obama administration’s top climate policy priorities is illegal.

Allow me to briefly explain. The Plant Ratcliffe project is the only carbon capture and sequestration system currently being constructed in the U.S. Last January, the EPA proposed the Carbon Pollution Standard, which would mandate that all new coal-fired power plants install carbon capture and sequestration. In the proposal, EPA relied on the Plant Ratcliffe project to demonstrate that CCS technology is “adequately demonstrated” as is required by the Clean Air Act.

However, the Clean Air Act forbids EPA’s imposition of a technology that is “exorbitantly” expensive. And the Plant Ratcliffe project, with a price tag of $5.5 billion for 582 megawatts capacity, is well more than 500 percent costlier than a comparably-sized conventional coal fired power plant outfitted with the latest environmental controls. A 500 percent price increase is excellent evidence that EPA’s Carbon Pollution Standard is “exorbitantly” expensive and, as a result, is illegal. The breaking news relayed above is further evidence. Thanks to the incredible costs of CCS at a single power plant, financial analysts are downgrading an entire utility’s stock.

I feel terrible for Southern. They took a big risk to try something really neat, from which all utilities will learn a great deal. When the project is completed, carbon dioxide will be captured at the plant, and then piped to nearby oil fields, where the emissions will be used to enhance oil recovery. While I certainly don’t condone the hundreds of millions of dollars of federal subsidies that went into the project, I nonetheless think it’s pretty cool effort. Alas, no good deed goes unpunished. Mississippi regulators capped ratepayer liability at $2.8 billion, the original cost of the project. The current tab is, again, $5.5 billion, and there’s no guarantee it won’t push higher.